GENERAL LIABILITY EXPOSURES
Almost every organization faces commercial liability exposures . A commercial liability loss exposure is a condition or situation that presents the possibility of an organization becoming legally and financially responsible for injury , harm or damage to another party .
These exposures stem from the kind of work an organization performs and where that work is executed . They also encompass other aspects of businessrelated circumstances , activities or events that could result in harm to a third party .
This article provides a better understanding of the most common types of commercial liability loss exposures and potential consequences and for guidance on how the correct insurance policy can reduce the risk to organizations .
COMMON TYPES OF COMMERCIAL LIABILITY EXPOSURE TO KNOW
There are five types of commercial liability exposure that every organization should know . Possible loss exposures that may affect an organization include the following :
1 . Premises liability — Premises liability describes the risk an organization faces if a customer or client is injured on the premises ( e . g ., tripping and hurting themselves at the store ). Organizations that require customers or clients to be physically present , such as retail stores and landlords , are particularly at risk for these losses and may be held liable for bodily injury or property damage .
2 . Operational liability — Operations liability exposure refers to the possibility that an organization will be held liable because of bodily injury or property damage that occurs as a result of their ongoing ( as opposed to completed ) operations . For example , imagine a contractor working on a client ’ s home . During the course of their work , an employee from the contractor drops a tool , striking a passerby and causing bodily injury and property damage to the home itself .
3 . Products liability — Products liability refers to the loss exposure an organization faces as a result of manufacturing , distributing or selling an unsafe or defective product . Any organization that makes or sells products is at risk . Associated injuries may occur virtually anywhere in the world once an organization ’ s products have been manufactured or sold .
4 . Completed operations liability — The completed operations liability exposure refers to injuries or damages incurred by a third party due to work ( including construction work ) that has been finished , turned over to the purchaser or client , and / or put to its intended use . For example , an electrical fire caused by faulty wiring at a completed construction project would represent a completed operations exposure for the contractor who completed the work . It should be noted that injuries or damages arising out of completed operations can occur after a business ’ s relationship with the injured party has ended .
5 . Contractual liability — Organizations take on contractual liability loss exposures when they enter into a contract . By agreeing to contractual terms , an organization becomes liable if the other parties involved in the contract believe an organization has not fulfilled its obligations under the agreement .
POTENTIAL CONSEQUENCES OF LIABILITY EXPOSURES
In the event of a commercial liability loss , organizations can face a variety of potential consequences , such as :
• Damages — If a court deems an organization responsible for a loss , that organization may be held financially accountable for paying damages to the harmed or injured party .
• Defense costs — The organization may have to pay legal defense costs and the costs associated with the claim .
• Reputational harm — Due to general liability losses , organizations may experience reputational harm , including but not limited to the loss of business , decreased employee retention , and a loss of consumer loyalty and investor trust .
Although commercial liability loss exposures are a risk for every organization , the severity of the consequences can be alleviated with proper insurance policies .
COMMERCIAL LIABILITY INSURANCE
No matter how careful an organization is , there will always be risks associated with commercial liability loss exposures . Therefore , the best way to protect an organization is to purchase commercial general liability coverage ( CGL ).
CGL policies are designed to cover an organization from liability claims for bodily injury and property damage to third parties . CGL policies have three standard coverages :
1 . Bodily injury and property damage — This coverage protects organizations from the legal liability arising from bodily injury and property damage stemming from an organization ’ s premises or operations .
2 . Personal and advertising injury — This aspect of CGL policies protects insureds from liability stemming from accusations of libel , slander , false arrest , copyright infringement , malicious prosecution , theft of advertising ideas and invasion of privacy .
3 . Medical payments — Medical payments coverage includes payments for injuries sustained by third parties that are caused by an accident at the insured ’ s premises or the insured ’ s operations . Unlike bodily injury and property damage coverage , medical payments coverage can be triggered without legal action and is designed to settle smaller , less serious medical claims without litigation .
CONCLUSION
Consult a trusted insurance professional for further guidance on how to protect your organization from commercial liability loss exposures . +
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