What is property damage liability? A small business owner’s guide

As a business owner, the last thing you want is to damage a client’s property. But if life has taught us anything, it’s that accidents can happen. That’s why your company needs property damage liability—a policy can protect you from various claims, including property damage.

What counts as property damage for a small business owner? Let’s look at an example: Let’s say you run a profitable photography small business. Last month, you were setting up your tripod to photograph a wedding when it slipped out of your hands and toppled into the cake. Luckily, no one was hurt—but the bride filed a claim for property damage.

Property damage liability is part of the coverage you get from general liability insurance. Here’s how it can help protect you and your company’s bottom line.

What is general liability insurance?

If you’ve heard of general liability insurance or commercial general liability insurance, rest assured they’re the same thing. Coverage comes as a stand-alone policy or bundled together with a Business Owner’s Policy (BOP). But what is it, exactly?

General liability insurance acts as a buffer between you and costly claims that can come up during normal business operations. For example, if a customer gets hurt after slipping and falling in your store or you accidentally damage a customer’s antique vase while working in their home, general liability can kick in to cover medical expenses and compensation for the loss of their damaged items.

You should also know that property damage liability for small businesses is not the same coverage as what you get in your auto insurance policy. Yes, your car insurance company and small business insurance can both include property damage. But, while your car insurance policy can cover car accidents, it does not cover claims relating to your business.

Other scenarios covered by general liability insurance

You know your company needs small business insurance protection, but you might not know if general liability is right for you. The good news is that it’s an excellent coverage type for most small business owners.

So, what does general liability cover? A typical policy includes:

• Bodily injury liability coverage: Slips and falls or other accidents
• Property damage liability coverage: Damage to a client’s property or belongings
• Reputational harm: Slander or libel
• Advertising injury: Using copyrighted artwork in a marketing campaign

Keep in mind these are just examples of what general liability might cover. While the law doesn’t require you to have business insurance, general liability is essential coverage that can protect your company from claims and set you up for success in the future.

It’s important to note that insurance coverage applies to third-party claims only (claims outside of your business). So, if an employee is injured on the job and files a claim, general liability wouldn’t cover it—that’s a situation where workers’ compensation would come in handy.

What happens if someone sues my business for property damage?

First, let’s talk about the difference between a claim and a lawsuit. General liability insurance can protect you in both scenarios, but the two are very different:

• A liability claim suggests you or your business made a mistake but only involves insurance companies.
• A lawsuit typically comes after a claim if the companies can’t agree on a satisfactory solution.

Although not all lawsuits end up in court (some can be settled before a big legal battle), they shouldn’t be taken lightly—you can lose a substantial amount in litigation.

If someone sues your business for property damage, you should do two things right away: Contact your insurance company and consult an attorney. A general liability insurance policy typically acts as the first line of defense for small business owners against lawsuits.

If you receive suit documents, your first call should be to your lawyer. They can review the paperwork, including the Summons and Complaint. The Summons and Complaint are the documents that begin a lawsuit.

You’ll likely have up to 23 days to respond to the filing. That’s barely 3 weeks, so don’t ignore the Complaint or put off contacting a lawyer. Additionally, if the person filing the suit is a regular customer, neighbor, or friend, you may be tempted to reach out to them—but don’t do that.

Make sure you follow your lawyer's advice. An experienced litigation attorney can guide you through the process. You can also call your insurer to find out if your general liability policy covers the situation. Typically, your insurance covers:

• Repair costs for property damage
• Replacement expenses for damaged items
• Medical bills for bodily injury liability insurance claims
• Advertising injury claims
• Administrative expenses
• Court costs, judgments, and settlements

Your general liability can pay for property damage and other covered claims up to your liability limits. So, how much property damage liability do you have? It depends on your policy. Ask your insurer what your coverage limit is.

Remember that general liability doesn’t protect against everything. You may need different types of liability insurance for the best coverage. Depending on your industry and chance of property damage, you may want to purchase umbrella insurance. Talk to your insurance agent about an umbrella policy to get a higher limit on your liability insurance coverage.

Who needs property damage liability insurance?

As a business owner, you need to protect yourself and your business from liability. A single property damage claim could result in a lawsuit that drains your company’s finances. But not every business needs property damage liability insurance.

Still, property damage coverage is bundled with general liability insurance, including various liability protections that most businesses could benefit from. Here's when you should consider a policy:

• You provide services or products that require you to be on or near client property.
• You have an office, store, or public location open to customers, clients, or vendors.
• You advertise or market your business.
• You use social media (professionally or personally).

So, how can you get the coverage you need? Huckleberry can help you protect your business with affordable small business insurance whether you’re in Alabama, Texas, Florida, Michigan, or somewhere in between. Get an insurance quote completely online in minutes.