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Commercial General Liability – Definition

Commercial General Liability (CGL) Definition

Commercial General Liability refers to a comprehensive insurance policy designed to provide liability insurance to you and your business. It provides protection against loss to a third party caused by either the service you offer or the product you sell. The CGL insurance also covers situations where either you or your employees are conducting offsite business.

A Little More on What is Commercial General Liability Policy (CGL)

Business-related lawsuits costs may have a negative impact on the business’ cash flow.  It is the reason why most businesses should consider taking CGL for protection against losses. In most cases, CGL covers the legal defense costs, and damages, if you are found to be liable for the damage or injury. However, the CGL  can only cover up to the limit stated in the policy.

In the United States, commercial general liability is a common policy in the insurance market. Businesses prefer purchasing this type of insurance policy because it covers many business-related common risks. The risks that CGL is may cover include:

  • Property damage or bodily injury that happens when in business premises
  • Body injury caused while exposed to business operations
  • Personal and advertising injury
  • Property damage
  • Medical payments

However, it is worth noting that his type of cover does not cover other risks such as professional services, pollution, and officers/director liability. In other words, the CGL does not cover professional negligence acts. However, there are separate insurance policies available to cover such risks.

Examples of Liabilities to your Business

Examples below depicts some of the situations your business may be responsible for, and it may meet certain costs, compensatory/punitive damages, and legal expenses. They include the following:

  • When a customer sustains injuries while visiting your business premises. For instance, a customer may strip on your slippery floor within your business premises.
  • When your employee in your construction business accidentally leaves the water running, which causes considerable damages to the customer’s house
  • When there is the filing of a case against your business for  advertising misleading information

Commercial General Liability Standards?

There are various consumer general liability standards.

Property Damage and Bodily Injury

It is possible for anyone to present the insured premises to succumb to an injury. People who are likely to get injuries in the insured premises may include the following:

  • Delivery persons
  • Employees
  • Vendors
  • Maintenance personnel
  • Customers

When this happens, the business might be liable for such bodily injuries. CGL usually mitigates such losses by covering the costs on behalf of the business. Note that if an individual is responsible for their own injury in your insured premises, that person can still file for an injury lawsuit. Claims related to body injury may include the following:

  • Lost wages- An individual not able to work and earn an income due to injuries
  • Pain and suffering that an individual goes through
  • Medical bills

Note that even emotional distress, as well as mental injury, is counted as bodily injuries, even though they don’t involve bodily harm. Also, note that CGL does not cover employment practices and worker’s compensation liability. However, there are separate policies that cover such losses that a business can obtain from its insurance company.

Advertising and Personal Injury

Advertising and personal injury liability insurance protect a policyholder against liability emanating from certain offenses such as:

  • Libel
  • Privacy invasion or wrongful entry/eviction
  • Using someone else’ advertising idea
  • False arrest
  • Slander
  • Malicious prosecution

Medical Payments

Medical payments are part of a standard CGL cover. CLG covers payments for injuries suffered by a customer or any other person who is a non-employee. For this policy to apply, the injuries must have taken place on the premises covered by the insurance or when you are exposed to the business operation that is insured.

In such situations, medical payment can be made without any legal action. CGL settles small medical claims with no lawsuits. Some of the things it may settle include reasonable surgical, medical, hospital, ambulance, and professional nursing. Also, in case a person gets an accident in the insured premises and later dies, CGL will cover that person’s funeral expenses.

Advantages of Operating your Business with a CGL

If there is proof that your business is responsible for the loss to a third party, a consumer general liability will pay or compensate for the loss on your behalf. It means that there will be no effect on your business’ cash flow.

Consequences of Operating without a Commercial General Liability

You may think that acquiring a CGL for your business is an expensive move or a waste of resources. However, keep in mind that no business is safe from liabilities. In fact, small businesses are likely to suffer worse implications in case of a liability claim.

For this reason, it is crucial for any person running a business to purchase a standard CGL policy. Below are examples of risks your business may face if you don’t cover it with CGL insurance:

  • Your company is likely to incur expensive costs to pay for the legal process if found legally responsible for any property damage or bodily injury. Note that these may affect your business cash flow, for they are financial losses.
  • Another consequence is that your reputation as a business person may not sit well with your customers. Customers value trust, so anything that can break their trust in you may ruin you and your business if not well handled.
  • Some clients may require you to provide a certificate that covers liability for them to offer you a work or business contract. So, if you don’t have one, it means that you will not get the contract.

How to Purchase Commercial General Liability

There are various types of CGL policies from which you can choose from. For instance, you can purchase a CGL as a stand-alone policy, as part of a Commercial Package, or as part of a Business Owner Policy. If you are not sure which option is good for your business, it is wise to consult with an insurance professional, on the available type of covers.

References for Comprehensive General Liability Insurance

http://www.businessdictionary.com/definition/comprehensive-general-liability-insurance-CGL.html

https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp

Academic Research for Comprehensive General Liability Insurance

Coverage for Environmental Liabilities Under the Comprehensive General Liability Insurance Policy: How to Walk a Bull Through a China Shop, Hadzi-Antich, T. (1984). Coverage for Environmental Liabilities Under the Comprehensive General Liability Insurance Policy: How to Walk a Bull Through a China Shop. Conn. L. Rev., 17, 769. This article is intended to provide courts with both a roadmap of the china shop and a description of the dimensions of the bull so that the journey may be made withh a minimum of damage – In pursuit of that goal, this articlee first briefly describes the nature and scope of environmental liabilities under current statutory and common law – The article then analyzes the CGL Policy in detail, with specific reference to the extent to which the Policy covers such environmental liabilities

Insurance Coverage for Faulty Workmanship Claims Under Commercial General Liability Policies, Franco, R. J. (1995). Insurance Coverage for Faulty Workmanship Claims Under Commercial General Liability Policies. Tort & Insurance Law Journal, 785-807.

The rise and fall of commercial liability insurance, Abraham, K. S. (2001). The rise and fall of commercial liability insurance. Virginia Law Review, 85-109

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