Popular Questions About Michigan Business Liability Insurance

Business liability insurance protects your business when it is negligent or causes harm to third parties—individuals or other businesses. Commercial general liability insurance (CGL) covers your business for these kinds of claims, and it is your first line of defense against costly lawsuits. 

All businesses are at risk for liability claims and lawsuits. You can be sued if injuries or property damage occur on your premises, or if you or your employees cause harm in the course of doing business. A Michigan commercial general liability policy pays for your attorney fees, as well as any settlements or judgments that you have to pay if you are sued. 

In addition to providing coverage for physical damage claims, your Michigan CGL policy also offers coverage for claims of libel, slander, copyright infringement, and false advertising. While this is very broad coverage, you may need special liability protection that is not included in a standard CGL policy. You may need to purchase additional commercial liability policies to cover any gaps in coverage. 

Michigan business liability insurance protects you, your business, and your employees from bodily injury and property damage claims. While customer slips and falls are some of the most common commercial liability claims, your business can be held responsible for faulty products, reputational harm, and a variety of other negligent behaviors that cause either physical or financial harm to a third party. 

  • SMALL BUSINESSES IN MICHIGAN (2016) - 866,186 
  • MICHIGAN COMMERCIAL INSURANCE CLAIMS (2016) - $3,326,842,000

While most commercial insurance claims involve property losses due to events like theft, fire, and weather, the most common claims are not necessarily the most expensive for business owners. Liability claims may happen less frequently, but they are often far more costly.

40% of small businesses are likely to experience a property or general liability claim in the next 10 years. Here are some examples of the most costly claims:

  • REPUTATIONAL HARM: $50,000 Average Cost Per Claim 
  • VEHICLE ACCIDENT: $45,000 Average Cost Per Claim 
  • PRODUCT LIABILITY: $35,000 Average Cost Per Claim 
  • CUSTOMER SLIP & FALL: $20,000 Average Cost Per Claim 
  • STRUCK BY OBJECT: $10,000 Average Cost Per claim 

CGL policies cover three types of liability exposures:

  • PREMISES AND OPERATIONS: Claims against your business for bodily injury and property damage related to the ownership and maintenance of the business premises, or as the result of business operations conducted both at and away from the business premises
  • PRODUCTS AND COMPLETED OPERATIONS EXPOSURE: Claims for bodily injury and property damage that result from faulty products or completed operations (work performed by your business)
  • INDIRECT/CONTIGENT EXPOSURE: Claims resulting from the negligent actions of independent contractors and subcontractors that you hire

Specifically, a CGL policy may pay for the following types of claims, up to the limits of your policy.

Damage to someone else's property 

  • We call this “property damage liability insurance.”
  • Example: A plumber working on a home remodel forgets to turn off the water and floods the homeowner’s finished basement. 

Someone else's medical bills

  • We also call this “bodily injury liability insurance.”
  • Example: A delivery person slips and falls on a restaurant’s recently mopped floor and breaks an arm.

Harm to competitors reputation

  • We call this “personal injury liability insurance.”
  • Example: Your employee makes slanderous or false statements about a competitor, causing loss of business and reputational harm. 

Harm caused by product

  • We call this “product liability coverage.”
  • Example: A child’s outdoor play set collapses and injures a child. 

A Michigan commercial general liability policy provides coverage for a wide range of liability risks faced by your business. But there are some very specific liability exposures that are excluded from most CGL policies. 

If you are susceptible to certain types of claims that are not covered under your Michigan CGL policy (e.g., you own commercial vehicles), you may need to purchase an additional specialized liability policy or add a tailored endorsement to your CGL policy. 

  • COMMERCIAL AUTO INSURANCE provides coverage for property damage and bodily injury liability claims, vehicle damage, and medical bills, as well as any costs related to lawsuits due to auto accidents involving your business-owned vehicles. 
  • COMMERCIAL UMBRELLA/EXCESS LIABILITY COVERAGE provides liability protection above and beyond the liability coverage that is included in your CGL policy, commercial auto policy, or business owners policy. A commercial umbrella policy pays for damages when your other liability coverage has been exhausted. 
  • DIRECTORS & OFFICERS (D&O) LIABILITY COVERAGE provides protection for directors and officers of large companies against legal judgments and costs arising from unlawful acts, erroneous investment decisions, failure to maintain property, releasing confidential information, hiring and firing decisions, conflicts of interest, and many other types of errors. 
  • ERRORS & OMISSIONS (E&O)/PROFESSIONAL LIABILITY INSURANCE is recommended for lawyers, accountants, architects, engineers, IT companies, or any company where individuals provide a service to clients for a fee. It offers coverage for lawsuits that arise from rendering negligent professional services or failing to perform professional duties.
  • CYBER LIABILITY INSURANCE covers a range of potential liability exposures that can occur while using, storing, or transferring data electronically for business purposes. Any business that handles electronic data—especially personally identifiable information about its customers—is particularly susceptible to cyber threats. 
  • OTHER LIABILITY ENDORSEMENTS are used to add special coverage to standard CGL policies to fill coverage gaps. The most common commercial liability endorsements include employment practices liability, liquor liability, and employee benefits liability. 

The cost of a CGL policy can range from $500 per year to thousands of dollars per year. 

Your premiums are based on several variables like the size of your business, its location, and most importantly, your industry. The coverage limits and deductibles that you select also determine the cost of your Michigan business liability coverage. 

Businesses in some industries tend to pose a greater risk to third parties (customers, suppliers, or the general public) than others. A restaurant owner in a busy entertainment district will pay far more for a CGL policy than a freelance marketing consultant. The restaurant owner faces risks from customer slips and falls and several other exposures, while the marketing consultant never has customers on its premises and does not produce a product that can cause physical harm. 

Some industries that typically pay more for liability coverage are:

  • Janitorial and cleaning services
  • Construction
  • Manufacturing
  • Retail trade
  • Wholesale trade

Unfortunately, lawsuits are all too common in our society. Whether a claim is appropriate or unfounded, you have to defend yourself, and the costs can be devastating. You need Michigan commercial liability insurance as your first line of defense. 

An independent agent in Michigan can help you get the coverage you need. Independent agents have access to multiple insurance companies, so they can help you find the policy that best covers your unique risks. 

  • There are 899 independent agents in Michigan who are ready to help. 
  • In 2017, our agents helped 5,362 Michigan residents. 

An independent insurance agent compares policies from multiple companies to find the best coverage for your needs. 

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Business Liability Insurance Stats By The Numbers

National average burglary per businesses 1 in 10 business burglarized each year

Number of businesses in US 32.5 million

National average business liability cost $500 year