What Does Commercial General Liability (CGL) Insurance Cover?

Commercial general liability (CGL) insurance covers a company for physical harm, personal injury, and property damage caused by the company's operations, goods, or injuries that occur on the company's premises. Although commercial general liability is considered comprehensive business insurance, it may not cover all hazards that a company may encounter.

Understanding Commercial General Liability (CGL)

Different levels of coverage are available under commercial general liability plans. A policy may contain premises coverage, which protects the company from claims made at the company's physical site during normal business operations. It may also include coverage for bodily injury and property damage caused by a finished product or service performed at a different site.

Excess liability coverage, which can be obtained from commercial insurance carriers, can cover claims that exceed the limit of the CGL policy. Some commercial general liability plans may contain exclusions that limit the kind of actions that are covered. A policy, for example, may not cover the costs of a product recall.

When acquiring commercial general liability insurance, the company must distinguish between a claims-made coverage and an event policy. A claims-made policy covers claims made at any time, regardless of when the claim event occurred. An occurrence policy is distinct in that it covers claims that occurred within the policy's term, even if the policy has since expired.

Businesses may obtain insurance that cover various business hazards in addition to commercial general liability plans. For example, the company might get employment practices liability insurance to defend itself from allegations of sexual harassment, wrongful termination, and discrimination. It may also obtain insurance to cover errors and omissions in financial reporting statements, as well as coverage for losses caused by its directors and officers' conduct.

Special Considerations 

Depending on the demands of the business, a firm may need to identify other companies or individuals as "additional insured" under their commercial liability insurance policy. When a company enters into a contract with another firm, this is common.

If an automobile repair garage contracts with ABC Co. to offer cleaning services for their facility, ABC Co. may demand the garage owners to add ABC Co. as an "additional insured" on their commercial general liability coverage.

Example of Commercial General Liability

The following are some instances of CGL requirements:

• A customer walks into a shop where the floors have recently been scrubbed and polished, making them extremely slippery. The customer falls to the ground and breaks his leg.
• An electrical business employee visits a customer's home for an electrical wiring job and mistakenly starts a fire.
• An individual claims libel or slander as a result of a business advertisement.

A business general liability policy may cover the expense of engaging lawyers to defend the company or the cost of paying the claims in each of these cases. If a company makes repeated claims on its CGL insurance, the insurer may boost the policy's premiums.

The Bottom Line

With the purchase of a commercial general liability policy, you may protect your firm from a number of hazards, including the chance of a lawsuit resulting from regular business activities. Property damage, personal harm (such as libel or slander), bodily injury, and advertising injury are all covered by CGL policies. In the event of a lawsuit, this coverage will assist you in paying attorney expenses or settlement costs, and you can supplement your policy with extensions that cover errors and omissions, excess liability, or employment practices liability.

You can't forecast what will happen in the future, but a CGL coverage can protect your company and lower your risk.