Texas Employers: Know Your Commercial General Insurance Exclusions – Before an Accident

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Your commercial general liability insurance is intended to protect your business if the worst happens: an accident or injury at your worksite. But beware of the exclusions. Many policies will not cover bodily injury or property damage for accidents involving trucks or automobiles, pollutants, or intentional acts (which could be triggered if OSHA issues a willful violation). You may also be denied coverage based on “lack of cooperation”.

Review your policy today to check for these common exclusions, and call in counsel after a worksite accident to make your rights are protected and preserved.

Common Commercial General Liability Insurance Exclusions

General liability coverage is often more limited than it seems. While your coverage helps protect your business from claims that it caused bodily injuries or damage to another person's property, it may not apply when certain exclusions are present. This warning is especially relevant for hazardous industries such as construction, energy (oil & gas), transportation, food services, storage, or manufacturing.

Common commercial general liability insurance exclusions include:

  • Expected or intended damage or injury – if you or your employees intentionally cause harm, your insurance policy will not cover it.
  • Criminal acts – most insurance companies do not cover damages caused by illegal activities.
  • Contractual liability – if you accept liability in a separate contract, your insurance company is no longer responsible for the damages you cause (never assume contractual liability before speaking to an attorney).
  • Breach of contract – if you breach a contract, your insurance company will not protect you from the consequences.
  • Liquor liability – insurance companies typically do not cover liability resulting from alcohol.
  • Workers’ compensation claims – if your employee gets hurt at work, workers’ comp applies instead of general liability coverage
  • Pollution – if your company causes pollution, and the pollutants cause injury, your insurance policy may not apply. Most policies do not cover clean-up costs, either.
  • Property damage – if you are liable for someone else’s property damage, general liability coverage may apply, but you need a separate policy for any property damage you suffer.
  • Automobile coverage – general liability insurance is different than automobile coverage and will not cover damages involving aircraft, watercraft, cars, or trucks.
  • Advertising issues – your insurance company may exclude liability for the failure of goods or services to perform as advertised or advertising the wrong price.
  • Intellectual property concerns – if you infringe on someone else’s intellectual property, you may not be covered.
  • Online behavior – most insurance policies do not cover damages created in online chat rooms or bulletin boards.

Every insurance policy is different, so review the specific list of exclusions included in your policy documents. If you need an attorney to look over your policy with you, Hendershot Cowart P.C. can help.

Making a Commercial General Liability Insurance Claim After a Worksite Accident

If your business or worksite has suffered an accident, there is more at stake than an OSHA investigation and potential citations. You may also need to go head-to-head with your insurance carrier.

After an incident, your insurance carrier will likely send its own attorney and expert to investigate the incident. Do not mistake your insurance carrier’s counsel as your own. Have your own experienced business law attorney present during all visits and discussions with insurance representatives to help you avoid exclusions and other coverage issues and work toward a successful claim resolution.

Some exclusions cannot be avoided – a willful violation citation from OSHA can trigger an intentional act exclusion, for example – but an experienced business attorney can help you avoid other reasons an insurance company may delay or deny your claim.

The Duty to Cooperate

Your commercial general liability insurance policy likely includes a “duty to cooperate” policy condition. This holds you, the policyholder, accountable for providing information to the carrier to assist in the settlement of the claim. It sounds like a benign and common-sense requirement, but the condition can be abused.

Any inaction or conflicting information (for example, if you and a manager provide conflicting accounts of an incident) may be enough for your carrier to misuse the duty to cooperate and deny payment of a claim.

Your attorney can oversee your end of the claims process to make sure information is consistently accurate and provided in a timely manner so that your coverage obligations are met.

Commercial General Insurance Claims and the Stowers Doctrine – What Texas Businesses Need to Know:

Your attorney can also get involved if your insurance carrier is dragging its feet on settling a claim.

In Texas, the Stowers Doctrine creates a duty for your insurance company to act in good faith while handling a liability claim on your behalf. If your insurer mishandles your claim, you can file a Stowers demand to put pressure on the insurance company to accept a reasonable pretrial settlement offer within policy limits.

For example, consider you have a $10,000 pretrial settlement offer on a slip-and-fall claim from a restaurant guest. None of the exclusions in your policy apply, so the insurance company must settle the claim on your behalf. Your policy limit is $20,000 and your insurance company has every ability to pay the claimant the $10,000 they are asking for. Still, the insurance company only offers your guest $5,000 for their injuries and medical bills. The guest is unhappy and files suit.

Under the Stowers Doctrine, if the claimant rejects your insurance company’s offer and sues you, your insurance company must cover all the resulting damages – even if they exceed policy limits.

Let’s return to the previous example: If the court awards the plaintiff $25,000 for their injuries, medical bills, pain and suffering, and the trouble of filing a lawsuit, you will not be responsible for the amount over your policy limits If you filed a Stowers demand. Your insurance company must pay the entire settlement – even though it exceeds your policy limit.

In most cases, once the insured issues a Stowers demand, the insurance company is quick to use policy limits to settle claims to avoid this kind of scenario.

Legal Counsel and OSHA Defense for Texas Businesses

Review your policy exclusions before a worksite accident exposes you to unexpected risks. If the worst should happen, consider engaging an attorney to advocate for your rights and protect your interests.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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