Insurance 101 for Startups and Small Businesses: Policies, Tender, and an Insurer's Duty to Defend and/or Indemnify
This week, our firm is excited to collaborate with guest blogger, Sheena Fitzpatrick of Walsh Carter & Associates, LLC, based in San Francisco. Sheena is an insurance broker who routinely procures insurance for her startup and small business clients.
We met Sheena at a BNI meeting in San Francisco and instantly connected. We were so grateful when she generously agreed to contribute to our firm’s blog. In this blog article, Sheena discusses the types of insurance that business owners may want to purchase when starting their business. Below Sheena’s discussion regarding policies, we generally discuss the process of tendering a claim or lawsuit to your insurers, and an insurer's duty to defend and indemnify your business.
Typical Insurance Policies for Emerging and/or Small Businesses
By: Sheena Fitzpatrick of Walsh Carter & Associates, LLC
There are many things to consider when deciding to open a new business. Whether you are deciding to open a new construction company, an accounting firm, or a vegan bakery, one thing is certain -- you should know your industry, the types of typical risks your industry typically encounters, and how to go about limiting those risks for your business.
The entire premise of insurance is to protect you against the uncertainty of life. Running a business is no different, as the complexity of your company becomes more enriched so does the need for your protection. Know the "must-haves" of insurance policies to help set your business up for success: what they cover; who they cover; and why you may need it, generally speaking.
Employment Practices Liability Insurance ("EPLI")
Directors & Officers ("D&O")
Commercial General Liability ("CGL")
Tendering a Claim or Lawsuit and the Insurer's Duty to Defend and Indemnify
By: Smith Shapourian Mignano LLP
Tendering a Claim or Lawsuit
Having insurance in place is especially crucial in case your business is ever sued. Subject to coverage concerns, your insurance carrier may cover your defense costs in a lawsuit and/or indemnify your business for any losses arising from a lawsuit. For this reason, it is important to let your carrier know when your business is has been sued. The most efficient way to do this is to tender the claim or lawsuit directly to your carrier(s). If you’re uncertain how to go about doing this, you may choose to send the claim or lawsuit to your insurance broker and ask the broker for assistance in tendering the claim to the appropriate carrier(s).
The Insurer’s Duty to Defend and Indemnify
As a general rule of law, liability insurance usually imposes two separate obligations on the insurer:
The insurer’s duty to defend is generally determined from all of the information available to the insurer at the time of the tender of the defense, although later developments may impact the insurer's duty to defend. The insurer’s duty to defend is broader than the duty to indemnify, and a bare "potential" or "possibility" of coverage is all that is necessary to trigger the duty to defend.
The duty to defend arises when the insured tenders defense to the insurer either: (1) formally, when the business delivers a copy of the claim or lawsuit to the insurer; or (2) constructively, when the business may not have actually provided the insurer with a copy of the claim or lawsuit, but the insurer had reason to know of the claim or lawsuit against the insured anyway.
Smith Shapourian & Mignano, LLP has acted as both insurance defense counsel and coverage counsel in the past, and is familiar with the process of tendering a claim or lawsuit to your insurance carrier(s). We are available to assist your business during this process and/or with disputing or litigating a denial of coverage under your business’ insurance policies. Feel free to contact us to learn more.
This blog does not constitute solicitation or provision of legal advice, and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter in a timely manner, as statutes of limitations may bar your claim.