An important consideration in avoiding or coping with litigation for small businesses is obtaining and maintaining appropriate insurance policies. Certain types of insurance are mandatory, while others are just sensible choices for one’s business. Often litigation arises over a matter for which the business does not have insurance, and judgments in such cases can be financially disastrous. Keep in mind that insurance policies should be reviewed and reconsidered periodically, particularly as the business grows or changes direction.
Workers’ Compensation Insurance. California requires all employers to have Workers’ Compensation insurance. This type of insurance is mandatory even if a business has only one employee. Workers’ Compensation provides insurance coverage to employees who are injured in the course of employment. It ensures that employees who are hurt or disabled on the job receive fixed monetary compensation, thereby preventing litigation against the employer.
Commercial Auto Insurance. Businesses that own a company vehicle, or use a vehicle to transport employees, must purchase commercial auto insurance. If the company does not have or use a vehicle for such purpose, it may not be subject to this requirement. However, if employees use their own vehicles for business purposes, having appropriate insurance for the business is advisable.
General liability insurance. Although not mandatory, general liability insurance is highly recommended for most small businesses. A business that obtains general liability insurance is protected from paying hefty out-of-pocket judgments for injury or property damage resulting from an accident at the workplace. Some clients will conduct business only with entities that retain this type of insurance. In addition, there are requirements for specialized liability insurance for particular industries. In California, for instance, private security and investigations companies must have specific liability insurance.
Other types of insurance may be applicable depending on the size of the business and the type of industry in which the business is engaged. For example, only business owners with more than 50 employees are legally obligated to provide health insurance. Having the insurance in place when a covered issue arises is not always enough. Sometimes, getting the insurance carrier to meet its obligations to defend and/or indemnify against the claim can cause a small business a whole other set of concerns and legal battles.
The legal requirements for small business are complex and often state-specific. To speak with an attorney who understands the insurance industry and can help businesses mitigate and assess risks, contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com.