Recently, the Supreme Court of New Jersey reversed a lower court decision in the case of Alejandra Padilla v. Young Il An, holding that all commercial property owners, including owners of vacant commercial lots or lots where there is no active business being conducted, have a legal duty to maintain public sidewalks adjoining their property.
Sidewalks must be in reasonably good condition and therefore commercial property owners are liable to pedestrians that are injured as a result of any negligent failure to maintain them in such condition.
The case
This lawsuit was brought after a woman sustained injuries, which required surgery, on the sidewalk of a vacant commercial lot in Camden, N.J. The owners had purchased the property nearly 30 years prior with the intention to build on it, yet such vision never materialized due to the poor economics and the exorbitant cost of liability insurance to cover the lot. The owners of the vacant lot were sued for negligence due to their failure to maintain the adjoining sidewalk. The owners moved for summary judgment, claiming they owed no duty of care to the pedestrian.
Initially, the trial court had granted the owners’ motion, holding that any owner of a non-income producing vacant commercial lot had no duty to the public to maintain an abutting sidewalk in good condition. An appellate court affirmed this decision.
What the court had to say
However, the Supreme Court of New Jersey reversed this decision, creating the bright-line rule that the owners, and all other commercial landowners, have a duty to maintain in good condition public sidewalks abutting their property, and they are thus liable to pedestrians who are injured because of any failure to do so.
The court also ruled that the moment a commercially zoned piece of property is purchased, a commercial endeavor has begun, and the intention is to make money from the property. Thus, liability insurance should be a normal financial consideration calculated into the cost of embarking on such commercial endeavor.
In New Jersey, sidewalk liability has evolved from imposing no sidewalk liability on commercial landowners to imposing a duty on commercial but not residential landowners, but only if there was a structure on such property or an active business operating on site. Some courts have exempted certain vacant properties reasoning that they lack the capacity to generate income and therefore the risk of loss is not spread.
In this case, the Supreme Court ruled that purchasing a commercial lot, vacant or not, is a business decision and one of the costs of business is maintaining the sidewalk abutting the property and holding liability insurance. While the defense suggested such instances should be evaluated on a case-by-case basis, the court found that this would not be practical and certain types of commercial properties should not be treated differently. The goal of this decision was to create “fairness, consistency and predictability” in cases such as this in the future.
Commercial property owners take note
All commercial property owners in the state of New Jersey, regardless of whether the property is vacant or not, now have a heightened duty of care and are required to exercise reasonable care to prevent foreseeable harm to those who use an entire commercial property. This includes being responsible for maintaining all sidewalks that sit adjacently in reasonably safe condition.
Some things commercial property owners should remember to do following the decision in this case include, but are not limited to:
- Regularly monitor your property—since negligence can be a huge component of these claims, if a hazard cannot be fixed immediately, block off the area or provide significant notice to passing pedestrians to warn them of the hazard.
- Always comply with local municipal codes regarding sidewalk maintenance, and in the event of a sidewalk liability claim, also check to see what the responsibilities of such local municipalities are in terms of maintaining walkways.
- Regularly evaluate your commercial general liability policy and consult with your insurance provider or a knowledgeable insurance agent—these policies are subject to specific limits and may exclude certain types of claims or situations.
- Be sure to consult your company attorney or another attorney who specializes in premises liability or personal injury claims defense if you find yourself in the throes of a sidewalk liability claim. They can help provide specific guidance depending on your situation.
Additionally, one of the key points of the court’s holding was that having business liability insurance and the expense of it is a normal cost of doing business and the lack thereof is not a defense for these types of claims. Therefore, it is even more important than ever for commercial property owners to re-evaluate the type of business liability insurance they hold, and if they do not have it, to purchase it for their business.
How insurance producers can help their commercial clients
Business liability insurance, or CGL insurance, typically provides financial protection in case a third party sues a business for bodily injury or property damage caused by your business operations or premises. This includes incidents that occur on commercial property, like slip-and-fall accidents.
In this case, if someone is injured on a sidewalk adjacent to a business property due to a hazard that a business could reasonably have been expected to prevent or repair and they claim that the owner’s negligence led to the injury (such as failure to maintain the sidewalk).
In this case, CGL insurance may provide coverage for medical expenses, legal fees and any settlements or judgments up to the policy limits. Also, even if a claim against a business for sidewalk liability turns out to be groundless, CGL insurance could potentially cover the cost of defending against such claims, including legal fees and court costs.
Having this type of insurance can create peace of mind for business owners knowing that if their business is sued, legal fees, court costs and settlements or judgments up to the policy limits can all be covered potentially. This can be crucial in protecting a business’s financial stability and having it is a responsible business practice. Not to mention, business liability insurance can be tailored to fit the specific risks of an industry or business operations, and different types and amounts of coverage are available depending on the varying needs of a business.
What this means for agents
As an insurance producer, it is recommended that you review and update the CGL policies your clients carry, and work to secure some sort of coverage for the clients that are not currently covered.
Performing this type of review is crucial for ensuring your clients have the right level of protection against liability risks specific to their business operations. It demonstrates proactive risk management and can enhance the client-producer relationship by building trust and providing valuable expertise.
Danielle Caswell, Esq.
Danielle Caswell joined PIA Northeast as associate counsel in the Government & Industry Affairs Department in 2023. She earned her bachelor’s degree from New York University and her law degree from Brooklyn Law School with a particular focus on intellectual property, information, and media law. Prior to joining PIA, Danielle was an associate at a law firm in New York City where she focused primarily on intellectual property and entertainment-related transactional and litigation matters.
