Kimberlee Leonard

Every commercial general liability insurance policy has defined limits set forth in the policy and on the declarations page. Understanding these limits is important for making sure that you have enough coverage in any given area and are adequately insured against risk. Here's a look at the six defined liability limits in a general liability policy. 1. General Aggregate The general aggregate limit is the maximum amount that an insurance policy will pay for claims during a covered period of time. The general aggregate limit applies to: Coverage A: Bodily injury or property damage Coverage B: Personal and advertising injury Coverage C: Medical payments The general aggregate limit applies to one large claim or a series of smaller claims tallying up to the limit. Once all claims in the policy term meet the aggregate limit, no other funds will be paid by the insurance carrier for claims—any resulting claims are the responsibility of the business. This limit does not apply to claims arising from products-completed operation hazards, which often has its own separate limit. General Aggregate Example Assume that you have an insurance policy with $1 million in each occurrence limit and a $2 million general aggregate limit. Imagine that you have three claims in the year, each for $800,000. That’s a total of $2.4 million in claims. If your aggregate limit is only $2 million, you will be liable for the additional $400,000 should the claimant win their case. 2. Per Occurrence There is a maximum amount that an insurance carrier will pay for any one claim. This is known as the per-occurrence limit and is spelled out on the declarations page of your insurance policy. The per-occurrence limit is often half of the general aggregate limit. This means that if the general aggregate limit is $2 million, the per-occurrence limit may be $1 million. Every insurance carrier and policy is different, so be sure to understand what your policy sets as the limit. There are times that the per-occurrence limit is equal to the aggregate limit, restricting the number of covered incidents that a policy will pay on greatly. The per-occurrence limit will reduce the amount of the aggregate limit by the claim amount whenever there is a loss. Per Occurrence Example Assume you have a policy with a $1 million per-occurrence limit and a $2 million general aggregate limit. If there is a claim valued at $1.1 million, the insurance would pay the $1 million based on the occurrence, the business is likely liable for the difference, and the aggregate for the policy term drops from $2 million to $1 million because of the amount used. 3. Product-completed Operations The product-completed operations limit sets the maximum amount that will be paid based on liabilities from work completed or made products. For this coverage limit to be triggered, the loss must occur away from the business operations. This limit does not affect the general aggregate limit and stands on its own. So, it is possible to have claims meeting the general aggregate limit plus a product-completed operations limit on top of that. Product-completed Operations Example Imagine that a general contractor has a general liability policy that has a $2 million general aggregate limit, plus $1 million for product-completed operations. If a staircase that the contractor built fails, leading to $800,000 in injuries for the event, the product-completed operations limit would cover this with $200,000 in claims to spare. The general aggregate limit would remain at $2 million, being unaffected by this claim. 4. Personal & Advertising Injury Personal and advertising injury refers to things like libel or slander that someone accuses you of. This coverage has its own occurrence limit not affected by the general per-occurrence limit. The personal and advertising injury limit applies to each affected claimant, not the entire occurrence. So, if more than one person was deemed injured from an incident, each person would be able to receive compensation based on the limit for this coverage. However, it does diminish the general aggregate limit when a claim is made. Personal & Advertising Injury Example Your general liability policy has an aggregate limit of $2 million with a personal and advertising injury limit of $500,000. On a Facebook post, you say something about a competitor's services, and the comment goes viral. The competitor loses business because of the post and claims that your assertion is wrong, and your business is sued for libel for $300,000. The personal and advertising injury limit pays to defend you in this claim, and the aggregate limit goes down by $300,000 for the year. 5. Damage to Premises Rented to You Many business owners rent commercial space and are required to obtain liability insurance. Often, this coverage requirement is a minimum of $1 million per event, with each event counting toward the general aggregate. It is not the same as the per-occurrence limit, although these two often have matching limits of $1 million. This coverage limit is triggered when there is damage incurred. Damage is often incurred by fire, but claims for vandalism, burst pipes, and other perils resulting in damage to the leased building are covered. Damage to Premises Rented to You Example Assume you have a policy with a $2 million general aggregate and $1 million for coverage limits on damage to premises rented to you. There is a small fire that erupts when a microwave catches fire in the break room. The sprinklers go off, and the fire department arrives to make sure the fire is out. While your contents are covered by a business property policy, the damage to the walls, floor, and ceiling are paid for by the coverage for damage to premises rented to you. If this amount is $300,000, then you reduce the annual aggregate amount to $1.7 million. 6. Medical Expense This is considered no-fault insurance and covers medical bills and first aid to those who obtain bodily injury while on-premises. It covers reasonable expenses subject to the medical expenses limit on the policy. When a claim occurs, the aggregate limit is diminished by the claim amount. Medical Expense Example Assume that you have a general aggregate limit of $2 million with a medical expense limit of $1 million. An elderly man slips and falls in your establishment and requires an ambulance as he has broken his hip. Your insurance will pay the cost of the transportation plus any medical bills incurred from the fall up to the $1 million in the policy limit. The aggregate limit is reduced by the claim amount as well. Bottom Line Understanding when general liability insurance is required, and what the policy limits are, helps you make sure that you are properly protected against various risks. Review the coverage with your insurance agent, to ensure you have the proper amount of insurance coverage and increase it where you think you have the most exposure. Remember that when a claim exceeds the limits, your business and you could be held responsible for the difference.

