Definition of Premises Liability in Insurance

by Neil Kokemuller; Updated September 26, 2017
Inviting guests into your business incurs legal liability.

Premises liability is the legal principle that property owners have some level of accountability for accidents and injuries on their property, or premises. Premises liability impacts businesses that own business property and that are legally responsible for the safety of invited guests to that property. Insurance companies offer liability products that help cover premises liability risks.

Potential Incidents

Whether you operate a business out of your home, or at a business property, your premises pose some level of potential for accident or injury. The level of danger faced by guests of a business vary based on the property location and the nature of the business. Simple slips on ice are common in cold weather climates, which is why businesses usually take care to plow parking lots, shovel sidewalks, and remove ice. FindLaw makes note of injuries at amusement parks as another possibility. Owners must consider their property and the business in planning for accident prevention and safety.

Visitor Status

One of the key considerations used to determine your liability when an accident occurs on your premises is the status of the injured party upon entry. Generally, you are most liable when the person is an invited guest, such as when a business opens its doors to customers. Licensees who come to the property for their own purpose at the owner's consent are the owner's responsibility in some, but not all states. Trespassers who clearly enter your premises without invitation or permission pose the least burden of liability to the owner of the property. FindLaw notes that more states are holding property owners accountable for legal visitors, including invited guests and licensees, but not for illegal visitors.

Other Considerations

Along with the type of visitor, other factors related to the reasonable care taken by the owner to establish a safe environment for legal visitors are considered by courts when hearing cases on premises liability. Key issues include: Whether the property was being used as directed by the owner when the incident occurred, the "foreseeability" of the incident by the owner, and whether the owner did enough to fix a dangerous condition or to warn visitors about potential dangers. When children are expected potential guests on your property, your burden of protection and adequate warning increases.

General Business Liability Insurance

Realizing the potential for major financial loss in the event of a lawsuit, many business owners purchase general business liability insurance, which typically covers a wide array of liability areas, including premises liability. The more risk posed by your property to guests, the higher the level of insurance needed. By getting a thorough liability policy with the right level of protection, you transfer some of the financial risks of premises liability to the insurer. Working with a business insurance specialist is a good idea to get the right coverage.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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