A business must assess its risks and requirements to select the appropriate commercial general liability (CGL) policy.
For contracting businesses, the right business CGL policy drafted by an experienced insurance agency provides an invaluable shield against liability risks. Read on to learn more about this essential coverage.
Coverage A
Commercial general liability insurance (CGL) shields your business from claims of causing bodily injury or property damage. The insurance helps pay for damages awarded against your business, including court costs and defense fees, up to your policy’s limit. Your insurer will defend you against any lawsuits seeking those damages, even if they’re frivolous or unfounded. However, the insurance company can require you to reimburse it for certain defense costs that exceed your policy’s limit.
Most CGL policies include limited medical payment coverage. This part of the policy pays for immediate, small-dollar medical expenses for non-employees injured at your premises or as a result of your business operations. This is in addition to your general liability policy’s coverage for bodily injury and property damage.
Premises/operations and products/completed operations coverage are the two main parts of a standard CGL policy. Premises/operations coverage pays for injuries on your business premises or as a result of your business activities, while products/completed operations coverage pays for injuries and damage arising from your business’s products or completed work. If you need more coverage than CGL insurance provides, you can purchase an excess liability insurance policy to cover your additional exposures. Also, suppose your business makes professional judgments or recommendations as part of its services. In that case, you must consider adding professional liability (errors and omissions) coverage to your CGL policy.
Coverage B
The coverage for structures not part of your business in a CGL policy pays for repairing or replacing them on your premises. This includes things like fences, sheds, and detached garages. It also covers damage to these structures from a covered cause of loss, such as a hurricane. The other structures’ coverage limit is based on the cost to repair or replace using current labor and materials rates. Your agent can help you survey your property and determine the proper limits for this policy portion.
Medical payments coverage in a CGL policy pays to provide medical, surgical, ambulance, and hospital expenses as well as professional nursing and funeral costs for non-employees injured or killed on the insured’s premises or as a result of the insured’s operations. It is generally limited to $10,000 per person. This coverage is usually only found in a CGL policy or combined with a worker’s compensation insurance policy.
Most CGL policies are auditable, meaning the insurer can examine your payroll, sales, or units sold during a policy period. If they find that your actual payroll, sales, or units sold are higher than you estimated, you may owe an additional premium. If they are lower, you may receive a refund for the difference. Your agent can assist you with preparing accurate estimates to avoid surprises when it comes time to renew your policy.
Coverage C
Commercial general liability insurance protects businesses against various liabilities, from physical injuries, property damages, and advertising injuries caused by business operations. It protects against financial pitfalls, such as lawsuits and judgments, that may otherwise negatively impact a company’s profitability.
The coverage type and policy limits differ based on a company’s size, risk exposure, and legal obligations. Larger companies and those in high-risk industries typically need higher policy limits. Additionally, a business must assess its risks and select a policy aligning with its objectives.
Aside from protecting businesses against financial loss, CGL insurance also offers peace of mind to enable them to focus on their core business operations. However, it is essential to remember that this coverage does not cover intellectual property disputes and data breaches. Business owners can consider additional Cyber Liability or Umbrella insurance policies for these unforeseen incidents.
Exclusions
A CGL policy covers two primary types of injuries: bodily injury and property damage. Both of these are very broadly defined in the insuring agreement, which means that, at first glance, it may seem like the policy will cover everything that could go wrong with your business. However, the exclusions limit this coverage.
The first set of exclusions eliminates coverage for any damages resulting from a war or an act of terrorism. These events are highly unpredictable and cannot be insured at a reasonable premium.
Other exclusions include any work done on a home or habitation. This typically excludes work on single-family homes but may include condominiums, apartments, tract housing, and hotels. This is because these projects present higher risks than other commercial construction projects. The other significant exclusion is for any injury resulting from using a vehicle. This typically excludes work done on vehicles but can extend to things like commercial autos and motorcycles, boats, and watercraft.
Finally, a CGL policy excludes any property damage caused by using a leased or rental vehicle. This can be a problem for businesses that rent spaces for their operations, but it’s usually easy to solve by adding an endorsement or obtaining a separate specialized insurance policy.
