When creating the game plan to enter the US marketplace, governmental regulation, contractual compliance and managing risk need to be included in the strategic planning process. The focus on regulation, compliance and risk primarily deals with mitigating exposure to lawsuits. The following are 7 top liability exposures when marketing and selling products and services to US and Canadian businesses and consumers.
1. General Liability
The business owners package insurance policy is the cornerstone of most commercial insurance portfolios. It contains general liability insurance which covers bodily injury and property damage claims within the course of the business operation. For a retail operation, claims from customers for slips and fall injury and property damage to a rented premises are the most common exposures.
2. Products Liability
When your product or service is used, there is a chance that bodily injury or property damage could occur, resulting in a lawsuit. The odds of being sued are greater in the US for several reasons. First and foremost, there are more litigation attorneys per capita in the US than in most other countries. And courts historically have ruled in favor of consumers regarding product safety and standards of care. This trend continues to increase, both in frequency of claims and severity of judgements. The past several years has seen a rise in “nuclear verdicts” that have resulted in some of the largest payouts ever seen in the insurance industry.
3. Cyber/Privacy Liability
Whenever personal identifiable information is shared, there is risk that this data can be stolen by cyber thieves and sold on the dark web. Ransomware links are ever present within the hundreds of emails received by individuals in a normal business day. Email hacking in the form of direct solicitation to your clients under your forged signature is growing. In the US several high-profile companies that have experienced data breaches which have resulted in substantial costs to remedy the situations. In addition, many US federal, state and local governmental regulations focus on the standard of care businesses are required to follow when in possession of confidential data. Failure to protect this client/vendor/employee files could result in fines to your operation, not to mention the potential loss in confidence by consumers.
4. Workers Compensation/Employers Liability
Employers are responsible by law to cover the medical expenses and lost wages if their employees are injured or become ill as the result of a job-related accident or exposure. There is no cap to the amount the employer is liable to pay an injured employee, either in expenses or lost wages. Some employees disabled on the job have been collecting workers compensation disbursements for 30 years and longer. Exposure is compounded when family members of employees charge the employer of putting their injured/sick relative in an unsafe work environment. Employer laws that apply in California will often be different in Texas. It is important to understand the nuances of the locality where you intend to have employees or conduct business.
5. Auto Liability
Auto liability insurance helps to cover the cost of bodily injury and property damage that results from your business use of automobiles. You will need this coverage whether you have a fleet of vehicles that transports goods or provides services or if you have employees or executives that drive their cars for work. In the US each state sets its own minimum liability requirements for auto insurance and this coverage. Purchasing adequate limits will help protect your assets from being affected in the event of an adverse loss.
6. Directors & Officers/Employment Practices Liability
Many key executives working in corporations consider directors and officers liability insurance a necessity. D&O liability insurance protects the individual and the operation against economic malfeasance claims from investors, employees, and vendors in the course of their managerial duties. Employment practices liability insurance triggers coverage for claims by employees of harassment, discrimination, retaliation, and unfair hiring/termination. These policies are listed together in this section because many employee lawsuits name individual managers as well as the company within the legal complaint.
7. Errors & Omissions Liability (E&O)
E&O, also known as malpractice insurance or professional liability insurance, covers a business against claims due to wrongful acts resulting in an economic loss to the injured party. This wrongful act could take the form of grave mistakes within a provided service, or the failure to perform a contracted service. These insurance policies are customized by service performed within different professions and industries.
The above represents some, but not all the exposures and compliance issues facing companies conducting business in the United States. These seven areas are at the top for many business owners…especially those who have expanded into the US marketplace. The main driver of these, as well as other liability exposures, is the litigious legal environment in the United States. The number of litigating attorneys per capita is exponentially higher in the US as compared with most other countries. With the opportunity of growth, by leveraging the robust US consumer and commercial markets, comes the responsibility to evaluate optimal ways to mitigate and transfer risk. Professional insurance evaluation by a broker that works with multi-national companies is one key component to consider.
- Sal Provenzano, Business Development, RAND INSURANCE, INC. | firstname.lastname@example.org
Compliments of Rand Insurance, Inc. – a member of the EACCNY.