If you own a small business in Arkansas, this information will help you understand Arkansas 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 Little Rock, Hot Spring, Conway, Fayetteville, Jonesboro, Fort Smith, Texarkana, or anywhere else in the Natural State, having sufficient commercial liability coverage is an important part of any small business plan in Arkansas.
Fast Facts About Arkansas Small Business
A small business is defined as any company with fewer than 500 employees. Small business is vital to Arkansas’s economic well-being, accounting for more than 96% of all state employers. Of Arkansas’s 241,316 small businesses in 2008 (the latest data available), 51,035 were small employers, accounting for more than 48% of the state’s private-sector jobs. Another 190,281 were one-person operations with no employees.
Source: SBA Arkansas Small Business Profile 2011.
About Commercial Liability Insurance for AR Businesses
Commercial liability insurance (also called business liability insurance and commercial general liability insurance) protects your Arkansas 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.
Arkansas Minimum Business Insurance Requirements
Commercial Liability Insurance is not mandatory for businesses operating in Arkansas. Arkansas is a modified comparative fault state. This means the injured party can only recover if he or she is 49% or less at fault. Since 2003, Arkansas has required clear and convincing evidence before punitive damages can be recovered. They also capped punitive damage awards at $250,000 or three times the compensatory damages up to $1 million. The statute of limitations for any personal injury suit and products liability is 3 years. Accidents and lawsuits (legitimate and frivolous) do happen in Arkansas. If you own property or other valuable assets you would be wise to invest in sufficient commercial general liability coverage for your Arkansas business to limit your risk exposure.
How Much Arkansas Commercial Liability Insurance Should You Carry?
Each situation is unique, but as a general guideline, the type of Arkansas business you operate or products you manufacture should determine how much Arkansas 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
Arkansas 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 Arkansas Small Business
Arkansas requires that anyone who employs three or more persons, whether full or part time, carry workers compensation insurance. If you are engaged in any contracting business with two or more employees (counting the owners as an employee), you must carry workers compensation. Sole proprietors or partners of a partnership who devote full time to the business are considered employees and must carry workers compensation or apply for a certificate of non-cover with the Arkansas Workers Compensation Division. Farm laborers and real estate agents are exempt.
Arkansas 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
Arkansas Insurance Department
This agency is responsible for regulating all insurance policies sold in the state, including commercial liability coverage. Visit their website at www.insurance.arkansas.gov Call 501-371-2600. Or write 1200 West Third St., Little Rock, AR 72201-1904.
Arkansas 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 at the University of Arkansas in Little Rock, as two field offices in Fayetteville and Jonesboro. Get the link to the Arkansas 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.