Column: What does liability really mean?

Johnson Tony

Commercial General Liability is often the first and sometimes only insurance a company will ever obtain. If you have an office space, this type of insurance is often a requirement of your landlord or lender. This type of liability insurance generally addresses three exposures and is typically compliance driven:

  • Bodily injury that I am liable for (Did I hurt someone?)
  • Property damage that I am liable for (Did I damage someone’s stuff?)
  • Personal injury (Did I call someone a name?)

This type of liability insurance is appropriate for many types of business. For example, if a customer were to walk into a retail store and slip on a banana peel that was on the floor, the retailer may be liable for their bodily injury. The retailer would look to their Commercial General Liability insurance to both defend and respond on their behalf if they are found liable for the injury sustained.

What if your business is a professional service? You create value and revenue based on the service or consulting advice provided. If your firm or employees are alleged to have provided bad advice, you do not damage someone’s stuff, you don’t hurt them and you don’t call them a name. So the exposure your business has falls outside of the scope of your Commercial General Liability insurance. The damage your service (or lack of service) could have caused may result in a negative financial impact on your client’s bottom line. Where the professional service provider needs to look for coverage is in their Professional Liability coverage; often referred to as “errors and omissions” or “mal practice” insurance. 

This coverage is needed by many businesses. From technology firms to printing and design services, the need for Professional Liability insurance is not limited to doctors, attorneys and accountants. An example of this type of insurance exposure: a technology firm is upgrading a network server and all of the data was not properly backed up. Although there was no injury or property damage, there will be a financial consequence to the client in the form of new installations and recreation of lost data. Properly placed Professional Liability insurance will respond to
this situation.

Professional Liability is just one additional type of liability a business may have based on their operations. The important thing to remember is that a knowledgeable business insurance advisor can help you identify your risks and can work with you to move your organization from being compliance driven to actively managing your risks.

Tony Johnson is an Accredited Advisor in Insurance and can be reached at Davidson Insurance, 360-514-9550 or


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