A commercial general liability (CGL) policy will insure your business against general liability exposures, unless a possible liability is specifically excluded from coverage. Benefits are paid for actual damages and legal costs when the business is held legally responsible for bodily injury, property damage, or personal and advertising injury liability. If someone is injured on the premises of your business, benefits may be paid even if the business is not held legally responsible.
The CGL policy replaced a similar policy known as the comprehensive general liability policy. Although the CGL is often issued as part of a business package policy that includes both property damage and liability coverage, it can be issued separately as well.
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Who's insured under a commercial general liability (CGL) policy?
Under a CGL policy, the type of business insured determines who can be covered under the policy. For instance, if you own a business as a sole proprietorship, you and your spouse may be covered under the policy. If you own a business that is a corporation, you and any other owners can be covered, as well as executive officers, directors, and stockholders. The parties insured, however, are covered only for liability claims and damages related to activities or services performed for the business, not for personal liability.
Types of liability covered by a CGL policy
The CGL policy covers three types of liability exposures: premises and operations exposure, products and completed operations exposure, and indirect/contingent exposure. Coverage for the premises and operations exposure protects your business against claims for bodily injury and property damage related to the ownership and maintenance of the business premises, or as the result of business operations conducted both at and away from the business premises.
Coverage for the second type of exposure--products and completed operations exposure--protects your business against claims for bodily injury and property damages that result from faulty products or completed operations (work performed by the business).
To protect against indirect/contingent liability exposure, the CGL policy protects your business if you are found liable for the negligent actions or work of independent contractors and subcontractors you hire.
Part A pays claims if the insured business is found legally responsible for causing accidental bodily injury or property damage.
Part B pays claims of the insured business if it is found legally responsible for causing personal injury (including false arrest, malicious prosecution, slander and libel, and violation of a person's right of privacy) or advertising injury (including slander and libel, violation of a person's right of privacy, misappropriation of advertising ideas, and copyright infringement).
Part C pays medical expenses to individuals injured on the premises of the business within three years of the accident, whether or not the business is found legally liable.
Not every liability risk is covered
The following 15 liability exposures are specifically excluded from coverage by Part A of the CGL:
- Expected or intended injury
- Contractual assumptions
- Liquor liability
- Workers' compensation
- Employers' liability
- Pollution exclusion
- Aircraft, autos, and watercraft (26' in length or over)
- Mobile equipment (off-road motor vehicles)
- War exclusion
- Care, custody, and control
- Damage to the insured's product arising from the product itself
- Damage to the insured's work