Commercial General Liability (CGL) insurance protect your business from lawsuits related to harm you cause others. The main parts of the policies are simple:
- Coverage A: Bodily Injury or Property damage from your work, products, operations or premises
- Coverage B: Personal or Advertising injury
- Coverage C: Medical Payments to injured parties, regardless of negligence or fault
General Liability – Coverage A:
- Your products
- Your work
- Your operations
- Your premise
General Liability – Coverage B:
- Personal or Advertising Injury related to slander, libel, copyright infringement, etc.
General Liability – Coverage C
- Medical Payments to injured parties, regardless of negligence or fault (this is “please don’t sue me money”)
That is a mouthful, but unlike property insurance, it covers other people’s stuff!
WHY PURCHASE COMMERCIAL GENERAL LIABILITY INSURANCE?
According to a report by the Insurance Information Institute, the average jury awards in 2015 for all major types of liability claims were $1.145M. The likelihood of this occurring to your business could be devastating and the incremental cost of buying insurance protection makes it a great value proposition.
General Liability policies exclude coverage for contractual liability, except when it arises from an “insured contract” as defined in the policy. Before you sign any indemnification agreements or contracts, consult with your lawyer to understand your legal exposures, but also consult with your insurance agent to determine how much of that exposure is insurable. Sometimes, it can be made insurable by simple endorsements to the insurance policy.
The definition of an “employee” includes “leased workers” and this creates a potential gap in coverage if worker is injured on the job. Under workers compensation statute, the leased worker falls under the employee leasing firm if they are injured while working for you.
However, the leased worker may select to claim damages against you for negligence, but the unendorsed CGL policy will not respond due to the “employee” and “workers compensation” exclusions.
BEST SOLUTION: Ask the leasing firm to name you as an “alternate employer” on their Work Comp and Employers Liability policy and show you proof of such.
Damage to Property
Property damage to any premises you occupy is not covered, except as outlined under Damage to Premises Rented to You.
Property damage arising out of electronic data is excluded. This is another part of the importance of Cyber insurance, discussed later.
Coverage A excludes pollution, but with a number of exceptions, most notably if caused by smoke, fumes, vapor or soot from an HVAC system, water heater or heat, smoke or fumes from a “hostile fire”. Another exception is for contractors and the owner or lessee was named as additional insured to your policy.
Many insurance policies contain “Total Pollution Exclusions” and thus, wiping out these exceptions. Many businesses do have some pollution exposure, especially contractors, so be sure to review your insurance coverage if you have this exposure and look for safe ways to control these environmental risks.
If you are “in the business of selling, distributing, or serving alcohol” then “bodily injury” or “property damage” is excluded. If you are hosting a party and provide alcohol to your guests for free, this is considered “host liquor” informally and is generally considered to be covered by the CGL policy.
There can be gray areas here if you are hosting a party where you charge for tickets, like fundraisers. Be aware of possible exposures and always hire 3rd party bartenders who carry adequate General Liability and Liquor Liability policies and name you as additional insured.
It is also advised that your attorneys draft a Hold Harmless and Indemnification agreement in your favor for the bartenders (and caterers) to sign.
Courts have not agreed in all jurisdictions on whether mental anguish or emotional distress is considered “bodily injury”. In some jurisdictions, there is clear precedent that is covered under the definition, but in some it is not.
Most cases settle outside of court anyway and the plaintiff takes a sum from the insurance company, but if your jurisdiction does not allow mental distress as bodily injury, this may be a legitimate coverage concern. If all else is equal, a policy that specifically includes mental anguish is preferable.
If you operate a business that sells products, this can be a potentially large exposure which is almost always excluded from General Liability policies. This coverage can sometimes be purchased as an endorsement to the insurance policy.
If you combine your property and general liability policies into a Business Owners Policy (BOP), it can save you money and greatly enhance coverage. These type of policies aren’t a fit for every business, but they are worth exploring – they are usually built for smaller companies.
General Liability insurance doesn’t protect you from every type of lawsuit or liability exposure. As a result, there are other types of liability insurance designed to meet your entire needs.
Here are a few:
- Professional Liability
- Employment Practices Liability
- Directors & Officers Liability
- Fiduciary Liability
- Business Auto Liability
- Workers Compensation
>> LEARN ABOUT OTHER COMMERCIAL INSURANCE SOLUTIONS