If you own a small business in the Last Frontier, this information will help you understand Alaska 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 Anchorage, Fairbanks, Juneau, Nome, Ketchikan, Sitka, Wasilla or anywhere else in the Land of the Midnight Sun, having sufficient commercial liability coverage is an important part of any small business plan in Alaska.
Fast Facts About Alaska Small Business
A small business is defined as any company with fewer than 500 employees. Small business is vital to Alaska’s economic well-being, accounting for more than 96% of all state employers. Of Alaska’s 68,200 small businesses in 2008 (the latest data available), 15,981 were small employers, accounting for more than 55% of the state’s private-sector jobs. Another 52,219 were one-person operations with no employees.
Source: SBA Alaska Small Business Profile 2011.
About Commercial Liability Insurance for AK Businesses
Commercial liability insurance (also called business liability insurance and commercial general liability insurance) protects your Alaska 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.
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.
Property Damage – damage done to another person’s property by you or an employee in the course of conducting your business.
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.
Alaska Minimum Business Insurance Requirements
Commercial Liability Insurance is not mandatory for businesses operating in Alaska. Alaska is a fault state with a pure comparative negligence system. Awards cannot exceed the injured party’s life expectancy in years multiplied by $8,000 or $400,000 (whichever is greater). If it is a severe disability, the award may be multiplied by the life expectancy in years by $25,000 or $1 million, whichever is greater. Alaska statutes of limitations are 2 years for general personal injury, product liability, slander/libel and wrongful death; and 10 years for fraud. Accidents and lawsuits (legitimate and frivolous) do happen in Alaska. If you own property or other valuable assets you would be wise to invest in sufficient commercial general liability coverage for your Alaska business to limit your risk exposure.
How Much Alaska Commercial Liability Insurance Should You Carry?
Each situation is unique, but as a general guideline, the type of Alaska business you operate or products you manufacture should determine how much Alaska 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
Alaska 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 Alaska Small Business
Alaska requires that anyone who employs one or more persons whether full or part time carry workers compensation insurance. Determining employee status uses the relative-nature-of-the-work test set out in Alaska Regulation 8 AAC 45.890. Exemptions include a sole proprietor with no employees, general partners, executive officers in nonprofit corporations, members of a member-managed LLC and several other areas specifically spelled out under the regulation. Executive officers in for-profit corporations may also elect to exempt themselves by filing a waiver.
Alaska 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.
Employee Disability Insurance
BOP – Business Owner’s Package
E&O – Errors & Omissions
EPLI – Employment Practices Liability Insurance
Commercial Property Insurance
Regulating Agency and References
Alaska Division of Insurance
This agency is responsible for regulating all insurance policies sold in the state, including commercial liability coverage. Visit their website at www.dced.state.ak.us. Write 9th Floor State Office Bldg., 333 Willoughby Avenue, 99801, Juneau, AK 99811-0805. 907-465-2515. Or Robert B. Atwood Bldg., 550 W. 7th Avenue, Suite 1560, Anchorage, AK 99501-3597. 907-269-7900. For in-state consumer services, call 1-800-INSURAK.
Alaska 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 Anchorage. Get the link to the Alaska 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 http://www.iii.org.