GENERAL LIABILITY

The foundation of small business liability protection

Commercial General Liability policy provides coverage to a business for bodily injury, personal injury, and property damage caused by the business’s operations, products, or injuries that occur on the business’s premises. CGL is considered comprehensive business insurance, though it does not cover all risks a business may face.

  • Commercial general liability (CGL) is a form of comprehensive insurance that offers coverage in case of damage or injury caused by a business’s operations or products, or on its premises. 

  • There are two types of CGL policies—a claims-made policy that covers claims regardless of when the event took place, and an occurrence policy where the event must take place during a set period. 

  • Companies can add other companies or individuals they contract with to their commercial liability insurance policy as an “Additional Insured."

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Understanding Commercial General Liability (CGL)

Commercial general liability policies have different levels of coverage. A policy may include premises coverage, which protects the business from claims that occur on the business’s physical location during regular business operations. It may also include coverage for bodily injury and property damage that is the result of a finished product or service done on another location.

Excess liability coverage can be purchased in order to cover claims that exceed the limit of the CGL policy. Some commercial general liability policies may have exclusions to what actions are covered. For example, a policy may not cover the costs associated with a product recall.

When purchasing commercial general liability insurance, it is important for the business to differentiate between a claims-made policy and an occurrence policy. A claims-made policy provides coverage for whenever a claim is made, regardless of when the claim event happened. An occurrence policy is different in that it covers claims where the claim event occurred during the time of the policy even if the policy is now expired.

In addition to commercial general liability policies, businesses may also purchase policies that provide coverage for other business risks. For example, the business may purchase employment practices liability coverage to protect itself from claims associated with sexual harassment, wrongful termination, and discrimination. It may also purchase insurance to cover errors and omissions made in financial reporting statements, as well as coverage for damages, resulting from the actions of its directors and officers.

Special Considerations 

Depending on its business needs, a company may need to name other companies or persons as "additional insured" under their commercial liability insurance policy. This is common when businesses enter into a contract with another entity. For example, if an automobile repair garage enters into a contract with ABC Co. to provide cleaning services for their facility, ABC Co. may require the garage owners to add ABC Co. as "additional insured" on their commercial general liability coverage.

Example of Commercial General Liability (CGL)

Some examples that would require CGL include the following:

  • A customer enters your place of business where the floors have recently been cleaned and polished, and as a result are very slippery. The customer slips on the floor and breaks their leg.

  • One of the employees of your electrical company visits a home for an electrical wiring job and accidentally causes a fire in the customer's home.

  • An advertisement you placed results in an individual claiming libel or slander.

https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp

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