Yes folks…you read it correctly… some woman..(and her lawyer) are suing the City of New York for $900 Trillion dollars….. First thought…some kooky lady…second thought some kooky lawyer…throw in a little greed and look what you get?

On second thought, this issue goes to the question that I get asked most often..in fact yesterday one of my clients called….. “How much coverage should a company like mine carry?”…. My usual answer is…”As much Liability coverage as you can afford”..

Liability (otherwise known as “Casualty” and yet other times “Third Party Coverage”)…protects you for being sued for a host of things almost always involving an allegation of negligence on your part…note the word “negligence”… for the court to hold you liable, the claimant must demonstrate that in some way you are negligent..

So, what is negligence?.. In very general terms..(I am not an attorney nor to I pretend to be one in real life)… negligence is defined as “that which a prudent person under ordinary circumstances does or fails to do that causes bodily injury or property damage to another…and if your in business providing a service or a product, the concept of “negligence” is heightened as you now have a greater responsibility to your client than a normal and prudent person… a certain level of expertise is expected of you…

Simple example is that you fail to shovel your sidewalk in the winter and someone slips and falls…. makes it worse if everyone else did shovel their sidewalk.. or in the case of a restaurant.. you serve food that by it’s preparation makes a customer sick…perhaps because the food was spoiled..Clearly, if you serve food to the public you have a greater responsibility to the public than if I had friends over for burgers on the grill.

So, I stand by my view that a business should buy as much liability as they can afford, with a little common sense thrown in. Size of the business and practicality must enter into the equation… and this is true of individuals as well. If your business grosses $600,000 per year and the premiums for insurance are $100,000 per year…your chances of making a profit are nil….so you’re protecting a business that isn’t going to be around long anyway….. In the end…most of my clients carry $1,000,000 per occurrence and $2,000,000 for all losses in a year, plus an additional $1,000,000 Umbrella…that’s just a word for an extra million of coverage…the bigger the business, generally the higher the limits of coverage… My largest account carries a $15,000,000 umbrella over their basic $1,000,000 liability limit…

The most important aspect of liability coverage is defense costs…in most liability policies (most I say…in insurance there are always exceptions) defense costs are outside the limits of coverage…and unlimited….and when you buy a general liability policy…you are essentially paying for legal service to defend plus judgement costs.

A final word… consider that one of your commercial (or personal) vehicles costs 18,000 and is destroyed in an at fault accident… could you survive financially, if you had to replace it without insurance?….. (that’s property insurance)…. now what if you killed someone in that same accident that was your fault, and you got sued for $2,000,000…. which would you rather have the insurance company protect you for?..

So, the question remains..How much shall I carry?…

“as much as you can afford” is the answer our Professional Liability carrier likes us to give..that way, we didn’t advise you to buy $5,000,000 only for you to get sued for $900 Trillion….and then your lawyer sues us for not giving you the right advice.