Commercial General Liability (CGL) insurance provides coverage for a range of liability risks faced by businesses. It protects businesses from financial losses associated with third-party claims for bodily injury, property damage, personal and advertising injury, and other covered liabilities. Here’s an overview of what Commercial General Liability insurance typically covers:

What Is Commercial General Liability Insurance?

Commercial general liability (CGL) insurance is a type of policy that 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.

Insurance Information Institute. “Commercial general liability insurance.”

Commercial general liability insurance is considered comprehensive business insurance, though it does not cover all risks that a business may face.

KEY TAKEAWAYS

  • Commercial general liability insurance 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.”
  • Commercial general liability policies may cover the cost of any accidental damages as a result of the business’ operations or the legal costs of defending a suit.
  • Commercial general liability does not provide protection against intentional damages, or any type of accident involving automobiles, aircraft, or watercraft.

Understanding Commercial General Liability Insurance

Premises Coverage

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 at another location.2

Excess Liability Coverage

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

Claims-Made vs. Occurrence Policy

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 covers claims where the claim event occurred during the time of the policy even if the policy is now expired.

Other Types of Policies

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.

 A typical commercial general insurance policy covers accidental damage or injuries but does not cover injuries that are intentional or could be expected to happen.

Special Considerations 

Depending on its business needs, a company may need to name other companies or persons as “additional insured” under its 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 have the latter provide cleaning services for its facility, ABC Co. may require the garage owners to add ABC Co. as “additional insured” on its commercial general liability coverage policy.

Examples of Commercial General Liability

Some examples that would require CGL include the following:

  • A customer enters a 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 a leg.
  • One of the employees of an electrical company visits a home for an electrical wiring job and accidentally causes a fire in the customer’s home.
  • An advertisement placed by the business results in an individual claiming libel or slander.

In each of these cases, a commercial general liability policy might cover the cost of hiring lawyers to defend the company or the cost of settling the claims. If a business has frequent claims against its CGL insurance, the insurer might raise the premium costs of the policy.

Commercial General Liability insurance is a foundational component of risk management for businesses, providing financial protection against a range of potential liabilities that could otherwise result in significant financial losses or legal challenges. Businesses should carefully review their policy, understand its coverage limits and exclusions, and work with their insurance provider to ensure they have appropriate protection based on their specific needs and risks.

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