Commercial General Liability (CGL) policies cover organizations for bodily injury or property damage arising from your products, work, or operations or at your premises, in addition to personal and advertising injuries.
There are a number of exclusions, so your unique risks need to be evaluated to determine if additional types of liability policies are needed or if certain endorsements should be made to the CGL policy.
There are three main parts of coverage: Coverage A, Coverage B and Coverage C.
Coverage A – Bodily Injury and Property Damage
Payments for sums you become legally obligated to pay because of “bodily injury” or “property damage” for an occurrence during the policy period and within the “coverage territory”, if not otherwise listed under exclusions (read the details in attached coverage form above). Note that Coverage A excludes:
- Intentional Injury
- Contractual Liability, except for “Insured Contracts”
- Liquor Liability
- Workers Compensation statutes
- Employer’s Liability (similar to work comp)
- Pollution (some coverage exceptions carved out within the wording, but most carriers are attaching Total Pollution Exclusion Endorsements to policies, as they don’t want this exposure)
- Aircraft, Auto or Watercraft
- Mobile Equipment
- Damage to Property you own, rent or occupy
- Damage to Your Product
- Damage to Your Work
- Damage to Impaired Property or Property Not Physically Injured
- Recall of Products or Impaired Property
- Personal and Advertising Injury (covered under Coverage C)
- Electronic Data
- Recording and Distribution of Material or Information in Violation of Law
Coverage B – Personal and Advertising Injury
Payments for sums you become legally obligated to pay as damages because of “personal and advertising injury” due to causes during the policy period and within the “coverage territory”, if not otherwise excluded. This is defined in the policy as false arrest, wrongful evictions, slander or libel, privacy violations (oral or written), advertising idea theft, and copyright or trademark infringements.
- Intentional Violations of Rights of Another
- Material Published with Knowledge of Falsity
- Material Published prior to Policy Period
- Criminal Acts
- Contractual Liability
- Breach of Contract
- Quality or Performance of goods – Failure to Conform to Statements
- Wrong Description of Prices
- Infringement of Copyright, Patent or Trade Secret (except when used in your “advertisement” for copyright, trade dress or slogan)
- Insureds in Media and Internet Type Businesses
- Electronic Chatrooms or Bulletin Boards
- Unauthorized Us of Another’s Name or Product
- Pollution-related (regulatory demands)
- Recording and Distribution of Material or Information in Violation of Law
Coverage C – Medical Payments
Payment for medical expenses for “bodily injury” caused by an accident, regardless of fault or negligence, on your premises or because of your operations, if within the policy period and “coverage territory”.
- Any Insured
- Hired Persons
- Injury on Normally Occupied Premises
- Workers Compensation
- Athletic Activities
- Products/Completed Operations Hazards
- Coverage A Exclusions
Limits of Insurance
These are listed on the Declarations page as follows and apply to a full policy period of one year or less (and defined as noted within Section III):
- General Aggregate – Limit for damages under Coverage A and B, except damages included in “products/completed operations hazard”; and medical expenses under Coverage C
- Products/Completed Operations Aggregate – Limit for damages included in the “products/completed operations hazard”
- Personal and Advertising Injury – Limit for damages under Coverage B for any one person or organization
- Each Occurrence – Limit for damages under Coverage A and medical expenses under Coverage C for any one “occurrence”
- Damage to Premises Rented to You – Limit for “property damage” to any one premises while rented or occupied by you
- Medical Payments – Limit for medical expenses under Coverage C for “bodily injury” sustained by any one person
Commercial General Liability: Common Coverage Gaps
The definition of an “employee” includes “leased workers” and this creates a potential gap in coverage if worker is injured on the job. Under workers compensation statute, the leased worker falls under the employee leasing firm if they are injured while working for you.
However, the leased worker may select to claim damages against you for negligence, but the unendorsed CGL policy will not respond due to the “employee” and “workers compensation” exclusions.
BEST SOLUTION: Ask the leasing firm to name you as an “alternate employer” on their Work Comp and Employers Liability policy and show you proof of such.
If you operate a business that sells products, this can be a potentially large exposure which almost ever General Liability policy excludes. There are a few insurers who will provide this coverage if you are in need of it.
“Bodily injury” or “property damage” and “personal and advertising injury” are excluded under the CGL policy. However, for “bodily injury” and “property damage”, there is coverage for tort liability including damages and defense costs for the indemnitee (if agreed to in the contract).
Indemnification agreements often require other payments beyond just damages and legal fees, so beware of what you’re agreeing to and that it may not be fully insurable. Also, any contracts whereby you assume liability for the sole negligence of another party, coverage will NOT apply.
Damage to Property
Property damage to any premises you occupy is not covered, except as outlined under Damage to Premises Rented to You. This exclusion includes property you are working on as well or that which is in your care, custody or control.
Exceptions exist if you are renting premises for seven or fewer days. If your business involves working on customers’ goods (e.g. auto or boat repair) or storing them (e.g. warehouses), for example, then you will need Legal Liability policies (discussed later).
Property damage arising out of electronic data is excluded. This is another part of the importance of Cyber insurance, discussed later.
Coverage A excludes pollution, but with a number of exceptions, most notably if caused by smoke, fumes, vapor or soot from an HVAC system, water heater or heat, smoke or fumes from a “hostile fire”. Another exception is for contractors and the owner or lessee was named as additional insured to your policy.
Unfortunately, many carriers are endorsing the policies with “Total Pollution Exclusions” and thus, wiping out these exceptions. Many businesses do have some pollution exposure, especially contractors, so be sure to review your insurance coverage if you have this exposure and look for safe ways to control these environmental risks.
If you are “in the business of selling, distributing, or serving alcohol” then “bodily injury” or “property damage” is excluded. If you are hosting a party and provide alcohol to your guests for free, this is considered “host liquor” informally and is generally considered to be covered by the CGL policy.
There can be gray areas here if you are hosting a party where you charge for tickets, like fundraisers. Just be very aware of possible exposures and always hire 3rd party bartenders who carry adequate General Liability and Liquor Liability policies and name you as additional insured.
It is also advised that your attorneys draft a Hold Harmless and Indemnification agreement in your favor for the bartenders (and caterers) to sign.
Courts have not agreed in all jurisdictions on whether mental anguish or emotional distress is considered “bodily injury”. In some jurisdictions, there is clear precedent that is covered under the definition, but in some it is not.
Most cases settle outside of court anyway and the plaintiff takes a sum from the insurance company, but if your jurisdiction does not allow mental distress as bodily injury, this may be a legitimate coverage concern. If all else is equal, a policy that specifically includes mental anguish is preferable.
Failure to Endorse
If you sign a contract requiring Additional Insured, Primary & Noncontributory, Waiver of Subrogation or any other similar clauses, you will need to endorse your insurance policy to account for this contractual exposure. Otherwise, the costs are all yours!