WHAT DOES COMMERCIAL GENERAL LIABILITY INSURANCE COVER?
What Does Commercial General Liability Insurance Cover?
But what does commercial general liability insurance policy cover? A CGL policy covers four main categories of liability for which you could be found at fault: bodily injury; damage to others’ property; personal injury, including slander and libel; and false or misleading advertising.
It is very important that business owners have basic idea of what, where and who is covered (& what, where and who is excluded). Below, we’ll shed some valuable light on this important type of business insurance policy.
Insurance Services Office Forms
When insurance companies issues commercial general liability policies, they often use the forms that are provide by the Insurance Services Office (ISO). The main reason for this is the convenience that it provides.
Insurance forms can be rather lengthy and developing them can require a significant investment in time. In an effort to save time, many insurance providers opt to use ISO forms. More importantly, however, these forms are used is because of the risks insurance companies face when they create their own forms. Whenever proprietary language is used – especially in the case of insurance documents – the language could be interpreted differently than how it was intended to be read and understood. As such, should a court take the language written in the forms differently than how it is supposed to read, there is a chance that the insurance provider could end up having to cover claims that they weren’t intending on covering.
What does commercial general liability insurance cover? Since Insurance Service Office forms are so frequently used when issuing commercial general liability insurance policies, most of the wording that they feature has been interpreted and understood by courts. In other words, the meanings of the language used in these forms has been clearly establishes, which means that there are less risks associated with using ISO forms than forms that an insurer creates themselves.
The Commercial General Liability Coverage Form (CG 00 01 04 13) – the form used by any insurance companies for their general liability policies – has 5 main sections including:
- SECTION I – COVERAGES
- SECTION II – WHO IS AN INSURED
- SECTION III – LIMITS OF INSURANCE
- SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS
- SECTION V – DEFINITIONS
Read on to get more detail on each of the sections:
SECTION I - COVERAGES
What does commercial general liability insurance cover? The Commercial General Liability Coverage Form (CGL) is the foundation of an ISO liability policy. This specific form offers three coverages that are separate and distinct from one another. They include:
- Coverage A – Liability for property damage and bodily injury
- Coverage B – Liability for advertising and personal injury
- Coverage C – Liability for medical payments
The Insuring Agreement
The coverage that the CGL offers is largely referred to in the insuring agreement. It highlights the amounts that your organization is legally required to pay out as damages in the result that property damage or bodily injury occurs. In other words, the CGL covers legal claims or lawsuits that are made against your business by a third party that has experienced property damage or suffered a bodily injury because of the negligence of your company.
What does commercial general liability insurance cover? Commercial general liability insurance offers reasonably expansive coverage. It covers all bodily injuries and property damages that are caused by your company, with the exception of those things that are excluded. For example, this type of policy does not cover the injuries that an employee may sustain; workers’ compensation insurance covers employee bodily injuries.
In order for Coverage A to apply to a claim made under commercial general liability insurance, your company must be held legally responsible for the damaged property or the injury. A commercial general liability policy will cover injuries or damages that:
- Happens on the premises of your business.
- Occurs as a result of services you perform, whether on or off your business’ property.
- Happens because of work that you or an employee has completed.
- Occurs as a result of the products that you provided.
On Your Property
Coverage A under CGL applies to any claims that are made against your business as a result of injuries or damages that happen on your property.
Under a CGL policy, coverage A will also apply to any claims that are made against your business as a result of operations that are performed on-site. It will also cover any claims that are related to operations that are performed off of business’ property.
Operations or Work that has been Completed
Should property be damaged or an injury occurs as a result of work that you have already completed, a commercial general liability policy will also cover claims. For instance, if work you completed was defective and causes an injury, your CGL policy will provide coverage for the claim.
Should a lawsuit be filed against your company and it is covered by Coverage A, your insurance provider will offer legal defense. This includes fees that are related to an attorney, courts, some types of bonds, and interest that may be charged on a judgement.
Read more on Coverages – Section 1 for specific CGL coverage form language.
SECTION II - WHO IS AN INSURED
What does commercial general liability insurance cover? International Risk Management Institute, Inc. (IRMI) says, “The first step in accurate coverage interpretation of the commercial general liability (CGL) insurance policy is identifying who is an insured and when protection applies. There is an important distinction between a named insured specifically listed on the policy Declarations and a person or organization that is granted insured status based upon their relationship to the listed named insured. The named insured has broad rights and coverage under the CGL policy, the additional insured has qualified or limited coverage as an insured. It is crucial to recognize the difference.” Read more on Who Is An Insured – Section 2 for specific CGL coverage form language.
SECTION III - LIMITS OF INSURANCE
This section makes it clear that the limits shown in the declarations fix the most the insurer will pay regardless of the number of insureds, claims made, or suits brought or persons or organizations making claim or bringing suits. Read more on Limits Of Insurance – Section 3 for specific CGL coverage form language.
SECTION IV - COMMERCIAL GENERAL LIABILITY CONDITIONS
This section discusses the conditions of the CGL policy including insured duties if sued, excess and other insurance, premium audits, bankruptcy and more. Read more on Commercial General Liability Conditions – Section 4 for specific CGL coverage form language.
SECTION V - DEFINITIONS
This section defines the terms used in the commercial general liability coverage form. It is vital to understand the meaning of the terms used in the policy. Read more on Definitions – Section 5 for specific CGL form language.
What Does Commercial General Liability Insurance Cover? - The Bottom Line
We hope this article on what does commercial general liability insurance cover? has been informative. A CGL policy protects your business from financial loss should you be found liable for bodily injury or property damage caused by your services or business operations.
Further Reading On Commercial General Liability Insurance
- Commercial General Liability Coverage Form
- General Liability Insurance
- CGL Exclusions Explained
- Contractors General Liability Insurance
- Difference Between General Liability And Auto Liability Insurance
- Does General Liability Insurance Cover Subcontractors?
- General Liability Insurance Claims-Made vs Occurrence
- Product Liability Insurance
- Product Liability Insurance vs General Liability
- What Damages Are Covered By A CGL Policy?
- What Does Commercial General Liability Insurance Cover?
- What Does Personal And Advertising Injury Mean?
- What Is A Premises And Operations Insurance Policy?
- What Is Damage To Premises Rented To You?
- What Is Products And Completed Operations Coverage?
- What Is The Difference Between Per Occurrence And Aggregate Liability Limits?