DC Business Insurance 1 — Questions and Answers
Question 1: What does 'Commercial General Liability' (CGL) insurance cover for DC businesses?
- Physical damage to the business's own property
- Third-party bodily injury and property damage arising from the business's operations, products, or premises (Correct answer)
- Employee injuries in the workplace
- Professional errors and omissions by the business
Correct answer: Third-party bodily injury and property damage arising from the business's operations, products, or premises
CGL covers the business's legal liability for bodily injury and property damage to third parties from its operations, completed products, and premises.
A CGL policy provides three main coverage sections: premises and operations (injuries/damage from day-to-day business), products and completed operations (injuries from sold products after delivery), and personal and advertising injury (libel, slander, copyright infringement). It does not cover employee injuries (workers' comp) or professional errors (E&O).
Question 2: Which DC business insurance covers employee dishonesty and theft of company property by employees?
- Commercial general liability
- Crime insurance / employee dishonesty bond (Correct answer)
- Directors and officers (D&O) liability
- Employment practices liability (EPLI)
Correct answer: Crime insurance / employee dishonesty bond
Crime insurance (including employee dishonesty bonds or fidelity bonds) covers losses caused by dishonest acts of employees such as theft, embezzlement, or forgery.
Employee dishonesty coverage (fidelity bond) protects the employer from financial losses caused by fraudulent or dishonest acts of employees. DC businesses—especially those handling client funds—often require this coverage. It is part of a commercial crime policy.
Question 3: What insurance covers a DC law firm for claims arising from its attorneys' professional negligence?
- Commercial general liability
- Errors and omissions (E&O) / professional liability insurance (Correct answer)
- Directors and officers (D&O) liability
- Business income insurance
Correct answer: Errors and omissions (E&O) / professional liability insurance
Professional liability (E&O) insurance covers claims arising from professional negligence, errors, or omissions in the performance of professional services.
CGL policies exclude professional services errors. A law firm in DC needs professional liability (malpractice/E&O) insurance to cover claims by clients alleging the attorney's negligence caused them financial harm. The policy covers defense costs and settlements.
Question 4: Which coverage would a DC tech startup need to cover data breaches and cyber attacks?
- Commercial property insurance
- Cyber liability insurance (Correct answer)
- Employment practices liability
- Commercial general liability
Correct answer: Cyber liability insurance
Cyber liability insurance covers losses from data breaches, cyber attacks, ransomware, and related privacy violations.
Standard insurance policies exclude or provide minimal coverage for cyber events. Cyber liability policies cover first-party costs (data recovery, notification costs, business interruption from cyber events) and third-party liability (claims from customers whose data was breached). DC's high concentration of government contractors makes cyber coverage especially important.
Question 5: A DC restaurant is sued because a customer became ill from a contaminated meal. Which section of the CGL policy would respond?
- Premises and operations liability
- Products and completed operations liability (Correct answer)
- Personal and advertising injury liability
- Medical payments coverage
Correct answer: Products and completed operations liability
Claims arising from the restaurant's food products cause harm after the product is consumed—this falls under products and completed operations liability.
Products liability (under the products and completed operations coverage of a CGL) covers bodily injury or property damage arising from the insured's products after they leave the insured's possession. A foodborne illness claim against a DC restaurant is a classic products liability scenario.
Question 6: What is Directors and Officers (D&O) liability insurance designed to cover for a DC non-profit organization?
- Physical damage to the organization's property from a director's negligence
- Claims against directors and officers for alleged wrongful acts in their management capacity (Correct answer)
- Workers' compensation claims by employees reporting to a director
- Employee theft orchestrated by board members
Correct answer: Claims against directors and officers for alleged wrongful acts in their management capacity
D&O insurance covers defense costs and damages for claims alleging that directors and officers made wrongful management decisions or breached their fiduciary duties.
DC non-profits and corporations face potential lawsuits from donors, employees, or regulators alleging mismanagement, breach of fiduciary duty, or failure to comply with regulations. D&O insurance covers the personal liability of board members and executives for these claims.
DC Business Insurance 1
What does 'Commercial General Liability' (CGL) insurance cover for DC businesses?