Safeguarding Your Business: Commercial General Liability Insurance

Running a business comes with inherent risks, and being prepared for unforeseen circumstances is crucial. Enter Commercial General Liability (CGL) insurance, a safety net that helps protect your company from the financial fallout of accidents, injuries, and property damage.

“These kinds of claims are more common than you think. In fact, they can come up during normal business operations,” says The Hartford Insurance.

CGL is also known in the insurance industry as general liability insurance or business liability insurance.

“A CGL insurance policy will usually cover the costs of your legal defense and will pay on your behalf all damages if you are found liable—up to the limits of your policy. CGL coverage is one of the most important insurance products, due to the negative impact that a lawsuit can have on a business and because such liability suits happen so frequently,” explains the Insurance Information Institute.

What is Commercial General Liability Insurance?

General liability insurance, according to Chubb, addresses a wide range of liability loss exposures, falling into two categories:

• Premises and operations liability — liability for conditions or activities arising out of the property or operations of a company.
  
  
• Products and completed operations liability — liability of a company to a user who is harmed by products manufactured, sold, or dispersed by the company.

CGL can cover expenses arising from incidents like:

• Bodily injury: A customer trips and falls on your premises, injuring themselves.
  
  
• Property damage: Your employee accidentally damages a client's equipment during a repair.
  
  
• Personal injury: A competitor sues you for defamation in your marketing campaign.
  
  
• Advertising injury: Your product endorsement unintentionally leads to product failure.
  
  

Essentially, CGL steps in when your business is held legally responsible for causing harm to others, shielding you from hefty legal fees, evidence and documents gathering, medical bills, and potential judgments and settlements.

“These expenses can add up, and your costs can rise if it takes a long time to resolve the case. Even if your customer drops their lawsuit, you’ll still have legal defense costs, like attorney fees. That’s why commercial general liability insurance is important. General liability insurance helps small business owners navigate lawsuits and claims. Without it, your business and its assets are at financial risk,” explains The Hartford.

Who Needs Commercial General Liability Insurance?

The short answer is almost every business.

Regardless of size, industry, or location, any commercial activity carries the risk of third-party claims. Even home-based businesses can benefit from this essential coverage.

Commercial general liability insurance, says The Hartford, is important for businesses of all sizes.

It can help:

• Sole proprietors
• Small business owners
• Large companies

Here are some specific groups who should seriously consider CGL insurance:

• Retail stores and restaurants: Dealing with public foot traffic comes with inherent risks.
  
  
• Service providers: From plumbers to consultants to beauty shops, mistakes can happen on the job.
  
  
• Product-based businesses: Defective products or misleading marketing can lead to lawsuits.
  
  
• Landlords and property owners: Accidents can occur on your rental properties.
  
  
• Independent Contractors: It’s important that 1099 contractors have insurance protection.
  
  
• IT Firms: Software developers, telecoms, IT service providers, computer consultants, web designers, and programmers all need protection from lawsuits.
  
  
• Marketing and Consulting Firms: When your business is offering solutions and advice, it can come with inherent risks.
  
  
• Photographers: Operating in public spaces, such as wedding venues and schools, or in private settings, such as homes and businesses, can lead to the risk of bodily injury and property damage.
  
  

What Do CGL Policies Typically Cover?

The Texas Department of Insurance (TDI) breaks down CGL coverage into the following categories:

• Premises/operations coverage: Pays for bodily injury or property damage that occurs on your premises or because of your business operations.
  
  
• Products/completed operations coverage: Pays for bodily injury and property damage that occurs away from your business premises and is caused by your products or completed work.
  
  
• Excess liability insurance: Pays for covered losses that exceed your CGL policy's dollar limit.
  
  
• Umbrella liability insurance: Excess liability insurance coverage above the limits of automobile liability and CGL policies. The umbrella policy also provides liability coverage for exposures not covered under the primary CGL insurance policies and not excluded by the umbrella liability insurance policy.
  
  

“Commercial General Liability (CGL) insurance protects business owners against claims of liability for bodily injury, property damage, and personal and advertising injury (slander and false advertising),” says TDI.

Claims can be broken down into the following two main categories:

• Bodily injury and property damage (BI/PD): This covers medical expenses, repair costs, and lost wages resulting from injuries or damage caused by your business operations, products, or employees.
  
  
• Personal and advertising injury (PI/AI): This covers claims like libel, slander, copyright infringement, and false advertising that harm someone's reputation or business.
  
  

However, it's important to remember that CGL policies often come with exclusions. Carefully review your policy with your insurance agent to understand what's not covered and consider additional endorsements if needed.

TDI says some common exclusions in CGL policies include:

• Generally, CGL policies exclude coverage for property damage to your work. There is an exception to the exclusion for damaged work if a subcontractor working for you caused the damage.
  
  
• CGL policies don't cover property damage to your product arising out of the product or any part of the product.
  
  
• CGL policies exclude coverage for bodily injury or property damage that you are obligated to pay because you assumed liability in a contract or agreement. The exclusion contains the following two exceptions:
  • Liability for damages that you would have assumed in the absence of the contract or agreement.
  • Liability is assumed in a contract or agreement defined in the policy as an insured contract if the bodily injury or property damage occurs after the contract or agreement is executed.

• CGL policies will not pay the cost to recall faulty products, work, or impaired property. However, this coverage may be added to the policy by endorsement for an additional premium charge.
  
  
• CGL policies are not intended to provide coverage for workers' compensation or employer's liability. This exclusion prohibits such coverage.
  
  
• The pollution exclusion eliminates coverage for injuries or damages to a third party resulting from a pollution event arising from your business operations. The exclusion applies to the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants.
  
  

Remember: CGL insurance is not a one-size-fits-all solution. The specific coverage you need will depend on your unique business activities and risks. Consulting with a qualified insurance professional such as Dean & Draper is essential to finding the right CGL policy for your company's needs.

The recommendation(s), advice, and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential, or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property, or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking, or responsibility to you.  The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.