Does Liability Insurance Cover Theft?

Commercial property insurance covers specific types of theft, like random burglaries. However, it doesn't cover stolen cash and applies only to tangible assets, such as computers or inventory. If theft is a significant concern for your business, explore other types of insurance covering such risks, including business theft insurance and burglary insurance.

Liability insurance protects businesses against financial losses due to lawsuits and settlements arising from accidents, injuries or damage that occur on their premises or as a result of their operations.

This insurance primarily covers third-party claims, such as a customer getting injured on your property or a product causing harm to a consumer. It helps pay for medical expenses, legal fees and settlements. However, it doesn't cover the business’s losses, like theft or burglary.

Liability insurance covers a range of situations where your business might be held responsible for harm caused to others. Here are the primary areas it covers:

• Bodily injury: If a customer or visitor is injured on your business premises, liability insurance will cover their medical expenses and any associated legal costs if they sue your business.
• Property damage: If your business operations accidentally damage someone else's property, this insurance will cover the repair or replacement costs and any legal fees if a lawsuit arises.
• Personal and advertising injury: This includes coverage for claims of libel, slander or copyright infringement related to your business's advertising efforts. Liability insurance will handle legal defense costs and any settlements or judgments.

Liability insurance — whether general liability, professional liability or any other form — doesn’t cover theft. It covers incidents where your business is legally responsible for causing harm to others, such as injuries or property damage. Theft represents a direct loss to your business, whether through a break-in, robbery or employee dishonesty.

Consider theft insurance or business crime insurance to protect your business from theft. These policies cover the financial impact of theft, including the loss of merchandise, cash, equipment and other valuable assets. Burglary insurance and robbery insurance can also be crucial, depending on the nature of your business's theft risk.

Relying solely on liability insurance creates a significant coverage gap. For instance, liability insurance won't cover the loss if a thief breaks into your store and steals merchandise. Likewise, it won’t help recover stolen money if an employee embezzles funds.

While liability insurance doesn’t cover theft directly, it might indirectly provide some level of protection in a few situations:

• Negligence claims: If a theft occurs due to negligence, like failing to secure your property, liability insurance may cover the legal claims from any third party affected by the incident.
• Vandalism leading to theft: If a thief vandalizes your property before stealing items and causes harm to others, liability insurance may cover the third-party damage.
• Employee-related incidents: If an employee commits theft resulting in a third-party claim, such as a breach of contract or fiduciary duty, liability insurance may cover the legal costs to defend your business.

Several types of business insurance protect your business from theft and burglary:

• Business theft insurance: This insurance covers the loss of goods, cash and other assets due to theft. Businesses with valuable inventory or equipment must secure coverage for internal and external thefts, including shoplifting and employee theft.
• Burglary insurance: This policy covers losses from break-ins and reimburses the cost of stolen items and any damage resulting from the burglary. Businesses handling large amounts of cash or valuable items need this coverage.
• Business crime insurance: This form of insurance protects a business from employee theft. It covers various types of theft, including employee dishonesty, fraud and cybercrime.
• Inside the premises theft of money and securities: This insurance covers theft from within the business premises. It benefits businesses that handle large cash transactions or keep significant cash on-site.

By using effective strategies, you can lower the chances of theft and reduce potential losses. Here are some steps to protect your business from theft:

• Enhance security measures: Invest in high-quality security systems, including alarm systems, surveillance cameras and motion detectors. These measures can deter thieves and help identify suspects if a theft occurs.
• Train employees on theft prevention: Educate your staff on recognizing suspicious behavior, proper cash handling procedures and responding to theft incidents.
• Conduct regular audits: Regularly audit your inventory and finances to detect any discrepancies that could indicate theft. Early detection can prevent small issues from escalating into significant losses.
• Insure your assets: Ensure you have adequate theft insurance coverage, including specific policies for business theft insurance and burglary and theft insurance. Review your policies regularly to ensure they meet your current needs and risk profile.

We answered some common questions about insurance that protects businesses against financial losses resulting from theft.