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What is commercial civil liability?

Everyone has a duty to act with care and diligence. The law states that if you fail to do so, meaning you commit a fault and that fault causes harm to another person, you’re required to make it right. That’s the principle of civil liability.¹

This principle applies to businesses too. No matter your industry, if someone believes they’ve suffered harm because of your company, they can file a lawsuit. It could be a client, supplier or visitor. 

And liability doesn’t stop with your own actions as the business owner. It includes your employees’ actions, the condition of your premises and sometimes even the damages caused by your subcontractors.

Make things right without putting your business at risk

When damage occurs and your business is found liable, liability insurance can be a life saver. 

If you’re sued, it can cover: 

• Legal defence costs: lawyer fees, investigation costs, expert opinions, etc. 
• Compensation to the victim if you’re found liable

For your insurance to step in, three conditions must be met:

• A fault occurred in the course of your business activities.
• Someone incurred real damage, i.e. personal, moral or material. 
• There’s a direct link between the fault and the damage. 

One example among many

In a store, a loose stair railing causes an elderly customer to fall, resulting in a fractured hip, multiple injuries and temporary loss of mobility.

The customer’s son documents the scene, gathers evidence and files a negligence claim over poor maintenance.  If the fault is proven and linked to the fall, the store could be found liable, meaning they would have to incur legal costs and potentially make a compensation payment. 

In this case, civil liability insurance could cover the defence and pay the settlement. Civil liability coverage works behind the scenes, but takes centre stage when an incident turns serious.

Is it mandatory?

While liability insurance isn’t legally required, it’s often a practical necessity. Some clients, including government agencies, may require it before signing a contract. Likewise, a commercial property owner may make it a condition of your lease.

Subcontractors and employees: liability still falls on you

Your business is responsible for its own actions, which includes your employees’ actions while they’re on the clock. But there’s more. Did you know that you can also be held responsible for your subcontractors’ negligence? In a dispute, your clients will come after you, the company they hired, not the subcontractor directly.
 
For example, a general contractor hires a subcontractor to install a fireplace. Soon after, a fire destroys the home. The investigation finds faulty installation. Even though the general contractor didn’t do the work, they could still be sued. 

They would be on the hook for:

• Lawyer fees
• Expert assessments
• Reconstruction costs 
• Replacement of damaged property 
• Temporary housing for the occupants

These types of expenses can jeopardize the financial stability of any business.

Tailoring the coverage to your business

General civil liability insurance works well enough for many companies. But depending on your industry, it may not be enough.

A hair salon, an IT consulting firm and a medical clinic face very different risks. Some sectors require more specific coverage. It might be wise to add: 

• Professional liability insurance to cover errors or omissions in your professional services
• Contractual civil liability insurance coverage to protect your business against breaches of contract terms

Some policies include these coverages, but not all, and not for every industry. 

That’s why it’s important to assess your situation carefully.

Is your business properly covered? 

Start by reviewing your options with your insurance broker. 

Already have civil liability insurance coverage for your company? Great. Review it regularly. Are all your operations covered? Have your risks changed? Are your contracts up to date?  

Also take preventive measures to limit risks: 

• Keep employees well trained and alert
• Inspect your premises regularly and fix any hazards ASAP 
• Maintain a clear and realistic maintenance schedule
• Document your processes to avoid surprises

Protect what you’ve built

No one likes to imagine worst-case scenarios. But in business, an accident or act of negligence can quickly become a costly legal and financial problem, damaging your finances, reputation and causing you stress. Including civil liability coverage in your commercial insurance can be a valuable safety net. 

¹ Civil liability insurance includes many conditions, exclusions and limits. Review your policy to understand them fully.