Commercial General Liability Insurance 101

Tyler Beck runs a good business, and he runs it well. It’s well-insured, for example. When Bob Austin was in an accident and broke his arm while making a delivery, he received the best medical help. And when Jason Tucker accidentally broke a customer’s window, it was fixed quickly. And when poor Mrs. Summers slipped in front of the office and broke her hip, Tyler knew the care she needed wouldn’t be a burden for her.

What Is Commercial General Liability Insurance?

The three examples are very different, but they share something quite important: all were covered by Tyler’s commercial general liability insurance policy. General liability commercial insurance protects your business from suffering a financial loss if you are held liable for property damage, bodily injury, or personal and advertising injury caused by your services, operations or employees.

It's a simple fact: even the most well-run businesses will experience unexpected incidents, whether it’s an injured employee, damage to someone’s property, or a slip-and-fall accident. Those incidents can lead to surprisingly high costs. A business may also find itself having to defend against accusations of slander or false advertising. Commercial general liability insurance (CGL) coverage will protect the business in these and other specified instances.

General Liability Insurance Policy Types

Commercial general liability coverage is generally divided into two types of policies: “claims-made” policies and “occurrence” policies. While that may seem like a minor distinction, the reality is a company’s protection under a general liability insurance policy depends largely on which type of coverage is involved.

Claims-made Policy

This type of policy covers only claims that both occurred and were filed with the insurer during the coverage period. Even if an injury or damage event happens during the coverage period, if the party doesn’t file the claim until after coverage ends, it won’t be covered. Companies can purchase “nose” (prior acts) or “tail” (extended reporting) coverage to fill the gaps before or after the primary policy is in effect.

Occurrence Policy

In contrast, an occurrence policy covers claims for any injuries or damage that occur during the coverage period, even if the claim is made outside the coverage period.

What Does Commercial General Liability Insurance Pay For?

It’s important to carefully read and understand your commercial general liability policy because each policy is as unique as your company. In most cases, a CGL policy provides coverage for these risks:

Third-party Injuries

Something as simple as a guest or a client visiting your business and slipping can result in serious financial damages. CGL provides coverage for bodily injuries suffered by third parties on your premises or in relation to business operations.

Third-party Property Damage

If you or your employees are found liable for damage to someone else’s property, your policy will protect your company.

Medical Payments

Generally, workers' compensation insurance covers expenses related to hospital visits, medical procedures and prescriptions when an employee requires medical attention for a work-related illness or injury. Your CGI policy provides protection if a nonemployee is injured on your premises or in an incident related to your operations, allowing smaller medical claims to be settled quickly and without litigation.

Personal and Advertising Injury

While this term may be unfamiliar, it refers to a variety of situations in which you or your company is accused of illegal behavior, such as slander, libel, intellectual property infringement or unethical actions by an employee. Your CGL policy will provide legal assistance.

Costs of Legal Defense

If you’re sued or someone files a liability claim that requires litigation, your business insurance cost includes legal representation.

Settlements

If the legal defense process results in a settlement, your CGL policy will typically pay up to your limits.

What Commercial General Liability Insurance Doesn’t Cover

Exactly what is covered by general liability insurance varies by policy, but most policies include specific exclusions for claims like these, so be sure to discuss your needs with your broker:

Intentional Damage by the Insured

Damaging or destroying something to obtain an insurance claim is fraud.

Automobile, Aircraft and Watercraft Accidents

Transportation-related risks are covered by specific policies.

Pollution

When an equipment failure or human error causes pollution that negatively affects others, your business liability insurance coverage generally won’t help.

Damage to Your Work or Product

If someone suffers a loss because of negligence or actions taken by your employees, you can be held liable.

Product Recalls

Product flaws can lead to costly recalls that won’t fall under your commercial general liability insurance coverage.

Liabilities You Assume by Contract or Agreement

Some contracts or agreements require you to assume coverage for bodily injury or property damage, and those situations usually require additional policies.

What Are Some of the Factors in Commercial General Liability Insurance Cost?

General liability insurance cost varies greatly from one insured to another. That’s because each policy is crafted to meet the unique needs and risk profiles of each business. Factors affecting general liability costs may include:

Nature of Your Business

General commercial liability insurance underwriters focus on the type of business you operate, its inherent risks and how well you manage those risks.

Location

Where your business operates affects issues such as crime and how long it would take first responders to reach you.

Company Size and Revenue

Your company’s finances provide insight into how well you can absorb many business risks.

Coverage Limits

As with auto and homeowners insurance policies, premiums depend largely on how much coverage is included and the size of deductibles.

Claim Frequency

Higher-than-normal claim activity can drive prices up or lead your insurer to drop your coverage.

Enhancing General Liability Business Insurance

While general liability coverage addresses a range of risks, it doesn’t address all risks. Depending on the nature of your business, you may need additional policies such as the following:

Workers’ Compensation

Nearly all employers are required by law to purchase coverage for workplace injuries.

Cyber Liability Insurance

As cyber threats increase, most commercial insurance general liability policies have added exclusions. Cyber liability insurance helps companies respond to and recover from the financial impacts of cyber-related events.

Professional Liability Insurance

Errors and omissions (E&O) policies protect leaders from damages related to alleged negligence.

Pollution Liability Insurance

Environmental accidents can happen to even the most conscientious companies, leading to enormous claims and reputation damage.

Employers Liability Insurance

Businesses can become legally obligated to pay for actual or alleged employment-related wrongful acts.

Learn More About General Commercial Liability Insurance

Whether you have questions about commercial general liability insurance or other types of coverage, Hylant can help you understand your options and obtain an insurance quote for your business.

Related Reading:
Professional Liability Insurance 101
General Liability Insurance for Contractors: Business Insurance 101

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.