Availability of Insurance for Premises Liability Injury Claims

If you were injured in a slip and fall or other premises liability accident, an insurance policy is usually the most reliable source of compensation.

One of the most important factors to consider when deciding whether to sue for premises liability (or any other personal injury) is: can the potential defendant actually pay out any damages?

If a defendant has no assets or other financial means, the cost and effort of suing may not be worth it. When it comes to premises liability, the main source of recovery is generally the defendant’s homeowners policy or, if the premises is a commercial property, a business/commercial or other general liability policy.

Here are some common questions that come up regarding insurance in premises liability cases.

Are the Premises Covered by Insurance?

This question isn't always as easily answered as you might think.

Typically, if the premises has a mortgage, either a homeowner’s, business owner’s, landlord’s or other insurance is required to be in place.

Even if a property is owned outright, most owners are still going to carry the kind of insurance that would cover premises liability claims. There is one very big exception to this general rule of coverage. As discussed in our article on owner versus occupier liability for injuries, a landlord is often not responsible for injuries that occur in the tenant’s apartment or other leased space. If the leased space is a store or other commercial property, insurance coverage will still most likely be available regardless of whether the commercial tenant or landlord is at fault: it is usually a commercial lease requirement that either the renter or the landlord carry some kind of liability insurance. However, many residential tenants do not carry renter’s insurance.

It could be the case that the landlord’s insurance does not cover injuries that occur in the residential tenant’s apartment. If the landlord’s insurance does not cover the claim and the tenant does not have renter’s insurance or other assets, there may not be a source of recovery for a premises liability claim.

What are the Policy Limits?

Although an insurance policy covers the claim, it could be that the policy limits are lower than the amount of the claim -- put another way, the dollar figure you are asking for.

For example, a commercial general liability policy might only cover up to $500,000 for any claims “arising from negligence” (which includes premises liability). If someone is seriously injured in the store, their damages may be in excess of one million dollars, but they will be limited to recovering $500,000 under the policy. Any additional recovery will need to be out of the business’s assets, if it has any. Some liability insurance policies will have different limits for the different kinds of damages caused by premises liability, such as one limit for pain and suffering damages and another limit for medical expenses.

If your damages exceed the limits of the insurance policy, you'll need to consider alternative sources of compensation.

Do Any Policy Exclusions Apply?

Insurance policies also contain exclusions, i.e. situations in which the insurance company will not pay for a claim. Typically, the kind of homeowners or general liability policy that will cover a premises will not exclude coverage for premises liability.

On the other hand, intentional or reckless behavior that injures someone on the premises may not be covered. For example, if the homeowner intentionally injures a guest, the homeowner’s policy may not cover the damages if the injured person sues.

It is important to closely examine the exclusions in any applicable policy (if you have an attorney, he or she will know how to handle this somewhat complex aspect of an injury claim).

Is There a Duty to Defend?

If an insurance policy applies to the claim, it is also likely that the policy contains a “duty to defend.” As the name implies, this means that the insurance company must provide the defendant an attorney to defend the claim and pay for all expenses.

Depending on the circumstances of the case, either the defendant or the insurance company will choose the attorney -- typically the insurance company chooses. The law requires that all settlement negotiations and other litigation be conducted in “good faith,” i.e. the insurance company cannot instruct the attorney to make decisions that benefit the insurance company and hurt the defendant.

The fact that the case is being negotiated with both a defendant and an insurance company can add to the complexity of the litigation process, but typically it is the insurance company running the show.

It is also important to keep in mind that paying to defend a lawsuit is very expensive, especially if there is a trial. If the amount of the plaintiff’s claim is less than the possible cost of a trial and it is either unclear or possible that a jury will decide in the plaintiff’s favor, the insurance company will probably be inclined to settle the case. If the settlement is reasonable, the defendant cannot stop the insurance company from making that decision, even if he wants to "prove his innocence" or "have his day in court."

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