As a business owner, you need to be prepared for anything and everything. Accidents could happen that you are liable for, which might cost thousands of dollars. Without general liability insurance, you’d have to pay those claims out of your pocket. Fortunately, a general liability insurance policy can mitigate those expenses when they arise. Even with a policy, you’ll want to do your best to reduce risk and avoid as many accidents as possible. Typical General Liability Insurance Claims There are many types of incidents that can lead to a general liability claim when you’re in business. Learn what the risks are and how to avoid accidents that could cause your insurance premiums to go up. Here are five examples of general liability claims and ways to avoid them. 1. Slip-and-Fall Claims Slip-and-fall claims make up about 10% of all small business insurance claims, with the average claim costing around $20,000. An example of a slip-and-fall might be when a patron is walking around your business establishment and slips on a wet or otherwise slippery floor, then falls and sustains injuries requiring medical attention. How to Avoid Slip-and-Fall Claims To avoid slip-and-fall claims, make sure that people are aware of any hazards. Use cones and signs that indicate a wet floor to redirect people to a path that is safely away from hazards. Make sure to install nonslip floor rug pads or tape to reduce the chance of slipping in high-traffic areas. Advise workers to be aware of incidents that may cause a slippery floor and to act quickly to mitigate any problems. Slip-and-fall claims often fall under the premises liability coverage in general liability insurance. 2. Third-party Property Damage Claims Third-party property damage claims happen when your business activity leads to the accidental damage of someone else’s personal property. For instance, imagine a contractor is moving a wheelbarrow across a client’s driveway—then he loses control, and the wheelbarrow collides with the client’s car, creating a big dent. How to Avoid Third-party Property Damage Claims You can avoid property damage claims by being aware of your surroundings when working around client property. Make sure there is enough space to work without putting client property at risk. If your clients come into your place of business, make sure they keep their belongings with them at all times. If they must leave their belongings, give them access to a locker or other safe area where they can store them. 3. Personal & Advertising Injury Claims Personal injury and advertising claims arise when someone’s reputation is harmed through your actions, usually by what you say or print in advertising. A common example is making a public claim (perhaps on social media) that your competitor is a “crook.” Your competitor may sue you because his reputation is damaged and he is losing business. How to Avoid Personal & Advertising Injury Claims Avoiding personal and advertising injury claims is easy if you are mindful of what you and your employees say. While it’s OK to compare factual statements between you and your competitors, avoid calling competitors names or making disparaging claims about them. When in doubt, don’t say anything at all, and make sure you know how your employees talk to customers as well. Train them on appropriate ways to talk about competitors. 4. Products-completed Operations Claims When there is a defect in a completed product or some other problem with the product that leads to property damage or injury, products-completed operations claim coverage kicks in. However, this won’t protect a business from recalls of items. How to Avoid Products-completed Operations Claims To avoid products-completed operations claims, set a high standard of excellence for all products. Make sure you properly test products for safety issues and always take feedback from customers seriously. Someone might point something out to you without a claim being filed, and this can be an invaluable insight into a danger that you didn’t see. 5. Liquor Liability Claims If you do not manufacture, produce, sell, or distribute alcohol, your general liability policy will offer incidental coverage for claims related to liquor. A claim could result from an afternoon happy hour that you host for your employees as a way to celebrate hitting sales goals. If one of your employees drinks too much and then hurts someone while driving home, you could be held liable. How to Avoid Liquor Liability Claims If you want to prevent claims related to liquor liability, you probably want to make sure that alcohol is not allowed at company events or on company property. If you do decide to host an event with drinks, make sure you keep tabs on who might be drinking too much. Offer to book ride-sharing so that no one drives under the influence. Limit the amount that anyone is allowed to drink at the event. What Your General Liability Insurer Pays for in a Claim When your general liability insurance policy pays a claim, it is paying for the amount of loss to the other party as well as any legal and investigation costs you might incur from the claim. For example, if a person files a slip-and-fall claim for $30,000 in medical bills and lost wages, your policy will pay that amount—unless you suspect fraud, in which case an investigation might be conducted by the insurance carrier to prevent paying a fraudulent claim. Depending on your policy, the legal and investigation fees paid might be part of your aggregate sum paid by the insurance carrier. This can eat up policy payout caps quickly if you only have $100,000 in liability coverage. Review how your carrier calculates the claim value toward your per-occurrence and aggregate total to understand fully if you have enough liability coverage. 3 Claims Your General Liability Insurance Won’t Cover Remember that general liability covers third-party claims. There are incidents that general liability won’t cover that include: Professional liability claims: Damages resulting from a professional error in your work or workmanship are covered by errors and omissions (E&O) insurance, not general liability. Workers’ compensation claims: When employees are injured at work, they are covered by workers’ compensation insurance as required by state law. Commercial auto claims: When you are in an accident while working, your commercial auto insurance policy covers the liabilities rather than general liability insurance. Bottom Line Preventing accidents and claims is the best way to save your company money on general liability insurance. However, you can’t prevent every bad incident from happening, which is why you should have a comprehensive general liability insurance policy to protect your company’s assets and reputation.

