Insurance should never be overlooked as a means of protection. Insurance will cover many claims of a "tortious" nature (slip & fall, negligence, etc). One of the benefits of insurance is the duty of an insurance company to "defend" (pay for your legal defense) is much broader than its duty to "indemnify" (pay for a judgment against you). Legal fees alone can be painful, especially for frivolous lawsuits, even if you win in court. The following is a brief summary of available insurance for your protection:

General Business Liability Insurance

This type of insurance can be reasonable and will cover a wide range of lawsuits from personal injury claims to copyright violations. It may be worthwhile to keep an insurance policy with a large deductible and high limits to substitute for having to keep excess capital in your corporation.

Malpractice Insurance

Lawyers, doctors, engineers, architects, real estate brokers and other professional can obtain malpractice or "errors & omissions" insurance. These policies are often "claims made"; that is, it only covers claims made in the year the policy is in effect. Regular liability insurance will cover you if you are sued years later for events that occurred during the policy period. In many states, the statute of limitations for malpractice is six years, so a lawsuit initiated years later will not be covered if you do not maintain continuous coverage.

Director Liability Insurance

Directors and Officers Liability Insurance provides financial protection for the directors and officers of your company in the event they are sued in conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and Omissions policy. Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, and is where the majority of your exposure will be.

Umbrella Liability Insurance

An umbrella policy is one that kicks in after all other underlying coverage is exhausted. For example, if you have a general liability policy with $100,000 and a judgment is rendered against your corporation for $500,000, the umbrella policy kicks in the extra $400,000. Umbrella insurance does not cover other claims that are otherwise not insured (e.g., breach of contract claim). Umbrella policies are quite reasonable, and can cover your business for up to several million dollars.

Extended Homeowner's Insurance

A typical homeowner's policy will cover basic liability claims against you regarding the property. It will not cover general liability claims unrelated to your property. Review your policies with your insurance agent as to coverage issues and policy limits.