The ABCs of liability insurance

What is liability insurance?  

This insurance protects you – and those living under your roof – against bodily injury and material damage that you may have involuntarily caused to a person and his assets, possibly leading to claims or lawsuits. Coverage includes all damage, whether sustained in Canada or elsewhere in the world. And if you are sued for damage covered under the policy, the insurer has a duty to defend you at his own expense. 

What does liability insurance cover?  

You are covered if: 

• You collided with and injured another skier; you accidentally caused a fire in a hotel room abroad; a child was injured while under your care; 
• your dogbit a person and caused serious injury;
• your washing machine malfunctioned and water flooded the apartment beneath yours; 
• a fire that started in your home damaged the house next door; 
• you accidentally hit another golfer with your club or ball; 
• you spilled red wine over a host’s brand-new carpet; 
• your son broke a neighbour’s window while playing hockey on the street; 
• and so on.  

On the other hand, injuries sustained by yourself or your family members are excluded, as are injury and damage resulting from intentional or criminal acts. Because exclusions and conditions vary from one insurer to another, it’s recommended that you read every clause in your contract carefully so you’ll understand what’s covered and what’s not.  

Who is covered under your liability insurance policy?

The policy will cover the following residents in your home: You yourself, your spouse and the children. Other persons might also be covered. It is always advisable to check with your insurer to understand the precise terms of your contract. 

Is liability coverage automatically included in a homeowners-insurance policy?  

Yes, whether you are a tenant, owner or co-owner. Note that coverage and premium rates may vary widely from one insurer to another. It’s therefore important to shop around for the policy that best suits your needs. 

Is coverage of $1 million enough?  

The most common amount suggested for liability coverage is $1 million. While the amount sounds like a lot of money, it may be inadequate in a number of situations. For example, you’re making French fries in your apartment and the hot oil suddenly catches fire, sending flames throughout the building.

Here again, should the landlord and other tenants decide to sue you, the liability amount could easily escalate. That’s why more and more insurers recommend liability coverage of at least $2 million – precisely what excess liability coverage typically offers – although you can also increase your basic protection coverage up to a maximum of $5 million. Note that excess liability covers the same risks as the primary policy.  

A house guests slips on my icy doorstep and breaks a leg. Will my liability insurance pay for the injury?   

• Not necessarily. To get compensation from your insurer, your guest must prove:

• that there was negligence on your part. If you had removed the snow and sprinkled salt on the doorstep, as well as warned your guest of the presence of ice, you would not have been considered negligent.
• that the fall was unforeseeable. Given Quebec’s weather conditions, falls are often foreseeable in winter.
• that the broken leg was the direct result of the fall. This would be a difficult thing to do if, for example, the guest was wearing a splint following a ski accident that had already weakened his leg or had consumed a large quantity of alcohol when he arrived at your home.

I am self-employed. If a client sustains injuries in my home, will he be compensated?  

No, unless your homeowner’s policy includes an endorsement covering business property and liability. If not, then be sure to add the endorsement without delay.