Products-completed operations coverage is a part of a general liability policy that pays for injuries or property damage caused by a business’s products or operations. It is essential for contractors, service providers, and businesses that manufacture, distribute, or sell goods. Typically, a small business can get a general liability policy that covers products-completed operations for around $400 to $600 per year. If a business needs a standalone policy, it will typically cost them $1 to $2 per $1,000 in revenue and more for high-risk products. What is Products-completed Operations Coverage? Products-completed operations coverage is a subset of general liability insurance that specifically covers your business if a third party―usually the consumer―is injured or has property damage as the result of your distributed product. As coverage of general liability, businesses can either get the coverage through their general liability policy, through a business owners policy (BOP) or standalone policy. Claims may include medical costs, repair costs, and legal fees when there is a loss due to products-completed hazards. Claims are typically covered, although there can be an endorsement that excludes them specifically in some policies. As with any insurance policy, it is best to read through your policy in detail to understand what is and isn’t covered fully. Products-completed Operations vs Standalone Product Liability Insurance Most small business owners find the products-completed operations coverage in their general liability sufficient for their needs. However, some businesses, such as manufacturers and product designers, face greater product liability risks and may need a standalone product liability policy. Product liability insurance is designed to meet that increased need and is typically sold through specialty insurers. Standalone product liability insurance works in much the same way as the coverage found in general liability. It pays for your legal defense if your product or service causes injuries or damages and only kicks in when damages occur away from your business premises. Product liability policies can have higher limits than what’s available in general liability policies. As a rule of thumb, manufacturers can pay between $1 and $2 per $1,000 of product sold for a policy with products that are deemed less risky. This means that a low-risk business, like a retailer or distributor, might pay $1,500 to $2,500 per year for product liability insurance. High-risk businesses can pay substantially more—between $6,000 to $12,000 or more annually. Manufacturers often buy product liability insurance for the added protection because the product liability suits they face usually involve multiple incidents and plaintiffs. The costs can add up quickly, and manufacturers would be on the hook for large portions of it if they only carried general liability insurance with products-completed operations coverage. How Products-completed Operations Coverage Works The products-completed operations coverage in a general liability policy is typically written on an occurrence basis, which means the policy must be in effect when the injury or property damage occurs. Additionally, the occurrence that triggers coverage has to happen away from the business premises. These criteria can confuse policyholders when it’s time to file a claim. Products-completed operations coverage typically won’t pay in these situations: Claims occurring after you’ve dropped your coverage: Say a contractor completes a job and cancels their general liability a month later; their insurer will not cover a claim for injuries a client suffers if the date of the injury occurs after the cancellation. Claims occurring on your business’s premises: An insurer will most likely deny a retailer’s claims if they sell a product to a customer who is hurt using it in the store. However, the general liability portion of the policy may kick in to pay for a third-party injury or property damage. In these situations, the business owner can still be sued, but their legal fees and court costs will come out of their own pocket. A business owner could be sued for years after they have distributed the product—even after they close. This is where having an extended completed-operations coverage endorsement helps. It pays claims related to products sold during the policy’s term for up to 10 years after the policy expires. What Products-completed Operations Covers When a business distributes a product, there is a risk that the product can create harm or damage to others. This risk is known as a products-completed operations hazard. In general, products-completed operations coverage protects small business owners when someone claims they suffered bodily injury or property damage as a result of a business’s product. The types of claims that products-completed operations coverage typically protects against include defects caused by accidents and intentional behaviors. Some claims covered by products-completed operations coverage include: Accidental contamination: For example, E. coli ending up in pharmaceuticals Labeling mistakes: For instance, a label misidentifying a product as lead-free Accidental defects: For instance, a battery defect causing spontaneous combustion when being charged Malicious tampering: For example, a hostile assembly line worker interfering with ingredients If a business owner faces a product liability lawsuit, their products-completed operations coverage kicks in to pay for their attorney’s fees, court costs, and other legal bills. Depending on the policy, the legal fees may be considered part of the aggregate total paid by the liability policy. Check your policy to make sure that you understand how legal fees are covered. What Products-completed Operations Coverage Doesn’t Cover Products-completed operations coverage has four standard exclusions. Exclusions are situations that your insurance policy does not cover and that are explicitly spelled out in the contract. The four standard exclusions in completed operations coverage are: Damage to your product: Your products-completed operations coverage only kicks in for damage to property other than your product. Let’s say you sell appliances, and a customer receives a broken dishwasher. Your insurer won’t cover the claim because no other property has been damaged. However, if a busted hose causes flooding, your insurer will most likely cover the claim. Damage to your work: Products-completed operations coverage also excludes damage to your completed work. For instance, imagine a carpenter completing a stairway that breaks under the weight of the client. That client might only sue for the damaged stairway. Because that’s the carpenter’s work, the insurance company won’t pay. However, the claim may be covered if the client sues for other damage the broken stairway causes. Subcontractors are an exception to this exclusion. If the carpenter had hired a subcontractor to build the stairway, then the insurer usually pays the claim. Damage