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Does Liability Insurance Cover Claim Investigations?

By December 8, 2021December 17th, 2021Insurance

man laying on back in painAll business owners strive to offer responsible, safe and satisfactory services for all of their clients. You do what you can to create a work environment that will foster honesty, creativity and, ultimately, growth and success. However, no matter how hard you might try, you cannot prevent the risk of something going wrong, and there might be a time where someone else’s problem is your fault.

When you are at fault for someone else’s losses, it is your business’s general liability insurance that can often help you cover the costs. However, it is sometimes hard to pinpoint whether you actually are at fault, and on the hook, for a third party’s problem. The good news is that your general liability policy can cover the costs of investigating this claim.

The Defense Component 

Liability insurance claims often arise out of lawsuits. For example, someone might sue you because they got hurt in your business, and demand that you pay for their medical costs. Your policy will be available to help you cover the costs of defending the lawsuit and paying the appropriate settlement.

Still, there are times when someone might make a liability claim against you that is completely unfounded, and you certainly should not have to pay a significant amount of money for something that is not your responsibility. When there is evidence that a claim is not your fault, your liability policy can provide the coverage for the costs to investigate this claim.

Ultimately, your general liability insurer wants to pay as little as possible for a liability claim. Therefore, the cost of investigating a claim and having it dismissed, while still expensive, will ultimately be less expensive than an eventual settlement. As a result, the insurer is often willing to cover the costs of speaking to witnesses, collecting data and uncovering the information that will lead to the eventual dismissal of your claim.

Still, there are a few things you need to know.

  • Your general liability insurance only applies for covered perils.
  • There are limitations to how much a plan will pay. Every policy has a maximum amount it will pay out for all costs.
  • It is generally up to the insurance company to determine if defense or an investigation is warranted. They may wish to avoid court by settling outright instead of investigating.

All in all, the goal of your insurer is to minimize the cost of a liability claim to both you and them, while still providing a third party with compensation when necessary. That’s why your insurance provider will be committed to helping you maximize your policy to your advantage both when you buy it and when making a claim. 

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