Running a business comes with many risks. A customer could be injured at your location, an employee could accidentally damage a client's property, or a product your company sells could allegedly cause injury or property damage. Even a relatively small claim can create significant legal and financial expenses.
This is where commercial general liability insurance, commonly called CGL insurance or general commercial liability insurance, can play an important role.
Commercial general liability insurance is designed to protect businesses against certain claims involving bodily injury, property damage, and personal and advertising injury arising from covered business activities. It can also help with covered legal defense costs and damages, subject to the policy's limits, conditions, exclusions, and other terms.
general commercial liability insurance
However, the phrase “full coverage” can be misleading. There is no single commercial liability policy that automatically covers every risk a business may face. General liability insurance is broad, but it has important exclusions and limitations.
So, what does commercial general liability insurance cover? Is it worth the cost? What does it exclude? And how much coverage does a business need?
This guide explains everything business owners should know before purchasing general commercial liability insurance.
What Is Commercial General Liability Insurance?
Commercial General Liability Insurance (CGL) is a business insurance policy designed to protect a company against certain third-party liability claims.
The Insurance Information Institute describes CGL as protection against financial losses when a business is liable for covered property damage or personal and advertising injury arising from its services, operations, or employees.
A typical CGL policy can provide several major forms of protection, including:
- Bodily injury liability
- Property damage liability
- Personal and advertising injury
- Medical payments for certain injuries
- Legal defense costs
- Products-completed operations liability
The exact protection depends on the policy.
What Does “Full Coverage” Mean in Commercial Liability Insurance?
Unlike some consumer insurance terms, “full coverage” does not have one universal definition in commercial general liability insurance.
When someone says they want “full coverage,” they may mean they want broad protection against as many business risks as possible.
However, a CGL policy does not cover every type of loss.
For example, standard CGL generally does not replace:
- Commercial auto insurance
- Workers' compensation
- Professional liability insurance
- Cyber insurance
- Commercial property insurance
- Employment practices liability insurance
- Certain pollution liability coverage
- Certain liquor liability coverage
The Insurance Information Institute specifically notes that workers' compensation, professional liability, pollution liability, and liquor liability can require separate coverage or endorsements.
commercial pickup truck insurance
Therefore, businesses should think of CGL as an important foundation of a broader insurance program, rather than a policy that covers everything.
What Does General Commercial Liability Insurance Cover?
Commercial general liability coverage typically includes several major coverage categories.
1. Bodily Injury Liability
Bodily injury liability can protect your business against certain claims that someone was physically injured because of your business operations, premises, products, or other covered circumstances.
For example, imagine a customer enters your store and slips on a wet floor.
The customer could potentially claim that the business failed to maintain a reasonably safe environment.
If the claim is covered, the CGL policy may help with eligible legal defense expenses and covered damages, subject to policy limits and terms.
Other examples may include:
- A visitor falling on business property
- A customer being injured by a condition at your premises
- Property-related accidents involving third parties
- Certain injuries arising from business operations
2. Property Damage Liability
Property damage coverage can protect a business against certain claims alleging that its operations caused damage to someone else's property.
For example, a contractor may accidentally damage a customer's home while performing covered work.
A landscaping company could accidentally damage a customer's property while working.
A cleaning company might unintentionally damage property while providing services.
When the claim falls within the policy's coverage, CGL may help pay covered damages and defense costs.
3. Personal and Advertising Injury
Commercial general liability can also provide protection for certain personal and advertising injury claims.
Depending on the policy, examples can include allegations involving:
- Libel
- Slander
- Certain copyright infringement
- Wrongful eviction
- Invasion of privacy
- Use of another company's advertising idea
These claims can become complicated because they may involve legal disputes over statements, advertising, intellectual property, or privacy.
Coverage is subject to the policy's definitions and exclusions.
full coverage General liability insurance
4. Medical Payments Coverage
CGL policies can include limited medical payments coverage for certain injuries to non-employees that occur on the insured premises or arise from covered business operations.
This coverage may apply without requiring the injured person to establish legal liability.
For example, if a customer suffers a minor injury at your business location, medical payments coverage may potentially help pay certain reasonable medical expenses, subject to the policy's requirements and limits.
5. Products-Completed Operations Coverage
Businesses that manufacture, sell, distribute, or install products may face liability after the product has left their control.
Similarly, contractors can face claims related to work that has already been completed.
Products-completed operations coverage can address certain bodily injury or property damage claims arising from products or completed work, subject to policy terms.
This can be particularly important for:
- Manufacturers
- Contractors
- Plumbers
- Electricians
- Construction companies
- Retailers
- Product distributors
- Repair businesses
The NAIC identifies commercial general liability as having major premises/operations and products/completed-operations components.
Does General Liability Insurance Cover Legal Fees?
One of the major benefits of commercial general liability insurance can be protection against covered legal defense costs.
If a covered claim results in a lawsuit, the insurer may have a duty to defend the insured according to the policy.
A CGL policy can also pay covered damages for which the insured is legally liable, subject to policy limits and other conditions.
Legal defense can become expensive even when a business ultimately wins a lawsuit.
However, business owners should not assume that every lawsuit will be defended by their CGL insurer. Whether a claim is covered depends on the policy language, facts of the claim, exclusions, and other conditions.
What Does General Liability Insurance Not Cover?
Understanding exclusions is just as important as understanding coverage.
Commercial general liability insurance is broad, but it is not designed to cover every business risk.
Common areas that may require separate policies include:
Professional Errors
A business that provides professional advice or specialized services may need professional liability insurance, also called errors and omissions insurance.
Employee Injuries
Employee work-related injuries are generally handled through workers' compensation insurance rather than standard CGL.
Business Vehicles
Vehicles used for business generally require commercial auto insurance. A businessowners policy does not provide vehicle coverage, and commercial auto insurance is generally the appropriate policy for business-owned vehicles.
Pollution
Pollution liability is generally excluded from standard CGL and may require specialized coverage or an endorsement.
high risk auto insurance company
Employment Practices
Claims involving employment discrimination, harassment, wrongful termination, or similar employment-related allegations may require employment practices liability insurance.
Cyber Risks
Cyberattacks, data breaches, ransomware, and certain privacy incidents may require cyber insurance rather than relying on standard CGL.
Business Property
Damage to your own building, equipment, furniture, inventory, or other business property generally requires commercial property coverage.
This distinction is important because liability insurance and property insurance protect against different types of financial losses.
General Liability Insurance vs. Commercial Property Insurance
These two coverages are often confused.