to impaired products: Claims stemming from property that’s defective because it contains your defective product or work are also excluded. For example, if a manufacturer’s flawed widget causes laptops to explode, their insurer probably won’t pay the ensuing claims for the damaged laptops but will pay the claims for any property damage or injury caused by an exploding laptop. Recall expenses: The costs associated with recalling defective products are not covered by products-completed operations coverage. To be fully protected, a business would also need a specialty policy known as product recall insurance that will pay costs associated with getting a defective product off of store shelves. Products-completed Operations Coverage Limits Products-completed operations coverage in general liability insurance has an aggregate limit that is separate from the general aggregate limit. An aggregate limit is the total amount that insurers pay for claims throughout the policy term. Most claims count against the general aggregate, but products-completed operations claims only impact the products-completed operations aggregate limit. This means you could have a general liability claim that hits the policy aggregate limit but also have a products-completed operations claim going against its own limit. Selecting a lower limit on your products-completed operations aggregate limit can reduce your overall premium. However, that may mean you don’t have enough coverage if you end up in court. This makes it important to balance what you want to pay each year against how much a product liability lawsuit might cost. Products-completed Operations Coverage Example Imagine a retailer who sells children’s toys. As a retailer, its main concern is its customers, so it has opted for a general liability policy that includes products-completed operations coverage. This way, the retailer has insurance for customer injuries that occur in the store and injuries its toys cause outside of the store. The retailer’s products-completed operations coverage may seem unnecessary until a customer claims their child was injured by a defective toy. The customer’s lawyer will likely name everyone involved with bringing the toy to market in the lawsuit, including the retailer. Luckily, the retailer’s products-completed operation coverage can pay for their defense. However, this situation could play out differently for the manufacturer of the toy. First, the manufacturer is much more likely to be found liable for the defective product. Moreover, it may face multiple lawsuits based on the same defective toy. Each lawsuit eats away at its products-completed operations aggregate limit and the per-occurrence limit in its general liability policy. With a standalone policy, the toy manufacturer is less likely to exceed its coverage limit, which could be a real risk if its only product liability coverage is part of its general liability policy. Who Needs Products-completed Operations Coverage? Any business that has a finished product is a business that needs to make sure that it has enough products-completed operations coverage. While any business with a general liability policy will have at least a minimal amount of coverage—as low as $100,000—businesses with more risk may want to increase coverage or get a specialized policy. Simply put, if consumers walk away from your business with a product in hand, you need to have some products-completed operations coverage because of the risk that the product may accidentally cause harm or property damage. Bottom Line Most small business owners face some product liability risk, which is why standard general liability insurance includes products-completed operations coverage. However, those at high risk may need specialty insurance, like a standalone product liability policy. Business owners need to assess their risk to determine the coverage limits that make sense for them.

General liability insurance covers accidents and mishaps that can happen during the course of business operations. While most accidents are covered, there are exclusions to general liability policies that you should be aware of so that you can try to avoid instances not covered or get additional insurance to protect your business. It’s important to read through your general liability policy to understand fully what is covered and what is excluded—you want to be informed fully before you’re faced with a claim. Here are 16 of the most common general liability policy exclusions. 1. Expected or Intended Damage When an action is done intentionally, and you can reasonably expect damage or injury from the activity, this won’t be covered. Insurance won’t protect you when you intentionally do something that will lead to a claim. For example, you need to maneuver a forklift through the parking lot to load materials into a customer’s truck. A motorcycle is blocking your path, and you run the forklift into the motorcycle to move it out of the way. This is not a covered claim. 2. Contractual Liability You cannot have bodily injury or property damage coverage when you assume the liability of another party through a contractual agreement. This often happens with construction companies that assume the liability of a project while under development. The insurance company cannot control what the other company does; it can only underwrite what your actions can create in liability. For example, if you agree to assume the liability of a construction agreement for a building, you are not liable for claims of the building owner’s liability to others. 3. Liquor Liability When a company is in the business of making, selling, serving, or otherwise furnishing alcohol, there is no coverage for liquor liability. This is a separate policy that the company must get that is underwritten specifically for the liquor risk. Many insurance companies expand the exclusion to companies that sell or serve alcohol occasionally, such as a nonprofit that offers alcohol at a fundraiser. For example, a nightclub regularly serves alcohol to its patrons. If a customer drives his car after being served drinks and hits a pedestrian, the general liability policy will not cover this. The nightclub must have specialized liquor liability coverage. 4. Workers’ Compensation Employees are not protected for injury or property damage under a general liability policy. Employees are covered for bodily injury via a workers’ compensation policy; most states mandate workers’ compensation for any business that has at least one employee. For example, a warehouse employee slips and falls, hurting his back. Even though this is a slip-and-fall accident, it is not a covered claim under general liability but instead is paid for by the workers’ compensation policy. 