What Does Commercial General Liability (CGL) Insurance Cover?

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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 arising from the business’s operations, products, or injuries that occur on the business’s premises.

Commercial general liability insurance is considered comprehensive business insurance, though it does not cover all the liability 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 of time.
• Companies can add other companies or individuals they contract with to their commercial liability insurance policy as “additional insureds.”
• 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.

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. Cyber insurance protects businesses from financial losses due to data breaches and similar attacks. 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 an "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.

What Damages Does CGL Insurance Cover?

Commercial general liability insurance covers injuries to a person or property damage that occurs on the premises of a business. CGL policies cover claims of property damage, personal injury (such as libel or slander), bodily injury, and advertising injury.

What Is Not Covered Under Commercial General Liability Insurance?

Most CGL policies do not cover intentional or expected damage by the insured. They also do not cover damages due to intoxication (in alcohol-related businesses), pollution, automobiles or other vehicles, damage to a business' work, or additional liabilities that the insured might take on. A business that is involved in these types of risks should purchase additional insurance in order to be fully covered.

How Much Does Commercial General Liability Insurance Cost?

The cost of commercial general liability insurance depends on the size of the business being insured, the riskiness of its business operations, and the amount of coverage needed. Some insurers say that their clients pay between $300 and $600 for a million dollars of insurance coverage. Others say their clients may pay as much as $1,000.

Who Is Insured Under Commercial General Liability Insurance?

The insured cover a named insured (such as an individual or business) that is specified in the insurance contract. The named insured is normally the policyholder. The policyowner can also name additional insureds (such as contractors) and additional named insureds (such as co-owners).

The Bottom Line

You can protect your business from a variety of risks, including the risk of a lawsuit arising from everyday business activities, with the purchase of a commercial general liability policy. CGL policies cover property damage, bodily injury, and other types of claims. This coverage will help you pay attorney fees or settlement costs in the event of a lawsuit. And you can augment your coverage with extensions that cover errors and omissions, excess liability, or employment practices liability.

You can't predict what will happen in the future, but you can cover your business and reduce your risk with a CGL policy.

1. Insurance Information Institute. "Commercial General Liability Insurance."
2. The Hartford. "Commercial General Liability Insurance."
3. The Hartford. "Commercial Umbrella Insurance."
4. The Hartford. "Claims-Made vs. Occurrence Policy."
5. Insurance Information Institute. "What Is Employment Practices Liability Insurance?"
6. Travelers Insurance. "What Is Errors and Omissions Coverage (E&O)?"
7. Next. "Additional Insured."
8. Landes Bosch. "CGL Exclusions: The Ultimate Guide."
9. Insureon. "General Liability Insurance."
10. Lakenan. "How Much is a One Million Dollar General Liability Insurance Policy?"
11. Contractors Insurance. "Who Is Insured Under A CGL Policy?"

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An associate in claims (AIC) is a professional designation for professionals with enhanced skill training to handle different types of claims.

The Chartered Insurance Professional (CIP) designation is a professional accreditation within the Canadian property and casualty insurance industry.

Chartered Property Casualty Underwriter (CPCU) is a professional credential earned by specialists in risk management and property-casualty insurance.

Workers’ compensation pays workers benefits due to a work-related accident or injury. Workers' comp covers medical costs, healthcare, lost wages, job retraining, and disability.

Business interruption insurance is a form of insurance coverage that replaces business income lost as a result of a business interruption event.

Unfair claims practices occur when an insurer tries to avoid or delay paying a claim that an insured client is entitled to.

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