What Is Premises Liability Coverage? A Guide for Business Owners

By Alex Brown

When you own a business, whether it's in an office or a storefront, you are exposed to some premises liability risk. Things happen in unexpected ways, from clients tripping in your parking lot to an item falling on a customer. The good news is these unfortunate circumstances don't have to keep you up at night if you have the right insurance.

What is premises liability?

Premises liability is a legal concept commonly appealed in personal injury cases when an injury is caused by a dangerous or defective condition on someone else's property. Most personal injury cases, including premises liability cases, are founded on negligence—the failure of the property owner to exercise due care about the property.

It's crucial to remember that just because a person is hurt on someone's property, it doesn't indicate the owner was at fault. Furthermore, just because the property was unsafe does not necessarily prove that the owner was irresponsible. To win a premises liability case, the injured party must establish that the property owner was aware, or should have been aware, that the premises was in an unsafe condition and did nothing to correct the problem.

While many states require property owners to exercise reasonable care in the ownership and maintenance of their property, other states rely on an outdated regulation that limits the landowner's obligations based on visitors' status. There are three types of visitors:

• An invitee is someone who has been granted permission to enter the property by the landlord, either explicitly or implicitly. Friends, relatives, and neighbors are frequently invited. Traditionally, a landowner owed an invitee a responsibility of reasonable care to maintain the property as safe for the invitee.
• A licensee is someone who has the stated or implicit authority of the landowner to enter the property, but is doing so for personal reasons. Licensees are typically people who work in sales.
• Trespassers are people who aren't supposed to be on the property. In the past, unless the trespasser was a minor, landowners had no obligation to trespassers. However, landowners had a responsibility to take reasonable precautions to avoid a reasonably foreseeable risk of injury to children from artificial conditions on the property (e.g., swimming pools).

Types of premises liability claims

Slip and fall cases, snow and ice accidents, inadequate property maintenance, defective conditions on the premises, inadequate building security leading to injury or assault, elevator and escalator accidents, dog bites, swimming pool accidents, amusement park accidents, fires, water leaks or flooding, and toxic fumes or chemicals are all examples of premises liability cases.

Let's look at a few different kinds of premises liability claims:

1. Slip and fall

These are the most basic situations of premises liability. When you slip (or trip) and fall on someone else's property, it's called a slip and fall. Defective staircases, ice or snow accumulation, wet or oily flooring, hidden extension wires, and unsecured rugs or carpets are just a few of the everyday situations that might cause a slip or trip and fall.

2. Inadequate building security

Typically, these incidents occur in residential complexes or offices. Owners of these structures have a responsibility to reasonably secure access to the facility. This is why on the first floor, most major apartment buildings and workplaces employ doorkeepers or security guards, and tiny apartment buildings require tenants to keep front and back doors locked.

Suppose someone breaks into a building (or walks in through an unlocked door) and assaults or kills someone inside. In that case, that person may have a premises liability case against the building owner if it can be demonstrated that the building owner failed to take reasonable precautions to safeguard the structure.

3. Swimming pool accidents

Typically, this involves children and an unattended and unsupervised pool. As a result, most states and municipalities have regulations requiring swimming pools to be surrounded by a fence, frequently with a locking gate. In a premises liability case, someone who leaves their pool open and unguarded may be held liable.

4. Hiring independent contractors

You own a business that relies on independent contractors or subcontractors, and they frequently visit your place of business. One day, one of your contractors sits on one of your chairs, loses their balance, and falls out of the chair, breaking their arm. The $5,000 in medical bills incurred by the contractor would not be covered by workers' compensation because the contractor is not an employee and would need to be re-covered under premises liability coverage.

How premises liability insurance can help

Every business owner's insurance portfolio should include commercial general liability (CGL) insurance. It defends you and your company against claims of personal injury, property damage, and negligence arising from your retail operations. The coverage for premises liability is one of the most important aspects of a CGL policy and can be found in these sections:

• General liability coverage—This liability coverage will pay for covered bodily injury and property damage claims brought against your company. The loss must have occurred due to negligent operations or property maintenance.
• Medical payments coverage—This coverage pays for medical bills, regardless of fault or carelessness. It pays for expenditures incurred by anyone other than employees who are injured on a property you own or rent, or who are injured as a result of your operations or activities.

Medical payment limits can be found on your insurance disclosures and are usually $5,000, $10,000, or $15,000 per person. Keep in mind, medical payment coverage usually does not apply to those trespassing on your property. Of course, whether or not a claim is covered depends on policy terms, restrictions, limits, and any applicable exclusions when the incident occurs.

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Grocery businesses offer a perfect example of the importance of premises liability insurance. Wet floors, spilled goods, and floor mats are standard in produce departments, posing trip and fall hazards. While most supermarkets take considerable measures to keep their stores safe, including non-slip floors, tight storage, and signage alerting shoppers to potential risks, accidents do occur and individuals are injured.

No matter how minor, any harm that occurs on your business premises can result in a lawsuit. The costs of defending oneself and paying damages might be crippling to your company's bottom line. Premises liability insurance provides the necessary protection for you and your visitors.

Premises liability insurance exclusions

Keep in mind that your business's premises liability insurance does not cover every possible injury to a customer. If you are a doctor, for example, and you injure someone while providing medical care, your premises liability policy will not cover you.

This type of situation would necessitate professional liability insurance, sometimes known as errors and omissions (E&O) insurance. Employee injuries and damage to your business property are also not covered by premises liability insurance (from fire, theft, etc.).

Be careful with shared properties

When a landlord and lessees share maintenance and control of a property, premises liability coverage becomes more complicated. Even when a grocery shop does not own the building it occupies, it has a vested interest in keeping the parking lot (which it also does not own) safe—after all, the grocery store owns the grocery carts, the most common cause of property damage and injuries in parking lots.

In these situations, it's typical for the landlord and lessee to specify in the lease who is responsible for maintaining common areas so that in the event of an injury or property damage, the relevant party is held liable. The lease also specifies who is responsible for covering premises liability claims (with commercial liability insurance) to avoid future disagreements.

Lessees (such as medical practices) in office buildings frequently are just required to acquire premises liability insurance for their leased space. If a patient slips and falls in the lobby five levels below, the landlord will be held accountable. Suppose a lessee does not have a contractual obligation to maintain a common area (by the lease). In that case, it cannot be held liable for damages and does not need to obtain premises liability insurance.

Tips for reducing premises liability accidents

To help prevent injuries in the first place, business owners should check and address any unsafe hazards on their property. If flaws or potentially dangerous problems cannot be repaired right away, warning signs or markers should be put in place to draw attention to the situation. Also, consult with a local lawyer to determine the specific responsibilities of landowners in your state.

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