Commercial general third-party liability insurance helps business owners handle claims that arise from their business, causing bodily injury or property damage to a third party. For example, a customer could injure themselves on business property and file a lawsuit. This is what we in the insurance industry define as a type of third-party liability coverage.
There are misunderstandings about what’s covered and what’s not covered by commercial general liability (CGL) insurance. That’s why we’re here to help by answering common questions, clearing up questions, and going into depth about various business liabilities. Here is everything you need to know about commercial general liability insurance coverage.
Commercial general liability insurance definition
Commercial general liability insurance is a policy that protects a business against legal actions. It covers the expenses associated with legal representation and claims of injuries or property damages made by third parties. It’s usually a part of a business’s comprehensive commercial insurance policy.
Having a form of additional liability coverage can give you peace of mind. The threat of legal issues is not only morally worrying but also can create a financial burden. Even if your business were to accidentally damage someone’s property or doesn’t directly cause an injury, it can still be subject to a lawsuit. Taking the risk of being sued without insurance coverage isn’t worth it. Now that we’ve established a CGL policy let’s get into the specifics.
What types of commercial general liability insurance coverages are available?
Obviously, this type of insurance is designed to combat liability claims. After all, anything that happens on your business property, you can be held liable for. In other words, you need CGL insurance to protect yourself from having to pay for legal liability claims out of pocket because, depending on the scenarios, this can add up quickly. Let’s dive into the two types of commercial general liability insurance policies:
Occurrence-based
When you choose this option, it provides coverage for incidents that occur during the policy period — it doesn’t matter whether you filed a claim or not. If an incident occurs when the policy is active, your insurance company will cover it even if the claim is made after the policy has expired. The majority of businesses prefer this option because it’s a form of long-term protection that would otherwise only be brought up long after the incident happened.
Claims-made
The difference between a claims-made CGL policy and an occurrence CGL policy is that claims-made only cover claims that are both made and happen during the policy period. In other words, the policy has to be active when the incident happens and when the claim is filed. The policy usually includes a retroactive date, which is the day after an incident has to happen to be covered. If something happens before then, it doesn’t matter if the claim is made during the policy period; you will not be covered.
There isn’t one standard insurance policy that encompasses both forms of CGL insurance. In the end, the type of insurance coverage you choose comes down to your needs. For example, a small business owner has fewer risks than a large one with multiple locations. It’s easy to damage something accidentally, so your best bet is to speak with your insurance broker to determine the form that suits your needs. Let’s move on to what this type of insurance covers.
What does commercial general liability insurance cover?
Having an insurance policy acts as a safeguard against financial losses. Most commonly, it protects you from the expenses associated with injury and property damage claims. When it comes to these two things, commercial general liability insurance is no exception. Here are the types of coverage you will receive when you purchase a commercial general liability insurance policy:
Third-party bodily injury
If someone, such as a customer, gets injured on your business property, you will be held liable. If this happens, your commercial general liability policy will provide coverage. Injuries could range from someone slipping on ice on the doorstep of your property or falling on a wet floor. If this happens, your CGL policy can come into effect and help you out.
Third-party property damage
If your business damages someone else’s property, you are liable. If this happens, you will have to pay for damages and any legal expenses if they decide to file a lawsuit. However, commercial general liability has you covered. For example, if a painter spills paint on a client’s floor, this policy will help handle the costs to repair or replace the floor.
Personal and advertising injury
Having CGL coverage can also protect you against claims of slander, defamation, wrongful eviction, or invasion of privacy. All of these issues are becoming more prominent since the rise of social media and online content. It also covers advertising injury, which is harm caused by your advertising material, such as accidental copyright infringement or misrepresentation. An example is a misleading advertisement with deceptive information about a product.
Medical expenses
If non-employees get injured on the property of your business, medical costs can add up. That’s why it’s a good thing that commercial general liability insurance operates on a no-fault basis. In other words, the insurance policy will cover medical expenses even if the business is not deemed to have been at fault for the injury. For example, it can prevent an extensive legal claim if a customer slips, regardless of whether the store is at fault for the incident or not.
Legal defence costs
A significant aspect of commercial general liability insurance is covering the costs if your business faces a lawsuit. After all, paying for legal fees out of pocket can be enough to put you out of business if you aren’t careful. When you have insurance, attorney fees, court costs, and any settlements or judgments are paid for. It allows the business to defend itself without suffering any significant financial losses.
