You might think you’re pretty good at detecting and preventing slip-and-fall/trip-and-fall hazards, and you might be right. But when it comes to managing business risks, pretty good isn’t good enough.
Liability lawsuits and so-called nuclear verdicts — loosely defined as exceptionally high trial awards — are increasingly frequent. Market conditions for General Liability Insurance are unrelentingly hard. Under such conditions, it’s more important than ever for businesses to consult with a risk-management and loss-control expert.
According to the online publication Risk & Insurance, “The number of nuclear verdicts resulting in $20 million or more in 2019 has risen more than 300% from the annual average between 2001 and 2010. And, over the last five to six years, there’s been a steady increase in verdicts over $1 million.”
In February 2022 — to cite one recent example — a jury in Orange County, Texas, awarded $1.325 million to a woman who slipped and fell in a grocery store while shopping in the store’s frozen-food section. According to the trade publication Progressive Grocer, jurors had heard evidence that the store had a history of issues related to leaking freezers.
Leaks, sidewalk divots, uneven floor surfaces, poor lighting — these are potential causes of slips, trips and falls that frequently go unnoticed but loss-control specialists are trained to detect. And, of course, a loss-control specialist can help prevent more severe damage and resulting claims.
Consider the case of a Massachusetts garment manufacturer that learned from a loss-control consultant that its cloth racks were too tightly positioned to allow the building’s sprinkler system to work effectively in the event of a fire. If a fire were to occur, the consultant warned, the damage could be catastrophic. The manufacturer overhauled its racking system to create openings for the sprinklers, received underwriter approval of its insurance applications and continued to operate with the peace of mind that comes from knowing its employees and property were properly protected.
Now it’s hard to quantify a loss that doesn’t occur, but suffice it to say the loss-control specialist’s recommendations — in addition to making the manufacturer insurable — at least greatly reduced the likelihood of the business experiencing a catastrophic claim.
General Liability Insurance Basics
Commercial General Liability Insurance protects a business from financial loss when the policyholder is held liable for damage or injury resulting from its services, business operations or employees. Examples of general liability claims include:
- Bodily injury — The slip, trip and fall category. General Liability Insurance also would cover an injury caused by a flaw in a product your business manufactures or sells.
- Property damage — If, say, a delivery driver for your company accidentally slams into a customer’s loading dock, General Liability Insurance would pay for repairs.
- Personal and advertising injury — Claimants could include a competitor alleging slander or copyright infringement.
- Legal fees — In cases that allow a suing party to seek remuneration for attorney’s fees, the defendant’s General Liability policy may pay for both parties’ lawyers.
General Liability Insurance does not cover employment practices liability or workers’ compensation.
Market Outlook for 2022
In December 2021, Alera Group published the Property and Casualty 2022 Market Outlook. Here’s what we had to say in the whitepaper’s section on General Liability Insurance:
“Markets will continue to offer capacity, but coverage will cost more and frequently be coupled with the imposition of tougher terms.
- “The substantial price increases of recent years will begin to moderate in 2022. While price increases may not be as severe, most organizations will nonetheless face increases. Pricing will be determined on a risk-by-risk basis rather than by broad-brush treatment to classes of business. Size matters, as medium to large accounts will experience higher pricing than smaller accounts. Low investment interest rates and social inflation are factors affecting the pricing of all accounts.
- “Capacity is sufficient to support the general market. While capacity is adequate, it will be deployed selectively and more favorably to better risks. Be prepared for tighter underwriting standards, a cap on limits, imposition of deductibles and more thorough underwriting evaluation of coverages offered for some risks.
- “Availability will remain stable, but some classes will be more difficult to place. Businesses being offered less capacity and more restrictive coverages include higher-hazard classes such as contractors, municipalities, public utilities, manufacturers of difficult products, chemicals and habitational real estate. Municipalities and school districts are among the sectors that will become more difficult to place.
- “Underwriting scrutiny will be on a risk-by-risk basis. New and renewal business will be evaluated on the merits of loss history, risk management controls, thoroughness of underwriting information provided and financial strength.”
Notice a common thread there? In each of those areas — rates, capacity, availability and underwriting scrutiny — risk management and loss control can improve market conditions in favor of the insurance consumer.
What You Can Do
The proliferation of liability lawsuits and the hard market for Property and Casualty Insurance make it especially vital to work with an agent or broker who knows your industry and your business, has a strong reputation among insurance underwriters and can provide loss-control services.
Here are some additional guidelines for protecting your business and containing General Liability Insurance costs:
- Keep an eye out for exclusions. Don’t over-emphasize price. In insurance, as in most other areas, you get what you pay for. An insurance policy won’t do you much good if coverages you need are excluded by the insurance company as a way to manage its own risk. Assault claims, for example, are commonly excluded from policies covering landlords and bar owners. Without that coverage, those policyholders are left exposed to a lawsuit that could put them out of business.
- Review all contracts, and transfer risk whenever possible. If you use a snow-removal service, for example, make sure the service is responsible for any damage caused by one its drivers. A good agent or broker will review contracts with you to ensure you’re not liable for a loss created by a third party.
- Supplement General Liability coverage with a Commercial Umbrella policy or Excess Liability Insurance. As noted in the Alera Group Market Outlook, in addition to exercising stricter standards, underwriters are placing tighter caps on limits in underlying liability policies. For full coverage, an Umbrella or Excess Liability policy is necessary. Forbes Advisor explains the difference: “An Excess Liability Insurance policy only provides additional liability coverage to a single underlying policy, such as a General Liability Insurance policy. A Commercial Umbrella Insurance policy can provide additional coverage to several liability insurance policies.”
- Take advantage of educational offerings. At Alera Group, we know that a well-informed client is generally a well-protected client. To educate yourself on foundational P&C topics likely to be relevant to your business, view a recording of our March 16 webinar, Fundamentals of Liability Certificates of Insurance, and register for our May 12 session, Navigating Additional Insured Endorsements.
To register for the Additional Insureds webinar, click on the link below.
About the Author
John Beauregard, CIC, LIA
Senior Partner/Account Executive
Sylvia Group, An Alera Group Company
During more than three decades as a business insurance professional, John Beauregard has built relationships with clients by recognizing and addressing their unique risks and needs, providing them with the best available coverage and delivering dedicated, dependable customer service. He specializes in providing insurance and risk management solutions for the property development/management, medical manufacturing, municipal, education and transportation industries. His professional designations include Certified Insurance Counselor (CIC) and Licensed Insurance Advisor (LIA).