Business Law 101 /INSURANCE

Business Law 101 /INSURANCE

By Albert L. Kelley, Esq.

Insurance policies can be put into essentially five groups: business liability insurance, marine insurance, fire and homeowners insurance, automobile insurance and life insurance.  We will address each of these in order.

A comprehensive business liability insurance covers all damages that a business might incur through property damage or physical injury due to their actions or inactions.  This can include anything from product liability cases (where an item the company makes is defective and results in injury or property damage through its use) to employment liability (such as wrongful termination).  It can also cover issues such as sexual harassment, false advertising and trademark infringement cases.  Business can also obtain insurance for their directors and officers, to protect them from liability for the decisions that they make.  This is referred to as D&O insurance.   Malpractice insurance is another form of business liability insurance that protects professionals, such as doctors, accountants, and lawyers, in the event they make a mistake that results in a loss or injury to another.

Marine insurance protects against loss of property due to transportation.  The word “marine” is only partially correct as marine insurance can also involve transport across land (termed “inland marine insurance” which protects all goods transported by land, air or rail).  Ocean marine insurance protects items that are shipped against “perils at sea” and covers the four major categories of hull, cargo, liability and freight.  Hull insurance covers the vessel itself; cargo protects the owner of the items being shipped if they are lost at sea; liability covers damages caused by the ship itself; and freight insurance guarantees that the ship-owner will be paid for his services.

Fire and homeowners insurance protects the homeowner from loss or damage of their home.   Fire insurance is just what it sounds like: it pays the homeowner for any destruction or damage to their home as a result of fire.  Homeowner’s insurance protects the homeowner for accidents and injuries that occur on the premises.  It can also protect the homeowner from theft.

Automobile insurance is required in most states.  For example, in Florida, all drivers must have Property Damage Liability and Personal Injury Protection (PIP).  Property Damage Liability covers damages or injuries to others caused by the driver’s actions, and PIP covers injuries to the driver or other covered person.  In addition, there are other automobile insurances you can obtain, such as uninsured motorists (covers damage to you or your car are struck by a driver without insurance), and collision coverage (covers damage to the driver’s property).

Finally, we have life insurance.  There are three forms of life insurance: term, whole life, and endowment.  Term life is written for a specific period of time and terminates at the end of that period.  For example, you may purchase term life for a year.  If you die within the year, your beneficiaries receive the insurance benefits.  However, if you do not die, the policy ends and no benefits are owed.  Whole life provides protection for the person’s entire life.  They are covered from the time the policy is written to the day they die.  This also has an investment portion that can be cashed in by the insured before they die.  Endowment insurance is similar to term life in that it is only for a specified time; however, if the insured is still alive at the end of the term, the insured receives a benefit.  Some policies also offer a disability clause which pays the insured if they become permanently disabled and are no longer able to work.

It is important to remember that insurance is a contract.  As with all contracts, it is crucial to read it carefully before agreeing to its terms.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University.  He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice.  If you have any questions about legal issues, you should confer with a licensed Florida attorney.

 

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