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Home / News & Events / You And Your Commercial General Liability

You And Your Commercial General Liability

This is the second in a series of articles about insurance coverage that affects you and your business. Last month we discussed some of the general principles of insurance coverage and surveyed the many types of policies available. In this issue we will focus on the commercial general liability policy, sometimes referred to as "CGL" insurance.

Your business can benefit from an adequate commercial general liability policy. Such a policy protects you if someone is injured at your place of business. It also covers you for damage or injuries caused by your employees at a customer or client's place of business or home. Typically, there are four basic categories of coverage in a CGL policy. These include: bodily injury; property damage; personal injury protection; and advertising injury.

Protection is provided for bodily injury and property damage arising from occurrences. In addition, if personal injury and advertising injury are included in your coverage, you may enjoy protection for unintentional defamation, wrongful eviction, advertising injury, and the like.

The CGL policy also covers the cost to defend or settle claims, even if the claims are fraudulent. This is of benefit in addition to the coverage provided, that prevents you or your business from having to expend money for counsel and litigation costs.

In short, the commercial general liability policy is your first line of defense for certain types of injuries or damages caused while conducting your business. Often a commercial general liability policy is combined in what is known as a "BOP" or business owner's package. In this type of package, you will typically see additional coverage for property insurance not covered under the CGL policy.

Another important point is worthy of note regarding CGL policies. They typically contain an exclusion for professional liability, also known as errors and omissions. In performing professional services, your business may be subjected to liability for negligent acts, errors, and omissions. As such, professional liability coverage is required. Unless this type of coverage is limited and added by an endorsement on a CGL policy, it typically does not exist in that form, and must be separately insured. If you or your employees make professional judgments or make recommendations in the course of your business, you might want to ask your agent or broker about a professional liability policy or an endorsement on a CGL policy to cover such recommendations, judgments, or opinions.

Perhaps most misunderstood about the CGL policy is that it is not intended to be a guarantee of the quality of a businesses' products, services, or work. It will typically cover your business for damage caused by your defective work, but not damage to your defective work. Let me give you an example. Let's assume you are a roofing contractor. You purchase a CGL policy, and during the policy term you install a roof on a school library which shortly thereafter leaks. The roof needs to be removed and replaced and there is significant damage to the books, furnishing, and carpeting in the school library, as well as the drywall, wallpaper and other wall coverings. Typically, your CGL policy will cover you for the damage to the books, carpeting, tables and chairs, and wall coverings, but not for re-doing the work and installing the roof that was done negligently in the first place.

A CGL policy is a good first step in protecting your business and its assets. However, understanding what is not covered under such a policy may cause you to purchase other forms of coverage or other policies including property coverage, professional liability coverage, directors and officers' coverage, et cetera.