6 Liability Risks for Small Businesses in Alberta

Portrait of a happy waiter opening on the doors at a cafe and smiling. He's not worried about the liability risks of a small business because he has commercial general liability insurance.

The number of small businesses in Alberta increased by 12% from 2012 to 2017, which reflects this province’s entrepreneurial spirit. Liability risks for small businesses in Alberta are often overlooked, however. Liability risk is the financial and legal costs brought about by litigation from clients, third-party vendors, or employees against the business. These can include:

  1. Staff complaints.
  2. Employee work-related injury.
  3. Libel or slander claims.
  4. Damage incurred by a product malfunction or service failure.
  5. Cybersecurity breach.
  6. Additional risks based on the industry.

Below, we’ll break down these 6 liability risks for small businesses in Alberta and what business insurance options you have.

1. Staff Complaints

This is any litigation brought against you from employees. This can include harassment, unjust termination of employment, a breach of contract, or discrimination in the place of work. Hopefully, with proper protocols following the laws set by the Alberta Government, you won’t have to worry about this. But there is always a risk with employees that you could be brought to court. Whether you win or lose, this could be a serious financial hardship for a small business. Talk to your broker about coverage for this type of liability risk once you’ve hired an employee.

2. Employee Injury Related to Work

This one is relatively straightforward. Unfortunately, injuries can be unexpected and can occur virtually anywhere. Any injury that occurs during work hours, at work, or carrying out a work-related task counts. A commercial general liability insurance policy covers you for any lawsuits deriving from injury at your place of work (for both employees and clients). You may require specialized coverage if you have work sites or work in certain industries.

3. Libel or Slander

Libel and slander are false statements used to harm or otherwise degrade an individual or organization’s reputation. This risk refers to any claims your business might make against other organizations or individuals or claims made against your business.

4. Damage Incurred by Product Malfunction or Service Failure

Your business will either sell products or provide a service. Even if you’re not the manufacturer of a product, if it harms someone, you could be held liable. Product general liability insurance protects your business if a product causes damage or harm.

If you provide a service, you could be held accountable for negligence, bad advice, or a failure to perform the service. You will need specialized insurance known as professional liability or errors and omissions insurance which will cover you in this case.

5. Cybersecurity

Cybersecurity is a huge vulnerability and every business is at risk for a data breach. Your business may be held accountable for any theft, ransom, or other unauthorized access to client information. Your business is responsible for protecting it – and you can be sued if you fail to do so or follow the proper post-breach protocols. Insurance companies are now offering cybersecurity insurance to help reduce the financial strain of a data breach. This includes damages, fines, costs of extortion, business interruption, and expenses related to restoration.

6. Additional Risks

Depending on your business and industry, there can be additional risks that apply to you. These would be specialized to a business’ products, services, and working conditions, including what hours your service is available. Talk to your broker for more info on what coverage is available for your business.

Liability Coverage Options for Small Businesses in Alberta

Liability insurance can be purchased separately or incorporated into a package. The cost will depend on your business’ risks, such as what products or services you offer, where you’re located, the training you give employees, the hours you operate, and so on. Talk to your broker about your options. Here are three of the most common liability insurance types:

  • Professional liability: Also known as errors and omissions insurance. This is for people who work in service fields, such as accountants, medical professionals, and consulting. It provides coverage for litigation arising from bad advice, misinterpreted advice, negligence, and failure to provide services. This is often required by clients.
  • General liability: This policy is not specific to any type of industry and provides rudimentary protection if your business is sued. It will cover things like injuries and damages to employees and clients on your premises.
  • Product liability: If your business sells products, this insurance will cover the costs if you are sued for injury or damage by a customer due to your product.
  • Cyber liability: Provides coverage in the event of a data breach or cybersecurity incident.

Every small business in Alberta has liability risks. This type of insurance protects you and will help keep your business afloat if the worst should happen. Financial security for your business is key – talk to your broker for more info on how to protect yourself.

Do I need business insurance if I work from home?

Professionally dressed business woman working from home.

Working from home can be fantastic – no commute, more flexibility, and working in your pyjamas, what else could you want? But with this freedom comes some additional risks, which is why working from home affects your home insurance. For example, you may be bringing home papers, materials and equipment from work or you may be inviting clients over to your home office. Any work-related property damage or liability claims won’t be covered by your home insurance unless they’re notified and you have the proper coverage. You may need business insurance if you work from home or run a business from your home – talk to your broker to determine if this is the case for you.

Why would your home insurance not cover you if you work from home? It’s pretty simple:

  • Businesses have greater liability risks.
  • Home insurance only covers damage to others as a result of your personal – not professional – actions.
  • Additional property would need to be protected.
  • You didn’t notify your insurance company.

 

What are my insurance options if I work from home?

First, you should check with your employer to see what insurance coverage they offer for employees working from home. This coverage may not cover everything, but it gives you a good idea of where to start when it comes to protecting yourself.

