A business owners policy (BOP) is a type of package policy that combines coverages for small businesses. There are a variety of coverages available under this type of policy that can be adjusted according to a business’ needs.
Basic BOP Coverage
A basic business owners policy covers two areas:
· General Liability: General liability covers basic claims against the business concerning bodily injury, property damage and personal or advertising injury. This insurance can cover medical bills for someone injured on your business’ property as well as lawsuits filed against the business. Personal and advertising injury covers claims concerning libel, slander, copyright infringement, malicious persecution and more.
· Commercial Property Insurance: Commercial property insurance covers the physical location of the business and its contents in case of damage caused by fire, wind, hail, lightning, smoke, theft, vandalism and more.
While a part of BOPs covers expenses such as medical bills, a larger portion can cover lawsuit costs. This includes settlement expenses, court fees, defense costs and more.
How Does BOP Compensation Work?
When a lawsuit is filed against your business, you may have the option to file a claim with your BOP. Once you file a claim, a claims adjuster from the insurer will work to calculate how much compensation you may receive based on the expenses incurred (such as the expenses you must pay for defense costs, etc.) and the limits of your policy. This compensation may be paid as the expenses occur and will only be provided once the claim is approved. Denied claims on a BOP will not receive compensation.
What Lawsuits Do BOPs Cover Against?
While a basic BOP only covers general liability, business owners can add different coverages to your policy. There are several liability options to protect a business from a range of lawsuit risks. Useful liability policies that can protect your business against a lawsuit include:
Where general liability covers non-professional negligence, professional liability covers claims against your business concerning professional negligence. If your business or employees offer a specialized service that may cause a client to lose money, you will need professional liability insurance. This insurance covers claims against the business where a professional’s actions cause a client to lose money. Professionals covered under this insurance generally include:
· Medical professionals
Directors and Officers Insurance
Directors and officers insurance (D&O insurance) covers a business’ key employees in case of claims from multiple sources. Claims filed against your business’ employees may come from clients, shareholders, employees, potential employees, vendors, spouses and more. Generally, these lawsuits concern the director’s or officer’s actions while serving on a board of directors or operating under the business’ name. This includes claims of fraud, misuse of company funds, theft of intellectual property, poaching competitor’s customers, misrepresentation of company assets and more.
Employment Practices Liability Insurance (EPLI Insurance)
Employment practices liability typically comes as part of a D&O insurance policy, although it can be purchased on its own. This covers lawsuits filed against the business concerning the business’ (or certain individuals in power) employment practices. Possible lawsuits include discrimination, sexual harassment, wrongful hiring or firing, failure to promote and more.
Cyber Liability Insurance
Cyber liability insurance covers claims against the business concerning electronically stored information that is lost, damaged or breached. It can cover expenses related to a recovering information, PR costs to recover from fallout after a breach, and compensation for cyberattacks in which information is held hostage for money.
Product Liability Insurance
Product liability covers bodily injury and property damage that may occur as a result of products offered or manufactured by the business. If your business manufactures items that in return injure a customer, this insurance can cover medical bills and protect your business from an impending lawsuit.
Liquor Liability Insurance
Liquor liability insurance is geared specifically for businesses that serve or manufacture alcohol. While most liability insurance policies cover claims concerning the business’ direct actions, liquor liability insurance covers indirect actions. For example, if a patron drinks and leaves your business location and ends up injuring someone, liquor liability insurance can cover your business in case expenses for the damages and injury falls back on your business. A business may be blamed for overserving, which can turn into an expensive lawsuit.
Umbrella Liability Insurance
Umbrella liability insurance is a blanket policy that fills in the gaps left by any of your other liability insurance policies. This includes the above liability coverages as well as liability that may be on your commercial auto insurance policy. If one of your liability insurance policies reaches its limit for a claim, this insurance will step in to cover the remaining expenses.