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Back to Basics - What’s New in Premises Liability Exposures?

Author: Nancy Germond

Premises liability can arise when a visitor, or even a trespasser, alleges an unsafe condition on your client's property. Premises liability is a subset of general liability, a risk that arises when others use the insured's premises.

Under the homeowners (HO) policy, Coverage E – Liability. provides liability coverage for homeowners. A claim after a trip and fall on the homeowner's property, for example, could find coverage under Coverage E.

Under the businessowners (BOP) policy, liability is usually found under Section II – Liability. This would cover normal liabilities business owners incur because of property damage or bodily injury to others arising out of the use of the premises. For example, a fall on an escalator may generate a bodily injury claim, and the businessowners policy should respond.

Under the commercial general liability (CGL) policy, Section I – Coverage A – Bodily Injury and Property Damage, provides protection against these types of bodily injury and property damages. In this case, a claim can arise in a variety of ways, but visitors to the insured's locations often generate claims upon injury.  

In the case of contractor and those who work in others' homes or businesses, liabilities can arise at work locations. For example, a tradesperson may leave out a tool at a customer's home, and the homeowner trips and falls. For the purposes of this article, however, we'll look solely at on-site premises liability issues.

What Properties Do Liability Policies Protect?

This property can be your insured's home, a secondary residence, an office building, or warehouse. Anywhere people are likely to visit opens the door to premises liability.

The homeowners policy, the businessowners policy, and the commercial general liability policy cover liability arising from a variety of incidents. These can include the following typical scenarios.

  • Your insureds hold a yard sale. A visitor falls in a trench near their yard, breaking her hip.
  • A delivery person enters your client's yard and the insured's dog bites him, leaving him injured and off work.
  • A recent rain leaves the front entry to your client's commercial building wet. Despite rugs and signs, a person falls and is seriously injured.
  • Despite surveillance cameras, an assault occurs at your client's commercial business.

Premises Liability Settlement Values and Verdicts are on the Rise

Here is a list of the top ten premises liability settlements for 2020. As you can see, the liability limits for many of the property owners may be insufficient to fund this size of settlements. Now look at the top premises liability verdicts in 2020. These are great examples to help your clients establish their limits of liability.

Here's a recent $12.2 million premises liability verdict caused after a carpet cleaning company allegedly failed to dry the carpet at a commercial building. The commercial building owner's carrier also defended the suit. While an appeal may ultimately result in a lower settlement, that type of verdict can cause your insured many sleepless nights. As one business owner here in Arizona reminds his employees, “We're one nuclear verdict away from bankruptcy."

Using some of these examples as quick case studies on your website or on social media may help your clients understand the need for adequate liability limits and excess liability coverage, as well.

As an agent, you want to ensure that you've done all you can to remind your clients to rethink the adequacy of their liability coverage limits.

Here are some tips you can use to remind your insureds about the need for safety on their premises, whether their personal residence, vacation home, or commercial properties.

Encourage Your Insureds Not to Neglect Routine and Sudden Maintenance

Recordkeeping is critically important when defending premises liability claims. A record of routine maintenance and regular inspections along with needed repairs can help organizations better defend a claim. If employees see a problem, they need to take immediate steps to correct the defect. Notice of a hazard that goes unrepaired, even a small problem, makes it very difficult to defend the insured.

Your insured should develop a strong reporting policy, as well as document routine cleanups, such as instituting sweep schedules. If your clients are in a high-crime area, they should consider private security and improved lighting at a minimum.

It's difficult to successfully defend a maintenance allegation without a record of repairs and responses to reported problems. After any premises liability claim, the carriers' defense attorneys face highly skilled and often well-funded plaintiff attorneys whose job it is to make your client's operations look indifferent and sloppy.

Property Managers Should Know Whom They Hire

Your commercial clients may use many different vendors to service their properties, from plumbers to electricians to cleaning crews. Many of these vendors hire temporary labor or perform no background checks on their employees, especially smaller vendors. Under the Work Opportunity Tax Credit, employers who hire ex-offenders get significant tax breaks. While many ex-felons successfully rehabilitate, wouldn't it be good to know if your vendor uses that federal program? Your insureds should ensure the repair firms they use run background checks on all their employees, especially those who will encounter your clients' employees.

Some property managers may decide to run their own background checks. This link provides a great deal of information on the importance of vetting employees, whether externally by the vendor or internally by your clients.

Can You Help Your Clients Better Manage Certificates of Insurance (COIs)?

Obtaining appropriate proof of coverage can mean the difference between your insured holding the post-loss bag and a successful co-defendant. Can your office help explain the importance of obtaining and reviewing COIs?

Any vendor they hire should be able to provide adequate proof of coverage. However, smaller business owners may not have even a basic understanding of the need for these documents, nor, if received, can they evaluate them. Any training you can provide can set you apart from the crowd of agents seeking their renewal dates.

High-Crime Areas May Have Changed

Much of today's crime is opportunistic. An unlocked door, a car left with its motor running, construction sites left unattended – these all present the opportunity for theft and vandalism. Many of today's business owners complain of new problems with homeless populations littering and causing other problems.

Your insureds should consider how they can best prevent and if needed, respond to crime in or around their business. Local police departments nationwide partner with business owners to assist in homeless situations, so offering referrals to your clients dealing with that issue can set you apart from the crowd.

The more crime occurs nearby, the more underwriters will balk at insuring the business. And if an area becomes more dangerous, your insureds should take proactive steps to increase security. They should consider their historical crime trends and that of their neighbors and invest in more premises security. Simpler fixes include better lighting, security cameras and fencing.

Here are some social media updates you can use to remind your clients to reach out to discuss their liability limits.

“Recent sky-high jury verdicts for premises liability claims can mean your current liability limits are inadequate. Losses can arise at your home or your work locations. Call us to discuss some recent lawsuits we've followed to help you determine if your liability limits are adequate."

“Liability settlements and jury verdicts for liability arising out of premises' visitors are escalating all the time. Your present liability limits may be inadequate given today's injury settlement trends. Reach out to discuss your liability limits and ways you can make your premises safer."

“Even the safest buildings can create unforeseen hazards. It's hard to prevent all losses, and juries are increasingly willing to hand out multi-million-dollar verdicts, even with little to no liability. Are your premises liability limits adequate? Call us for more information about premises liability trends."

First published: August 12, 2022

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Alexandria VA 22314
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