What Coverage Is Needed in Commercial General Liability Insurance?

Commercial General Liability (CGL) insurance is the bedrock of a business’s risk management strategy. It’s a policy designed to protect your company from the financial devastation of a lawsuit brought by a third party. Unlike a property insurance policy that covers your own assets, CGL insurance focuses on the unexpected liabilities that arise from your daily operations. A comprehensive CGL policy provides a robust shield against legal claims for bodily injury, property damage, and a range of other non-physical liabilities.

A strong CGL policy is built upon three primary pillars of coverage:

1. Bodily Injury: The Physical Harm. This is the most common type of claim covered by a CGL policy. It protects your business against lawsuits if a third party—such as a customer, client, vendor, or visitor—is physically injured on your business premises or as a result of your business operations. A bodily injury claim can arise from countless scenarios:
   • A customer slips and falls on a wet floor in your retail store.
   • A visitor trips over a loose cable in your office lobby and breaks an arm.
   • An employee’s ladder falls and injures a passerby on the sidewalk. The policy will cover the injured party’s medical expenses, lost wages, and other damages, as well as the crucial legal fees associated with defending your business in court, regardless of the lawsuit’s outcome.
2. Property Damage: The Unintended Destruction. This part of the policy covers damage to a third party’s property that is caused by your business or its employees. This can include:
   • A contractor’s equipment damages a client’s driveway.
   • An employee accidentally breaks a client’s valuable antique in their home.
   • A fire originating in your business spreads to a neighboring building. The CGL policy will cover the cost of repairing or replacing the damaged property. This coverage is essential for any business that interacts with clients or their property.
3. Personal and Advertising Injury: The Non-Physical Liabilities. This is a more subtle but equally important component of a CGL policy. It protects your business from lawsuits alleging non-physical harm, often related to your brand or reputation. This includes:
   • Libel and Slander: Making a false, damaging statement about a person or another business in a social media post, an advertisement, or a company newsletter.
   • Copyright Infringement: Using an image, logo, or text in your advertising without permission from the owner.
   • Violation of Privacy: Unlawfully accessing or sharing an individual’s private information. This coverage is a crucial safeguard in the digital age, where a single misstep in a marketing campaign can lead to a costly lawsuit.

When selecting a CGL policy, it is vital to understand the key terms and their implications.

• Per-Occurrence Limit: This is the maximum amount the insurer will pay for all damages and expenses arising from a single incident.
• General Aggregate Limit: This is the total maximum amount the insurer will pay for all covered claims over the life of the policy period, typically one year. For example, if you have a $1 million per-occurrence limit and a $2 million aggregate limit, the insurer will pay up to $1 million for any single event, but no more than $2 million total in a year.
• Products-Completed Operations Aggregate Limit: This is a specific aggregate limit for claims that arise from a product you sold or a service you completed. For a manufacturing company or a contractor, this coverage is essential as it protects them from lawsuits that are filed long after the work is done.

It is equally important to understand what a CGL policy does not cover. CGL is not an all-encompassing policy. It does not cover:

• Professional Negligence: For mistakes made in professional advice or services (e.g., a doctor’s misdiagnosis or an accountant’s error), a separate professional liability (Errors & Omissions) policy is needed.
• Employee Injuries: On-the-job injuries to employees are covered by workers’ compensation insurance.
• Auto Accidents: Liability claims arising from vehicle accidents are covered by commercial auto insurance.
• Cyber Liability: The costs associated with a data breach are covered by cyber liability insurance.

In summary, a comprehensive CGL policy is a multi-layered shield that protects your business from the unpredictable costs of lawsuits. It’s a non-negotiable part of a sound business plan, and understanding its components is key to ensuring your company is truly protected from the ground up.