This article is part of a larger series on General Liability Insurance.
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.
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 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. No one makes it easier to get coverage.