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| General Liability Risk Control |
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General liability insurance is intended to protect you against possible financial loss when others claim that your negligence caused them bodily injury or property damage. This might result when they slip and fall on your property or when one of your employees forgets to reinstall the oil pan drain plug and the customer's car engine blows up. Even if you are not negligent, your general liability insurance may be needed should you have to defend yourself in court against such claims.
There are two primary general liability risk control strategies you should employ to protect business, property, and people. First, there are the pre-loss activities necessary to either prevent a loss from occurring or to minimize the severity or cost of such claims. For example, during rainy days you can place a mat in the lobby of the building to prevent slips and falls. To help minimize the cost of such claims, you can train employees to properly respond to an injured customer or visitor. An employee who shows care and concern for the injured customer might even prevent a claim from being made. At the very least, experience shows that a demonstration of goodwill often helps minimize the size of jury awards.
Second, post-loss activities help minimize the size of the loss. A good example is to train your staff on how to properly conduct an accident investigation to discover any and all of the circumstances that led to the alleged accident. The investigation may reveal there was comparative negligence on the part of the injured party, which may serve to reduce or eliminate your legal liability. Refer to the Visitor Accident Investigation section for additional information.
The remainder of this section will address risk control procedures that should be established for each of the following general areas of concern:
• Products and Completed Operations Liability
• Premises and Operations Liability
• Employment Practices Liability
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Product Liability 
Product liability refers to the legal liability that arises out of the design, manufacture, distribution, sale and disposal of a product you manufacture, sell, or supply to others. If your product is defective or not safe to use and causes bodily injury to another or damages their property, you may be liable.
At one time, the injured party would have to prove that you were in some way negligent. Today, under the legal theory of strict liability, an injured party does not need to prove negligence. They only need to show that your product was defective, that injury or damage was a result of the defect, and that the defect existed at the time the product left your control. The party seeking damages can be the buyer, a bystander, or any foreseeable user.
Manufacturers, Wholesalers & Retailers All Have Duties
Manufacturers have a duty to produce products that are "defect free" and safe for both their intended use and any reasonably foreseeable misuse. Being defect free means the design is not defective, there is no manufacturing defect, and adequate warnings are provided when needed (i.e. there is no warning defect).
Knowing who might be regarded as a manufacturer in any product injury situation is not always crystal clear. Though some business owners might not consider themselves to be a manufacturer they might learn they have assumed some of the duties and accompanying liabilities of one if they:
• Assemble various parts and components produced by others into a unit with their brand
name or company name on it
• Sell a product under their company name, brand name, or label though actual design,
manufacturing, assembly, fabrication, etc., is done by someone they subcontract the work
to or simply purchased the product from
• Are a retailer or wholesaler who assembles products made by others such as bikes,
barbecues, and furniture
• Rebuild, retrofit, or recondition used products originally manufactured by others and
resell them
• Modify or repackage new products originally manufactured by others and sell them
• Sell products that they directly import from a foreign country
This list is not intended to be all-inclusive. Instead, it's only intended to point out that though you are not the company that originally designed and manufactured a product, you may assume the duties and liabilities of one without being fully aware of it.
In addition to the duties and liabilities that wholesalers and retailers might assume by their actions, others duties they may have as a matter of law can include:
• The duty to inspect and test
- While retailers generally have no duty to inspect or test products they sell, businesses
such as car dealers have been found to have a duty to inspect and test.
- Retailers generally need to inspect and test if they recondition a product and/or warranty
that it as safe.
• The duty to warn
- If there is an inherent danger involved with product use that is not obvious or common
knowledge and the retailer is aware of it, there may be a duty to warn. The user's age or
mental capability will be considered when determining the extent of this duty.
- A wholesaler or retailer who purports to have expertise in a given field and knows that the
product a customer is purchasing is not suitable for its intended purpose may have a duty
to warn the customer.
• The duty of care (i.e. to take reasonable and prudent precautions)
- If retailers sell a product that is more dangerous than the one ordered, they likely will be
found liable for injuries attributed to product use.
- Retailers will generally be found liable if a product injury arises from a sale in violation of
a statute, such as injury arising from sale of firearms to a minor or sale of food not fit
for human consumption.
