General Liability Exposures Every Organization Should Know

Each business has unique exposures that can inflict harm upon a third party. Unavoidable commercial liabilities and loss exposures can pose legal obligations and financial responsibilities on your organization.

Reduce your organization’s risk and review the most common forms of commercial liability loss exposures, consequences and insurance policies available.

Five General Liability Exposures that Can Influence Potential Loss

1. Premises Liability

This responsibility involves your organization’s risk when a customer or client experiences an injury on the premises (e.g., slips, falls, tripping, accidents). Businesses that need customers or clients to be physically present (e.g., retail stores, property owners) are in jeopardy to suffer losses and be held liable for bodily injury or property damage. Your organization is responsible to make a reasonable effort to maintain a safe environment. The most common property areas that lead to accidents include:

• Steps & ramps
• Holes & ditches
• Vegetation
• Sidewalks
• Flooring & floor coverings
• Construction areas

2. Operational Liability

An organization that is responsible for bodily injury or property damage from ongoing operations falls under operational liability exposures. For example, a worker from a hired contractor for a commercial property building causes damage to the property. The contractor is responsible for repairs or replacement for that damage.

3. Products Liability

This loss exposure derives from the manufacturing, distribution or sales of an unsafe or defective product. Any organization that creates or markets products is at risk. Additionally, injuries associated with products also fall under this liability and can occur after manufacturing is complete and the product is sold.

Most product liability claims cases are classified as defective manufacturing, faulty designs or failure to provide sufficient warning or instructions. One of the most famous product liability cases was a fast-food hot coffee case where a customer alleged the company failed to warn customers of the risk from the beverage’s temperature.

4. Completed Operations Liability

This risk involves injuries or damages that occur from a third party due to completed work that is turned over to the client/purchaser and utilized for its intention. Injuries or damages from completed operations can occur after the business relationship with the injured party has ended. Completed operations insurance is must-have insurance coverage for contractors.

5. Contractual Liability

Organizations accept contractual liability loss exposures when entering a contract. By agreeing to contractual terms, a company is liable if the other parties in the contract believe you have not fulfilled all obligations under the agreement.

Potential Liability Exposure Outcomes

In the event of a commercial liability loss, your organization could suffer potential consequences, such as:

• Damages: When the court deems a business responsible for a loss, that company may be financially responsible for compensating damages to the harmed or injured party.
• Defense Costs: An organization could have to reimburse legal defense costs and the expense associated with the claim.
• Reputational Harm: Due to general liability losses, a business could experience reputational harm (e.g., business failure, lower employee retention, loss of consumer loyalty, damaged investor trust.)

Commercial liability loss exposures are a potential risk for every organization. Securing proper insurance policies can alleviate the severity of the consequences.

The Standard Commercial Liability Insurance

Even if your business takes every precaution, risks will always be associated with commercial liability loss exposures. The best protection is to secure commercial general liability (CGL) coverage. These specific policies cover against liability claims of bodily injury and property damage to third parties. Three standard CGL coverages include:

• Bodily Injury & Property Damage: Provides protection for legal liabilities derived from bodily injury and property damage that occurred on your organization’s premises or operations.
• Personal & Advertising Injury: Protects insureds from any liability stemming from slander, false arrest, copyright infringement, malicious prosecution, theft of advertising ideas or privacy invasion accusations.
• Medical Payments: Compensates for third-party injuries caused by an accident on business’ premises or operations. Medical payment coverage can generate without legal action and may settle smaller, less serious medical claims without litigation.

We’re Here to Help You Understand Potential General Liability Exposures

Commercial general liability insurance will provide your organization protection and peace of mind to focus on your business’ operations. Additionally, our risk advisors go beyond protection and help you to establish risk mitigation strategies that can prevent these incidents from occurring. Connect with a member of our team to learn how we can protect your company.