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Home > Blog > Why You Still Need General Liability Insurance, Even As A Corporation
WEDNESDAY, JULY 21, 2021

Why You Still Need General Liability Insurance, Even As A Corporation

Many people think of having a corporation as having a guard against liability. This is partially true, but there are still reasons to have general liability insurance as a corporation. a person standing in a kitchen

Here's what you should know. 

A Corporation Can Be Sued 

Having a corporation just means it's harder to sue you personally. The corporation itself could still be sued. That means if someone wins a personal injury claim against your corporation and you don't have general liability insurance, you would need to pay them from your corporate bank account or sell off your corporation's assets to get the money you have to pay. 

You should also be aware of the fact that many states have laws that say a corporation can't represent itself in court and must have a lawyer. If you're the main shareholder and aren't a licensed attorney in that state, you'd need to hire one to defend you in a lawsuit. Your general liability insurance will typically cover your legal defense costs. 

You Can't Just Start Over 

You might think if your corporation gets sued, you could just close it down and start a new one. But this is not the case. 

First, the person suing you could still win the rights to all of your cash and business equipment. Second, there are laws to protect against this exact scenario. If the court orders your corporation to pay $500 per month until you pay off the judgment, you can't just open a different corporation doing the same thing. The court order would apply to the new company. 

You Can Be Sued Personally 

Assume you own a barbershop that's a corporation and a barber cuts off a customer's ear. The customer has the right to sue both the barbershop and the individual barber personally. Even though the company is a corporation, the individual person was still negligent. The good news is that since it was a business activity, your general liability insurance company will generally settle the entire lawsuit. 

Piercing The Corporate Veil 

Piercing the corporate veil means a judge can allow someone to sue you for something a corporation would normally protect against because you didn't follow the corporation rules properly. For example, if you didn't have a separate corporate bank account, the judge might say you weren't actually acting as a corporation and shouldn't get that protection. 
Posted 2:42 PM

Tags: general, liability, insurance, commercial, coverage
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