Will Business Insurance Cover Damage Caused by Employees?
Here’s the quick answer: Yes, general liability insurance for small businesses usually covers damage your employees cause, provided they are acting within the scope of their employment. Let’s talk more about it.
Hiring a growing team means accepting entirely new risks. Even the most careful worker can drop a client’s expensive equipment or accidentally break a window. Knowing exactly how your coverage responds to these mishaps is important for keeping your daily operations running smoothly.
What Does Scope of Employment Mean?
Courts and insurers look at the “scope of employment” to decide if your business is liable for a worker’s mistake. That means employee damage will likely be covered if it falls into one of these categories:
- Actions taken while performing assigned job duties
- Events occurring during work hours or on behalf of the business
- Behaviors following specific company responsibilities
If an employee behaves negligently within the scope of their job duties, the business owner is typically held responsible for the resulting damage.
What General Liability Covers When Employees Are Involved
Accidents happen on the job despite your best efforts. Fortunately, general liability insurance for small businesses acts as a reliable financial safety net when an employee makes a costly error.
Your general liability insurance for small businesses typically covers:
- Property damage caused by employees to a third party
- Bodily injury to third parties resulting from employee actions
- Legal defense costs if your business is sued over the specific incident
When Employee-Caused Damage Is Not Covered
Every policy has limits. General liability insurance for small businesses will not rescue you from every single scenario, especially if the employee acted maliciously or far outside their assigned job description.
Insurers will typically deny claims for the following situations:
- Outside the scope of employment: Personal errands, off-the-clock behavior, or actions entirely unrelated to job duties.
- Intentional or criminal acts: Deliberate damage, theft, or fraud. According to the Association of Certified Fraud Examiners, organizations lose an estimated 5% of their revenue to fraud each year.
- Damage to your own property: General liability does not cover internal business losses. This falls under property or other policies.
Other Coverage You May Need
General liability insurance for small businesses only covers third-party claims. To build a thorough safety net, you should consider combining it with a comprehensive Business Owners Policy.
Additional coverage options to round out your protection include:
- Commercial property insurance: Pays for damage to your own building or equipment.
- Workers’ compensation: Covers medical expenses for injuries your employees sustain on the job.
- Commercial auto: Protects against accidents occurring while driving company vehicles.
- Employment practices liability: Defends against claims regarding wrongful termination or workplace discrimination.
How to Protect Your Business
Prevention is always cheaper than filing a claim. You can easily minimize the chances of an employee causing significant property damage or bodily injury through proactive, daily management.
Take these steps to protect your business in the future:
- Train employees properly on safety standards and equipment handling.
- Set clear job roles and responsibilities in writing.
- Review insurance coverage regularly to catch any potential gaps.
- Understand what your policies actually include before a costly incident occurs.
Frequently Asked Questions
What if an employee damages property off the clock?
If the worker is completely off the clock and not performing any duties for your company, your general liability insurance for small businesses will not cover the damage. The employee remains personally liable for their own off-duty actions.
Does general liability cover employee theft?
No, general liability insurance for small businesses does not cover employee theft or deliberate fraud. You will need a specific crime insurance policy or a targeted endorsement added to your Business Owners Policy to cover these intentional losses.
What if my employee causes damage while driving?
If the employee is driving a company-owned vehicle, your commercial auto policy handles the resulting claim. If they are driving their personal car for work errands, you need a hired and non-owned auto coverage add-on.
Am I liable if my employee damages a client’s property?
Yes, you are generally liable if the damage happens while the employee is actively performing their assigned job duties. Your general liability policy will typically step in to cover the cost of repairing or replacing the client’s property.
Evaluate Your Policy With Bethany Insurance
You can’t predict every mistake your employees might make, but you can control how well you prepare for them. A customized Business Owners Policy gives you immense peace of mind as your team expands.
Let Bethany Insurance Agency review your current coverage and build a plan tailored to your exact needs. Reach out to our dedicated team today to explore your options and keep your livelihood completely safe.
