Can You Lose Homeowners Coverage due to a Premises Liability Lawsuit?

Premises liability can be mitigated by obtaining insurance coverage. Property insurance will pay for the expenses and other costs related to an injury if a guest or visitor is hurt while on the property. However, a premises liability lawsuit can sometimes cause an insurance company to drop a party’s coverage.

Loss of Coverage

Typically, an insurance company cannot drop a party for no reason, regardless of whether the party in question is being sued. An insurance agreement is a contract that is binding on both parties. Therefore, courts would be very unlikely to find a company’s dropping coverage during a lawsuit acceptable.

Note, however, that an insurance company can refuse to renew a policy at the end of the terms expiration. At this point, the property owner or resident would need to obtain insurance from a different company.

The Exception to the Rule

Of course, it would not be a legal issue without there also being an exception. If an individual acted with extreme negligence and a guest or another individual was injured on his property, an insurance company might refuse coverage. There is a difference between denying coverage and losing coverage. Coverage that is lost leaves the property and property owner with no insurance; a denial of coverage is the insurance company’s way of saying that it is not responsible under the insurance contract because the other party acted in a way that removes the injury from one that the company could legally be expected to cover.

A property owner or resident that acts recklessly when he does not repair an item that is almost certain to cause injury without being repaired, installs an unsafe object or building without care for the damage it could cause and other similar actions. The key to defining an action as reckless is whether a reasonable person would undertake the same effort without safeguards. Something that is outrageously dangerous or uncommon to find on property would be included.

Obtaining Legal Assistance

If an individual has been injured on your property and your property insurance company is threatening to drop coverage or deny the claim, it is important that you seek legal advice. An attorney will instruct and assist you on challenging the insurance company’s actions and protect yourself against the injured party’s claim.