Matching liability insurance limits with 100% of the financial exposure is difficult. For example, how do you establish the financial exposure for bodily injury and property damage caused by a vehicle? So many variables influence the outcome. On the other hand, property insurance limits can be precisely judged to determine the amount needed to insure 100% of the financial exposure. For example, the cost to rebuild a building can be precisely measured, though it is always good to factor in an allowance for inflating construction costs. Building a building does not involve a judge and jury!

Liability insurance is purchased to cover the cost of defending and settling lawsuits. Some familiar types of liability insurance coverage include Commercial General Liability, Commercial Auto Liability, Employment Practice Liability, Professional Liability/Errors & Omissions, Management Liability (D&O), and Umbrella/Excess Liability. Each of these coverage areas respond to specific circumstances.

Depending on the nature of the business and the risks associated with it, the typical business will look at several insurance coverage options. The financial exposure for each risk will vary, so the limit of insurance will vary for each coverage. For example, the financial exposure is different for an employment related claim, compared to an auto related claim, or compared to a premise liability claim.

Below are some questions to consider when deciding on limits of liability insurance:

• What is the maximum financial exposure (severity), from a single event, for which insurance is purchased?
• When determining the aggregate limit for all claims, how many occurrences (frequencies) should be contemplated?
• Are there multiple limits, and if so, to which financial risks do they apply?
• To achieve the limit level desired, should excess liability policies be purchased?
• Is the cost of defending a lawsuit included in the liability limit, a separate limit, or is it unlimited?
• Can I structure the insurance policy to have a limit apply to multiple areas of insurance?
• When structuring the limits of insurance, how do I maximize the premium I am paying?
• Am I more concerned about the cost of defending a lawsuit or the cost of settling a lawsuit?

The above questions are not all-inclusive. However, they create a great starting point when deciding the limits for liability insurance coverage.

Please keep in mind that as your business changes it is always prudent to reevaluate the limits of insurance. Whether your business is starting up or is strategizing to reach the next level, Riviera Insurance Services is always available to assist you with your risk management and insurance needs.

Rental car agencies offer coverage for “Liability” and for “Comprehensive and Collision.”  Riviera Insurance Services recommends including rental car liability on your Business Auto Policy (BAP) and purchasing rental car comprehensive and collision from the rental agency.

I am aware of a tragic auto accident in which an intoxicated employee killed several people while operating a rented vehicle. Rental companies simply do not sell high enough limits to protect a business for such an extreme event, however a business with a properly endorsed BAP, plus an Excess/Umbrella policy, will be better prepared to meet the full liability of such a costly accident.

For several reasons, RIS recommends purchasing the rental agencies “Comp and Collision.” A BAP may not provide some coverage the rental agencies require, such as loss of use and replacement cost. Coverage purchased through the rental agency will match up with the requirements to protect the rented vehicle.   In addition, a claim for even minor vehicle damages will appear on the business’ claims experience and loss report, thus negatively affecting their future BAP coverage and premium over the next five years. If the claim is covered through the rental agency insurance, it will not affect the BAP. Should damage occur to the vehicle, the “Comp and Collision” coverage purchased through the rental agency will allow the driver to ‘walk away’ from the time consuming hassle of the claim and paper work he/she may otherwise need to endure with the rental agency.

Many businesses that frequently use rental vehicles find it convenient and economical to prearrange rates and coverage with one or more favored rental agencies. The agencies may be willing to lower the rates when they are assured of repeat business. Maintaining a prearranged contract with a rental agency will eliminate the possibility of an employee making an incorrect choice when signing the rental agreement and will provided consistency in coverage.

The above advice applies to travel within the United States. For companies with travels outside of the US, we recommend purchasing all the insurance offered by the rental agency in addition to independently purchasing excess liability insurance to provide higher liability limits. As with other international business activities, there are often unique insurance features to consider when insuring your business and employees. Riviera Insurance Services is here to help you with all your insurance needs!