General Liability Policy Required Before Purchasing

Another member of our community got in contact with me yesterday as she was reviewing the purchase agreement from a direct contact she was about to make a purchase from. All looked good until she came across the insurance requirement. This particular company required that purchasers of liquidation merchandise have a general liability policy in place with at least one million dollars of liability coverage.

So what is this about? Why would a company want to make sure I have liability coverage before they will allow a new liquidation buyer to make a purchase?

Lets take a look at an example:

If you buy a direct truckload of customer returned power tools from lets say Harbor Freight, they will ask you for a certificate naming Harbor Freight as an additional insured under your business general liability policy. If you cannot provide this certificate, you cannot make a purchase.

Where is the liability? In the world we live in everyone will get named in a lawsuit; often attorneys look for deep pockets. I will create a scenario where a liability policy will protect you and your business interest.

Maybe you purchased a truckload of tools from Harbor Freight and one of the table saws ended up in the hands of one of your customers who cut off their hand while using the saw. You will end up being named in a lawsuit along with Harbor Freight and the manufacturer of this table saw. Maybe in this situation after investigation it is discovered that there was a design flaw, which would go back to the manufacturer. Or perhaps you the end reseller bears the most liability because you resold a broken table saw that was deemed dangerous and un-usable?

A general liability policy will offer a defense on your behalf and pay any judgment placed against your business up to your policy limits.

Obtaining a Business Owners policy

Often referred to as a BOP (Business Owners Policy), you can solicit local independent insurance agents in your area to market your business to many different insurance companies to find the lowest premium. A BOP will offer premises liability for your store (slip and fall claims) as well as many other coverages you may need.

A typical BOP will cost between $700 – $2,000 per year depending on several factors including the nature of your business, gross annual sales and your experience in your particular field.

Once you have a BOP/GL (General Liability) policy in force your agent can then issue what is called an evidence of insurance naming the company you are buying from as an additional insured to meet buying requirements.

Sounds complicated, but really a knowledgeable commercial insurance agent will further educate and help you make the right policy choices for your business. Remember, not all department stores or catalog companies will require you to have a general liability policy in place to make a purchase.