Why General Liability Insurance Got Limited
Posted on July 23rd, 2011
If you own general liability coverage for your business, you have hopefully read it through. In reading it, you may have taken note of the various types of limits contained in it. A limit is a maximum amount of money that your insurance company is willing to pay under a certain circumstance. The most common types of limits are per-occurrence, which means per claim or related series of claims, and aggregate. The aggregate limit is the total amount of money your insurance policy is willing to pay out per year, regardless of the number of claims.
General liability insurance policies didn’t used to carry aggregate limits. Their only limits were per-occurrence. What changed all that was a series of issues in the 1980s which caused countless expensive claims to be lodged against insurance companies, costing them billions of dollars. One of those was asbestos. When it was discovered how dangerous asbestos was, the claims resulting from its use came in in spades and insurance companies suffered severe losses.
Problems with leaking underground storage tanks brought about massive claims on environmental damage, resulting in current limits on environmental protection. At the same time, other insurance companies worried about the then-unknown long term effects of microwave ovens and cells phones. Hence the decision to set aggregate limits. What used to be comprehensive general liability policies (comprehensive meaning that anything not specifically excluded was covered) turned into commercial liability policies, where careful exclusions and limits were set on nearly every kind of protection.
Another issue that triggered general liability limits was a rise in lawsuits for discrimination and sexual harassment. Previously, insurance companies would have to settle an unlimited number of such suits, which certainly didn’t encourage businesses to modify their practices. General liability limits are actually a good thing, because they prevent abuse of the system by lazy or negligent companies. Limiting the amount of money an insurance company has to pay out on a single policy means that your policy costs less. And provided that you take precautions and practice good business, you should always have enough insurance coverage for your needs.
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