Commercial General Liability (CGL) Insurance - Explained

September 29, 2020

The commercial general liability (CGL) insurance policy is one of the most common business insurance policies in America. This broad coverage insures businesses against most third-party property damage or bodily injury claims.

Although there are a variety of commercial general liability coverage forms, the most common is the “CG0001 - Commercial General Liability Coverage Form.” Today we will review this form and explain how most insurance policies are put together.

From slip and falls to certain class-action lawsuits, commercial general liability is a critical component for your business protection. Whether you are looking for high-risk public liability insurance or just a policy to protect your company, there is relevant coverage for every business.

CGL Coverages

Commercial general liability can cover a range of potential lawsuits. We will go over the core coverages, but if you have any specific questions, talk to one of our risk advisors for additional clarification.

Coverage A: Bodily Injury And Property Damage Liability

CGL coverage A protects you from damages arising out of bodily injury you cause other people, or from damage you cause to third-party property.

Coverage B: Personal And Advertising Injury Liability

CGL coverage B protects you from claims of slander, libel, false arrest, and even improper eviction. In addition, it provides some coverage for improperly using copyrighted material in your business.

Coverage C: Medical Payments

CGL coverage C pays for medical bills arising from third-party bodily injury regardless of the business's liability or negligence. This coverage will pay for smaller injuries and is often to as a goodwill coverage to provide some level of reputational protection in case a customer is injured.

How To Read The Declarations Page

Now that you know what the commercial insurance policy wording looks like on the CGL0001, let’s take a look at a declarations page.

This page provides a brief summary of what coverages you do have, what coverages you can get and what coverages are excluded. Some policies can exclude some of coverage part A, all of coverage B, or all of coverage C; the declarations page is where you find out.

Declarations Page

Although this does not paint as complete a picture as reading the endorsements would, it will give you a basic summary of what you are purchasing. This is the first place to look when you are reading your liability policy.

What should I avoid when purchasing general liability insurance?

Not all commercial general liability policies are created equal. Although most liability policies use the CG0001 form, some have more exclusions than others. The declarations page looks the same as a policy with no exclusions, which is why you need to read carefully.

Sometimes certain scenarios are excluded because they are better covered by an individual policy. For example, most liability policies exclude certain computer-related losses, as this coverage would be insured through a cyber liability policy instead of general liability.

Although sometimes unavoidable, here are a couple of endorsements that we would caution against.

Premises Liability Exclusions

One of the most common ways insurance companies reduce coverage on insurance policies is by adding a premises liability exclusion. This limits insurance coverage to a select address or the addresses listed (usually the place of doing business).

With this endorsement in place, coverage doesn't follow your business operation from location to location. An unendorsed commercial general liability policy would. Endorsed with this exclusion or limitation, the policy would only cover claims that happened at the address listed. This could affect coverage for off-site business dealings and parking lot liability, as well as numerous other ways.

Operation Limitations

If you’re running a high-hazard business, you may find this endorsement on your insurance policy. It limits coverage to the operations listed on the endorsement. The operations description can be very broad (“construction”) or very narrow (“iron fence welding”). It is essential to read over this endorsement carefully in the context of your business operations.

If the description of your business does not encompass everything you do, then you either need to amend the endorsement wording or remove it entirely.

Contractor & Subcontractor Exclusions

We are seeing these subcontractor or contractor exclusions on more commercial general liability policies. It has been a common occurrence for construction businesses for a while, and it is starting to appear in other industries.

Let’s use a real estate business as an example. There will often be an exclusion that takes away coverage from claims arising out of contractor or subcontractor work. This would exclude coverage if a contractor that you hired hurt a customer while they were in your building, or if their work injured someone.

Industry-Specific Exclusions

Each industry has its own specific set of exclusions that commonly pop up on insurance policies. It is important to have a broker that understands what these exclusions are and how it affects coverage.

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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