commercial liability exposures

General Liability Exposures for Commercial Properties

September 15, 2022

Almost every organization faces commercial liability exposures. Unfortunately, in these situations, there’s a possibility that an organization will become 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 business-related circumstances, activities, or events that could result in harm to a third party.

Read this article to better understand the most common types of commercial liability loss exposures and their potential consequences. We’ll also provide some guidance on how the correct insurance policy can reduce the risk to organizations. Let’s get started!

Common Commercial Liability Exposures

There are five types of commercial liability exposure that every organization should be aware of.

  1. Completed operations liability—The completed operations liability exposure refers to injuries or damages incurred by a third party due to work that has been finished. For instance, 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.
  2. 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.
  3. 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 operations. For example, imagine a contractor working on a client’s home. During their work, an employee drops a tool, striking someone and causing bodily injury or damage to the home itself.
  4. Premises liability—Premises liability describes the risk an organization faces if a customer is injured on the premises. Commercial properties that require customers to be physically present, such as retail stores, are particularly at risk for these losses and may be held liable for bodily injury or property damage.
  5. 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.

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 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.

The Importance of 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.

These policies are designed to cover an organization from liability claims for bodily injury and property damage to third parties.

There are three standard coverages:

  1. Bodily injury and property damage—This coverage protects organizations from the legal liability arising from bodily injury and property damage.
  2. Personal and advertising injury—This protects the insured 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 the insured. 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.

Bottom Line

Consult a trusted insurance professional for further guidance on how to protect your organization from commercial liability loss exposures.


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