Premises liability coverage is an insurance policy that protects property and business owners from financial losses due to injuries and property damage claims on their premises. Specifically, this insurance is designed to cover situations like slips and falls, injuries from falling objects, the destruction of personal belongings, or accidents due to negligence in maintenance or structural defects on the premises.
By law in all states, the property or business owner is obliged to make reasonable efforts to ensure a safe environment for visitors.
How Premises Liability Coverage Works?
A general liability insurance policy usually includes premise liability, but premise liability can be purchased as standalone coverage. If purchased independently, the limits are often higher than the general liability.
Property Owner’s Responsibility Under Law
Property owners are legally obligated to maintain a secure place for customers, visitors, invited people, or anyone else who enters their property. They should identify and address potential accidents that may occur because of the following:
- Poor lighting
- Uneven surfaces
- Construction
- Wet or slippery floors
- Loose carpets
- Low-hanging objects
- Faulty wiring
- Undetectable obstructions
- Explosive or ignitable materials
3 Categories for Visitors: Premise Liability Key Terms
Within the scope of premise liability insurance, there are different categories for on-site visitors, and each can impact the coverage.
- An invitee is like a customer. They are welcome on-site, either by invitation or the implied consent of the business.
- A licensee may have limited protection because they are not invited, but they still can expect reasonable safety. They might be a delivery driver who must access the property to do their job or someone using the bathroom in your restaurant.
Both an invitee and a licensee visitor are permitted 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.
- Finally, there is the trespasser. Their rights are often limited, and if they are injured while on the property, they can’t collect from the property owner in most cases. However, in most states, the property owner must adequately maintain the property and try not to harm the trespasser, such as with a trap.
Children are a particular category with premise liability—they may fall under any of the three categories above. Regardless of the category, business owners must ensure their property is safe when children may be on the premises. For example, they may surround a hole or a pit with a fence.
As a business owner, reviewing state laws to fully understand your liability within your state is essential. You may owe all visitors—even those trespassing—a high duty of care and safety. However, there are exceptions to the rule, where some trespassers must be given warnings of nonobvious dangers.
Pro Tip: Take extra precautions if you have a swimming pool on the premises, as pools are often classified as “attractive nuisances” for kids.
Install warning signs and safety covers and supervise inexperienced swimmers and children. Another good idea is to install gate alarms in pool areas to alert people when someone enters.
Regularly inspecting and maintaining the pool equipment ensures the safety measures are on point. If the property owner is unaware of these precautions, they are deemed liable.
How Shared Premises Are Covered
In some cases, a business owner may lease property, complicating premises liability. Generally, the lease transfers all liability to the business and away from the lessor.
For example, the business owner might not be responsible for parking lot maintenance; thus, liability would revert to the property owner. The same applies to elevators and escalators, which are the building owner’s responsibility.
What Does Premise Liability Insurance Cover?
Premise liability insurance will help you manage the financial risks associated with owning property. It can protect you by covering legal defense costs, physical injuries, accidents, and property damage.
Legal Defense Costs
The insurance provider supports covering the legal expenses if an injured party files a lawsuit in disagreement with the property owner.
- Attorney fees to hire a legal defense team for the property owner
- Settlement costs or court-ordered damages
- Covers court-associated costs
- Financial assistance goes up to the limit of the policy
Physical Injury
Premise liability insurance covers the expenses if someone is physically injured on your property in any uncertain situation. This includes the following:
- Doctor visits
- Surgery expense
- Hospital stays
- Physical therapy
- Lost wages
- Medical rehabilitation costs
Accidents Caused by Negligence or Unsafe Conditions
Premises liability insurance covers the circumstances if an accident occurs because of the property owner’s negligence or unsafe conditions. Some common cases are poor structural maintenance, swimming pool accidents, faulty plumbing, elevator or escalator malfunctions, inadequate lighting, uneven surfaces or broken tiles, and loose wires.
Property Damage
If someone’s property is damaged while on-premise and the damage is the direct result of the property owner’s negligence, then premise liability can help with the costs of repairing or replacing the damaged property.
Factors Influencing Premises Liability Insurance Coverage
When considering purchasing insurance, remember that certain factors will impact how the policy handles a claim.
Policy Limits
Policy limits come in two forms: how much the insurance provider will pay per claim and the maximum it will pay for the entirety of the policy period (suppose for a year). Regarding premises liability insurance, policy limits refer to the maximum amount of coverage possible by the insurance company for claims.
Generally, your carrier will do everything it can to resolve a loss within the policy’s limits. But if any costs exceed that limit, then the rest of the amount will be the owner’s responsibility. A property owner should know his insurance policy limit and measure whether it’s adequate for his business size.
Exclusions
Not every type of loss is covered by the premises insurance company. The types of occurrences that are not covered can be found in the policy under the listed exclusions. Before signing any insurance, reviewing the policies to understand the specific exclusions is essential.
Some examples of exclusions are as follows:
- Typically, premises liability insurance doesn’t cover employee injuries; workers’ compensation insurance covers it.
- Any accident or injury intentionally occurred by the property owner or their employees will not get any insurance support.
- If the owner has signed contracts with any third party mentioning that the property owner is liable for any accident, the insurance company will not cover it. If the policy specifically covers this, the owner may get insurance coverage.
- Any claim from the acts of war is generally prohibited from getting premise liability insurance.
- Injuries or circumstances related to nuclear accidents or radiation are on the exclusion list.
Property Condition
The physical condition of a property can influence insurance premiums. A regularly well-maintained property reduces risks and can help with the cost of premium liability insurance.
