What Is a Comprehensive General Liability Insurance?

Comprehensive General Liability (CGL) insurance is a foundational business insurance policy designed to shield businesses from financial losses arising from third-party claims. It primarily addresses liabilities related to injuries or damages occurring due to a business’s operations, products, or on its premises. This policy covers common risks businesses encounter daily, helping manage the significant financial burden of lawsuits, including legal defense costs and potential settlements or judgments.

Understanding Covered Perils

CGL policies cover incidents primarily involving bodily injury, property damage, and personal and advertising injury. Bodily injury coverage addresses physical harm, sickness, disease, or death sustained by non-employees due to business operations or on business premises. For instance, if a customer slips and falls in a retail store, CGL could cover their medical expenses and associated legal costs.

Property damage coverage applies to physical damage or loss of use of tangible property belonging to others. For example, if a contractor accidentally damages a client’s home while performing work, this coverage extends to repair or replacement costs for the damaged property.

Personal and advertising injury covers non-physical harms, including claims of libel, slander, false arrest, invasion of privacy, or copyright infringement in advertisements. If a business’s marketing campaign inadvertently defames a competitor, CGL can help cover legal expenses and damages. CGL coverage also includes legal defense costs, typically covering attorney fees, court costs, and investigation expenses incurred while defending against covered claims, even if the business is ultimately found not liable.

Exclusions from Coverage

While CGL insurance offers broad protection, it does not cover every business risk; specific exclusions are common. Claims from professional advice or services, such as errors or omissions by accountants or consultants, are not covered, requiring a separate professional liability or errors and omissions (E&O) policy. Incidents involving company vehicles are also excluded, necessitating a commercial auto policy.

Injuries sustained by employees fall under workers’ compensation insurance, not CGL. Damages or injuries caused by intentional acts, such as assault or deliberate property destruction, are also excluded, as insurance does not cover criminal or willful acts. CGL policies often exclude punitive damages, which are awarded to punish a defendant rather than compensate for losses.

Environmental pollution and related cleanup costs are another exclusion, often requiring specialized pollution liability insurance. Disputes stemming purely from a breach of contract, where no bodily injury or property damage occurred, are also not covered by a CGL policy.

Businesses That Need Coverage

Virtually any business interacting with the public, operating from a physical location, or providing services to third parties can benefit from CGL insurance. Retail stores, restaurants, and hospitality businesses face risks from customer slips and falls or other incidents on their premises. Contractors and service providers frequently work on client property, exposing them to potential claims of accidental damage.

Businesses engaged in advertising or marketing activities also face risks related to personal and advertising injury claims. Even home-based businesses or freelancers who meet clients or have visitors are exposed to general liability risks. Property owners also need protection against incidents occurring on their premises. This widespread applicability makes CGL a foundational insurance policy for diverse enterprises.

Key Policy Components

Understanding a CGL policy’s structural elements is important for policyholders. Policy limits define the maximum amount an insurer will pay for covered losses. These include a “per occurrence” limit, the maximum paid for any single incident, and an “aggregate” limit, representing the total maximum payout during the entire policy period.

Deductibles specify the amount a policyholder must pay out-of-pocket before coverage begins. For example, if a claim is $10,000 and the deductible is $1,000, the insurer would pay $9,000. Some policies feature a Self-Insured Retention (SIR), which functions similarly to a deductible but often involves the insured managing claims up to the SIR amount before the insurer becomes involved.

Endorsements are modifications to the standard policy, adding or removing specific coverages or altering terms. These customize a policy to a business’s unique needs or clarify exclusions. These components collectively define the scope and financial parameters of CGL coverage.

The Claims Procedure

If an incident may lead to a CGL claim, prompt policyholder action is important. The first step involves immediately notifying the insurance provider, as delays can impact coverage. This notification typically includes initial details about the event, such as the date, time, and location.

Following notification, the policyholder should gather and document all relevant information. This includes incident details, names and contact information of witnesses, photographs of damages or injuries, and any police reports or official documentation. Maintaining thorough records supports the investigation process and helps substantiate the claim.

Cooperation with the insurer throughout the investigation is necessary. This involves providing requested documents, answering questions, and allowing access for adjusters or investigators to assess the situation. If a lawsuit is filed by the third party, the CGL policy dictates the insurer’s role in providing legal defense, managing litigation, and ultimately paying covered judgments or settlements up to policy limits.