Liability Losses are SEVERE
The #1 insurance item for Commercial Real Estate owners is property insurance, but gaps in the liability section can easily take down any real estate business.
Litigated liability claims, including defense costs and settlement, can easily reach 7-figures. If the cause-of-loss is excluded from the GL policy, your business assets are paying those costs.
Some Exposures MUST be Excluded
Policy exclusions are a necessary part of the insurance industry. If insurers were not allowed to apply exclusions, rates would be sky-high or insurance companies would be bankrupt.
There are exclusions that are standard on all insurance policies, such as the War exclusion, the Nuclear Energy exclusion, or exclusions for lead or asbestos.
Watch out for Exclusions that Take Away Significant Coverage
Insurance companies, using loss-history statistics, can pinpoint where severe and frequent claims occur in a particular industry. Then, for these risk-exposure, they type policy endorsements that exclude coverage.
For real estate driven businesses, there are some troublesome exclusions. One example is the Liquor Liability exclusion:
|Liquor Liability Exclusion – Claim Example
At a BYOB restaurant, intoxicated patrons reverse out of their parking spot and run over a child. The family of the victim is looking for financial recourse. The restaurant didn’t buy liquor liability insurance. You, the real estate owner, have nothing to do with serving the alcohol, but the injured party decides to bring legal action against the ‘deep pockets’. The case closes with a multi-million dollar settlement. Since your policy has the ‘liquor liability exclusion’, your business must reach in to business assets to pay the claimant.
Underwriters will casually exclude liquor liability, assault & battery, and a several other significant liability exposures…with little warning.
How to review policy exclusions
The ‘schedule of forms’ is a section on your insurance policy that outlines every ‘form’ on the policy. Here’s an example…
Most exclusions, like the Liquor Liability Exclusion, include the risk-exposure in the title. Pull out the ‘schedule of forms’ on your policy and glance over it to see if there are any eye-catching exclusions.
This should take no more than 10 minutes, and may save you from being uncovered after a major liability incident.