How much of a risk am I taking? I plan to go to arts and crafts shows and sell hiking sticks that I make by hand. The sticks are strong, and I’m not that worried about them failing and causing someone to fall, but if someone falls off a mountain their next of kin might try and sue me for damages?
Should I buy business liability insurance just in case, or would it be a waste of money?
If you have an actual, legitimate business, you should probably have insurance. People will sue you for pretty stupid stuff. Things that if they did on their own they wouldn’t think twice about it, but since they did it with something of yours they’ll sue you for it.
We’ve had people trip on their shoelaces…that’s a $30,000 payout. Someone caught their foot on a shopping cart…$30,000. One guy literally just walked into a sign and I shit you not he put his hand out and said “I hurt myself, what are you going to do for me” he clammed up real fast when we started to call 911" Confused, he asked why we were calling 911, but we explained that if he hurt himself bad enough to want something for free, surely he wouldn’t mind if we called the paramedics down to come check him out. That stopped that one.
Oh, and the endless stream of people that call and say “I just (like 5 minutes ago) had lunch and now I have a stomachache, I think I have food poisoning”…well go to the hospital then, call me if it’s positive for something.
Insurance is about transfer of risk. The risk of someone prevailing in court against you is seemingly small; the risk of someone suing you because they fell down a hill is substantially higher.
And that is an aspect of general liability insurance that most people don’t know: the policy includes a “duty to defend”. If you do get sued, the insurance company has an obligation to defend you, up to the limits of your policy.
If you are operating as a sole proprietorship, and have homeowner’s insurance, you might check into getting an umbrella policy; these might run around $200-300 for a $1 million limit. But first check to see if they would cover you in this situation; they may not, since it is a business operation.
An actual business GL policy might run $500-1000 annually for a $1 million limit, given that you have no (or very little) premises exposure.
Something else, at my store we work with an insurance broker. This is someone who, each year, checks our rates against several companies that he works with and shuffles us around to the best company. But he’s more then that, when there’s an issue, we hand it off to him. He’s our point of contact, he’s the one that says “This guy’s looking for a handout, don’t even return his call and you’ll never hear from him again” or “Don’t worry, I’ll take care of it, give me his number” and it’s out of my hands. It’s like having a lawyer for your insurance. Someone who knows what they’re doing instead of me floundering around trying to decide what to do each time a customer calls me and wants money.
But you’re probably not quite big enough for that.
In addition to the excellent advice already provided, you can consider how your business is organized. If dolphinboy as an individual sells me a faulty stick I can try to recover damages from your personal bank account and your beloved vacation home and your portfolio of stocks. If dolphinboy’s sticks, inc sells me a dangerous stick my recourse is with dolphinboy’s sticks, inc. If things take off you might have a $1,000,000 in stick inventory, and it would still really suck if dolphinboy’s sticks, inc lost a lawsuit. So the corporation would still want the business liability insurance, but to protect its stick inventory / business cash on hand, etc, not your personal assets.
I’m a businessman not a lawyer or insurance expert. I don’t know much about whether an extremely small business organized in a form with liability limitation can do things to expose their proprietor to personal liability. In other words, my advice should be pretty broadly construed.
I think there is also a relationship between this phenomenon and the rise in items sold for “decorative” uses only.
In other words, this is a lovely decorative rocking-horse that you’re buying to decorate your room with, and if your two-year-old uses it and falls off of it, that’s not what it was intended for, so you’re out of luck.
I have NO IDEA if this actually works, but apparently a shitload of people on Etsy and craft fairs think so.
I sell my artwork on the street as a licensed vendor. I must have liability insurance to get a decal from the city. Not only to protect me if someone sues me for selling “dangerous” merchandise, but also in case someone trips on my display and hurts themselves. The city is also covered by my policy.
It’s about $200 a year. Since I sell my stuff cheap and I only sell once or twice a month, that’s a pretty hefty premium for me. But I guess it’s worth the piece of mind.