What is a premises and operations insurance policy? In a commercial general liability policy this covers injuries resulting from negligence associated with owning a commercial property and the day-to-day operations necessary to conduct business at that location.
What Is A Premises And Operations Insurance Policy?
Premises and operations insurance is part of the general liability insurance policy. It is intended to cover property damage liability and bodily injuries that occur to the public when they are at your place of business.
This means that your business is protected if somebody is injured within your facility or on your property. If an accident occurs, the insurance company will compensate up to the liability limit that you have. Whether someone was injured in a slip and fall accident or it was due to negligence by your employee, it does not matter.
What is a premises and operations insurance policy? Having a premises and operations insurance enables your business to carry on your normal business operations while dealing with real or fraudulent claims of negligence or wrongdoing. Let's look at an example of each:
What Is Premises Coverage?
Imagine you own a restaurant. As the owner, you are liable for both injury and property damage suffered on your premises as a result of your negligence. Perhaps the parking lot is icy, and someone slips and falls as a result. It is your duty to maintain a safe dining environment for your customers; therefore you would be responsible for any resulting injuries that occur in your establishment - Like a waiter spilling hot coffee on a patron. Premises coverage, as part of your insurance policy, will cover these types of losses.
What is a premises and operations insurance policy? Most visitors to your business will fall into one of three categories:
- Invitee: A person who is asked to visit the property (e.g., a customer). Invitees can assume that you have taken reasonable precautions to ensure their safety.
- Licensee: Someone who is permitted to enter the property, but has not been invited (e.g., delivery persons, utility workers). Licensees are aware of certain hazards, but cannot expect the highest level of care is given to their safety. In fact, some may add to the hazards at your premises.
- Trespasser: Someone who is neither invited nor permitted to enter a property. Trespassers (e.g., burglars or vandals) have an extremely limited assumption of safety.
What Is Operations Coverage?
Imagine you own a plumbing business. As a result, you would conduct business at numerous locations you don't necessarily own. This is where operations coverage comes into play.
Perhaps you are fixing the overhead piping while strapped to the roof. If you were to drop a wrench and injure someone on the head, you would be responsible for the resulting injuries caused to the individual. Operations coverage would be activated by the resulting claim for bodily injury. Or if you installed a new hot water heater and it leaked causing property damage to your customer.
What is a premises and operations insurance policy? Of course, there are many business types in which both coverage types are necessary. An example of this may be if you own a restaurant and catering business. You might have a fixed restaurant location where you serve your food, while also do catering at locations outside of your restaurant.
How Much Coverage Does Your Business Need?
The amount of coverage that your business requires is subjected to three criteria: perceived risk, the location of your business operations and the categories of products your business produces:
- Perceived risk: Think about the level of risk related to your business operations and functions. For example, if you manufacture heavy industrial machinery, you would typically require more coverage as compared to another business that produces disposable food cutlery.
- The location of your business operations: If you operate in a city or state that is known for awarding high damages to injured victims, then you may want to purchase higher limits of liability.
- Type of products manufactured: If you produce highly dangerous products such as chemical cleaning solutions, you may want to carry higher limits of liability.
Liability Policy Limits
The declarations page of a general liability policy will list how much the policy will pay for claims on behalf of its insured, for each specific limit. Premises and operations is covered under the 'each occurrence' and 'general aggregate' limits. Below is in example of commercial general liability policy's limits of insurance as listed on the declarations page:
What Is A Premises And Operations Insurance Policy? - The Bottom Line
We hope this article on what is a premises and operations insurance policy? has been informative. If you are ever sued for an offense that is covered under premises and operations then your insurer will defend you. But there is no duty to defend when the insurance does not apply or when the limits has been exhausted due to payment of judgments or settlements.
Further Reading On Commercial General Liability Insurance
- CGL Exclusions Explained
- Contractors General Liability Insurance
- Difference Between General Liability And Auto Liability Insurance
- Does General Liability Insurance Cover Subcontractors?
- General Liability Insurance Claims-Made vs Occurrence
- Product Liability Insurance vs General Liability
- What Damages Are Covered By A CGL Policy?
- What Does Personal And Advertising Injury Mean?
- What Is A Premises And Operations Insurance Policy?
- What Is Damage To Premises Rented To You?
- What Is Products And Completed Operations Coverage?
- What Is The Difference Between Per Occurrence And Aggregate Liability Limits?