How to Respond to a General Liability Claim (Small Business Guide)

Unexpected incidents can occur in any small business, such as a customer slipping and falling, a subcontractor damaging property, or a client alleging your work caused financial loss.

A general liability claim means you do business in the real world, not that you run a bad business. How you respond determines the claim’s impact.

A delayed or poorly documented response can cost your business:

• Raised insurance premiums
• Coverage disputes
• Legal expenses
• Damage to reputation
• In severe cases, business closure

In contrast, a prompt, well-documented response provides your insurance carrier and defense team with the information they need to protect your small- or midsize business.

This guide will help you respond confidently.

What is a general liability claim?

A general liability (GL) claim usually involves:

• Third-party bodily injury (e.g., slip-and-fall)
• Third-party property damage
• Personal or advertising injury (e.g., libel, slander)
• Damage caused by your operations

If someone alleges your business caused harm or damage, your general liability insurance may respond if you manage the situation appropriately. Next, we will clarify the difference between a potential and an active claim.

What’s the difference between a potential claim and an active claim?

What is a potential claim?

A potential claim arises when an incident occurs, but no formal demand, lawsuit, or written request for compensation has been made. Examples include:

• A job site injury occurs, but the person says they’re “fine.”
• A client says your work “cost them money.”
• A subcontractor suggests they may seek damages.
• A customer complains about damage but hasn’t requested payment.

You believe the situation could escalate into a claim.

What is an active claim?

An active claim exists when:

• You receive a written demand for money.
• A lawsuit is filed.
• A demand letter is sent.
• An attorney contacts you.
• Your insurance carrier formally opens a claim.

At this stage, the claim is active.

How do you respond to a potential general liability claim?

If you believe a claim may arise, act promptly.

1. Secure the area

If the incident involves your premises or operations:

• Prevent further injury or property damage.
• Call 911 if necessary.
• Encourage injured parties to seek medical attention.
• Complete a formal incident investigation report.

Establishing an incident response procedure can help protect your business over time.

2. Document the situation immediately

• Take photos from multiple angles.
• Preserve video footage.
• Write down the date, time, weather, and conditions.
• Collect witness statements from employees.
• Secure contracts and scope of work.
• Preserve maintenance logs.

If property damage has occurred, document it thoroughly before making any repairs.

3. Do not admit fault

Avoid statements like:

• “This was our fault.”
• “We’ll pay for it.”
• “Our insurance will handle this.”

Instead say:

• “We take this seriously.”
• “We’re looking into it.”

Admitting fault or offering payment may jeopardize coverage under many insurance policies.

4. Streamline communication

Designate one person to handle all communication.

• Do not discuss details internally beyond what’s necessary.
• Do not post anything on social media.
• Do not argue or assign blame.
• Do not discipline employees publicly in response to the incident.

5. Notify your insurance broker and carrier promptly

Delayed claims are often denied. Even if no lawsuit has been filed, the issue appears minor, or the injured party says they will not pursue it, you should still report it.

Provide your broker with an:

• Incident report
• Photos
• Witness statements
• Relevant contracts
• Maintenance logs

Then, follow your carrier’s instructions.

Why fast action matters for small businesses

Large corporations have in-house legal and risk teams, while most small businesses do not. Decisions made in the first 48 hours often determine the outcome. For small and midsize businesses, a general liability claim is a reality, not a failure. Your long-term stability depends on your response.

To recap, when an incident happens:

1. Stay calm and secure the premises.
2. Document it thoroughly.
3. Avoid admitting fault.
4. Control communication.
5. Notify your broker and carrier immediately.

Having an incident response plan and a reachable insurance advisor can make claims manageable rather than overwhelming.

If you are unsure whether your current coverage or procedures are sufficient, review them now rather than waiting for the next incident. We’d be happy to help you through the process - start here.

Sources:

Zywave: Coverage Insights - Best Practices for Responding to General Liability Claims

AI Disclosure:

Portions of this content were generated with the assistance of ChatGPT (OpenAI) on February 13, 2026, and reviewed by our insurance team for accuracy.

Disclaimer:

This information is intended for reference only and should not be considered as financial or legal advice. Consult with a qualified professional for personalized guidance.