In Philadelphia yesterday, an abandoned four-story building collapsed. The structure had been in the process of being demolished, and the collapse littered rubble throughout the surrounding area, including on parked cars and a Salvation Army store. While initial reports from the Associated Press indicated that there were no fatalities associated with the incident, updated reports note that at least six people died.
Naturally, this event is not something that we’d wish upon anyone. But it provides a vivid example of how various types of business liability insurance work. And because business insurance often feels like an abstract, foggy set of concepts, I decided to seize this opportunity to explain how various unexpected incidents can cause damage and how various coverage types can protect a business.
Business Liability Insurance in Action
Here’s what you need to know to follow the story.
Cast of Characters
- A Salvation Army store, onto which rubble from the collapsed building fell.
- Plato Marinakos, Jr., an architect listed in city records as the contractor in charge of the collapsed building’s demolition
- Campbell Construction, the firm reportedly doing the actual demolition work.
- People who were shopping at the Salvation army or around the collapse.
List of Potential Liabilities
- General Liability: Let’s start with the basics. Anyone who was injured by the collapse (and remember, reports list 13 such people) could potentially sue for damages related to their injuries. That means shoppers at the Salvation Army could sue the store, even though the store itself wasn’t at fault for the collapse. In addition, folks whose property was damaged by the collapse (including anyone who had rubble fall on their car) could also sue to collect damages, though they would likely target the architect or Campbell Construction in their suit.
- Property Liability: The Salvation Army store hit by falling debris will no doubt file a Property Insurance claim or two to receive funds to repair its building or replace broken structures. But there’s more to the story: the AP reports that a man en route to an appointment got stopped when falling bricks landed on his truck. If that man were a properly insured small-business owner, he could file a claim with his insurance provider to cover the costs of repairing or replacing his vehicle.
- Errors & Omissions Liability: Some bystanders reportedly suggested that the Campbell Construction workers weren’t tearing down the building safely, and that a collapse was inevitable. Depending on who is ultimately found responsible for the collapse (Campbell Construction? The architect?), affected parties could very well file E&O claims to collect money for damages.
- Business Interruption: The Salvation Army (and possibly the gentleman with the damaged truck) will likely not be conducting business as usual tomorrow (or maybe for the rest of the week). Will the loss of revenue leave them unable to pay their bills? Pay their employees? Make payments on their loans? It could depend on whether or not they have any Business Interruption Insurance, which offers payments to replace revenue lost when a covered event prevents a business from operating as usual.
- Workers’ Compensation: If any of the 14 people injured or killed at the Salvation Army were employees, they and their families might have medical bills or funeral expenses to pay in the near future, and the thrift shop will likely be responsible for paying them. Luckily, if it has a Workers’ Comp policy in place, making those payments should be no problem. And what about the folks working on the collapsed building? They, too, could have suffered injuries, which would have to be covered by Campbell Construction’s or the architect’s Workers’ Compensation policies.
Business Liability Insurance: Not Something to Gamble On
If nothing else, an event like yesterday’s building collapse in Philadelphia reminds us how unpredictable the world is and how a single unexpected incident can lead to a dizzying array of liability issues. It also serves as a sobering wakeup call about how even the most careful business owners can be sidelined by an incident beyond their control – and if they don’t have adequate insurance in place when that happens, they could face serious financial losses.