- Wholesalers or retailers who store or ship products have a duty to be sure that the
conditions under which the product is stored or shipped will not render the product
defective (i.e. temperature extremes, shock, sunlight, contaminants, etc.)
Again, this list is not all-inclusive and it's only intended to emphasize that responsibility for product safety does not reside only with manufacturers. A wholesaler or retailer should be sure the products they sell are produced by reputable manufacturers, who employ reasonable measures to assure that the products they make are safe for their intended use and reasonably foreseeable misuse.
Commitment to providing safe and reliable products is becoming more critical to long term success in today's quality conscious market place. It's not unusual to see product safety featured in national sales campaigns. There are at least seven key risk control measures you can implement to help minimize your product liability loss potential.
Seven Keys to Product Liability Risk Control
Seven key performance areas that will help business owners insure product safety and minimize product liability loss potential include:
1. Management leadership and support
2. Design evaluation
3. Legal review and counsel
4. Quality assurance and control
5. Product labels, packaging and warnings
6. Marketing and customer service
7. Product recall planning and implementation
Our Product Liability Risk Control Checklist (Appendix C1) provides you with an overview of factors you need to plan for in each of these seven key areas. A more in-depth discussion of each area can be found in the Risk Control Bulletin, Product Liability Risk Control, an additional resource available from FCCI.
Completed Operations Liability
Completed operations liability refers to the liability that contractors or service businesses have if work they have completed is defective and causes bodily injury to another, or damages another's property. Determining when a service or a project has actually been completed can be difficult. Sometime it's determined in accord with terms and conditions specified in a contract. Other times it's based on the customer's sign- off or simply when the work at a job site has been put to its intended use or occupancy.
Completed operations claims can result from things like faulty plumbing repairs or installation that result in water damage to customer's property. They can be more serious or even catastrophic in nature such as when faulty brake repair work results in a serious auto accident or if a building collapses because of failure to build to construction specifications. Completed operations losses such as these can occur long after a job is finished.
Proper selection, inspection, and testing of materials and equipment are vital to reduce such losses. Careful evaluation and selection of qualified subcontractors is critical. For additional ideas that will help you protect business, property, and people from completed operations losses, refer to the Completed Operations Checklist (Appendix C2).
Premises and Operations Liability
Premises liability hazards refer to those conditions on your property that can cause injury and/or property damage to others. The premise hazard of greatest concern is anything that prevents an occupant from exiting a building safely in the event of fire or other emergency. The National Fire Protection Association's (NFPA) Life Safety Code, NFPA 101, is a primary reference source and code for the basic requirements for ensuring safe egress from a building. The Risk Control Bulletin titled Planning for Emergency Evacuation is an additional resource available from FCCI that will help you address life safety concerns.
Common examples of other premises hazards include potholes in parking lots, poor lighting in stairwells, slippery floors, and "attractive nuisances" such as unfenced ponds that attract children. When identifying and controlling these types of hazards it helps to keep in mind that you are trying to minimize loss potential arising from harm or injury to anyone who visits your property, other than employees. These might include the general public, vendors, subcontractors, meter readers, letter carriers, etc. Naturally, injuries to employees also arise from premises hazards, but the losses are addressed by workers' compensation.
Operational hazards are created from the activities of your business. These activities may take place at or away from your premises. They can range from poor traffic control on or around construction jobsites to fire damage to neighboring property negligently caused by a fire while you are welding on your property.
Refer to the Premises and Operations Liability Checklist (Appendix C3) to help identify and minimize other potential loss exposures. Survey your premises regularly. Because weather, traffic, customer volume, etc., change frequently you should perform surveys at different times of the day and on various days of the week. The impromptu survey helps you evaluate the situations and conditions your visitors may be required to negotiate in order to conduct business with your company. Once a hazard has been identified, you will need to establish a priority to correct, eliminate, or minimize the exposure. Consult your local Loss Control representative for additional assistance.
Employment Practices Liability Risk Control (EPL)
The area of EPL risk control is one of the most difficult and problematic for employers to manage. Most employers are more likely to be sued by their own employees than by anyone else. While in the 1970s and 1980s lawsuits against employers alleging unfair employment practices were uncommon, today they must be considered a risk of doing business. The average plaintiff's verdict in such suits exceeds $250,000 with 15% of all verdicts topping $1 million dollars.
