Liability insurance Featured

8:00pm EDT July 24, 2005
Here it comes, every business owner’s nightmare.

You watched it happen from 20 feet away. Mike just finished mopping the floor. The kid was actually on his way back from the closet with the yellow DANGER — WET FLOOR sign. You remember thinking how the little black stick figure with his feet shooting forward and into the air was so surprisingly similar to the woman as she went down on the slick linoleum.

Well, you suppose, that image had to come from somewhere. The real difference, however, was that while the little guy with the big, black, round head was forever perched between heaven and Earth, this poor woman went down. Hard.

Your employees rushed to her aid, as did you. It was obvious that she was in pain. Your guilt kicked into overdrive as your concern for the woman was interrupted by thoughts of ambulances and lawyers.

Mistakes happen. Being in business is a risk. That’s why liability insurance exists. Liability insurance is important for a number of reasons, but the most important one is that all organizations face liability loss exposures, including yours.

This article takes a very basic look at this type of insurance — a starting point so that you can speak intelligently with an independent insurance agent about your needs.

Legal liability — the abridged version
Legal liability can be imposed by civil law, criminal law or both. Civil law provides a means to settle disputes between parties, whereas criminal law imposes penalties for wrongs against society.

Liability insurance responds to liability imposed by civil law.

Commercial general liability provides an option Fortunately, most property and casualty insurance carriers have the ability to offer you a product that will provide coverage for liability losses.

Called commercial general liability (CGL), this robust contract provides coverage primarily for liability losses arising from premises, operations, products and completed operations.

Briefly defined:

  • Premises liability — Exposure to liability for injury or damage due to the ownership, occupancy or use of premises. This is the exposure you experience when a customer slips and injures herself on your wet floor.

  • Operations liability — Exposure to liability for injury or damage due to activities in addition to those referenced under premises liability. For example, if you are a plumbing contractor and one of your employees accidentally sets a customer’s house on fire while soldering pipes, that’s operations liability.
  • Products liability — Exposure to liability for injury or damage due to products sold or distributed. For example, if you manufacture a hand tool that ultimately causes bodily injury to a consumer, that’s products liability.

  • Completed operations liability — Exposure to liability for injury or damage due to work completed. For example, if you build a pole barn for a customer that collapses after it is put to use by the customer, that’s completed operations liability.

Don’t forget to read the contract As with any insurance policy, not everything is covered. The following are a few of the more noteworthy CGL exclusions.

  • Expected or intended injury — Of course, if you intentionally injure someone, you cannot look to your insurance policy for protection.

  • Workers’ compensation/employers liability — These exclusions deal with injuries to any employee of the insured. You can purchase workers’ compensation insurance from private insurance carriers (and in some states, from the government). An employer’s liability coverage form is also available from insurance carriers in some states.

No harm, no foul
All’s well that ends well. The woman got up and walked without assistance. She seemed more embarrassed than angry.

She left with an apology and a free gift certificate — no talk of courtrooms or how she would turn your office into her sunroom. No harm, no foul. Note to self: Call agent, review liability policy.

Deep, cleansing breath and back to work.

Reach Tony Falcone, manager, underwriting practices group, at (330) 887-0133 or In business for more than 156 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product it offers is peace of mind and its promise of protection is supported by a commitment to service excellence. For more information, visit