Property manager or owner? – the differences in your liability to the public
When it comes to owning or managing commercial property there are very distinct and different duties owed to the public all depending on who you are.
Bellrock has many clients on each side of this equation. We have property owner clients and we have clients whose business it is to manage those properties, often in a portfolio. Shopping centres are a good example of this kind of property portfolio management arrangement.
Owners of property are liable for injury and damages sustained by visitors and guests whilst on their property, if such losses arise from a failure to identify a hazard and act to mitigate any damage that hazard may cause.
This is true whether it is your home, your business premises or land that you own. Anyone on these premises who suffers loss or injury as identified above can sue the owner of the property for damages.
Businesses (and homeowners) usually deal with this potential risk and liability through the placement of Public or General Liability Insurance (to see what is covered under a general liability policy refer to our fundamentals here). We will refer to it as General Liability (hereunder referred to as “GL) for the purposes of this article.
Homeowners will usually find they have appropriate GL insurance in place via the purchase of Home and Contents insurance policies. Very simply, private homeowners owe a duty to third parties invited into their homes, or onto their land, to ensure they are safe and that there are no risks, dangers or perils that may cause damage or injury. GL essentially indemnifies an insured against any claim by a third party (whether litigated or not) in circumstances they suffer loss or injury for a failure by the property owner to appropriately identify risks and keep them safe.
For commercial property and business owners there is a statutory requirement, where members of the public may access your land or business, to purchase GL insurance to provide indemnity to the public for any injury or loss for the same failure to mitigate against or identify possible risks.
There is an onus on both private owners and businesses to actively manage their properties and identify risks if people are expected to enter or access those properties. As an example, a private property owner may find they have a problem if a visitor is injured by an exposed electrical cable that was not identified or made safe on their premises. The same principle would obviously apply to a businesses, such as when customers frequent their premises or store.
So far, so relatively straightforward.
For commercial enterprises that manage properties on behalf of the owners there are some different considerations that need to be taken into account.
In the normal course of managing someone else’s property, such as a shopping centre or office building or complex, a contract will be entered into. This contract will define what responsibilities are being assumed by the manager and thus removed from the owner. The owner is still obliged to have and maintain GL insurance, but the manager is assuming their own raft of responsibilities and by definition, liabilities, which require additional insurance.
A shopping centre manager would, as an example, assume responsibility for the supervision of services such as cleaning, security, statutory safety requirements and identification of required maintenance to keep a property safe and in good or order for its’ designated usage.
The potential liabilities facing that property manager are different to those liabilities facing the owner. The manager faces liabilities for things that they fail to do that are either contracted or for breach of duties that can reasonably be expected of them as a manager.
In these circumstances, the manager does not face a General Liability risk but more likely a Professional Indemnity exposure (see our product fundamentals here) covering them for their provision of professional services as a property manager.
We traverse the differences in these two covers in our article Public & Product Liability Insurance vs Professional Liability Insurance: A guide to coverage and claims. However, for the purposes of this article and in the context of liability for owning and managing property, it is perhaps easiest to demonstrate by the use of examples.
In an office block, a tenant identifies a problem with a trip hazard in a doorway. The office has recently been refurbished by the owner and the doorway now has a raised threshold lip that wasn’t there before.
The tenant reports this to the building manager. If the building manager fails to act, by not marking the threshold as a trip hazard nor reporting the issue to the owner as a matter that needs rectification, then clearly the manager has been negligent and failed to perform its duties as required by the owner. Any personal injury claim that subsequently occurs could be brought against the manager for that negligence or breach, which would fall under a Professional Indemnity Policy. Conversely, it would not be a General Liability problem for the owner.
Alternatively the building manager, as is expected and required, diligently marks the door threshold as a trip hazard and reports the issue to the building owner for urgent rectification. The building owner decides that the cost of rectifying the problem is prohibitive and decides to do nothing despite the issue having been raised by the manager. Any subsequent injury claim would most likely rest with the owner, and as such would be considered a General Liability claim against them and not a claim against the manager.
A shopping centre manager assumes a number of responsibilities from the owner for various services that occur at the location(s) every day. One of the services that the manager is expected to deal with is the cleaning services.
The cleaners are engaged under contract that obliges them to clean in such a rotation that the risk of harm to the public is minimized as much as possible and in turn the owner’s General Liability exposure is reduced for matters such as slip and trip claims. The cleaning contract stipulates that areas are cleaned in line with the established expectation laid down by the courts under the Civil Liability Act. This states that areas must be inspected, and if need be cleaned/maintained, with rotations at most every 20 minutes, with increased rotations of for areas of high traffic, such as entrances and food court areas. The centre manager is responsible for this requirement being contracted and must audit and monitor that the standard is being met and maintained by the cleaning company.
Centre management are notified of a customer falling over in a common area outside of a supermarket. The centre manager attends to the customer and it becomes apparent that the customer has slipped on coffee spilled on the floor by another patron.
The customer subsequently indicates that they intend to bring a claim for injuries sustained as a result of the fall.
It transpires that the cleaner’s contract stipulates that they are required to rotate cleaning every 40 minutes. The centre manager had previously raised cleaning rotations as an issue with the owner, but because of the additional expense involved to lower the cleaning rotations to every 15 minutes, it was decided by the owner that the contract should remain at 40 minutes. On the basis that the previously recommended cleaning rotations of 15 minutes would have prevented the incident, the owner’s exposure in terms of a General Liability is increased.
Alternatively, it transpired that the cleaning contract called for 15 minute rotations and the cleaner was only adhering to a 40 minute schedule. Given that the centre manager was unaware and failed to adequately monitor the cleaning regime and enforce the terms of the contract they had negotiated on the owner’s behalf, a claim would be appropriately directed towards the centre manager in the first instance for professional negligence and also probably the cleaner in terms of General Liability.
Bellrock’s Team of risk advisors and advocates welcome any enquiries regarding property owners’ and managers’ liability in the context of adequate insurance placement, management of programmes and claims services. Please contact us via the form below.