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Insurance - A Shield Against Loss


One of the first steps you should take to protect yourself against premises liability is to purchase insurance. There are several types of insurance a business can purchase to protect itself against the financial risk of being sued for premises liability. One type of insurance is a commercial general liability policy, also known as a CGL policy. A CGL policy provides coverage for any bodily injury or property damage that occurs on the premises of the business, regardless of who caused the injury or damage.


Many CGL policies include coverage for premises liability, but it is important to verify the extent of the coverage and the exclusions or limits on the coverage. If you are a sole proprietor, the exercise you did in the first chapter to determine your potential financial liability will help you and your insurance agent determine the proper amount of insurance you need. If you are operating a business out of your home, you may want to consider purchasing separate policies for your business and your home.


Liability for off-premises injuries or property damage caused by an employee of the business is also typically covered by a CGL policy. This type of coverage is intended to protect the business from being held liable for injuries and property damage caused by the employees while they are working off the premises of the business.


Another type of coverage a business owner will be required to purchase is a workers’ compensation policy. Nearly every state requires a business owner to carry workers’ compensation coverage. A workers’ compensation policy provides coverage for any injury to an employee that occurs on the job, such as lifting heavy equipment or slipping on a wet or oily surface. It covers medical expenses and a portion of lost wages for your employees who are injured in the course of their job duties. Deciding not to carry workers’ compensation insurance puts your business at great financial risk. You could be sued by an employee for workplace injuries or fined by the state for breaking the law. Workers’ compensation coverage premiums are another cost of doing business that should be included in your operating budget.


I don’t want to paint this as all doom and gloom for the business owner. Even if a person is injured on your premises, most states look at the comparative fault of the person who is injured. The invitee or licensee must use reasonable care to keep themselves safe on your premises. In pure comparative negligence states, if they don’t use reasonable care, any recovery in a lawsuit can be reduced by their percentage of fault. In modified comparative negligence states, if they are found to be 50% - 51% at fault or more, depending on the state, the injured party cannot recover any compensation. Illinois is a modified comparative negligence state. An injured party may recover damages only if they are less than 50% at fault for the injury or damages. See 735 ICLS 5/2-1116.


General and premises liability in a business can be complicated. However, even the most careful and attentive business owner cannot prevent every injury or all damage to its property. You should consult with a knowledgeable insurance agent before opening your business to customers and employees. Your best preventative measure is to attempt to keep your premises free of hazards, warn of hazards you can’t repair or control, and insure yourself against the possibility of a problem.


If something happens on your premises, document everything in writing, take pictures, and contact your insurance carrier. Get as many witness statements as you can, as soon as you can. Accurate memories of events fade quickly. Employees should not be coerced or enticed to provide witness statements.


In your interactions with the injured person, show care and compassion toward them, however, don’t discuss whether you knew or should have known about the premises defect. Instruct your employees who may interact with this person to do the same. Let the insurance company and their lawyers deal with the fault and liability.


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