Costs can add up quickly if you let them. That’s why having insurance is so important whether your business operates out of an office or you visit each customer’s home to provide a service. Additionally, coverage to suit your business needs matters. It’s best to protect yourself whether an incident happens directly on your business’s premises or not. Next, we will discuss what’s excluded from commercial general liability insurance.
What doesn’t commercial general liability insurance cover?
Like other insurance policies, commercial general liability has exclusions. Generally, you can find out what these are by reviewing the terms and conditions of your contract. However, not every contract is written the same because some people opt for additional coverage options. Despite this, there are a few things that commercial general liability insurance won’t cover, regardless of any additions you make to your policy:
Commercial fleet damage
A commercial fleet can be defined as a group of vehicles used for business purposes. Suppose you own a fleet of more than one vehicle that you use for your business, and they get damaged or stolen. In that case, commercial general liability insurance won’t cover repair and replacement costs. When this happens, you need a commercial auto insurance policy to receive coverage.
Commercial auto insurance can help handle expenses in the event that your commercial vehicle(s) is damaged or stolen. Before making your purchase, review fleet insurance requirements to ensure you get the coverage you need.
Lost business revenue
Insured perils (e.g. flood, fire, or sewer backup) may prevent you from operating your business effectively. Your insurance company will refer to this as “business interruption,” and this will likely result in lost revenue. For example, if your business floods, you may have to stop operations until the property is safe to enter. If you have to stop business operations, commercial general liability insurance won’t provide compensation. Business interruption insurance is required, and if you have it, this type of policy will provide compensation for lost revenue if you have to stop operations because of an insured peril.
Experiencing a loss from uninsured business operations
If a business owner doesn’t let their insurance company or BrokerLink insurance company know about new operations, commercial general liability insurance might not come into effect. This is especially true if the new operations resulted in third-party bodily injury or property damage. For example, if you own a landscaping business and start doing snow removal, you will need to purchase new equipment.
If you hit a parked car while removing snow and didn’t let your insurance company know about the new addition to your business, you likely won’t receive any coverage. Reach out to your BrokerLink commercial insurance broker if you plan to expand your business, and your coverage will be updated accordingly.
Expenses to handle the result of a cyber attack
A cyber attack is when someone intentionally tries to damage a computer system or network. An example of a cyber attack is an infiltrator stealing customer credit card numbers. Commercial general liability insurance doesn’t usually cover losses from cyber attacks. You’ll need to purchase cyber insurance. Depending on your policy, cyber insurance can help you pay for expenses related to a cyber attack. This can include restoring customer data and notifying customers in case of a privacy breach.
Life is unpredictable — running a business is the same way. You can’t predict what will happen from day to day. That’s why you should purchase additional coverage if needed. CGL insurance, like other policies, isn’t a one-size-fits-all solution. In fact, even though it may cover injuries and property damage, there are some things that it won’t. That might leave you to wonder who needs this type of insurance coverage. We’ll explore this next.
Who needs commercial general liability coverage?
If you’re running a business, the chances are you need some sort of liability coverage. It’s easy to opt for general liability coverage, but this isn't the right option for everyone. Even if you’re a small business, you probably don’t think much about someone making a personal injury claim. However, it can happen and get quite expensive regardless of who wins the case. That’s why if you’re providing professional services or selling products, you should protect yourself.
Those without a CGL policy are vulnerable to significant financial loss. In other words, if something does happen, you have to pay for it out of pocket if you don’t have coverage. This type of business insurance will help protect you from losing a significant amount of money. You will likely need a commercial general liability insurance policy if you find yourself in any of the following situations:
You own a physical space for your business
Having a storefront or office is great because it allows you to separate work and home. However, it’s not all fun and games. You have to get insurance because if someone gets injured or has their property damaged on the premises, you will be held liable.
You host client meetings at your home office
Not everyone rents a space for their business. Working from home is not only convenient, but it’s also more economical. However, if you plan to host in-person meetings at your home office, you need insurance. If someone gets injured or damages their property, home insurance won’t cover it.
You visit your client’s property
Mobile service businesses are becoming more popular than ever. Because of this, some businesses visit their clients directly rather than having them come to their property. Insurance coverage is required because you take the risk of paying for damage if anything happens when visiting your client. If you work in a profession where you visit your clients, consider professional services insurance as well.