5. Employer’s Liability If an employee gets hurt while working and either he, his family, or a third party files a lawsuit against the employer, general liability will not cover the claim. For example, if an employee is hurt while using a certain machine at work, he might sue the machine maker. However, if the machine manufacturer finds out that the employer, as company policy, did not operate the machine according to safety standards, then the employer is liable, with no coverage from the general liability policy. There is one exception to this, which would be if the employer is characterized in the lawsuit as something other than an employer like the manufacturer of a product that caused harm. 6. Pollution When pollutants are released as a result of business operations, there is no coverage for claims against this. The general liability policy has the same exclusion regardless of whether the pollutants were released gradually or suddenly. All waste is excluded regardless of how or where the waste is released. For example, a manufacturer has a byproduct that is made when producing his product. The byproduct accidentally gets into a local stream and kills a farmer’s sheep. This is not a covered claim. 7. Aircraft, Auto, and Watercraft Any liability caused by the use of aircraft, automobiles, or watercraft, whether owned, leased, or borrowed, is excluded from the general liability policy. This would need to be covered by a policy specific to the aircraft, automobile, or watercraft. For example, your business rents a truck to pick up a shipment of materials for a special project. When reversing to load the truck at the loading dock, the business’ driver hits a golf cart. This is not covered by the general liability policy and would instead be covered by the auto insurance policy held for the truck. 8. Mobile Equipment When using mobile equipment such as tractors, forklifts, or golf carts, any damage or injury resulting from the use of the equipment is not covered. The business would need to have a special policy that offered liability protection for the operation of mobile equipment. For example, a forklift runs into a car when trying to navigate around it. The resulting damage to the car is not covered by the general liability policy. The business would have to have a specialty policy specifically for the forklift. Otherwise, the business must pay out of pocket. 9. Damage to Property General liability does not provide for business property protection. This means that the office building, materials, equipment, or inventory are not covered if they are damaged in the course of business operations. This would have to be covered by a commercial property policy. For example, if a small fire breaks out in the office kitchen, damaging the building itself as well as the kitchen furniture, it would be covered by a commercial property policy, not general liability. 10. Damage to Your Product When damage happens to a company’s products, there is no coverage afforded for the loss under the general liability policy. This coverage also comes in the form of commercial property insurance. For example, a circuit board used in a business’ hoverboards is faulty. This defect leads to an entire palette of hoverboards being damaged and unusable. This is not covered by the general liability policy. 11. Damage to Your Work When work is completed and fails to operate properly, leading to property loss or injury, there is no coverage from the general liability policy. This would be covered by a professional liability policy that protects a business for professional errors. For example, if a contractor builds a two-story house with a grand staircase and that staircase collapses after the homeowner moves in, the homeowner is likely to sue the contractor. This lawsuit is not covered by the general liability policy. The contractor would need a professional liability policy to cover the claim. 12. Damage to Impaired Property or Property Not Physically Injured This exclusion refers to incidents where the business has provided a part of service, but their part has not worked, causing the other property to become impaired and rendered ineffective. There isn’t property damage per se with this exclusion, but the inability for work to be completed due to the impaired property. For example, an electrician is hired to complete work on a new development by June 1. The electrical panels he installs are defective and, even though the work is completed by the date, the project doesn’t pass inspection due to the problem. This delays the developer from selling the property, causing financial loss. This type of claim is not covered by general liability and could be covered, instead, by a professional liability policy. 13. Recall of Products, Work, or Impaired Property When a company has to recall its own products, any claims arising from the recall are not covered by general liability. It’s not just potential damages that are excluded, but the cost of inspections, removal, and adjusting of the defective product. For example, a dangerous battery for cell phones must be recalled for consumer safety. The manufacturer cannot make a claim on the general liability policy and must instead absorb the costs of notifying retailers and consumers about the problem, getting the batteries back, and paying for replacements. 14. Personal and Advertising Injury When bodily injury results from a personal injury offense, that bodily injury is excluded from coverage in the general liability policy. For example, a business claims that a competitor is defrauding consumers and makes this allegation on social media. The information goes viral, and the competitor files a lawsuit for advertising injury against a false claim on his company. During the lawsuit, the competitor’s owner has a heart attack from the stress. While the advertising injury is covered under general liability, the costs related to the heart attack are excluded. 15. Electronic Data Because electronic data is not considered tangible property, it is excluded from coverage in a general liability policy. This means that claims filed by customers who experience a loss of data, loss of software function, corruption of data, or the inability to access or manipulate data are not covered by general liability. For example, a medical office with an MRI machine inadvertently stores a client’s laptop in the MRI room, wiping all data from the drive. This is not a claim covered by general liability, and the business would be on the hook to pay for the damages. 16. Distribution of Material in Violation of Statutes When a company violates laws or statutes and that violation results in property damage or bodily injury, the loss is not covered by general liability insurance. For example, a collections firm repeatedly violates telemarketing laws by calling too early in the morning, and the firm finds itself in a lawsuit. Because the company has violated the law, the lawsuit is not covered by the general liability policy. Bottom Line While general liability insurance offers very broad coverage, it does have several limitations set forth by the exclusions in the policy. Read through your general liability policy and talk to your insurance representative to find out how you can get coverage for some of these exclusions.

