Premises Liability Emerging as Significant Driver of Nuclear Verdicts

Last year, a jury in Oregon awarded a $15.8 million verdict against Topgolf after the sports and entertainment complex was found negligent for a young child’s skull fracture and traumatic brain injury at its Hillsboro facility. It became one of the latest examples of how premises liability is becoming a significant driver of nuclear verdicts above $10 million and losses for businesses.

From 2015 to 2020, in fact, the median cost of a jury award over $10 million increased from $20 million to $27 million, according to Advisen’s loss database. Even non-nuclear premises liability cases are stretching well into the seven figures. Late last year, for example, a jury awarded $5.34 million after a customer at Food4Less in Los Angeles tripped related to an inattentively displayed pallet and cooler stack and suffered serious spinal injuries.

This trend is prompting insurers to reassess their appetite for premises liability risk while reinforcing a key reality: many of the losses driving nuclear verdicts originate from preventable failures. Routine maintenance gaps, unclear internal procedures, and delayed claims reporting can quickly escalate otherwise manageable incidents into high-severity outcomes.

For agents, this presents an opportunity to expand beyond coverage placement and serve as advisors who can guide insureds toward risk mitigation and reduced exposure. Understanding where these breakdowns occur is the first step in helping clients avoid costly claims.

Common Mistakes Found in Major Losses

Often, missteps that can turn a routine premises incident into a severe loss are preventable.

One of the most commonly overlooked preventative actions is routine maintenance and documentation. Small hazards become big claims when they sit unaddressed–uneven pavement, poor lighting, loose handrails, and roof leaks that make floors slippery.

One recent premises liability case involved a client whose customer fell on a wet entryway during a rainstorm. Because there were no floor mats or signage, what could have been a nuisance claim turned into a six-figure loss for the business once a back surgery, lost wages, and a settlement were calculated.

Another common mistake pertains to a business owner’s failure to implement clear internal procedures and communication, which can cause uncertainty among employees when an accident happens. Clearly spelling out procedures such as who is responsible for certain duties or how to report an accident after it occurs can significantly help reduce liability issues and lower claim severity. Without clear communication around reporting claims, we’ve seen reports reach six figures.

In one recent incident, a poorly lit parking lot was the impetus for a costly claim. The claimant’s injury was not overly significant, but with an allegation that the insured knew about the condition and didn’t repair it, ultimately led to the cost of the incident skyrocketing for the insured.

Additionally, delaying claims reporting, even by just a few hours, can complicate and considerably raise a claim’s cost.

Agents should advise insureds to properly educate employees on the protocol for reporting claims and offer an open line of communication for them to report an incident.

Important Coverage to Avoid Issues

Having adequate coverage to protect against unexpected incidents is the most important way to help insureds avoid claims that could lead to major financial losses and even business closures. Agents should encourage property owners to obtain commercial general liability coverage with limits that reflect today’s verdict environment, not to limits that may have been adequate 10 years ago. Property coverage is critical from a maintenance standpoint, but liability is the primary protection for premises risk.

Just as insureds must raise coverage limits to accommodate for today’s market, in many cases, an umbrella or excess liability policy is no longer optional. This extra layer of coverage will pay for liability claims that exceed the limits to standard policies, including bodily injury and property damage. If needed, medical payments coverage can also help resolve smaller incidents before they escalate.

In instances where an insured works with contractors, agents should always recommend requiring, and double-checking for certificates of insurance and written indemnification agreements. These items are often forgotten or overlooked, but they can make a major difference in the case of a claim.

In one incident involving a contractor, equipment cords were left in a hallway overnight causing a tenant to trip and sustain a traumatic head injury. Even though the contractor caused the hazard, the building owner was brought into the suit and had to defend it. Between legal costs and settlement contributions, it became a $750,000 incident.

‘Agents should advise insureds to properly educate employees on the protocol for reporting claims and offer an open line of communication for them to report an incident.’

Mitigating the Risk of Nuclear Verdicts

In addition to recommending proper coverage, there are a few key steps agents can take to help insureds avoid liability risks and losses.

Prioritize Comprehensive Recordkeeping. Documentation, inspections, and incident response protocols are vital to defend premises liability claims. Documentation can make or break a premises claim, allowing an insured to produce inspection logs, maintenance records, and incident reports immediately after the event. This changes the tone of the claim by providing objective evidence and establishing a clear timeline of what occurred.

Assign Third-Party Liability Proactively. The message to insureds should be simple: transfer risk upfront, not after the loss. This could include obtaining written contracts, hold harmless agreements, verifying insurance limits, and requiring additional insured endorsements. It’s also important to not only collect certificates once and file them away. Renewals need to be continually monitored to ensure coverage is up to date and accurate.

Implement Helpful Technology. Agents can recommend technology solutions to help protect against premises risks, and they don’t have to be overly complicated. High-quality surveillance systems are extremely helpful, both as a deterrent and for claim defense. Good lighting with motion sensors can help reduce incidents in parking areas. Water detection systems and weather monitoring alerts for snow and ice response are practical tools as well. Technology won’t replace good procedures, but it strengthens them, especially when it comes to proving a claim.

As insureds continue to face traditional and emerging premises liability risks, agents can play an essential role in establishing coverages and developing policies and procedures to protect their clients from these increasingly expensive claims, court awards, and settlements. Mitigating these risks not only ensures vendor, employee, and customer safety, it prevents financial losses, protects a client’s reputation, and helps business owners avoid time-consuming litigation that takes the focus away from critical business functions.

Mercado is a commercial lines account manager at All Solutions Insurance Agency, one of the largest independently owned insurance agencies in California placing over $34 million in annual premiums. She can be reached at roberta@allsolins.com.

Topics Trends Personal Auto Liability