Typically, these suits allege that an employer has engaged in a "wrongful act" against their employees in one or more of the following areas:
• Discrimination
• Wrongful termination
• Sexual harassment
• Other workplace related wrongs such as invasion of privacy and defamation of character
While studies show that most employers who are at greatest risk are aware they need employment practices liability insurance (EPLI), they also need to remember to periodically reevaluate their insurance programs. The law in this area continues to evolve and insurers continue to offer new and expanded coverages.
In addition, review your risk control program to be sure you have effective measures in place to help minimize the potential for an EPL claim and to help minimize loss potential should one be made.
Sound employment practices liability risk control programs typically begin with establishing written human resources policies and procedures that address at least the following:
• Hiring practices, interviewing, reference checks, testing, drug free workplace policies, motor
vehicle record checks, criminal background checks, employment-at-will statement
• Salary administration, employee benefits, wage and hour compliance;
• Work assignments, position descriptions, performance evaluations, and reviews;
• Workplace conduct, harassment policy, procedures for reporting wrongdoing without fear of
retribution or embarrassment
• Procedures to properly address, investigate, and manage alleged wrongdoing promptly,
fully, fairly, and internally
• Discipline, discharge, exit interviews, grievance procedures, post-employment rights
• Compliance with applicable state and federal laws such as: a) Equal Pay Act of 1963,
b) Title VII of the Civil Rights Act of 1964, c) Age Discrimination in Employment Act of 1967
(ADEA), d) Civil Rights Act of 1991, e) Americans With Disabilities Act (ADA), and
f) Family and Medical Leave Act of 1993 (FMLA)
• Training to insure that supervisors and managers are aware of company policies and
procedures and of the potential legal implications of their statements and actions with
respect to employees.
Visitor Accident Investigation
To further protect business, property, and people you will want to control the cost of claims by conducting thorough accident investigations, especially when visitors are involved. Handling visitor accidents is significantly different than employee accidents, mainly because of the legal liability issues. The basic difference between investigating an employee injury claim and an injury to the general public is determining who is responsible for the financial costs of the claim. Employee accidents are generally considered to be "no fault" and the employer (usually via their workers' compensation carrier) is responsible for the costs of the injury as specified by the state statutes. Another difference is that the dollar value of customer injury claims often increase based on the visitor's perception of how they were treated at the time of and following their accident.
The areas of responsibility for customer accident investigation generally involve two groups, namely all employees and management staff.
Responsibilities for all employees include:
• Show compassion and concern for the injured person.
• Never argue, assign blame, or admit fault. If asked by the injured party, tell them that your
corporate office will be notified.
• Offer to telephone a local physician, paramedics, or a friend or relative. In general it is not
advisable to transport an injured person in your own vehicle.
Management staff has additional responsibilities, which should include at least the following:
• Complete and submit a report of the accident to the corporate office immediately, but no
later than 24 hours post accident.
• Write down the visitor's statements about what happened and how it happened. As the
manager, you should also separately submit your version of the facts. When describing
how the accident occurred, use the phrase "alleged." When there is no witness, use
statements such as, "the visitor allegedly..." or "the visitor alleges..." to describe what
happened.
• Preserve the accident scene. After the visitor has left the premises inspect the area and
take photographs of the site. Each photograph needs to have the date, time and signature
of the management representative on the back.
• For food related incidents, save alleged contaminated food in a plastic bag, refrigerate, or
otherwise preserve for examination.
• Attach the photos and any documents concerning housekeeping to the report, which is
sent to the corporate office.
• Identify all witnesses and include their address, phone number, and what their relationship
to the company is.
• Take reasonable measures to help prevent recurrence of the accident.
The primary purpose of an investigation is to identify the facts and not to assess blame or fault. The discovered facts often can reduce the ultimate cost of a claim. For more details and suggestions, please read the FCCI Risk Control Bulletin, titled Visitor Accident Handling Guidelines that is an additional resource available from FCCI. Please use the sample Visitor Report of Accident (Appendix C4) as a guide to report injury or damage from an accident.
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