The Importance of Business Classification for Insurance Purposes
A recent lawsuit involving a landscaping company and its insurance agency brings to light an important issue: the classification of businesses for insurance purposes. General liability codes are used by insurance companies to classify businesses according to the risks the insured company may face. In short, classification codes help determine the appropriate cost for insurance policies.
General liability codes impact the premiums a business must pay in order to receive coverage. These codes are also used to exclude coverage for certain types of claims (as in the landscaping company incident). In this case, the landscaping company’s long-time insurance agency failed to clearly communicate classification codes to its client, resulting in a battle with the insurer over liability and coverage.