If you own a small business in the Yellowhammer State, this information will help you understand Alabama Commercial Liability insurance and protect your business and your personal assets from legal claims and settlements that can spell financial ruin. Whether you work in Birmingham, Huntsville, Montgomery, Mobile, Tuscaloosa or anywhere else in the Heart of Dixie, having sufficient general liability insurance is an important part of any small business plan in Alabama.
A small business is defined as any company with fewer than 500 employees. Small business is vital to Alabama’s economic well-being, accounting for more than 97% of all state employers. Of Alabama’s 388,853 small businesses in 2008 (the latest data available), 77,465 were small employers, accounting for more than 49% of the state’s private-sector jobs. Another 311,388 were one-person operations with no employees.
Source: SBA Alabama Small Business Profile 2011
About Commercial Liability Insurance for AL Businesses
Commercial liability insurance (also called business liability insurance and commercial general liability insurance) protects your Alabama business from financial loss resulting from claims of injury or damage cause to others by you or your employees. A policy typically covers:
Bodily Injury – physical damage to a person other than an employee at your place of business and injuries caused by you or an employee at a client’s home or work place.
Property Damage – damage caused by you or an employee to someone else’s property.
Personal Injury – libel, slander, copyright infringement, invasion of property or privacy, wrongful eviction, false arrest and similar acts that cause damage to a person’s reputation or rights.
Advertising Injury – losses caused by your advertising
Legal Defense and Judgments – costs to defend against real and frivolous suits and judgments up to the limit of your coverage. Note this generally does not include punitive damages for negligence or willful misconduct.
Alabama Minimum Business Insurance Requirements
Commercial Liability Insurance is not mandatory for businesses operating in Alabama. Alabama is a fault state with a pure contributory negligence system, meaning a plaintiff can only receive compensation if he or she shares no liability for an accident. Non-economic personal injury awards in Alabama are limited to three times damages, up to a cap of $1.5 million. Accidents and lawsuits (legitimate and frivolous) do happen in Alabama. If you own property or other valuable assets you would be wise to invest in sufficient commercial general liability coverage for your Alabama business to limit your risk exposure.
How Much Alabama Commercial Liability Insurance Should You Carry?
Each situation is unique, but as a general guideline, the type of Alabama business you operate or products you manufacture should determine how much Alabama commercial general liability insurance you need. A good rule of thumb for most small businesses is between $500,000 and $1 million. However, if yours is a high-risk business such as the building trades or has a high volume of interaction with the public such as a restaurant or retail business, you should consider increasing your coverage. Note that if you operate out of your home, your homeowner’s or renter’s insurance has limited coverage for business liability and loss.
How Are Premium Costs Assessed?
Alabama commercial liability insurance premiums are based on a number of factors including the types of service or products you provide, the number of people you employ, how long you’ve been in business, and your claims history. Coverage is typically capped at a specific dollar amount for your policy period.
Other Insurance to Consider for Your Alabama Small Business
Alabama requires that anyone who employs five or more persons (other than contractors),whether full or part time, including officers or corporations or members of an LLC, carry workers compensation insurance. Sole proprietors with no employees are not required to carry workers compensation.
Alabama requires that all drivers carry minimum automobile insurance. If you use your car or truck for business, it is recommended that you purchase a commercial vehicle policy.
Alabama Department of Insurance
P. O. Box 303351
Montgomery, AL 36130-3351
Alabama Small Business Administration
The SBA is an independent agency of the federal government created to aid, counsel, assist and protect the interests of small business concerns and maintains a District Office in Birmingham. Get the link to the Alabama SBA at www.sba.gov.
National Association of Insurance Commissioners (NAIC)
This is an organization of insurance regulators from the 50 states, District of Columbia and the five U.S. territories. NAIC provides a forum for the development of uniform policies when appropriate. It also offers an online form for filing complaints, reporting suspected insurance fraud and downloading key financial information about insurance carriers at www.naic.org.
Insurance Information Institute (III)
This organization’s mission is to improve public understanding of insurance – what it is and how it works. Visit III at www.iii.org.