Two commercial trucks that got into a road accident

What Liabilities Are Not Covered By Commercial Property Insurance?

Mar 29 2021

Commercial property liability insurance is a must-have for businesses from all kinds of industries. In a nutshell, any company with an office, workspace, storage space, or brick-and-mortar store can benefit from this type of insurance coverage. This is because commercial properties often contain valuable assets that the business needs to operate and flourish. In addition, due to the uncertainty arising from external factors, like natural disasters or theft, the need for commercial property liability insurance is undeniable. However, it is important to note that commercial property liability insurance is not the be-all and end-all for having comprehensive business insurance. 

In this article, we discuss everything you need to know about commercial property liability insurance, including its scope and limitations and what other types of insurance you need to have your business fully covered. 

Let’s get started!

Close up of a “Caution Wet Floor” signage on a floor that’s being mopped

What It Covers

Commercial property insurance benefits virtually all businesses with a physical location containing valuable assets, such as computers, phones, printers, furniture, important documents, products, and raw materials. It’s also a place of business where you meet your clients to offer your products or services. Therefore, any damage, theft or loss, or inaccessibility to your commercial space will ultimately lead to financial loss. 

Consider the following examples:

  • A landslide damages your commercial property
  • Your construction company’s scaffolding and other high-value tools are stolen from your storage area
  • Your retail space suffers damages from an electrical fire or extreme weather,  leading to costly repairs and business interruptions 

Your commercial property insurance will cover for repair, replacement, and lost income from business interruption due to fire, vandalism and theft, and natural calamities like landslides, earthquakes, and floods.

For more information on this topic, read 5 Commercial Property Insurance Claims Examples

What Is NOT Covered 

Despite the extensive coverage commercial property liability insurance offers, it also has its limitations. Here’s a list of common risks and liabilities that are not covered by this type of policy.

1. Injuries Within Business Premises 

Commercial property liability insurance may cover damages for your physical business location, but NOT bodily injuries sustained within the establishment. These can turn into a viable lawsuit from various third-party individuals, such as clients, customers, suppliers, and even the general public. 

To give you an idea, here are a few example scenarios:

  • A tool accidentally falls from scaffolding and hits a person passing by because the safety nets did not hold
  • A customer suffered a concussion after slipping from wet floors
  • A customer falls and gets a wrist sprain from impact due to poorly designed chairs in your store
  • A client gets hurt because a fixture fell from your office ceiling

Should any of these scenarios happen and the injured party takes you to court, you’re going to face costly settlements. To protect your business from these risks, you need commercial general liability insurance (CGL).

2. Injuries, Illness, or Death of Employees 

If your employees get injured or ill while performing their job, whether within your commercial property or somewhere else on assignment, a commercial property liability insurance cannot do anything for you; you need worker’s compensation coverage for that. 

Depending on what kind of industry you’re in, this kind of insurance can cover your business if an employee suffers from:

  • Respiratory conditions from regularly inhaling chemicals
  • Back strain due to repetitive heavy lifting that’s needed for work 
  • Falls and slips while at work 
  • Electrocution and burns while doing their job 

Worker’s compensation coverage compensates you for medical treatment costs, lost income of the employee during recovery, disability benefits. It also covers funeral expenses in the unfortunate event of an employee’s death while on duty.

3. Injuries and Illnesses Sustained From Your Products 

Other factors not covered by your commercial property liability insurance are injuries and illnesses caused by your products, which can lead to a financially damaging class-action lawsuit when it happens to several customers.

Let’s take a look at some examples

  • Customers complain of widespread food poisoning after eating from your restaurant
  • Someone goes into anaphylaxis shock because your product does not have an allergen warning on the label
  • Customers develop rashes and other adverse skin reactions from your skincare product
  • Someone gets injured from a defective product that you sell because it failed quality control

Along with injuries within your business premises, this considerable risk is covered in general liability insurance. Arguably, CGL is truly one of the most fundamental insurance plans a business should have. 

4. Damage in Other Properties 

Commercial property liability insurance is purely for YOUR business’s space. It does not protect you if you get sued for third-party property damage. 

Here are a few example scenarios: 

  • The crane hits the concrete wall of a private property near your construction site
  • The flatscreen TV gets broken in a home renovation project where you’re the contractor
  • There’s extensive water damage due to faulty plumbing work by your employee

It’s definitely going to cost you a lot of money should any of these things happen to you without another policy other than commercial property liability insurance. Fortunately,  you can protect your business from these types of risks as long as you have commercial general liability insurance. This comprehensive policy also provides benefits for third-party property damage, covering damage repairs and lawsuit expenses.

Upset woman cleaning up puddles from a pipe leak while talking on the phone

5. Property Damage in a Building You Are Constructing 

If you belong in the construction or home building sector, commercial property liability insurance won’t cover the structures that you are building, even if you consider them your place of work. For damages to unfinished structures, you need a builder’s risk insurance to protect you. This type of policy provides cover for construction companies while a building is being constructed. 

Buildings under construction are exposed to a number of risks, many of which result from uncontrollable environmental factors, such as high winds or floods. They may also fall victim to an accident or to vandals who may cause damage to the property. Builders and contractors are often the ones purchasing builder’s risk insurance, but the building owner can also get it.

6. Damage Towards Your Commercial Auto 

Even if a commercial vehicle, like service cars or delivery trucks, counts as “commercial property,” it is not covered by commercial property liability insurance. This applies even if the company-owned vehicles get damaged in your place of business. 

This is where commercial auto insurance comes in handy. Commercial auto insurance covers businesses that maintain a fleet of cars, regardless of how big or small that fleet is. It is the business equivalent of personal auto insurance and provides cover for the same things, and a few extras that are specific to the needs of a business. 

The extent of cover will depend on the type of policy, but commercial auto insurance policies can include some or all of the following:

  • Bodily injuries - The policy covers the business if one of your vehicles is responsible for an accident that results in injury or death. It can also include coverage for the driver and passengers, paying out in the event of injury even if they were at fault.

  • Property Damage- Pays out if a company-owned vehicle damages another person’s property, covering the cost of the damage and potentially providing assistance with any resulting lawsuits.

  • Damage to the Vehicle - Payouts can also be made if a vehicle is stolen or vandalized. It may also cover damage from disasters such as floods and fires.

  • Uninsured Motorist Coverage- This means it can cover both injury and property damage that results from an uninsured motorist.

Comprehensive Insurance for Your Business

After reading this article on the limitations of commercial property liability insurance, you may be eager to take the next step to having a more comprehensive insurance plan for your business. However, you may have discovered additional risks in this list that you want to address but don’t know where to begin. 

This is where KASE Insurance comes in. Based in Toronto, we are an award-winning commercial insurance brokerage firm specializing in providing comprehensive and personalized insurance plans for various businesses from all industries. 

Speak to one of our experts for more details on how to expand your company’s insurance coverage.  Contact KASE Insurance now!


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