More than seven million small businesses operate in the United States require commercial general liability (CGL) insurance to help protect them against unforeseen professional accidents. Without it, the country simply wouldn’t be able to operate at the same commercial level.
In this brief article, I’ll provide an introduction to commercial general liability insurance, including how it works, the types of coverages it provides, and where you can turn to learn more.
What are the Basics of Commercial General Liability Policies?
A commercial general liability (CGL) policy is designed to help cover property damage, advertising injury, and medical and administrative expenses related to non-professional negligent acts caused by a business’s services, operations, or employees.
Commercial liability policies can also cover related court costs (i.e., legal defenses), judgments, and settlements against your business, up to your policy’s limits.
However, CGL policies do not provide coverage for work-related employee injuries, accidents caused while driving a work vehicle, damage to your business’s property, mistakes caused by your professional advice, purposeful acts, or punitive damages.
What’s the Difference Between Claims-Made Policies & Occurrence Commercial General Liability Policies?
Not all commercial general liability policies are created equal. Specifically, there are two main types you need to be familiar with.
A claims-made CGL policy will provide coverage for a claim, regardless of when the claim actually occurred, as long as you have an active policy. For example, if a person who experiences a slip-and-fall accident at your office doesn’t experience back pain for many months—long after the event occurred, a claims-made policy may payout.
Comparatively, an occurrence CGL policy provides coverage for claims sustained when the policy was active, even if it’s currently expired.
What Are Some Examples of Commercial General Liability Coverage?
Using this information, let’s look at a couple of (admittedly simplistic) examples to outline when commercial general liability coverage could kick in:
You own a small retail store in a great walkable location, so you typically see a lot of foot traffic. One day, a child with their mother accidentally spilled their soda at the entrance, and as you walked to the back to grab a mop and bucket, an elderly customer slips on the liquid, falls to the ground, and injures their hip.
Or, let’s say that you own an advertising agency, and you make a commercial comparing your high-profile client to their competition. While the client loved your work and was a success with customers, the company’s competitor felt that you slandered their product and decided to litigate.
As a third example, imagine that you run a mid-size electrical company. On one job site, your employee incorrectly wires a switch, which ultimately results in a fire that requires the project to restart from scratch completely.
With these details in mind, let’s dive in and take a closer look at each of the individual coverages provided under a commercial general liability policy.
Coverage A: Bodily Injury and Property Damage Liability
In most instances, businesses are legally required to carry bodily injury and property damage coverage. However, just like personal lines policies, there are limits to what’s provided.
In this instance, CGL policies could provide coverage for claims that don’t necessarily involve physical injuries, such as mental injury and emotional distress. However, most CGL policies exclude coverage for workers’ compensation, employment practices liability insurance, liquor liability, professional liability, and pollution liability, although these can be purchased if it aligns with your business needs.
Coverage B: Personal and Advertising Injury
Coverage B under a commercial general liability policy protects a business against personal and advertising injury. Offenses include:
- Reputation damage
- False arrest and imprisonment
- Copyright infringement
- Malicious prosecution
- Wrongful eviction or entry
- Invasion of privacy
- Advertising theft
Coverage C: Medical Payments
Medical payments under a CGL policy provides coverage for injuries sustained on your business’s premises or as a consequence of your business’s operations. While they don’t necessarily have to be customers, the injury must have been sustained by a non-employee.
One benefit of commercial liability-related medical payments is that they can be used immediately to help pay for related medical expenses, including medical, surgical, ambulance, hospital, nursing, and funeral expenses, without any litigation occurring.
However, medical payments do not cover defense or legal liability coverage since the carrier offers it on a no-fault basis.
Would You Like to Know More About Commercial General Liability Policies?
Does your business need a standalone commercial general liability policy, or do you require additional endorsements to cover your unique exposures adequately? Whatever you need, the commercial professionals at IHS Insurance Group can speak with you and help you determine which works best—and also fits within your budget.
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