Second, you should talk to your broker and current home insurance company. Some insurers offer a home-based business add-on which will cover work-related property and provide the liability insurance you need. However, it may not be available from all insurers or your type of business may not qualify. If that’s the case, you may need to purchase separate business insurance if you work from home. Your broker will be able to help you find the coverage you need and take care of the research and price shopping.

Do I really need business insurance if I work from home?

Not necessarily. It will depend on your business and your home insurance provider. You may need to switch providers to get the proper coverage or purchase separate business insurance.

If you decide to depend on only your home insurance, you could be paying out of pocket if your business property is damaged (or causes damage) or if you’re sued by a client visiting your home. If you store inventory or use a work computer and it’s damaged or stolen, you could be on the hook for replacing it. If a customer trips walking up to your home, they could sue you – and you’d be responsible for all of the legal expenses. Finally, if you fail to inform your insurer, they can deny coverage or void your insurance. This is especially true if you lie on a new home insurance application.

Furthermore, your home insurance won’t provide any coverage for:

  • Professional Liability (if someone blames you for financial loss because of your professional service or advice and sues you)
  • Product Liability (if a product you sell injures someone or damages their property)
  • Business Interruption (if you’re forced to close your business temporarily due to a mandatory evacuation or covered loss)
  • Cyber Liability (if your company is the victim of a cyber-attack or data breach)
  • Equipment Breakdown (covers repairs or replacement of essential equipment)
  • …and many more protection options available, depending on your business.

Whether or not you opt for business insurance if you work from home is up to you, however, you should inform your home insurance provider and talk to your insurance broker.

 

4 Tips For Using Commercial General Liability Insurance to Protect Your Business

An insurance broker and two employees reviewing their commercial general liability insurance policy.

4 Tips for Using Commercial General Liability Insurance to Protect Your Business

Commercial general liability insurance helps protect your business, no matter what industry you’re in. Also known as a CGL policy, this coverage is the starting point and essential for any company. Here are 4 tips to help you make the most out of your commercial liability insurance to protect your business:

  1. Take advantage of risk management resources.
  2. Understand what is and what isn’t covered.
  3. Use your broker as a resource.
  4. Consider your CGL policy as a last line of defence.

We’ll discuss these each in a little more detail below.

 

1. Take Advantage of Risk Management Resources

As part of your commercial general liability insurance, you should have access to a variety of risk management resources. These are provided by insurance companies or associated third parties to help you minimize your chance of injury or property damage occurring on your business premises or wherever you operate. This can include everything from a phone line staffed with experts to training webinars to brochures and pamphlets. These resources are a great way to protect your business and learn how to handle potential lawsuits. For example, check out the Insurance Bureau of Canada’s risk management resources.

2. Understand What Is and What Isn’t Covered with Your Commercial General Liability Insurance

Commercial general liability insurance is basic coverage for all businesses, regardless of the industry you operate in. It protects you if you’re held liable for bodily injury or property damage to third parties. It will help reimburse you for your legal expenses, including any settlements and awards, up to your policy limit. You’ll also be required to pay a deductible. For example, let’s say someone walks into your store or office in the winter and slips in the front entrance. They fall and break their arm. They hold your company liable for damages. This type of scenario would likely be covered by your CGL policy.

But not everything is covered. For example, if you’re sued for causing financial loss as a result of your advice or professional service, you wouldn’t be covered by this type of policy. You’d need a professional liability insurance policy (also known as errors & omissions insurance) in order to protect yourself in that scenario.

That’s why it’s critical that you understand your policy, including what is and what isn’t covered. You should also understand how your insurance works and what you need to do in the event of a claim (or if you’re aware you might need to make a claim).

3. Use Your Broker as a Resource

Your broker is there to help you. Not only do they do the price shopping and research to find you competitive quotes that match your company’s insurance needs, but they’re also there to answer your questions and advocate you through the claims process. They’re there to ensure you’ve got the insurance you need and to help you will all things related to insurance. They can provide additional risk management resources and help you understand your coverage.

4. Consider your CGL policy as a last line of defence.

Insurance should always be your last line of defence. While you may be covered, you’ll still need to pay a deductible and your policy has limits. You may also see a rise in your premiums after a claim (although this is not always true). Plus, lawsuits aren’t many people’s idea of fun.

Your insurance should be just one part of a risk management plan to protect your business’ financial security. If you can prevent lawsuits in the first place, you will likely save money in the long run and save you from many headaches that come with legal action.

Do I need commercial general liability insurance?

In short, yes. This is essential, basic coverage to protect your business if someone is injured or has their property damaged while on your company’s premises. Lawsuits can be extremely costly, and this insurance provides you with a measure of financial security and peace of mind. It’s also important to note that some contracts require insurance coverage.

Talk to one of our brokers for more information or to get a quote today. They can help you determine your small business’ insurance needs and which commercial general liability coverage suits you best.