CGL Policies Offer Business Owners Peace of Mind
A commercial general liability policy (CGL) provides coverage for bodily injury to a person, or damage to the property of others caused by a company’s negligence. Although you never think it will happen to you, damage caused by negligence does happen, and it’s something you should prepare for.
Effectively, your CGL offers broad coverage and peace of mind. If you read an insuring agreement – which is at the heart of the CGL policy – it says: “We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”
But your coverage doesn’t end there: Your CGL also covers personal injury liability, including libel and slander, as well as advertising injury, a very important addition for many businesses.
For the last several years, courts have repeatedly ruled that the CGL policy is not a performance bond.
This means that a CGL policy does not cover the quality of a company’s advice or services. As a result, a business owner is less likely to low-bid a job and perform poorly, because the owner is not able to rely on an insurance carrier to assume that risk.
Following are several factors you should be aware of when deciding if your company needs CGL cover:
A few of many business exposures covered under CGL:
- Additional insured coverage when you sign agreements or contracts.
- Premises and operations liability for persons injured or items damaged while on your premises, or due to your business operations.
- Tenant’s liability, which protects tenants in the event they damage someone else’s property. For example, they accidentally start a fire in rented premises.
Benefits of having CGL cover:
- A legal defense for covered claims.
- Payment of bonds and court costs associated with a claim.
- Limited financial remuneration when assisting the carrier in the defense of a claim.
There are exclusions under CGL cover, but understanding all of them can be tricky. Forms differ, and different jurisdictions render very diverse opinions. Here, however, are some general exclusions:
- Intentional injury is excluded. Generally, there is coverage if you act in self-defense.
- Loss of property owned by others in your care, custody and control is excluded. If you repair equipment such as computers, you may need additional bailee coverage (protecting individuals who, with the approval the property’s owner, have temporary possession of someone else’s property.)
- Faulty workmanship is excluded.
- Liability arising from an aircraft, auto or watercraft is excluded. However, entrusting an automobile to a negligent employee may trigger coverage, depending on the coverage form and the jurisdiction.
- Perhaps most importantly, CGL cover excludes losses arising out of your employees’ injuries.
While the CGL policy offers broad coverage, it may not protect all your company’s exposures as your business grows, particularly when you begin to hire employees. For assistance in selecting the right policy for your business, contact your advisor.