Welcome to the ABCs of Insurance Claims. Over the next few months, Sherri Walker, Sentinel’s Director of Claims will address an aspect of claims handling for every letter of the alphabet to help provide a better understanding of the claims process.
If you are a business owner, chances are that at some point you’ve had a concern that someone will slip, trip or fall on your property and sue you, or that you’ll be blamed for some sort of malady that occurs as a result your business operations. As much as you try to prevent the worst, there are times that it’s simply not enough, and that is why General Liability coverage is so important. In simplest terms, General Liability coverage, also referred to as “GL,” provides protection to third parties in the event that you are found liable for injury or damage to a person or their property.
GL is formally defined as “coverage to a business for bodily injury, personal injury, and property damage caused by the business’s operations, products, or injuries that occur on the business’ premises.” This coverage can pay medical bills and physical property that is damaged as a result of negligence. It can also pay defense costs if you are sued and additional other costs such as “pain and suffering.”
Duty Owed, Duty Breached, Causation, and Damages
In order for there to be coverage for resultant bodily injury or property damage, the element of negligence must prevail. For negligence to be determined, we examine 4 elements: Duty owed, Duty breached, Causation, and Damages.
Overall, General Liability responds when you failed to act as a reasonably prudent person would, and that failure is the reason damages occurred. For instance, the owner of a retail establishment noticed a small pothole in the parking lot. The days and weeks go by and the area around the pothole continues to erode and now the hole is quite large.
The owner of the business means to call a local company for a repair every day but gets busy running the operation and ends up doing nothing to fix the hole. One day, a customer leaving the store stumbles in the hole and as a result falls and breaks their arm. Given this situation, there is a strong likelihood that the General Liability policy will respond.
By contrast, one day a customer of the same retail store trips over their untied shoelace in the parking lot. There were no other factors at play besides their own clumsiness and the GL policy would likely not apply.
It is important to note that there are exposures that your GL policy will specifically exclude. It will not cover Contractual Liability, defined as damages you become obligated to pay only because you entered into a contract. For example, if you knowingly hired an employee that was on a non-compete contract and then had them violate such contract in the scope of their work with you, your policy would not provide coverage for any sums a court orders paid.
Your policy will also not cover “your work” but will cover resulting damages. For example, a contractor installs cabinets in a new home without properly fastening them to the wall. Once the homeowner moves in and puts dishes in the cabinet, the additional weight causes them to fall. The policy would not pay for the cabinets to be re-hung correctly; however it may cover any damage to the counters, or the floor incurred and all of broken dishes as “resulting damage.”
There are various other exclusions to be mindful of, such as pollution, employer’s or professional liability, automobile liability (as these are all covered by other insurance policies) or trademark infringement, as well as intentional or criminal acts just to name a few.
There are some types of liability in which limited coverage is offered. An example of this would be Personal and Advertising Injury. This is different from Bodily Injury of a person, but rather the type of impairment suffered as a result of slander or libel, false arrest or wrongful eviction. This coverage is limited and excludes violating the rights of others and publishing material that is known to be false, as well as advertisement of wrong prices and copyright or trademark infringement.
Additionally, there may be coverage for Products – Completed Operations. This would apply if your product caused injury or damage. Consider the manufacturer of a toaster that malfunctions and causes a devastating fire in a customer’s home, or a company that processes frozen chicken nuggets with a piece of bone left in that chips a customer’s tooth.
There is often a coverage added into the GL policy that does not require the element of negligence – Medical Payments coverage. This is a limited amount of funds that will provide for incurred medical expenses for injuries occurring on your property regardless of negligence. There are exclusions such as injury sustained while participating in an athletic activity, as well as injury to employees or Insureds. This is essentially a goodwill type of coverage offered to reimburse for medical or funeral expenses incurred from business’ operations.
An Ounce of Prevention is Worth a Pound of the Cure
Maintaining a clear, cared for premises is an important factor, as well as having procedures in place to clear anticipated debris – such as salting sidewalks in advance of a forecasted winter storm and promptly clearing the sidewalks of snow or ice.
Sufficient lighting, attention to changes in elevations such as steps or curbing, and changing out tiles or carpet that have become chipped or torn are all some basic precautionary methods. Safety goes beyond those minor aspects and is the cornerstone of Risk Management.
Our Sentinel Risk Performance Group can assist you in reviewing the policies and procedures that are currently in place and can make recommendations for improved safety for your premises and operations. Our dedicated team of professionals can assist you with materials for training and can consult with you if and when a loss does occur. Safeguarding Your Success is our business!