Commercial General Liability (CGL): What Is It? What Does a CGL Policy Cover?

This is what a commercial general liability policy is, why you need it, and what it typically includes.

Have you ever looked, really looked, at an insurance policy? Any insurance policy? It's loaded with legalese and insurance industry jargon, and can be downright confusing. Not only does it outline what's covered, what's excluded, and the policy's conditions, but it's often so complicated it's loaded with terms only lawyers use requiring its own set of definitions.

So let's step away from the legalese and jargon for a bit because it's overwhelming. Instead, let's—in plain English—look at what a commercial general liability policy is, why you need it, and what is typically included in it so that you have a solid understanding of the basics before taking on the wording of your actual policy.

What is CGL and why, as a business owner, you need it?

In a nutshell, commercial general liability insurance, or CGL, is coverage that will protect your business in the event that you are sued. It is often used to cover claims against your business for injury or property damage. Typical examples include if a customer is injured at your place of business, or say an employee damages property at a client's site.

Without a commercial general liability insurance policy, you are leaving yourself and your company vulnerable to lawsuits that could have a devastating impact on your business. It is, unfortunately, a necessary cost of doing business because the likelihood of being sued is more common than you might think. It is for this reason that business owners get commercial general liability insurance.

Commercial General Liability: What's covered...

There are four main types of coverage included in the standard Commercial General Liability (CGL) policy: Bodily Injury and Property Damage Liability, Personal Injury Liability, Medical Payments, and Tenants' Legal Liability (for those that rent or lease their workspace).

We'll pick these off one-by-one with what will hopefully be an easy-to-understand explanation.

A. Bodily Injury and Property Damage Liability

Basically, if your company, your product, your work, your employees, or anything else associated with your company causes physical injury to someone like a client, or damages their property or belongings, you could be held legally responsible. If held legally responsible you may be required to pay. It is in cases like these that your coverage will pay for the compensatory damages.

Plainly put, compensatory damages are damages meant to compensate. Its purpose is to put things back the way they were (financially) prior to the injury or damage.

  • What's not included?
    A few of the most common things not covered under the Bodily Injury and Property Damage Liability portion of your CGL policy include: punitive damages (where you're ordered to pay money as a form of punishment); intentional injuries or damage (to a person or their property); injuries or damage from the use of your commercial automobile (this is what your commercial auto insurance coverage is for); injuries to employees or damage to their own personal property; and damage to property you own, rent or occupy.

B. Personal Injury Liability

The phrase 'personal injury' is confusing because in the insurance world it means one thing, and everywhere else it often means something all-together different. While most people associate 'personal injury' with physical injury this is not the case with a CGL policy where it actually means damage (so to speak) of a person's character, reputation and position in the community as a result of libel (in print) or slander (verbal defamation.) Remember, a liability policy is to protect you if you're accused of libel or slander, not the other way around.

  • What's not included?
    Typical situations not covered include statements known to be untrue when said, as well as damage caused by offences that are illegal or go against ordinances or by-laws.

C. Medical Payments

This part of your CGL policy is interesting, as its purpose is to provide coverage that pays someone's minor medical expenses from an accident that happens at your company's premises or as a result of your company's operations-even though you may never be held legally liable for the accident. In fact, it's often used as a way to avoid a costly lawsuit.

  • What's not included?
    This coverage typically excludes everyone that's also "excluded" from coverage under the Bodily Injury & Property Damage, as well as casual workers and tenants who injure themselves in their own unit.

D. Tenants' Legal Liability (for those who rent or lease their workspace)

Suppose you don't own the space where you've set up shop and instead rent your office, shop or retail space. If you are held legally responsible for causing a fire, explosion, smoke damage, or other damage caused by fire protection (like sprinklers going off) then this coverage will pay the compensatory damages (remember, the intent of compensatory damages is to put things back the way they were.) This applies only to damages of the rented premises - not the property (i.e. product, inventory etc.) that you may personally own.

  • What's not included?
    Obviously, intentionally trying to destroy property is not covered.

CGL Insurance: What's not covered...

Every business insurance policy for commercial general liability coverage has risks, events or "occurrences" that are not covered. That's not to say that coverage is not available, just that the following are highly specialized "risks" that require more than a standard, typical CGL policy:

  • Professional liability (often referred to Errors and Omissions insurance)
  • The misuse, destruction or distribution of data
  • Injury or property damage resulting from pollution caused by your company's operations, activities, employees or product
  • Injury or property damage resulting from the use of nuclear material
  • Injury or property damage resulting from war
  • Acts of terrorism
  • Injury or property damage resulting from fungi
  • Injury or property damage resulting from asbestos

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Protect your business-get a general liability insurance quote online today

With general liability coverage, your business is protected. It's not expensive - especially when compared to the cost to defend a claim against your business in the courts. Get a CGL insurance quote today.

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