Almost every business needs specific insurance to meet legal requirements and cover accidental breaches of the law. Depending on your profession or business size, you might need coverage for your workers, business traveling or the professional services you offer. But understand that your insurance company likely won’t tolerate deliberate acts against the law.
What is statutory liability?
Statutory liability is a business’s responsibility for acts, omissions or damage related to a law. This liability often describes responsibility for workplace health and safety, vehicle, environmental or employment laws.
Statutory liability insurance is any type of insurance that covers liability if your business breaks a law, such as occupational health and safety regulations. This term doesn’t refer to one specific type of coverage. Instead, it can involve a mixture of insurance that covers different laws applied to your business.
What types of insurance cover statutory liability?
You can shelter your business from a variety of laws it’s responsible for, including:
Workers’ compensation pays employees’ medical bills if they get injured or become ill on the job. This insurance helps your business meet health and safety laws.
Vehicle liability pays for medical bills or to repair property damage if your company vehicle causes a car accident. This liability complies with state insurance requirements.
Employee benefits liability defends your business if employees claim it’s mishandled its employee benefits program. This protects your business and meets federal laws to provide employee health insurance.
Professional liability protects from lawsuits related to your profession, such as faulty tax advice from an accountant. Your local area may require professional liability or medical malpractice insurance based on your profession.
Medical malpractice protects the those in the medical industry from professional liability claims.
Media liability helps if your business violates advertising or copyright laws. It can pay for legal defense and settlements that come from media-related lawsuits.
Compare business insurance for statutory liability
What should I watch out for?
Certain details and exclusions to your coverage might influence your insurance choices. Those details include:
Fines or penalties in professional liability cases — Coverage for punitive damage depends on your professional liability policy.
Intentional or illegal acts — You may not receive protection if there’s proof your business intentionally dodged a legal requirement or performed criminal actions.
Limits on court settlements — Some states limit the amount a business can get sued for professional liability or medical malpractice, called tort reform. You might adjust your liability insurance to match these limits.
Terms and conditions vary among different insurers. To avoid misunderstandings, read your policy and ask clarifying questions when needed.
How do I manage risk for statutory liability?
A business can protect itself against statutory liability by developing a risk management plan, a step that can lower insurance premiums too. When lowering your business’s risks, you can:
Assess all of the relevant laws that apply to your business.
Consult a lawyer or insurance professional to identify weaknesses in your business’s protection.
Together with your professional adviser, determine the amount of damage your business could suffer.
Outline the particular actions or types of insurance required to bolster liability protection.
Train your staff toward skilled customer service and workplace safety to prevent liability claims.
Evaluate and monitor your business’s compliance with relevant laws.
Case study: Hillside Nature Retreat’s employee benefits
Hillside Nature Retreat’s former employee sues the business for failing to provide health insurance benefits that the employee could afford. Although the lawsuit had no grounds, Hillside still paid $30,000 to defend itself in court. However, employee benefits liability insurance covered the claim after Hillside Nature Retreat paid its $2,500 deductible.
Every business faces legal requirements, and failing to meet them could mean hefty penalties or expensive lawsuits by those affected. Consider which business insurance provider offers the best coverage for your company’s statutory liability.
Frequently asked questions about statutory liability
The statutory liability limits vary based on your state and the type of insurance you’re looking for. You might see liability requirements for commercial vehicle insurance, professional liability or medical malpractice liability insurance.
The statute of limitations refers to your state’s limited time frame for filing a legal claim against a person or business. The statute of limitations varies by state. It may start from the date of the damage, the date the person discovered the damage or the date the person should have reasonably discovered damage.
Strict liability means that a business can be responsible for consequences following their work or services, whether or not the actions meant any damage.
Sarah George is a writer at Finder who unravels complicated topics about insurance, business and finance. She's been wordsmithing for nearly five years, after earning an English education degree. Her insurance know-how has been featured on CarInsurance.com. You can usually find Sarah sipping hot tea and talking through movie plots in her downtime.
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