Blog - Tag: Commercial Property
How to Avoid Being Sued for Injuries at Your Commercial Property
One of the biggest risks commercial property owners face is a visitor suffering an injury on their property.
One slip and fall can start a cascade of events, starting with a premises liability lawsuit seeking financial compensation. Your defense, as a property owner would be proving that you lived up to your duty of care to protect visitors to your property from injury.
Also, since your commercial property policy will not cover property liability, you’ll need a commercial general liability coverage as well.
Accidents happen, but if a third party is injured on your commercial property, the chances are high they’ll seek some type of compensation, either for medical costs, lost wages or both. And if they seek out legal counsel, prepare to be sued.
Prevent accidents before they happen
To reduce the chance of an accident, keep a tidy facility and fix any issues that could result in an injury. Take the following steps:
- Be proactive about inspections, repairs and maintenance.
- Have written inspection and maintenance guidelines that meet or exceed industry standards particularly as they concern safety of tenants and guests.
- Ensure your employees closely follow the guidelines and encourage them to report any issues that could result in injury.
In the discovery phase of a lawsuit, a plaintiff may ask for your maintenance and risk management procedures as well as documentation regarding whether you followed those procedures.
Your policies should be extensive and clear, but not overly intricate. Documentation is key to showing that you took reasonable steps to keep the property safe.
Your defense
Keep in mind that the duty is for you to use a reasonable amount of care. What is reasonable is determined in comparison with what an average commercial property owner would do.
There are times when accidents really do happen, and you are not automatically liable for them. You are neither expected to be perfect, nor are you expected to prevent every single mishap.
Rented property
A commercial property owner may not have a duty of care when they are not in control of their property. When the owner leases the property, the lessee may assume the duty of care to maintain the premises in reasonable condition.
A lease should clearly state that the renter is responsible for premises safety and that they indemnify the owner in any lawsuits and pay the costs to defend these lawsuits.
Insurance
Finally, make sure that you have commercial general liability insurance, which covers legal defense and potential settlements or judgments, helping protect your assets and financial stability.
Commercial Property Rate Hikes High, but Slowing
While commercial property insurance rates have been increasing for seven straight years, the pace of rate hikes has slowed a bit this year, according to a new report.
With many factors continuing to pressure rates, businesses should expect continued hikes for their commercial properties, with the biggest increases taking place in areas at higher risk of natural catastrophes, which vary depending on which part of the country they are located in.
The third quarter 2024 “Commercial Property/Casualty Market Index” by the Council of Insurance Agents & Brokers reported a 7.9% year-on-year increase in property insurance pricing, which is a significant drop from the 17.1% average rate increase noted in the same period of 2023.
While rates are still rising, analysts say that the pace of increases may finally be catching up with the higher claims costs and other factors affecting insurers.
If your business insurance policy renewal is coming up, here’s an explainer of what is driving rates this year and what you may be able to do about it.
Rate increase drivers
A convergence of factors has caused this extraordinary rate-hardening cycle in commercial property insurance:
Catastrophe losses — This includes hurricanes, floods, wildfires, tornadoes and winter storms. As climate change intensifies, the U.S. and the world at large have seen a surge in the cost and scope of natural catastrophes.
Adding to what insurers pay after these events, Americans have also been migrating for decades to areas that are now most at risk of disasters. With higher population density comes more claims.
Insurers in the U.S. generally paid out increasingly large amounts for natural disasters in the last decade. In recent years the payouts have totalled:
- 2023: $81.6 billion
- 2022: $116 billion
- 2021: $108 billion
- 2020: $98 billion
Catch-up pricing — Insurers have been trying to catch up after years of underpricing their policies. They had done this by not keeping up with the cost of rebuilding, but also not requiring policyholders to increase their policies’ replacement costs to keep up with those higher costs.
Bright spot: It now looks like insurers have caught up with prior years’ underpricing as rate increases continue rising, but at a slower rate, depending on where you live.
Rising reinsurance rates — Insurers buy their own insurance by contracting with reinsurers, which share the risk. Due to rapidly rising catastrophe claims costs, these reinsurance firms have recorded substantial losses in the last few years due to natural catastrophe hits.
Facing financial pressure, reinsurers have:
- Raised their own rates substantially,
- Started requiring insurers to carry more of the risk,
- Tightened their terms, which also transfers more risk to the insurers, or
- Pulled out of markets altogether.
Bright spot: Reinsurance rates are leveling off for 2025 and the companies are starting to take on more risk once again, which could bring some relief to commercial property carriers.
Higher construction costs — The cost or construction and rebuilding has skyrocketed since 2019, due to higher material, energy and labor costs. However, that inflation has cooled as well.
Bright spot: According to CBRE, a real estate firm, in 2023 construction costs rose 4.9% year on year, compared to 14.1% between 2021 and 2022 and 11.1% between 2020 and 2021.
What you can do
Depending on where you live, insurance may be relatively easy to secure or it could be near impossible, forcing you to go to a state-run carrier of last resort.
Insurers have gotten picky about which properties they will insure, but as a property owner you can take steps to improve your insurability or reduce your rates, such as:
- Making sure you have a detailed property maintenance plan in place.
- Replacing or repairing the roof, electrical system and plumbing as necessary, particularly if it’s outdated or decades old.
- Having a disaster recovery and business continuity plan to ensure continued operations in case of an event.
- Installing sprinkler systems and leak-detection sensors that can alert you if there’s a water leak in the building.
- Thinking about increasing property deductibles.
- Giving us a call.