In any area of business, benefits are accompanied by risks. Sometimes, risk starts from the ground up with the physical structures you own.
When you own a building used for business, your facilities can be a liability. Knowing what you can be found liable for and how to have adequate coverage in place can protect you when an unexpected incident occurs on your property.
What is a building owner liable for?
Business ownership inherently puts you at risk of liability for incidents that occur on your property.
A facility owner is responsible for maintaining a safe and functioning building. In addition to the maintenance of the physical structure itself, this responsibility also extends out to all of the elements that keep a facility safe and running well, like electrical systems and plumbing.
If a visitor, guest, or authorized party who enters the property is harmed because you did not reasonably maintain the property, you may be liable for their damages.
The general rule of thumb for facility liability is that the building owner is responsible for the state of the building and any issues or incidents that occur due to improper or unsafe building maintenance.
Any tenants are responsible for the activities of workers and visitors and for incidents that arise due to the activities that occur during regular use of the facility.
What coverage is recommended?
Business owners should carry liability insurance. There are many different coverage options available to the owner of a facility. These include:
- Commercial general liability coverage
- Commercial property coverage
- Commercial building owner’s coverage
- Facility operations liability coverage
These options all provide protection for a building owner in the event of a personal injury or property damage. The specific needs of a facility owner will vary depending on the type of business being conducted at the building.
What happens if I don’t have the right coverage?
Without the right coverage, a business owner runs the risk of costly lawsuits.
At minimum, it’s important to have a general liability insurance policy. It’s smarter and safer to have a business owner’s policy tailored to meet your specific business needs.
A business owner’s policy can also offer extra protection against financial loss. For example, with business income coverage, you can have some protection against the loss of rental income.
A facility that allows public access will need coverage that accounts for the possibility of injury to visitors. A facility in which products are stored, like a warehouse, will need product liability coverage in place.
If an incident occurs and the property owner is found to be at fault, failing to have adequate coverage can be financially ruinous.
For example, if the owner of a warehouse facility fails to maintain a safe, updated electrical system, the owner might be found at fault for an electrical fire.
Exceptions: Reading the Fine Print
Policies and leases differ in the details. It’s always crucial to read the fine print to make sure that you fully understand your coverage.
The best way for a facility owner to be protected against liability is to have coverage and responsibility defined as clearly as possible.
Likewise, a lease or any other agreement for the use of a facility should clearly outline the responsibilities of each party. Insurance policies should be specifically chosen to address the likely risks that might arise for the way in which a given facility is used.
It’s wise to have your attorney review both the terms of a lease and the terms of an insurance policy to identify any areas where lack of coverage might be an issue.
Finally, facility owners should take care to conduct regular maintenance inspections to ensure the facility is in a safe state.
Taking a proactive approach to safe facility maintenance is the best way to guard against liabilities that are most likely to come back on the building owner. Contact our office today.