This article will attempt to define common terms used in the insurance industry, which may be of interest to small business owners. Insurance can be divied into two types, indemnity insurance and liability insurance. Indemnity insurance is insurance which provides reimbursement for loss. For example, insurance which pays the policy holder for damages caused by a fire to his own property is indeminity insurance. In contrast, liability insurance is coverage that provides reimbursement of cover suits against the insured for such damages the insured causes to others. The coverage provided by the typical auto policy for injuries caused by the negligence of the driver/ policy holder, is liability coverage. The distinction between indemnity and liability coverage is mirrored by the distinction between first party coverage and third party coverage. First party coverage covers the insured against loss to his own person or property, and third party coverage is insurance which pays others who are harmed by the insured's activities.

Commercial General Liability Insurance is liability insurance which covers the operation of a business. Acts related to the business which create liability may be covered under such insurance. CGL insurance is usually sold to a business as part of a package of insurance products. The typical CGL policy will cover damages which can be catagorized as either "bodily injury" or "property damage." These are defined terms within the policy and do not necessarily have their ordinary meaning when it comes to denial or acceptance of coverage.

CGL polices specifically do not cover employment related claims such as wrongful termination and sexual or racial harassment. There is a separate policy called Employment Practices Liability Coverage which covers these types of claims.

Directors and Officers Liability Insurnce (D and O) is insurance which insures corporate officers and directors against claims based upon negligence and failure to disclose. Errors and Omissions insurance is insurance which indemnifies the insured against loss sustained by reason of his own errors or omissions.

There are at least three instances in the life of a business wherein insurance should be dealth with. First, business owners should analyze the need for insurance at the time the business venture begins operation. Next, it is important to periodically review insurnace coverages to insure that they are updated to the needs of a business as it changes over time. Lastly, any lawsuit or potential lawsuit against a business should cause the owners or other responsible persons to check for the existence of coverage, because most policies require that the insured give notice of a claim within a specified period.

Copyright, 2003. The Gauss Law Firm.