A commercial general liability (CGL) policy will insure your business against general liability exposures, unless a possible liability is specifically excluded from coverage. Benefits are paid for actual damages and legal costs when the business is held legally responsible for bodily injury, property damage, or personal and advertising injury liability. If someone is injured on the premises of your business, benefits may be paid even if the business is not held legally responsible.
The CGL policy replaced a similar policy known as the comprehensive general liability policy. Although the CGL is often issued as part of a business package policy that includes both property damage and liability coverage, it can be issued separately as well.
Who's insured under a commercial general liability (CGL) policy?
Under a CGL policy, the type of business insured determines who can be covered under the policy. For instance, if you own a business as a sole proprietorship, you and your spouse may be covered under the policy. If you own a business that is a corporation, you and any other owners can be covered, as well as executive officers, directors, and stockholders. The parties insured, however, are covered only for liability claims and damages related to activities or services performed for the business, not for personal liability.
Types of liability covered by a CGL policy
The CGL policy covers three types of liability exposures: premises and operations exposure, products and completed operations exposure, and indirect/contingent exposure. Coverage for the premises and operations exposure protects your business against claims for bodily injury and property damage related to the ownership and maintenance of the business premises, or as the result of business operations conducted both at and away from the business premises.
Coverage for the second type of exposure--products and completed operations exposure--protects your business against claims for bodily injury and property damages that result from faulty products or completed operations (work performed by the business).
To protect against indirect/contingent liability exposure, the CGL policy protects your business if you are found liable for the negligent actions or work of independent contractors and subcontractors you hire.
Part A pays claims if the insured business is found legally responsible for causing accidental bodily injury or property damage.
Part B pays claims of the insured business if it is found legally responsible for causing personal injury (including false arrest, malicious prosecution, slander and libel, and violation of a person's right of privacy) or advertising injury (including slander and libel, violation of a person's right of privacy, misappropriation of advertising ideas, and copyright infringement).
Part C pays medical expenses to individuals injured on the premises of the business within three years of the accident, whether or not the business is found legally liable.
Not every liability risk is covered
The following 15 liability exposures are specifically excluded from coverage by Part A of the CGL:
- Expected or intended injury
- Contractual assumptions
- Liquor liability
- Workers' compensation
- Employers' liability
- Pollution exclusion
- Aircraft, autos, and watercraft (26' in length or over)
- Mobile equipment (off-road motor vehicles)
- War exclusion
- Care, custody, and control
- Damage to the insured's product arising from the product itself
- Damage to the insured's work
- Property damage to impaired property
- Product recall
- Employment-related practices
Part B exclusions include breach of contract (advertising only), incorrect price descriptions (advertising only), and violation of a penal statute or ordinance (personal injury and advertising). Part C exclusions include injuries payable under workers' compensation laws and injuries to all insured parties, tenants, or employees of the insured.
Specialized products and endorsements
If you purchase a CGL policy and still need coverage for one or more of the items specifically excluded by the policy, you may be able to purchase a specialized policy or add an endorsement that will extend protection to you. Here is a partial list of types of specialized coverage and endorsements you can purchase:
- Workers' compensation and employers' liability policy
- Liquor liability policy or endorsement
- Pollution liability policy or endorsement or an environmental impairment liability policy
- Marine policy
- Aviation policy
- Employment-related practices exclusion endorsement
- Owners and contractors protective liability endorsement
- Manufacturers and contractors liability insurance policy
When coverage is triggered under the policy
CGL policies can be written in two forms, a claims-made form and an occurrence-made form. These forms describe when coverage is triggered. If a CGL policy is a claims-made liability policy, the policy will cover losses for which claims are made during the policy period. If the CGL policy is an occurrence-made liability policy, the policy will cover losses that occurred during the policy period, no matter when the claim is made.
A coverage limit is the most that can be paid for claims under the terms of the policy. A CGL policy includes several different coverage limits and sublimits that apply to different sections of the policy or types of coverage:
- The general aggregate limit is the maximum amount that the insurance company is obligated to pay for all damage and injury during the policy period. This limit includes injury or damage covered under Parts A, B, and C, but excludes damages or injury related to the products-completed operations coverage; a separate aggregate limit applies to this coverage. When the total claims exceed the specified limit, no more claims for the policy period will be paid.
- The per-occurrence limit is the most that will be paid for all injury, property damage, and medical payments under Parts A and C for any one occurrence.
- The personal and advertising injury limit is the most that will be paid per person for damages resulting from personal injury or advertising injury under Part B, subject to the general aggregate limit.
- Sublimits apply to both medical payments under Part C and the fire damage legal liability under Part A.