Premises liability coverage is an insurance policy that pays claims for accidents involving guests that take place on your business property. By law in all states, an owner of property must make reasonable efforts to make sure that those visiting the property are entering a safe environment. To understand why premises liability coverage might be necessary, you must first understand what the liability entails. Premises liability is the notion that a business is responsible for making their premises reasonably safe for visitors. If someone gets hurt on the property, the business is responsible for injuries and damage. This could result in lawsuits or claims against the business. While every state maintains laws for premises liability, states may define coverage based on the type of visitor: invited, licensed, or trespasser. How Premises Liability Applies Both an invitee and licensee visitor are given permission to use the property. The invitee is often seen as a guest while the licensee isn’t invited but is given access to the property. The invitation to use the property is viewed legally as an express promise that the property is safe. A licensee may have limited protection because they are not invited, but they still can expect reasonable safety. A licensee might be a delivery driver or utility worker who must access your property to do their job. Trespassers' rights are often limited, and if a trespasser is injured while on the property, in most cases they are not able to collect from the property owner. However, in most states, the property owner must adequately maintain the property and be sure not to try to harm the trespasser, such as with a trap. However, there are exceptions to the rule where some trespassers must be given warnings of nonobvious dangers. This might be a sign for something like a swimming pool that is seen as an “attractive nuisance” for children. Property owners would have a higher duty of care in this case. As a business owner, it is important to review the state laws to understand fully what your liability is within your state. You may owe all visitors, even those trespassing, a high duty of care and safety. Types of Premises Liability Exposures There are different types of exposures that a business faces when addressing premises liability. Examples of exposures include, but are not limited to: Slip-and-fall accidents: Whether the floors are slippery due to a good wax or because someone spilled water, this is a liability to the business owner. Inadequate maintenance: Something as simple as a railing needing new bolts can lead to serious injuries and liabilities. Poor security: A business is liable for not having the right personnel or security measures in place to prevent people from accessing higher-risk locations. Defective conditions: If someone sits on a chair that is found to be defective, then falls and hurts themselves, the business is liable for injuries Elevator and escalator accidents: For instance, a business owner could be held liable if someone doesn’t get off the escalator in time and gets injured by the belt feeding back into the system. How Premises Liability Coverage Works Premises liability coverage protects business owners from claims arising out of premises injuries and property damage. For most business owners, this coverage is obtained as part of a general liability policy but can also be purchased as standalone coverage. If purchased on its own, the limits are often higher than what the general liability policy limits are. Important Exclusions to Premises Liability Coverage Premises liability doesn’t cover every type of injury or all property damage incurred on the premises. There are exclusions that include: Professional malpractice: If a person gets injured while under the care of a professional, such as a doctor or physical therapist, this is covered by errors and omissions insurance. Employee injuries: While employees can expect a high duty of care for their welfare, they are not covered by premises liability. They are instead covered by workers’ compensation insurance. Business’s own property: A business must have commercial property insurance to pay for losses that occur to their own property. How Are Shared Premises Covered? There are times where a business owner may lease a property that is owned by another person or company, which complicates premises liability. In general, the business lease transfers all liability to the business and away from the lessor. However, the business and its customers can expect a reasonable amount of care in the property safety and maintenance. The liability reverts back to the property owner in cases where the business owner should expect a reasonable level of care. The business owner might not be responsible for parking lot maintenance; thus, liability would revert to the property owner. The same is true for elevators and escalators that are the responsibility of the building owner. General Liability Insurance vs Premises Liability Insurance General liability insurance and premises liability insurance are often viewed as the same thing, but they aren’t. While premises liability insurance can be part of a general liability policy, general liability covers more than just premises liability. Premises liability insurance covers claims where there is not proper maintenance of a property, and a visitor gets hurt. General liability insurance offers broader protection that includes personal property coverage and claims resulting from business operations that may occur away from the actual business—like a homeowner tripping on a handyman’s tool bag and getting hurt. Who Needs a Standalone Premises Liability Policy? A standalone premises liability insurance policy is a good idea if you need to have higher protections for a property that doesn’t have other liabilities. This is commonly seen with vacant land or land that will be built on that is covered by contractors' insurance for other general liability claims. An example would be a premises liability policy with builders' risk insurance. When is General Liability Insurance Enough? Most small business owners are fine with a general liability insurance policy that covers premises liability plus other concerns. You can increase the general liability limits or get a commercial umbrella policy if you feel the limits on the general liability policy alone are not enough. Bottom Line As a business owner, you are responsible for creating a safe environment for people to visit. Not only are you responsible for injury claims that occur on your property, but you can also become a target for lawsuits if nefarious people make fraudulent claims. This is where premises liability coverage is important: it will protect you from real and fraudulent claims. If you are unsure of whether you need premises liability coverage, talk to the folks at . They will evaluate your business risk and then pair you with one of their 200-plus insurance partners to get the right policy for the best price. No one makes it easier to get coverage.

