What is Commercial General Liability Insurance?

Commercial general liability, commonly referred to as CGL, is a vital type of insurance that offers protection against various risks associated with business operations. Specifically, it encompasses protection against bodily injury, personal injury, and property damage that may arise during the course of conducting business activities. This type of insurance is essential for businesses of all sizes, as it helps safeguard against potential lawsuits and claims that could have significant financial repercussions.

CGL policies are designed to cover the costs associated with accidental damages, which can include medical expenses for injured parties, repair or replacement costs for damaged property, and legal defense fees in the event of a lawsuit. However, it is essential to note that these policies typically exclude coverage for intentional or expected damages, meaning that if a business deliberately causes harm or damage, it would not be protected under its CGL policy. This distinction is vital for business owners to understand, as it highlights the importance of maintaining ethical practices in their operations.

Within the realm of CGL insurance, there are two primary types of policies: claims-made policies and occurrence policies. Claims-made policies provide coverage for claims that are made during the policy period, regardless of when the incident occurred, as long as the incident is reported while the policy is active. On the other hand, occurrence policies cover incidents that occur during the policy period, regardless of when the claim is filed. This fundamental difference in coverage criteria can significantly impact a business's risk management strategy and should be carefully considered when selecting a policy.

To enhance their protection, businesses have the option to add "additional insureds" to their CGL policies. This feature allows businesses to extend coverage to contractors, vendors, or other entities that may be involved in their operations. By doing so, the primary business can ensure that these additional parties are also protected against potential claims, thereby providing wider protection and reducing the risk of liability in collaborative projects. This is particularly beneficial in industries where subcontracting is common, as it helps to mitigate risks associated with shared responsibilities.

Business owners need to be aware that CGL insurance does not cover certain specific liabilities. For instance, damages resulting from the use of vehicles are typically covered under separate auto insurance policies rather than CGL. Similarly, incidents related to intoxication, such as those arising from serving alcohol at events or workplaces, are often excluded from coverage. Additionally, pollution-related claims, which can arise from environmental damage or contamination, are generally not covered by CGL policies. Understanding these exclusions is critical for businesses to ensure they have the appropriate coverage in place for all potential risks they may face.