If you own a small business in the Michigan , this information will help you understand Michigan 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 Detroit, Lansing, Grand Rapids, Dearborn, Ann Arbor, Warren, Flint or anywhere else in the Wolverine State having sufficient general liability insurance is an important part of any small business plan in Michigan.
A small business is defined as any company with fewer than 500 employees. Small business is vital to Michigan’s economic well-being, accounting for over 98% of all state employers. Of Michigan’s 820,244 small businesses in 2008 (the latest data available), 179,525 were small employers, accounting for more than 51% of the state’s private-sector jobs. Another 640,719 were one-person operations with no employees.
Source: SBA Michigan Small Business Profile 2011.
About Commercial Liability Insurance for MI Businesses
Commercial liability insurance (also called business liability insurance and commercial general liability insurance) protects your Michigan 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.
Michigan Minimum Business Insurance Requirements
Commercial Liability Insurance is not mandatory for businesses operating in Michigan. Michigan is a modified comparative negligence no- fault state. The plaintiff who is 51% or more at fault cannot recover damages. Non-economic damages for general personal injury are capped at $280,000. If a design defect causes death or permanent loss of a major bodily function, awards are capped at $500,000. The statute of limitations for personal injury is 3 years for negligent conduct and 2 years for intentional conduct. Product liability statute of limitations are 3 years, unless a product was in use for more than 10 years, in which case strict liability will not be the standard. Accidents and lawsuits (legitimate and frivolous) do happen in Michigan. If you own property or other valuable assets you would be wise to invest in sufficient commercial general liability coverage for your Michigan small businesses.
How Much Michigan Commercial Liability Insurance Should You Carry?
Each situation is unique, but as a general guideline, the type of Michigan business you operate or products you manufacture should determine how much Michigan 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?
Michigan 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 Michigan Small Business
Michigan requires that anyone who employs 3 or more persons, whether full or part time, carry workers compensation insurance. Sole proprietors with no employees are not required to carry workers compensation. Members of LLCs, LLPs, partners, corporate offices and independent contractors are generally exempt. Other exemptions may apply. Contact the Michigan Department of Licensing and Regulatory Affairs Workers’ Compensation Agency for details. www.michigan.gov/
Michigan 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
Michigan Department of Licensing and Regulatory Affairs
This agency is responsible for regulating all insurance policies sold in the state, including commercial liability coverage.
Michigan 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 District Offices in Detroit and Grand Rapids. Get the link to the Michigan SBA at http://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/