Four out of 10 small businesses are likely to experience a property or general liability claim in the next 10 years, according to an analysis of The Hartford's small business claims. Topping the list for the most common claim is burglary and theft. The most costly claim for a small business, however, is reputational harm, which includes libel, slander, and violation of privacy.
“An unexpected event happens more often than many small business owners realize,” said Stephanie Bush, the senior vice president of small commercial insurance at The Hartford. “It is important that a small business owner work with a local independent agent to find the right coverage to protect them at various stages of their business and minimize the impact of a potential claim.”
Based on a five year analysis of data from more than one million property and liability policies, burglary and theft impacted 20 percent of small business owners in the past five years. However, burglary and theft ranked lowest out of the top 10 most costly claims, averaging $8,000, compared to reputational harm claims, which cost $50,000 on average.
A claim payout on a reputational harm claim, covered through a general liability policy, can run much higher if a lawsuit is involved. If a lawsuit is involved, a general liability claim can average more than $75,000 per case to defend and settle. Based on The Hartford's claims history, 35 percent of all general liability claims result in a lawsuit.
Fire claims are ranked in the top five of both the most common and costly claims. The average cost for a fire claim is $35,000, impacting 10 percent of small business owners in the past five years.
| Top 10 Property and Liability Claims | ||||
| Most Common | Most Costly | |||
| Burglary & Theft (20 percent) | Reputational Harm ($50,000) | |||
| Water and Freezing Damage (15 percent) | Vehicle Accident ($45,000) | |||
| Wind and Hail Damage (15 percent) | Fire ($35,000) | |||
| Fire (10 percent) | Product Liability ($35,000) | |||
| Customer Slip and Fall (10 percent) | Customer Injury or Damage ($30,000) | |||
| Customer Injury and Damage (Less than 5 percent) | Wind and Hail Damage ($26,000) | |||
| Product Liability (Less than 5 percent) | Customer Slip and Fall ($20,000) | |||
| Struck by Object (Less than 5 percent) | Water and Freezing Damage ($17,000) | |||
| Reputational Harm (Less than 5 percent) | Struck by Object ($10,000) | |||
| Vehicle Accident (Less than 5 percent) | Burglary and Theft ($8,000) | |||
“A small business owner can take steps to avoid these types of claims,” said John Kinney, the chief claim officer at The Hartford. “By making simple modifications to operating procedures or following a few safety tips, a business can be better positioned to prevent accidents and property damage.”
Learn more: www.thehartford.com.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].