The Slip on the Icy Steps
Priya owns a small bakery in Winnipeg. A customer, Tom, slips on ice on the front steps in January and fractures his wrist. He sues Priya for $120,000 in damages, alleging she failed to salt the steps. Priya's commercial general liability policy has a $2 million occurrence limit, a $1 million products-completed operations limit, and a $5,000 deductible for property damage only. The policy contains the standard 'insured contract' and 'your work' exclusions. Tom also claims the bakery's delivery van, driven by an employee, later struck his parked car while he was at the hospital, causing $9,000 in damage. Priya calls her broker, Ken, asking whether the liability policy covers both claims and whether her premium will rise.
1. Assess coverage for Tom's slip-and-fall claim under the CGL policy.
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The slip-and-fall is the classic premises liability exposure the CGL is built to cover.
- Occurrence: bodily injury caused by an accident (the fall) qualifies as an occurrence.
- Premises: the injury happened on the insured's premises, in the course of the bakery's operations. The duty to maintain safe access is a core premises risk.
- Exclusions to check: the 'your work' exclusion targets defective workmanship, not maintenance of the sidewalk; the 'insured contract' exclusion is irrelevant here. No standard exclusion obviously bars the claim.
- Defence and indemnity: the insurer has a duty to defend, which is broader than the duty to pay. Even if some allegations are uncovered, the insurer must defend the whole suit if any claim is potentially covered.
- Deductible: the $5,000 deductible applies only to property damage, so it does not reduce the bodily injury payment.
- Conclusion: the claim is covered, subject to the $2 million limit.
2. Explain whether the van incident is covered under the same policy.
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Probably not under the CGL, because automobile liability is excluded and belongs on an auto policy.
- Auto exclusion: CGL policies exclude bodily injury or property damage arising out of the ownership, maintenance, or use of an automobile. The van striking a parked car is exactly that.
- Where the coverage lives: the bakery's commercial auto policy (or the employee's personal auto policy, depending on ownership and use) should respond. Ken should confirm whether the bakery has a commercial auto policy and whether the van is scheduled.
- Gap risk: if the bakery has no auto policy and the van is owned by the business, there may be an uninsured gap. Ken should flag this immediately.
- Hired/non-owned auto: some CGL policies provide limited coverage for non-owned autos; Ken should check whether that endorsement exists, but it would not typically cover an owned van.
- Practical advice: report the auto claim to the auto insurer separately and keep the two files distinct.
3. What should Ken tell Priya about how the claims may affect her premium and insurability?
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Ken should be candid but not alarmist.
- Experience rating: liability losses feed into the insurer's rating, and repeated claims can raise premium at renewal. A single slip-and-fall may have limited impact, but the combination with the auto loss is a signal.
- Underwriting review: the insurer may ask about snow-removal contracts and maintenance procedures. Priya should be ready to show a written snow-removal and salting schedule.
- Risk management: Ken should recommend documented inspection logs, a contractor with a certificate of insurance, and signage. Insurers reward demonstrated controls.
- Market risk: if claims continue, the insurer may non-renew or impose a higher deductible. Ken should start renewal conversations early.
- Honesty: Ken must not suggest Priya hide the claims or misdescribe the facts; that would be misrepresentation.