Commercial General Liability Cover

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Commercial General Liability

Commercial General Liability (CGL) Policy is a standard insurance policy issued to business organizations to protect them against third-party liability claims for bodily injury (BI) and property damage arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability. This policy operates as a combination of public liability and product liability with various supplementary covers. Understanding this cover is an important first step in managing CGL Risks. The policy has time-tested wording, which has stood the scrutiny in the most litigious jurisdictions of the world.

Who is an insured?

An insured can be an individual, partnership firm, Company, or a Trust.

What it covers?

A CGL insurance policy will usually cover the costs of your legal defense and will pay on your behalf all damages if you are found liable—up to the limits of your policy. Standard CGL includes:

  • Coverage A: Bodily Injury & Property Damage. (Mental injury and emotional distress also included)

  • Coverage B: Personal & Advertising Injury

  • Coverage C: Medical Payments

The liability can be classified as

  • General liability: Any claim for compensation that may arise due to an accident-causing Bodily Injury or Property Damage arising from Manufacturing operations, Pollution, Transportation, etc.

  • Product / completed operations liability: Any claim for compensation that may arise due to the use or consumption of your products causing Bodily Injury or Property damage arising from Your products or Completed Operations.

  • Personal advertising injury arising out of one or more of the following offenses:

    • False arrest, detention, or imprisonment.

    • Malicious prosecution.

    • The wrongful eviction or wrongful entry

    • Defamation libel or Slander including Product Disparagement.

    • Oral or written publication that violates a person’s right to privacy.

    • The use of another’s advertising idea in your advertisement.

    • Infringing upon another’s copyright, trade dress, or slogan in your advertisement.

  • Medical payments: Limited coverage for medical payments includes payments for injuries sustained by a non-employee caused by an accident that takes place on the insured’s premises or when exposed to the insured’s business operations. Medical payment coverage can be triggered without legal action. This provides for prompt settlement of smaller medical claims without litigation.

Exclusions

Each section is subject to standard exclusions to enumerate some of them are, Workmen’s compensation liability, damage to own / care/custody property, expected and indented injury, contractual liability, etc. For more details, one must refer to the policy wording.

Extensions available.

There are various extensions available including modifications of wording and deletion of some basic exclusions like

  1. Transportation liability
  2. 72 hours sudden and accidental pollution.
  3. Food and beverage 
  4. Lift liability
  5. Terrorism
  6. Tenant liability
  7. Product recall
  8. Swimming pool liability
  9. Terrorism extension
  10. Act of god peril extension.
  11. Supplementary payments
  12. Liquor liability extension.  
  13. Carriage of effluents etc

Sum Insured/ Limit of Indemnity

The limit of indemnity should be selected after a proper assessment of liability exposure. The limit under the policy is defined as Any One Accident (AOA) – which defines the maximum amount payable for each accident under the policy and Any One Year (AOY) – It describes the maximum payable amount for any one year under the policy.

Claim procedure

Your claim under CGL can come from the affected third parties through a property damage lawsuit, slip and fall incident, product liability lawsuit, customer injury lawsuit, or an advertising injury lawsuit. You may get a notice from the affected parties. Once you know of any incident that may result in a claim under CGL, the same should be immediately intimated to your insurer.

Special Terms which one must know in CGL

  1. Civil law vs Criminal law.  Civil law is the law of civil & private rights whereas criminal law is the law of crimes and punishments A civil offense is like custody disputes, bankruptcy, defamation, breach of contract, property damage, etc. whereas criminal offenses include, homicide, conspiracy, obstruction of justice, assault, possession of controlled substance, etc.
  2. What is tort law?  A tort is -a “wrongful act or an infringement of a right leading to civil liability.”. This includes behavior that causes injury, pain, suffering, unfair loss, or harm to another person. 
  3. Plaintiff vs defendant. Plaintiff is the party bringing the lawsuit whereas another party is the defendant or respondent
  4. Claims made vs occurrence:  The most commonly accepted form of CGL policy is written on a “Claim-Made Basis” as opposed to being written on an “Occurrence Basis”. “claims-made” basis means that the policy in force at the time a claim against you is made will pay for losses, regardless of when they occurred in the past. With an “occurrence” based policy, even though the policy may have expired, provided the policy was in force at the time that the bodily injury or property damage occurred, a claim can still be made against it.
  5. Retroactive date: A provision found in many claims-made policies that eliminate coverage for claims that took place prior to a specified date, even if the claim is first made during the policy period. This is normally the starting date of the first policy taken and then renewed without a gap.
  6. What is defamation? Defamation is a false statement presented as a fact that causes injury or damage to the character of the person.  
  7. What is Slander & Libel? Libel and slander are both types of defamation. Libel is an untrue defamatory statement that is made in writing. Slander is an untrue defamatory statement that is spoken orally.
  8. Right to defend vs duty to defend.  Under the ‘Duty to defend’ clause, as soon as a claim has been reported to the insurance company, it takes the lead in arranging for and managing the defense on behalf of the insured. In other words, the insurance company steps up to manage the defense and assigns the claim to a law firm in its panel.  However, in the case of the right to defend policy condition, the duty to defend is lying with the insured. The insurer may help you to find out a law firm or reimburse you the legal cost, once it is incurred by you.