By Jack Garson
(As seen in the SmartCEO Magazine, February 2012)
Ensuring you have insurance when you need it.
On Aug. 23, 2011, a magnitude 5.8 earthquake hit the Mid-Atlantic region, causing damage to structures as famous as the Washington Monument and the National Cathedral. The very next month, in September, Tropical Storm Lee thundered up the East Coast, causing historic rainfalls and flooding.
In each instance, countless businesses suffered damage, only to discover that their existing insurance failed to provide necessary coverage.
A variety of other threats can pose risks to your company. You may face anything from injuries to your workers and customers, to fire that destroys your facilities, to lawsuits accusing you and your colleagues of failing to uphold duties to shareholders, clients and employees.
So when you buy insurance, you shouldn’t be simply checking a box. You are investing in a life raft. When you hit an iceberg, you don’t want to find out the boat leaks or isn’t big enough for all the passengers.
Start with the basics. There are many types of insurance to address the risks that could threaten your business, but they often fall into three categories:
Injuries and death: First, there is insurance for injuries or death to those affected by the operation of your business. This category of insurance includes commercial general liability insurance, workers’ compensation insurance and product liability insurance.
Damage to property: Second, there is insurance for damage to property. This insurance also comes in many forms. For years, the most common form of this insurance was referred to as “all risk” or casualty insurance. More recently, this insurance has been referred to as “special causes of loss” insurance.
Executive protection: Third, there is insurance that protects company officers, executives and directors for their roles and duties with your company. For example, directors’ and officers’ liability insurance (“D&O” insurance) provides protection where a company’s shareholders allege wrongdoing by your business’ senior managers. As our society has grown more litigious, insurance companies have created new types of insurance. You might procure fiduciary liability insurance to protect against employee claims of mismanagement of your business’ 401(k) plan. Or you might buy employer’s liability insurance for protection against employee allegations of sexual harassment or discrimination.
Of course, any individual business may face the need for special types of insurance. But, most importantly, you need to make sure you understand how your insurance will work and whether it provides the protection you need when you need it the most.
Jack Garson is the founder of Garson Claxton LLC and leads the firm’s business and real estate practice groups. Jack serves as a legal advisor for numerous local, regional and national companies, focusing on business transactions, commercial real estate, commercial leasing, and construction law. In addition to providing legal counsel, Jack serves as a strategic advisor and negotiator for many clients, providing guidance on issues such as the growth and sale of businesses, liability and risk reduction, the hiring and retention of key personnel, and protecting and enhancing profitability, as well as negotiating the resolution of complex commercial disputes.