When used in the right manner, liability waivers can help protect your business from lawsuits. Of course, you can still be sued, but the liability waiver serves as part of your defense that the plaintiff waived their rights to a claim. However, there are cases where the liability waiver is unenforceable. What Is a Business Liability Waiver? A liability waiver, sometimes called a release of liability form or general waiver, is a document that a business has patrons sign to acknowledge risks and release the business from claims arising from injury. You see these types of waivers frequently with recreational or fitness businesses. For example, you might have to sign a liability waiver when you join a gym or go on a paid horseback-riding tour. The waiver means that you realize there are risks to the activity you will be doing, and you accept responsibility for those risks. A release is different from a waiver in that it relieves a party from any responsibility, but this usually applies to an already-existing relationship. For example, you may have someone sign a release of debt to relieve the debtor of the responsibilities of the original agreement. How Does a Business Liability Waiver Work? A business liability waiver is signed at the onset of a new relationship with a customer. Insurance companies may require certain types of businesses to obtain a liability waiver to reduce the number of claims made with a high-risk business. When the customer signs up to do a particular activity or service, they sign the waiver. In the waiver is language stating that the consumer acknowledges the potential risks involved in performing the activity. Because people aren’t having an attorney review the document, the language used in a liability waiver must be easily understandable. The intent of the form must be clear, as those signing it will have fewer rights if a claim arises. The liability waiver should state specifically what the risks are and must require the signature of the consumer. For legal purposes, underage participants must have a parent or guardian sign on their behalf. In addition, liability waivers cannot violate state law. The waiver protects the business from ordinary negligence. However, the waiver is not relevant when gross negligence is found. Ordinary negligence is an act or omission that another reasonable person would not have committed. Gross negligence is an act that consciously disregards what is considered reasonable care for another. What a Business Liability Waiver Should Include To be valid, a liability waiver must have key components included in its language and structure. The key components of a liability waiver include: Inherent risks: The waiver must declare that activities have risks involved and should include a comprehensive list of those risks. Assumption of risk: The waiver must include a statement to the effect that the consumer acknowledges the risk and voluntarily assumes the risk as their own. Release clause: This statement directly talks about how the business assumes no risk, and the consumer will not hold the business liable in the event of injury. Indemnification clause: This is a statement saying that the consumer is responsible for the business’ legal costs if they are sued. Venue clause: The venue clause states what legal jurisdiction the waiver falls under. This is often the city or state in which the business is located. Successors and assigns: This protects anyone who might take over the company at a later date, ensuring that they are not subject to a lawsuit for the same liabilities. Signatures: The consumer must sign the waiver or have a parent or legal guardian sign for them. Failure to include all components of the liability waiver could result in an unenforceable waiver if you are taken to court or if an insurance claim is filed. When Does a Business Need a Liability Waiver? A business needs a liability waiver when they have inherent risks associated with their services. Common examples of businesses needing liability waivers include: Personal trainers and gyms Event venues Conference organizers Theme parks Businesses offering high-risk activities like sky diving, scuba diving, trampoline houses, and rock climbing If your industry has insurance claim statistics with high loss rates for certain types of injuries, this is a key indicator that you might need a liability waiver program. If you are unsure whether you need a liability waiver, talk to your insurance agent. They can best advise you on the risks your business has and whether a liability waiver can help. Can a Business Liability Waiver Replace General Liability Insurance? While a liability waiver can reduce the chance of lawsuits and liability claims, it does not replace a general liability insurance policy and, in many cases, a general liability policy is required. Even with the waiver, you can still be the subject of a claim or a lawsuit. Remember that the waiver becomes part of your defense but is no guarantee that a payout won’t happen. Insurance protects you in that case, so it’s important that you maintain adequate general liability coverage. Plus, there are other types of claims that the general liability policy protects you from. Imagine that you have a liability waiver signed for a specific activity, such as personal training, but your customer slips and falls in the bathroom. The claim resulting from this incident would be covered by general liability insurance. Bottom Line If you have a business where consumers are participating in risky activities, you’ll want to implement a liability waiver program. This will reduce the chances of an insurance claim or lawsuit. Make sure that liability waivers have all the required components to be legally enforceable. With any high-risk business, implement safety programs to reduce the number of injuries and liabilities as a whole.

General liability insurance class codes are a way for insurance carriers to classify risk based on the work a company does. Every business has differing types and degrees of risk. The class codes help insurance carriers assign an appropriate premium rate, offer the correct type of coverage, and determine any exclusions, if necessary. How General Liability Class Codes Work No matter which catalog of class codes, such as Insurance Services Office (ISO) or North American Industry Classification System (NAICS), that an insurance carrier uses, they all do the same thing. They assign a number corresponding to your company’s industry and type of work, and each number has an associated risk premium. The insurance company uses this as the basis for determining the amount to charge for your business’s general liability policy. For example, some broad sample categories listed in the ISO are: 10000-19999: Mercantile 40000-49999: Miscellaneous 50000-59999: Manufacturing or Processing 60000-69999: Building or Premises 90000-99999: Contracting or Servicing If we use the NAICS, we see sample codes like: 11: Agriculture 23: Construction 44: Retail Trade 51: Information 72: Accommodation and Food Services These broad groups are then broken down into smaller, more specific listings. For example, looking at the NAICS codes for Group 72 (Accommodation and Food Services), a bed and breakfast inn would be classified by code 721191 while a caterer would be classified by code 722320. These subgroupings help identify the specific risks for that particular type of business because while they both still fall within the same industry, they have different considerations. You can find your company’s class code by visiting one of the classification sites, such as NAICS. Begin by finding the overall industry your business falls in, and then click through the subcategories to find a description of what your business does. General Liability Class Codes in Action In the examples provided above, both types of businesses fall under the general category of Accommodation and Food Service. But when you look at what a bed and breakfast business does compared to a catering company, they have distinctly different risks involved in their daily operations. A bed and breakfast would be concerned with risks, such as someone tripping and falling on the property, whereas a caterer is more