You work off-site at multiple locations
Travelling for work isn’t anything new. Many people do it whether they’re attending a meeting or showing off new products at trade shows. In other words, not being insured while taking your business on the road isn’t a good idea. You can still be subject to a lawsuit even if you aren’t working in an office. You have to keep track of all assumed liabilities regardless of where you are.
It’s best to explore your coverage options before committing to CGL insurance. You should look for an insurance company that understands your business needs to find a policy that works for you. It will also allow you to explore your coverage options and cover damages that are more likely to occur in your specific industry. From there, you can set the maximum amount that you will be covered for. However, if you do opt for CGL insurance, you can reap the many advantages that we discuss in the following section.
What are the benefits of a commercial general liability policy?
Bodily injury and property damage are the most common claims made by third parties. This is the obvious reason for having this type of professional liability insurance. However, there’s so much more to it than that aspect alone. Whether you’re a small business owner or own a business with multiple branches, the premium costs are often worth it to protect yourself. Let’s further explore the advantages of this type of insurance policy:
Protects your business from financial loss
CGL insurance is designed to protect a business against financial losses that occur as a result of various claims. In other words, this coverage safeguards against multiple types of liability, including bodily injuries, property damage, and personal and advertising injury. For example, if a customer slips in a store or a business deliberately slanders a competitor, CGL insurance can provide coverage. Otherwise, paying for legal fees, settlements, and judgements can add up quickly.
Legal defence coverage
Another advantage of CGL coverage is the fact that it pays for legal costs. Going to court is expensive and time-consuming, and even if the lawsuit is unfounded, building a solid defence case requires several resources. Attorney fees, court costs, and any settlements or judgements are cheap when you add them all up. As a business, you have a legal liability if something happens on your property, which is why you need coverage to protect yourself.
Better business reputation
Purchasing a CGL policy provides a sense of financial security and improves your business’s reputation. This will show clients, customers, and potential partners that your business is responsible and prepared to face unexpected events. It’s important to have a policy if you are in an industry where third-party injuries and property damage are common. It will allow your business to experience more growth while protecting your financial interests.
Continuing to operate
Sometimes, a legal claim can put someone out of business because the costs are too much for the business to pay upfront. However, CGL policies can help keep businesses open even if a liability claim is brought against them. It also allows the business to continue to operate while the insurance company helps cover legal costs.
Be prepared for multiple risks
One of the best parts about CGL insurance is that it can be used as part of a broader risk management strategy. It allows businesses to combat significant and common risks that an insurance company prefers to address sooner rather than later. In turn, this type of liability coverage allows businesses to spend more time focusing on their business and less time worrying.
Fulfilling contractual obligations
Although it’s not legally required, some businesses will find themselves in situations where CGL policies are mandatory. The most common occurrence is when they need to fulfill contractual obligations, which can range from leasing property and securing financing to entering into client contracts. This type of business insurance protects you, but sometimes you need it to operate in general.
Creating a sense of trust
Accidents happen — that’s why it’s important to have an insurance policy to protect you and your customers. Being insured allows you to improve your business’s reputation while showing customers that you have liability insurance if something were to happen. It also shows them that you are committed to resolving issues, whether paying for medical expenses or offering compensation for damaged property.
Eliminating worries
The main but often overlooked benefit of CGL insurance is the peace of mind it offers to business owners. Opening up shop for the day and knowing you are protected against a variety of liabilities lets you make strategic decisions for your business. In turn, you can work on developing your business without the overhanging threat of legal issues.
There are many benefits to choosing a CGL policy over its counterparts. Having this type of insurance coverage helps you mitigate some of the most significant financial risks a business can face. In other words, you won’t have to pay out of pocket if someone takes legal action against your business. As long as the incident is included in your coverage, you don’t have to worry about suffering financial losses.
Got questions? BrokerLink has the answers!
Are you looking for commercial insurance in Ontario? Maybe you need a business insurance broker in general. Regardless of what you’re looking for, BrokerLink is here for you. Our team is knowledgeable about commercial general liability insurance and much more.
Our commercial insurance experts will review the risks your business has and set you up with the right insurance coverage. They can also answer any business insurance questions you may have. Whether it’s questions or insurance advice, we have you covered.
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