Does Liability Insurance Coverage Stop at the Border?

Nearly one-third of small business owners believe they face international risks, but few believe they have the right insurance protection in place, according to a recent study by Forbes Insight and The Hanover Insurance Group.

Given the exposures many of these companies face, independent agents can play an important role in providing valuable counsel to help their clients minimize their global risks. 

Once a business starts selling, importing or traveling outside the U.S., it becomes subject to the laws and regulations of every country with which it conducts business. If a lawsuit is filed for damages resulting from activities outside the U.S., the standard business owners or commercial package policy may not suffice. At best, standard BOPs or commercial package policies offer very limited protection for international operations.

Today, just about any small business can compete globally, which means businesses of any size can be exposed to global risks. Consider a scenario where a small business exports packaging for an overseas food manufacturer, and the manufacturer alleges the packaging was defective, causing them to lose several batches of product. With the product sold overseas, an international liability policy would provide important protection.

While many businesses have international exposures, certain activities are more likely than others to cause increased risk, such as:  

  • Direct importing: buying finished products and goods, or raw goods, direct from overseas manufacturers
  • Exporting: selling goods and services outside the U.S., which may be subject to the laws of the country where the consumer lives or where the product is used
  • International travel: especially important for companies with international suppliers, businesses may be on the hook for the actions of their employees while overseas on business, including:
    • Workers compensation claims
    • Car rental damages
    • Laptop theft or damage
    • Libel and slander
    • Property damage

As agents seek to provide broad and comprehensive insurance programs for clients facing international risks, they should pay close attention to the following:

Endorsement and standalone options. A small business today could be a midsized business tomorrow, and growth means more risk. International coverage from a carrier that offers both endorsement and standalone options enables agents to find a long-term placement for their small business clients, then easily adjust insurance protection as risks evolve and become more specialized.  

Flexible coverages. Selecting an insurance carrier that offers solutions for a broad array of risks, both as admitted and non-admitted coverages, provides clients with a seamless solution and single point of contact for their international policies. This can prove valuable as they navigate through the various insurance standards and international risks unique to each country.

Value-added services. Emergency assistance services can prove valuable for small businesses when faced with medical- or travel-related emergencies when employees are overseas for business. These services can be bundled with international coverage and may include medical assistance, such as medical or dental referrals; travel assistance, such as replacement of lost or stolen documents; and facilitation of emergency travel arrangements.

Chip Hamann is chief underwriting officer, small commercial, at The Hanover Insurance Group, Inc.