Could General Liability Insurance Cover False Advertising Claims?

November 9, 2022 / By: Stampede Insurance Team
Could General Liability Insurance Cover False Advertising Claims?

It's important that you understand what general liability insurance for businesses can adequately protect your business and to what extent. Regardless of the industry, false advertising, mislabeling, and trademark infringement are notoriously gray areas for business owners when it comes to securing proper insurance coverage—which can be costly.

Commercial claims for advertising liability are on the rise. As a business owner, you may find a situation in which a customer discovers a discrepancy with one of your products.

Even minor differences can result in legal action claiming deceptive, unlawful, and false advertising—underlining the importance of having general liability insurance coverage for small businesses.

Below, we’ll discuss whether general liability insurance coverage will protect against false advertising claims and how an experienced insurance provider can help your business stay prepared.

What is General Liability Insurance?

Commercial general liability policies are designed to protect your business from bodily injury caused by your product.

For example, if a customer becomes sick after consuming your product, your general liability coverage would adequately protect you from any financial burden.

What Do General Liability Insurance Policies Protect Against?

The majority of general liability insurance policies will protect four types of lawsuits:

Slip-and-Fall Accidents

Slip-and-fall accidents do not always involve a person actually slipping and falling. If a customer or vendor is injured in an accident on company property, they may sue—and the lawsuit may be covered by a general liability policy.

Slander Claims

Slander is similar to libel in that it is spoken rather than written or published. Business owners may believe their company is unlikely to face such a suit, but a single unfounded comment about a competitor made by a salesperson or customer can expose a company to such a suit.

Libel Claims

Libel occurs when one party makes defamatory remarks about another party in writing or in print. If the remarks are unsubstantiated and cause harm, the person or organization making them may be sued for damages.

Competitors may file libel suits against other companies based on false claims made in advertising campaigns, and just paying the legal defense costs for such a suit can be costly.

False Advertising Claims

False advertising suits are typically based on claims made in marketing campaigns, and these suits can be particularly costly. Even if a single claim is minor, good marketing campaigns reach a large number of people, and many of those people may sue.

They may even band together in a class action lawsuit, which is one type of suit that general liability policies typically cover.

Regardless of how large or small, the claim is, general liability policies typically cover these four kinds of claims. Most policies will cover minor suits seeking relatively small sums, catastrophic suits seeking six- and seven-figure sums, and class-action suits involving multiple plaintiffs as long as the subject matter of the suit falls within the terms and conditions of the policy.

However, just because a policy covers a specific type of suit does not imply that the policy will cover all expenses associated with the suit. General liability policies, like other types of insurance, typically have limits and frequently will not pay for costs that exceed those limits. 

Limits can be per-occurrence, which means they will pay the most for a single claim, or aggregate, which means they will pay the most for the entire duration of their effective period. Most businesses should look for general liability policies with high per-occurrence and aggregate limits, as well as sure coverages, to make sure they are adequately covered.

What is Personal and Advertising Injury Liability?

Advertising injury coverage protects a business from claims of offenses committed while advertising its goods, products, or services. These policies may also protect policyholders against advertising-related claims of stolen ideas, invasion of privacy, libel, slander, and copyright infringement.

Previously, advertising injury and personal injury were insured separately. However, these coverages have been combined under a new name: Personal and Advertising Injury Liability.

Most policies include Coverage B and personal and advertising injury liability coverage. The former protects you from claims or lawsuits arising from offenses committed while advertising your business.

To be covered, a claim must be the result of an offense that falls under the definition of personal and advertising injury.

This definition includes seven different types of offenses, four of which are related to advertising:

  1. Libel, slander, or product disparagement
  2. Violation of the right to privacy
  3. Using someone else's advertising concept in your advertisement
  4. Copyright, trade dress, or slogan infringement in your advertisement

For your policy to cover an advertising injury claim, the claimant must seek compensation for one of the offenses listed above. If the claimant seeks damages for another type of offense, such as patent infringement, the claim will be covered.

Find General Liability Insurance Coverage for Your Business with Stampede Insurance

General and advertising injury liability insurance coverage is important to most businesses. It can assist you in recovering from errors in oral and written material, as well as some additional coverages such as false arrest and wrongful eviction.

If you'd like to learn more about this type of policy, we can help. For over ten years, Stampede Insurance has been a dependable insurance provider to clients across the United States.

We stand out from other insurance agencies because of our dedication to meeting your business's needs, and we're proud to partner with reputable insurance providers to find the right coverage for you.If you have any questions about general liability insurance for small business coverage, get in touch with our team right away. Contact us at 888-306-7887 at Stampede Insurance Services today!

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