A Commercial General Liability (CGL) policy protects your business from financial loss. It kicks if your services, operations, or employees cause property damage, or personal or advertising injury. It covers non-professional negligent acts. Understanding this coverage is an important first step in managing CGL risks.
Here are just a few examples of situations in which your business could be responsible for paying various costs, such as medical and legal expenses, as well as compensatory and punitive damages:
- While visiting your business, a customer trips on loose flooring and is injured.
- An employee in your painting or construction business accidentally leaves water running, causing substantial damage to a customer’s home.
- A class action lawsuit is filed against your business, alleging advertisements constituted misleading information.
What commercial general liability insurance covers
A CGL insurance policy covers the costs of your legal defense, and pays all damages on your behalf if you are found liable—up to the limits of your policy. CGL coverage is one of the most important insurance products, due to the negative impact that a lawsuit can have on a business and because such liability suits happen so frequently. Standard CGL includes:
Coverage A: Bodily Injury and Property Damage Liability
Bodily injury and property damage coverage provides protection against losses from the legal liability of insureds. A CGL covers bodily injury – including mental and emotional distress – or property damage to others arising out of non-professional negligent acts.
Bodily injury and property damage coverage excludes workers compensation and employment practices liability insurance. However, business often purchase separate policies for these items. In addition, pollution liability is excluded and can be purchased as an endorsement. However, this coverage is very limited, and high-risk businesses should consider purchasing a separate pollution liability policy. Most often exclude liquor liability, professional liability and other risks. An insurance professional can help you to determine endorsements that are right for your type of business.
Coverage B: Personal and Advertising Injury
Personal and advertising injury liability protects an insured against liability arising out of certain offenses, such as:
- False arrest
- Infringing on another’s copyright
- Malicious prosecution
- Use of another’s advertising idea
- Wrongful eviction, entry or invasion of privacy
Coverage C: Medical Payments
Limited coverage for medical payments includes payments for injuries sustained by a non-employee. Accidents that takes place on the insured’s premises or when exposed to the insured’s business operations often cause these kinds of injuries. Included in the CGL policy, this provides for prompt settlement of smaller medical claims without litigation. It pays for all necessary and reasonable expenses for a person injured or killed in an accident taking place at the insured’s premises or arising from business operations. There is no defense or legal liability coverage—as there is with bodily injury and property damage (Coverage A) and personal and advertising liability (Coverage B) —since coverage is provided on a no-fault basis.
Purchasing commercial general liability insurance
You can purchase commercial general liability insurance as a stand-alone policy, as part of a Business Owners Policy (BOP) or as part of a Commercial Package Policy (CPP). Consult with your insurance professional about what type of coverage you need and how much. If your general liability policy, BOP or CPP do not provide sufficient coverage, you may want to consider purchasing a commercial excess (umbrella) policy, which will provide additional protection.
Additional liability coverages to consider
Depending on your type of business, you may want to consider additional liability coverage that is not part of commercial general liability insurance. Talk with your insurance professional, risk manager and/or legal counsel regarding the types of coverages that you may need. The following is not exhaustive, but key types of insurance to consider include:
Directors and Officers liability
Directors and officers liability insurance protects past, present and future directors and officers of for-profit or nonprofit companies from damages resulting from alleged or actual wrongful acts they may have committed in their positions. The policy provides protection in the event of any actual or alleged error, misstatement, omission, misleading statement or breach of duty. In addition, some policies extend the same coverage to employees.
Liquor liability insurance protects against loss if an intoxicated patron injurs himself or others. If your business manufactures, sells, serves or facilitates the use or purchase of alcohol, then your business will likely need this coverage. Businesses purchase liquor liability coverage as an add-on to a commercial policy or as a stand-alone policy. But, if you do not purchase this extra coverage, your standard commercial general liability policy does not protect your business against liquor-related claims.
This type of coverage provides pollution liability forindustrial, commercial and agricultural property owners, managers and developers. This also includes gradual, as well as sudden and accidental, first-party and third-party environmental liabilities. It also protects assets from unforeseen environmental exposures that could have substantial impact on earnings. In addition, it protects against unforeseen pollution hazards that may lead to bodily injury, property damage or pollution clean-up costs.