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Commercial General Liability (CGL) protects A business from financial loss should you be liable for property damage or personal and advertising injury caused by your services, business operations or your employees.
People often speak about “General Liability” as if it is one coverage or one thing. General Liability is really a broad term that refers to a package of coverages and coverage limits. These coverages and how they work are often misunderstood.
On the most basic level the Commercial General Liability (CGL) policy covers against lawsuits alleging bodily injury, personal injury and property damage due to negligence on the part of the insured. The insured is the entity and/or person shown on the policy along with some other folks such as employees.
So, in plain English, if you do something wrong that wasn’t intentional and someone is hurt or their property is damaged then your liability policy will kick in. The response to a claim is twofold; the insurance company will step up and defend you as well as pay damages. Now, there are a lot of exclusions and variables to the coverage but, this very simplified definition will help us get started with explaining the 6 key elements of the CGL policy.
Most Commercial General Liability policies may appear something like this when you look at the coverage page:
What does this all mean?
General Aggregate Limit
This is the most the insurance company will pay in any one policy year for claims arising out of your Operations, Personal or Advertising Injury, Fire Damage and/or Medical Payments. Operations coverage is the basic coverage afforded for Bodily Injury and Property Damage (as explained above) due to your negligence.
Products & Completed Operations Limit
This coverage provides protection for those who are contractors (completed operation) or manufacture or sell something (product). For example, if you are an electrician and you fix someone’s lights and consequently their house burns down you could be sued because you were negligent in completing the operations you performed to the lights. Or, if you manufacture light bulbs or sell them at your store and the light bulbs then cause damage you could be sued because your product caused harm. This is a separate aggregate limit and claims of this nature will not diminish the General Aggregate Limit but is still subject to the Per Occurrence Limit for each claim.
Personal & Advertising Injury Limit
In insurance speak, Personal Injury refers to slander, libel, invasion of privacy, and defamation of character. Advertising injury refers to false advertising practices.
This coverage provides protection from suits related to any of the above. This is the most the policy will pay for any one claim of this nature.
Each Occurrence Limit
This is the maximum that the policy will pay for any one claim arising out of your Operations, Personal or Advertising Injury or Products & Completed Operations. Each claim
will reduce the General Aggregate Limit or in the case of Products &Completed Operations each claim will reduce that separate aggregate limit.
This separate limit shows the coverage for fire damage. This coverage is for fire damage to buildings that are leased or rented by you. For example, if you accidently leave a coffee pot on in your
office suite and it starts a fire; this coverage will pay for the repairs to your suite. Claims of this nature will diminish your General Aggregate Limit.
This limit shows the coverage for Medical Payments to third parties. This provides coverage for incidental medical payments to others if they incur minor injuries while on your
premises. This coverage will pay regardless of who is responsible for the injury. Claims of this nature will diminish your General Aggregate Limit.
This is only a brief overview of Commercial General Liability. Most policies differ in terms of actual coverage’s provided, limits and exclusions however; this should give you a good foundation from which to discuss the coverage with your insurance professional.