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General Liability Exposures Every Organization Should Know – CoverLink Insurance



Almost all organizations are exposed to general liability exposures. A general liability loss exposure is a condition or situation that presents the possibility that an organization may become legally and financially liable for injury, damage or harm to another party.

These exposures arise from the type of work an organization performs and where that work is performed. They also include other aspects of business-related circumstances, activities or events that may lead to harm to a third party.

This article will help you better understand the most common types of commercial liability loss exposures, the potential consequences, and provide guidance on how the right insurance can reduce risk for your organization.

Common types of general liability exposure to know

There are five types of commercial liability exposure that every organization should be aware of. Possible loss exposures that could affect an organization include the following:

  1. Local responsibility̵
    1; Premises liability describes the risk an organization faces if a customer or customer is injured on the premises (e.g. tripping and injuring themselves in the store). Organizations that require customers or clients to be physically present, such as stores and landlords, are particularly vulnerable to these losses and may be held liable for bodily or property damage.
  2. Operational responsibility— Operational liability exposure refers to the possibility that an organization will be held liable for bodily injury or property damage arising from their ongoing (as opposed to terminated) operations. For example, imagine a contractor working on a client’s home. During the course of the work, an employee of the contractor drops a tool, hits a passerby and causes bodily and property damage to the home itself.
  3. Product liability—Product liability refers to the loss exposure an organization faces as a result of the manufacture, distribution or sale of an unsafe or defective product. All organizations that manufacture or sell products are at risk. Associated damages can occur virtually anywhere in the world when an organization’s products are manufactured or sold.
  4. Completed operational responsibility— The completed business liability exposure refers to damage or injury sustained by a third party due to work (including construction work) that has been completed, handed over to the buyer or customer and/or put into service. For example, an electrical fire caused by faulty wiring on a completed construction project would represent an end-of-operations exposure for the contractor who completed the work. It should be noted that damages or injuries resulting from terminated business may occur after a business’s relationship with the injured party has ended.
  5. Contractual liability— Organizations take on contract loss exposures when they enter into a contract. By agreeing to contract terms, an organization becomes liable if the other parties to the contract believe that an organization has not fulfilled its obligations under the contract.

Potential consequences of general liability exposures

In the event of a commercial liability loss, organizations can face a number of potential consequences, such as:

  • Damages—If a court finds an organization responsible for a loss, that organization may be held financially responsible for paying damages to the injured or injured party.
  • Defense costs—The organization may have to pay the legal costs and costs of the claim.
  • Damage to reputation—Due to general liability losses, organizations may suffer reputational damage, including but not limited to loss of business, reduced headcount and a loss of consumer loyalty and investor confidence.

Although commercial liability exposures are a risk for every organization, the severity of the consequences can be mitigated with appropriate insurance policies.

Commercial liability insurance

No matter how prudent 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 (CGL) coverage.

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 injuries and property damage—This coverage protects organizations from legal liability arising from bodily injury and property damage arising from an organization’s premises or operations.
  2. Personal and advertising damage—This aspect of CGL policies protects insureds from liability arising from allegations of libel, slander, false arrest, copyright infringement, malicious prosecution, theft of advertising ideas and invasion of privacy.
  3. Medical payments—Medical care compensation includes compensation for damage caused by third parties caused by an accident on the insured’s premises or the insured’s business. Unlike bodily injury and property damage coverage, medical payments coverage can be triggered without legal action and is designed to resolve smaller, less serious medical claims without litigation.

Conclusion

Consult one of our trusted insurance advisors for additional guidance on how to protect your organization from commercial liability loss exposures. Or you can visit our Education Center for more information.




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