Premises and operations liability

Premises liability coverage is essentially part of your P&O insurance. However, premises liability only covers third-party accidents that occur on your business property.

A premises and operations insurance policy offers broader coverage, including incidents that happen on the insured premises as well as incidents caused by business operations at jobsites and client locations.

Individually, premises liability coverage and operations coverage will each protect your business in these specific areas:

• Premises coverage covers claims arising from conditions at the business's physical location, such as tripping over a cord while visiting the property.
• Operations coverage handles claims arising from ongoing business activities, such as an employee accidentally damaging a client's property or injuring someone while working.

As part of its general liability coverage, P&O has two coverage limits: a per-occurrence limit and an aggregate limit. Each limit affects a policyholder's coverage.

• The per-occurrence limit is the maximum amount your insurance company will pay for a single incident that's covered by your policy.
• The aggregate limit refers to the maximum amount an insurer will pay for all covered losses during the policy term, which is usually one year.

P&O insurance provides essential coverage for many small businesses—but it does have its parameters. The most common exclusions from a premises and operations liability policy include:

• Catastrophic risks: P&O doesn’t cover operations or premises liability claims tied to catastrophic risks, including damage caused by earthquakes, floods, wars, and riots.
• Intentional acts: Premises and operations insurance likely won’t cover claims caused by wrongful acts, such as damaging a customer’s property on purpose.
• Criminal acts: Your P&O policy won’t cover illegal actions or criminal acts, such as if you’re caught selling illegal substances from your office.
• Maintenance issues: Premises and operations liability usually excludes claims arising from maintenance issues or general wear and tear, like failing to fix a faulty step that a client falls and hurts themselves on.
• Preventable risks: Property damage or injured party caused by preventable risks, such as a customer slipping on icy steps you didn’t salt, wouldn’t be covered by P&O.
• Subcontractors: A P&O policy wouldn’t cover any damage caused by a subcontractor who is working for you. To extend your coverage to subcontractors, you can add them to your premises and operations policy as an additional insured endorsement.

P&O insurance covers injuries and damages that happen while work is being done at a jobsite or while a customer or visitor is on your business property.

On the other hand, products-completed operations insurance covers third-party injury and damage claims after a project has been completed or a product has been sold.

For example, a handyman is hired to retile a shower:

• If they accidentally crack a glass door while retiling the shower, premises and operations coverage would pay to replace the door.
• If the homeowner sues the handyman three months after the job is finished, claiming the handyman applied sealant unevenly, which caused severe water damage, products-completed coverage would step in.

Since these policies are both core components of commercial general liability, it's important to understand a few additional details about this coverage:

• Most standard CGL policies include a "your work" exclusion, meaning the policy won't pay to repair a contractor's own faulty workmanship, but it may still cover damage caused by the faulty work.
• Products-completed operations and P&O have separate aggregate limits of insurance, meaning a claim in one category doesn't affect the limits of the other.

Going back to the handyman example, this means insurance would cover the resulting mold and drywall damage caused by the faulty work. But under the "your work" exclusion, it wouldn't pay to redo the improperly applied sealant or the tiles laid over it.

Finally, because P&O and products-completed operations carry separate aggregate limits, the cracked door claim and the water damage lawsuit would each draw from their own limit, leaving the other unaffected.

While premises and operations liability insurance is a great way to protect your business, there are additional things you can do to reduce your legal liability. These steps include:

• Establish safety programs: Create comprehensive safety protocols that adhere to government regulations and prioritize workplace safety.
• Create a safe environment: Provide signage and barricades for potential workplace hazards, such as wet floors, icy sidewalks, and uneven surfaces.
• Reduce hazards: Use floor mats, have adequate lighting in all areas and the parking lot, and implement cleanliness policies to remove clutter and efficiently clean up spills.
• Provide employee training: Teach employees to identify and properly report safety hazards and thoroughly document all incidents.