What is the difference between General Liability, Premises Liability and Professional Liability?

General liability typically covers injuries or property damage arising out of the operation of the business that may not have been preventable, or caused unintentional by factors beyond the control of a business employee or owner. General Liability is intended to cover damages to a third party resulting from bodily injury or property damage. General liability policies include coverage for premises liability, and often include coverage for products liability. Some examples of common general liability claims include slips, trips and falls at a business premises. Other examples include property damage or bodily injury caused at a customer’s home or place of business, or damages caused by a product that is manufactured or distributed by a business.

Premises Liability also known as slip and fall coverage, covers negligence and steps that a business or owner could have taken to prevent bodily injuries or property damage to others.

Professional liability, sometimes used interchangeably with errors & omissions (E&O), covers professional mistakes that result in economic loss to a third party. For example, if a professional is hired to make recommendations to improve a process and the recommendations result in financial loss rather than gain to their customer, the customer may claim economic damages.

There are several differences between general liability and professional liability.

1. Coverage Triggers – The coverage triggers that obligate an insurer to respond to a general liability claim are bodily injury or property damage. Simply put, there must be bodily injury or property damage in order for general liability coverage to apply. In comparison, the trigger for professional liability is the notice to the insured of economic damage claimed by a third party.

2. Coverage Period – General liability policies are usually written on an “occurrence” basis, which means that the policy responds when a third party suffers bodily injury or property damage, regardless of when the claim is filed for damages. In other words, a claim could be filed for a policy that was in effect several years prior if the incident that resulted in damage occurred during the prior policy period.

In contrast, professional liability policies are often written on a “claims-made” basis, which requires that a claim be made during the policy term or within a specified period following the policy term. In other words, the incident must occur during the policy period and the claim must be reported within the policy period. Thus, if a claim is brought after the policy term in which the incident occurred, and there are no changes to the current policy to cover prior acts, there would likely be no coverage in place.

3. Policy Deductible – General liability policies often do not require a deductible or out-of-pocket expense in the event of a claim. Although, some general liability policies do include a small deductible. In contrast, professional liability policies generally include a “retention,” commonly ranging between $1,000 and $10,000. The retention must be paid by the insured before the policy responds.

In summary, general liability coverage protects a business from claims resulting from bodily injury or property damage suffered by a third party. Professional liability protects a business from economic damage claims resulting from professional mistakes.

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