What Business Owners Need to Know About Premises Liability Insurance

Key Insights into Premises Liability Insurance for Business Owners

From hospitality and retail to offices and service providers, many businesses operate out of a physical location that will be visited by customers, clients, business partners, delivery drivers and those providing business-to-business services. Even if your business is not customer-facing, it likely doesn't operate in complete isolation, and that's why it's so essential for Ontario business owners to understand premises liability insurance.

Regardless of how careful you are and how many precautions you take to avoid accidental injury, there's always the potential for something to go wrong that could cause third-party bodily injury. With the right premises liability insurance, you can get the financial help necessary to deal with the cost of being found liable for the injured party on your business property. Please speak to your reliable broker at Morison Insurance to find out more about premises liability insurance and make sure your business has the coverage it needs to thrive.

What Is Premises Liability Insurance?

Premises liability insurance, which is sometimes referred to as liability, is an essential type of business insurance coverage that applies to the legal and settlement costs that a business owner can incur if they are accused of being liable for causing third-party bodily injury that occurs on their commercial property.

A typical example is a slip-and-fall accident—a customer entering your business slips on a patch of ice outside the front door, injuring themselves. They could then bring legal action against you, alleging that you are responsible for their injured person because you failed to clear away the ice. If you have premises liability insurance coverage, your insurance company will provide funds to cover expenses such as legal mediation, attorney and court fees for your legal defence, and, should you be found liable, settlement costs.

Isn't That the Same Thing as Commercial General Liability Insurance?

This is among the most common questions about premises liability insurance, which makes sense. Premises liability is a specific type of coverage that falls under the broader umbrella of commercial general liability (CGL) insurance. A commercial general liability insurance policy will typically include premises liability insurance, along with other types of coverage such as contractual liability, product liability and completed operations liability. Premises liability insurance has a narrower scope, as it applies particularly to scenarios where a third party suffers bodily injury or their property is damaged on the policyholder's commercial premises.

That begs the follow-up question, "Don't I already have premises liability insurance if I have CGL?" The answer is, in all likelihood, yes. If you already have a commercial general liability insurance policy, it almost certainly includes some premises liability coverage. However, your entire CGL coverage limit doesn't necessarily apply to premises liability coverage, so you may only be able to access a portion of the coverage limit for a premises liability claim, leaving you underinsured for the particular insurance needs of your business. Suppose you need more premises liability insurance coverage. In that case, the best course of action is to give your Morison Insurance broker a call and consult with them about your unique business insurance needs.

Which Types of Businesses Should Have Premises Liability Insurance?

Most businesses need premises liability insurance coverage, but it's essential for any business that third parties may visit. Remember that it doesn't just mean customers and/or clients. It also applies to suppliers, delivery and shipping companies, cleaning and maintenance personnel, utility providers, and anyone with a legitimate reason to visit your business property should any of those individuals have their property damaged or suffer a bodily injury. In contrast, on your commercial property, you could be held liable and need to file a premises liability insurance claim to get the financial assistance necessary to handle the resulting costs.

Does Premises Liability Insurance Apply To Any Injury or Damage That Occurs On My Business Property?

No, it doesn't. Your premises liability policy is for accidental third-party injuries or third-party property damage that you, as a business owner, may be liable for. It doesn't apply if you or your employees are injured or if your property is damaged—those would fall under different insurance coverages, such as employer's liability insurance and commercial property insurance. Your premises liability insurance policy also does not provide liability coverage that arises from your actual business operations. For example, if you are a massage therapist and accidentally injure someone during a massage, the resulting legal action would be covered by professional liability insurance, not premises liability. Or, if you produce an edible product that causes food sickness, the liability would be handled under product liability insurance coverage.

Does Premises Liability Insurance Only Apply When Invited Guests Are Injured?

As a business owner, you have a duty of care to provide a safe environment for anyone on your commercial property, and you can be found liable for failing to do so—with a couple of notable exceptions. The people who may be on your business property generally fall into three broad categories:

• Invitees: If you invite someone to your business, they certainly fall into this category. But even people who aren't explicitly invited can be considered invitees. Suppose you have a retail store open for any public member to come in, look around and purchase something. In that case, they are considered invitees because there's an implicit invitation for them to enter the property during your business hours.
• Licensees: This category differs from invitees, but you still have a duty of care to provide a safe environment for licensees. It includes people that you may not have been expecting but who still have a legitimate reason to be there, such as a delivery person or utility worker.
• Trespassers: People who are not invited, explicitly or implicitly, and have no reason to be on your commercial property are considered trespassers, and in most cases, you have no duty of care to them. If a thief breaks into your office and hurts themselves, they generally hold you liable for that injury. There is a notable exception, however, regarding children and "attractive nuisances." If you own a motel with an outdoor pool that is not fenced off, for example, and some children break in to use the swimming pool and end up injuring themselves, you could potentially be liable because the pool is considered an attractive nuisance that is particularly appealing to children who don't always know better.

The above information means that premises liability insurance isn't limited to situations with people who are explicitly invited to be on your business property. Business owners can be considered liable for bodily injury or property damage to implicit invitees, licensees, and, in some rare situations, even trespassers.

Do I Need Premises Liability Insurance If I Rent My Commercial Space?

There's a common misconception that premises liability insurance isn't necessary if you only rent or lease the commercial property you operate your business out of. However, that's not the case. Even if you're not the building owner, you can still be held liable for third-party bodily injury or third-party property damage that occurs on your business premises. As a result, you need premises liability insurance so you can get insurance compensation to cover the costs of legal defence and liability settlements. Property owners, such as your landlord, should also have their own liability insurance. Still, the financial protection of their insurance coverage only applies to them as the policyholders.

Do I Need Premises Liability Insurance If I Keep the Property Well-Maintained?

Some business owners assume that if they do an outstanding job keeping their commercial premises free of any dangerous conditions, including all the appropriate signage warning of potential injury or damage, they can't be held liable for third-party property damage or third-party bodily injury and, therefore, do not need premises liability insurance. That is not true. We all know that accidents can happen, even to the most conscientious person who takes every measure imaginable to avoid hazardous conditions. But it's also important to remember that you could be accused of causing bodily injury or damage you're ultimately not liable for, and you'll still have to defend yourself in court against those allegations. Even without the cost of a liability settlement, you'll need premises liability insurance coverage for legal defence costs such as your attorney fees and court fees.