Premises liability coverage is an insurance policy that protects business owners from claims of injuries and property damage sustained while on the business premises. By law in all states, an owner of property must make reasonable efforts to ensure that visitors are entering a safe environment.
If someone gets hurt on the property, then the business is responsible for injuries and damages—and 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 Coverage Works
A general liability insurance policy usually includes premise liability, but premise liability can be purchased as standalone coverage. If purchased on its own, the limits are often higher than the general liability policy’s limits.
Premises Liability Insurance vs General Liability Insurance
General liability insurance and premises liability insurance are often viewed as the same thing—but they aren’t.
- Premises liability insurance can be part of a general liability policy and covers claims where there is no proper maintenance of a property and a visitor gets hurt.
- 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.
How Shared Premises Are Covered
There are times when 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 safety and maintenance of the property.
The liability reverts 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—which are the responsibility of the building owner.
Important Premises Liability Coverage Exclusions
Premises liability doesn’t cover every type of injury or all property damage incurred on the premises. We’ll go over the important exclusions and offer recommendations for each.
Exclusion is an insurance term to describe an event or action that is not covered by a policy. Exclusions are listed on your policy, so ensure you are familiar with what is and is not covered.
Exclusions | Our Buyer’s Guides |
|---|---|
Professional malpractice: When 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, or professional liability, insurance. | |
Employee injuries: Employees can expect a high duty of care for their welfare, though they are not covered by premises liability if they are injured while on the job. Instead, they are covered by workers’ compensation insurance. | |
First-party property: Commercial property insurance is necessary for businesses to pay for losses that occur to their own property. |
Premise Liability Key Terms: Categories for Visitors
Within the scope of premise liability insurance, there are different categories for on-site visitors, and each of these categories can impact the coverage.
- An invitee is like a customer. This is someone who is 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 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.
- Finally, there is a trespasser. Their rights are often limited, and if they are injured while on the property, then they can’t collect from the property owner in most cases. However, in most states, the property owner must adequately maintain the property and ensure to try to not harm the trespasser, such as with a trap.
Children are a special category with premise liability—they may fall under any of the three categories above. Regardless of the category, business owners have a duty to ensure their property is safe when there is a possibility children could be on the premises. For example, surrounding a hole or a pit with a fence.
As a business owner, it is important to review the state laws to fully understand what your liability is within your state. 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 non-obvious 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.
Examples of Premises Liability Exposures
There are different types of exposures that a business faces when addressing premises liability. Examples of exposures include:
- 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 and then falls and hurts themselves, the business is liable for injuries.
- Elevator and escalator accidents: 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.
Frequently Asked Questions (FAQs)
Premise liability insurance is a policy that protects a business from injuries sustained by another party while on the business premise.
Some scenarios where you would need premise liability insurance include if your business has a physical space that visitors can access and if you are a contractor or real estate investor with vacant buildings.
Premise liability is narrower in what it covers compared to general liability. For example, premise liability does not have coverage for advertising injury or a reputational harm claim. Premise liability is focused solely on injuries or property damage a third party suffers while on your property.
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 normal foot traffic, you may want to consider seeing if you can get a separate aggregate limit for premise liability.
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 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 Tivly. 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.
