Commercial General Liability Insurance Basics

What Is Commercial General Liability Insurance?

Transcript

The Commercial General Liability, also known as the CGL, is one of the most important types of insurance as it is the first line of defense in the event of a loss. In fact, it is the broadest in terms of types of incidents it will protect the company against. In this video we will talk about the Commercial General Liability policy and its limits.

The Commercial General liability coverage appears first in the list of coverages on the accord 25. According to IRMI, “commercial general liability insurance is a coverage that will protect a business if it gets sued. “The CLG covers claims for both bodily injury and property damage.

Here are two practical examples for when a CGL would be triggered to cover a loss:

Let’s imagine a painter is working on a building and falls off a ladder and injuries himself. That would be a bodily injury example. As far as a property damage example, lets imagine the same painter, and his ladder tips over and shatters a window. Both examples would be types of claims that could go against a CGL policy.

Now let’s talk about the General Liability limits. The various amounts refer to how much the insurer will be responsible to cover for the different, specific events. Each occurrence, damage to rented premises, medical expense, personal and advertising injury, general aggregate, and products- completed are all specific limits included under the commercial general liability policy.

We will start with each occurrence

This is the limit of insurance available to pay an award or settlement due to a claim. Defense cost are in addition to the policy limit if the policy is an “occurrence” basis policy.

Damaged to Rented premises refers to the coverage available if the policy holder is negligent in causing damage to the specific space that they are renting

Medical Expense limits tell us how much the policy will pay for reasonable medical expenses for bodily injury caused by an accident without regard to fault. This is subject to the limit on the policy. It applies separately to each injured person, but will reduce the “each occurrence” or “general aggregate limit” each time.

Personal and Advertising Injury is the coverage available if the policy holder is negligent in causing personal injury (false arrest, detention, imprisonment, malicious prosecution, wrongful eviction) or advertising injury (slander, libel, invasion of privacy, copyright infringement, and misappropriation of advertising ideas).

General Aggregate is the total amount the policy is obligated to pay in any one policy term. This is subject to the “Per Occurrence” limit – the policy will only pay up to the “Each Occurrence” limit for each claim, so long as it is less than or equal to the General Aggregate limit.

 The General Aggregate can respond in three ways:

• Per Policy
• Per project
• Per location

Products and completed ops. – This is the coverage available when the policy holder is negligent in causing injury to a third party once the policy holder has finished their work or once a third party has possession of and use of the policyholder’s products.  This coverage has a separate limit subject to its own aggregate limit compared to the general aggregate which covers the policyholder’s premises and operations exposures.

This is a crucial form of coverage because it relates to coverage afforded after the vendor/subcontractor has completed work – like installing an HVAC and the installation suffering a catastrophic malfunction several months after the work was done. Imagine the HVAC short-circuits and causes a fire that in turn causes tremendous physical damage to the building. That’s what Products-Completed Operations is concerned with.