Commercial General Liability insurance (CGL) is a type of coverage known as a third party coverage. “Third Party Coverage” simply means that it protects you from lawsuits filed by others against you. Some typical examples of people who might file a claim would be:
Visitors injured on an insured’s premises
Customers injured on an insured’s premises
People, other than an insured’s employees, injured by an insured’s products
- Property damage caused by an insured to the property of others
So how does general liability insurance work?
As with many insurance plans, your general liability policy will outline the maximum amount the insurance company will pay against a liability claim. So, if your small business gets sued for $250,000 for medical costs associated with an injury caused by a worksite hazard, plus an additional $100,000 in legal fees, but your coverage maxes out at $300,000, then you are responsible for paying the difference of $50,000.
If you are on the higher end of the risk scale and already have general liability insurance, you can also opt for excess insurance or umbrella insurance that increases your coverage limits. This will cover you in situations in which you’re worried that your existing coverage won’t cover all your costs should someone file and win a claim against you.
Reading your GL policy
A typical CGL policy is made up of 3 separate coverage parts that respond to different types of situations. The coverages are:
Coverage A: Bodily Injury and Property Damage
This section is where most claims fall under, and covers four major liability exposures to loss. Coverage A is also the section where the underwriter for the insurance company spends the most time contemplating loss and pricing exposures. The four major liability exposures are:
Premises Liability: pertains to bodily injury or property damage for an occurrence arising out of the ownership, maintenance or use of the building.
Operations Liability: pertains to bodily injury or property damage for an occurrence arising out of the process of the business.
Products Liability: pertains to bodily injury or property damage for an occurrence arising out of real or alleged defects in a product manufactured, sold, handled, or distributed by an insured.
- Completed Operations Liability: pertains to bodily injury or property damage for an occurrence arising out of real or alleged faults in work completed by an insured.
Coverage B: Personal Injury and Advertising Injury Liability
This is an entirely separate coverage section in the policy with its own insuring agreement and exclusions. As the name implies, it responds to suits where you are accused of infringing on the copyright or privacy of another party. The definition of “Personal Injury” also includes libel, slander and other cases dealing with written or oral publication.
Coverage C: Medical Payments
Unlike Coverages A and B, there is now mention of legal liability; meaning that an insured does not need to be negligent for this part of the policy to respond to a claim.
Medical payments may be used to reimburse the medical expenses incurred by someone hurt on an insured’s premises or because of their operation. By offering to compensate them for their medical bills, hopefully they will not seek further restitution under coverage A for bodily injury and property damage.
Although there are different sections and different coverages contained within your General Liability policy, they all work together to make sure that your business is protected against lawsuits. Making sure that there are no gaps in your coverages can be the difference between staying in business and losing everything that you’ve worked hard to build. Check with your broker to ensure that you have all the protection you need.