Load up on Liability Insurance to Stay in Business
When purchasing liability insurance, business owners usually question how much insurance they need - how much is enough? The answer for one construction firm in Florida: At least $3.6 million.
Late in 2006, two temporary construction workers were electrocuted while working on a Miami apartment building. They were assisting the operator of a crane lifting large concrete beams when a cable on the crane touched a live electrical wire. The resulting shock knocked one of the men unconscious and induced a heart attack. The other man lost his right arm and two fingers on his left hand.
In reaction to their injuries, the two men sued the property owner; the general contractor on the project; the owner and operator of the crane; and the steel erection contractor who hired the crane operator. The court dismissed the case against the property owner, as well as a Workers' Compensation claim the heart attack victim made against the steel erection firm. The general contractor and the crane operator settled with them out of court, paying $2.1 million to the man with the lost arm and fingers and $300,000 to the man who had the heart attack. However, the man who suffered the amputations pursued a claim against the steel erector that went to trial.
The injured man's attorneys argued in court that the steel erector failed to:
- Properly supervise the crane operation
- Provide a safe workplace
- Create a safe system for operating the crane
- Warn the two men of the dangers they faced
- Hire a safe subcontractor
- Provide adequate tools
- Properly train employees
The defense's sole argument was that the responsibility for the accident was with the crane operator only, not with the steel erector. It was not a successful argument.
After six and a half hours of deliberation, the jury found the steel erector's negligence was responsible for the man's injuries. It awarded him $3.6 million. Unfortunately, the firm had a liability insurance policy in the amount of only $1 million. A search online indicates that this company no longer exists.
Only the owners of this business know why they decided to purchase that amount of liability insurance. They may have focused on the cost of the coverage, or they may have believed that their subcontractors' insurance would protect them. Regardless, this case illustrates why businesses should purchase as much liability insurance as they can afford, both commercial general liability and commercial umbrella policies.
Equally as important is verifying that the insurance will apply to the business's common operations. A high insurance limit does no good if the contract excludes coverage for an activity the business performs all the time.
Liability insurance can be a very expensive purchase. However, if a business wants to continue operating, it is prudent to buy as much coverage as possible.
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