- Increasing safety improvements: These include installing handrails and fire extinguishers, enhancing lights, removing tripping hazards, and closing the wiring area for random people.
- Making preventive guides: If the owner assesses the property to find out potential risks and create guides to prevent them.
- Documenting the records: Continuously documenting the records of maintenance and repairs on that property can help describe how responsible the owner is for the property’s safety.
Type of Industry
Your business or property type influences the coverage of your premises liability insurance. Suppose you have a small office with limited visitors on weekdays only. The coverage needed would be less than if you own a restaurant with frequent customers. So, the business type varies the risk levels, influencing the insurance.
Location of the Property
The location and area of the property notably impact the premiums and coverage of premises liability insurance. If the property’s location is in a high-risk area, it may lead to higher premiums. Because of the increased risk, finding affordable premise liability insurance may be a challenge.
When Would I Need Premises Liability Insurance?
There are two primary reasons why you may need premise liability insurance: your business has excessive public access or you need to comply with local property laws.
Suppose you own a property or business open to the public, a restaurant, store, or any other open property. These properties have a considerable amount of traffic, which means there is a higher risk of accidents and injuries.
For instance, in New Jersey, a person got injured at a county park and filed lawsuits against the owner. The Appellate Division affirmed that the landowner is liable for the incident. This example shows us the importance of securing premises liability insurance, especially for those who own properties that the public can access freely.
Some states (for instance, Utah and California) have laws for property owners who must carry premises liability insurance. So, before buying any property or starting a business in an area, ensure you know all the regional laws and regulations.
Premises liability insurance is important as it protects you from claims, cases, and financial losses while keeping you in compliance with local laws and regulations.
Differences Between Premises Liability Insurance vs General Liability Insurance
Both premises and general liability are types of small business insurance. They are similar and share some overlapping coverage, but they also have key differences.
Aspect | Premises Liability Insurance | General Liability Insurance |
|---|---|---|
Coverage | Provide coverage for injuries or damages on the property due to negligence or unsafe conditions. | Grant coverage in a broader range of accidents, such as physical hurt, property damage, or advertising injury. |
Examples of Covered Incidents |
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|
Who Needs It | Landlords, property owners, and businesses like restaurants, hotels, retail stores, or property managers. | All types of businesses, particularly those that interact with customers, sell products and services, or employ on-site workers (e.g., construction, consulting firms, event planners, and cleaning services) |
Who Needs It | Landlords, property owners, and businesses like restaurants, hotels, retail stores, or property managers. | All types of businesses, particularly those that interact with customers, sell products and services, or employ on-site workers (e.g., construction, consulting firms, event planners, and cleaning services) |
Limitation of Coverage | Only to incidents and harm that happen on the insured premises. | It covers both the on- and off-site operations of a business, together with customer and property disfigurement. |
Focus | The main focus is on the occurrence of the physical premises. | The main focus is protecting the business from claims due to business activities. |
Exclusions | Does not provide coverage for employee injuries or accidents off-site of the property. | Does not cover professional liability claims or intentional misconduct. |
Premises liability insurance can be part of a general liability policy and covers claims if people get hurt on the premises.
Who Needs Standalone Premises Liability
If you require higher protection for a property that doesn’t have other liabilities, a standalone premises liability insurance policy is a good idea. This is commonly seen with vacant land or land that will be built on that is covered by contractor’s insurance for other general liability claims. An example would be a premises liability policy with builder’s risk insurance.
General and premises liability insurance are often viewed as the same thing—but they aren’t. General liability insurance coverage offers broader protection. This includes personal property coverage and claims resulting from business operations that may occur away from the actual business—like a homeowner tripping on a handyperson’s tool bag and getting hurt.
When General Liability Insurance Is Enough
A standard general liability insurance policy with premises liability plus is sufficient for most small business owners. You can increase the general liability limits or get a commercial umbrella policy if you feel the general liability policy limits are insufficient. Our list of the top general liability insurance companies could be an excellent place to start if you want this coverage.
Frequently Asked Questions (FAQs)
This policy safeguards a business from injuries sustained by another party while on the business premises. It covers legal fees, settlements, and medical bills if the owner is found guilty.
PPL in insurance stands for Public and Products Liability. Here, public liability protects a property owner from third parties’ claims when injured or suffers from property damage on the insured premises. Conversely, product liability covers the claims of injuries or damages caused by the product you manufactured or the product your business sells.
Most general liability policies include premise liability. However, depending on the type of business you have, you may need a standalone policy for premise liability, like for an empty building. Or, if your business sees higher than regular foot traffic, consider seeing if you can get a separate aggregate limit for premise liability.
Yes, you should have premises liability insurance even if you own a small business. Premise liability helps prevent major legal and medical expenses if anyone gets injured on your business building or property.
No, premises liability is included in general liability insurance, where general liability covers some additional areas like product-related and advertising injury claims. Premises liability only covers the incidents that happened on your property.
The cost of premises liability insurance depends on the size of your location, business, building, number of visitors, and coverage limits. An average small business might pay between $400 and $1,000 annually, considering the potential risk levels.
Yes, certainly. Though renting a business space, you can’t deny the injuries or incidents in the areas you control. When you are liable, you will receive lawsuits, and only insurance can save you that time.
Bottom Line
As a business owner, you are responsible for creating a safe environment for people to visit your area. However, accidents can still happen, and if someone is injured on your property, premises liability coverage is essential: It will help you by handling and resolving claims.
If you are still determining whether you need premises liability coverage, talk to the folks at Tivly. They will evaluate your business risk and pair you with one of their 200-plus insurance partners to get the right policy for the best price.