concerned with foodborne illness risks. Either can happen with both types of companies, but the chance of one happening is greater for a specific company. Understanding class codes is essential to understanding their exclusions as well. If your company is identified as one class code, it might not be covered for performing work that falls within another class code. For example, if your business is classified as a painting company, you might not be covered for accidents that happen while performing work as a general contractor. Disclosing to the insurance carrier all activities that your business performs regularly and occasionally ensures your business has the proper general liability coverage. Who Determines Your General Liability Class Code? Insurance companies don’t use a universal method or system of class codes. The most commonly used systems include: ISO National Council on Compensation Insurance (NCCI) NAICS Standard Industrial Classifications (SIC) Some insurance carriers may even use their own proprietary codes to classify businesses. The classification should be based on what your company regularly does as its primary offering of business. So, while an accountant may provide payroll services on top of their primary bookkeeping duties, they will get listed for their primary activity. What Happens If My Operations Change? If your primary business activities change, it is essential to notify your insurance carrier so that they can reunderwrite the policy and make sure you have the correct coverage. If a carpenter (SIC class code 1751) ends up getting a general contractor’s license (SIC class code 1521) and expands their business, they will no longer be listed as a carpenter on their class codes. The insurance carrier will adjust the policy and rates based on the new class code 1521. This adjustment reflects the change in risk that a general contractor has compared to a carpenter. Failure to notify the insurance carrier could result in a problem when it comes time for a claim. If the insurance carrier weree unaware of what you did as a primary job duty, it could deny the claim stating that you misrepresented your business to them. Be sure to check your declarations page to see what class your business is listed as to ensure you are covered properly. How General Liability Class Codes Impact Your Premium Insurance carriers base premiums on risk. The higher the risk of your industry or occupation, the higher your premium will be and vice versa. For example, an accountant sits at a desk all day in an office with few hazards compared to a general contractor with tools, supplies, and equipment as hazards on every job site. To reduce your premiums, it's best to have safety programs in place and keep claims down. Insurance carriers may offer discounts to those who are claim-free. Whatever you can do to reduce risk will help keep insurance costs down. Bottom Line Class codes are an important way that insurance carriers define risk based on industry duties and hazards. Determine your class code is to make sure your most regular business operations are identified. If your insurance carrier has misclassified your business, you could be overpaying.

A general liability audit is when your insurance agency reviews your risk exposure based on payroll, gross sales, and employees’ job duties. It’s a way to make sure that you have the proper amount of coverage and are paying the correct amount for general liability insurance. Why Insurers Audit General Liability Policies General liability policies use certain business information to establish the risk and thus the premium of the policy. But it can be hard to have an accurate account of payroll and revenues at the start of a premium term year. This is why the audit takes place. The audit will look at your business payroll accounting, taking into consideration whether or not you hired or fired people. It will consider the growth or decline in company revenues. It will assess the risk classifications employees have while working based on the duties assigned to them. If you underestimated financials and coverage needs, you could receive a bill for the difference in your premium. Likewise, if you overestimated data, you could receive a refund of the overpaid premiums. Are All General Liability Policies Auditable? Audits are commonly done on general liability, liquor liability, and workers’ compensation policies. Not every liability policy will be audited. Which policies are audited varies from carrier to carrier and may also depend on how old your company is. More established companies with consistent financials are less likely to be audited than a new company with premiums and coverage based on projected financials. Additionally, those businesses operating in high-risk industries are more likely to be audited to ensure the risk is rated appropriately. The General Liability Audit Process The general liability audit process is not as arduous as it might sound. The insurance company wants to validate specific financial details and risk factors for your business. If you are getting an audit, you will likely receive a letter informing you of the audit one to three months prior to the end of your policy’s term. It’s essential to comply with the audit request promptly so that your insurance coverage is not interrupted. For the audit, you may be asked to provide: Payroll Revenue data Tax returns 1099s for subcontractors Square footage of business space The audit may require some or all of the information listed above. To fulfill the audit request, provide the reports requested and the completed audit questionnaire sent to you by your insurance carrier. If you have questions about any aspect of the audit process, contact your carrier, who will walk you through their specific requirements. One benefit of a general liability insurance audit is that you will have a better understanding of the amount of coverage that your business needs. If you feel you are overpaying for coverage based on the premium determination, you may be able to find a cheaper policy with the same amount of coverage from another provider. Types of General Liability Audits The format of your audit will depend on the preference of your insurance carrier. There are four ways an audit may be completed: Telephone: A phone appointment is set to gather the pertinent data for your company. Expect this call to take approximately 45 minutes. Mail: A questionnaire is sent and should be completed and returned with copies of requested financial data. Electronic: The audit is done through an online portal where you can upload documents. In-person: An auditor will meet at your business location, review paperwork, and perform a walk-through of the establishment. Expect this type of audit to take a couple of hours in most cases. How to Prepare for a General Liability Insurance Audit An organized business owner will be prepared for a general liability insurance audit almost instantaneously as much of the information that the insurance carrier will request is based on your business financials. All that is needed to prepare for an audit is having quick access to your business’s financial data. Once you receive the audit request, print or make copies of the required documents and submit them to the insurance company. Remember that you’ll likely need to access your payroll data, annual revenues, growth, tax returns, and subcontractor details. If your business has expanded its physical locations, you’ll also want to provide copies of the lease data that details how many square feet your business occupies. The audit won’t ask for random details about your business. Remember, it wants to verify your business risk and coverage amounts, which are based on payroll, revenues, business size, and industry. Bottom Line If your insurance provider asks you to complete a general liability audit, don’t panic. It’s a simple process that insurance carriers use to validate the risk to determine proper coverage amounts and premium rates. The audit often looks at payroll and revenues and is done anywhere from one to three months prior to your renewal. Not only does the audit reconcile the risk retroactively, but it also is used to determine the next term’s premium.