Whether you are a sole proprietor or a corporate entity, your business
can benefit significantly from insurance policies that provide general
commercial liability (CGL) coverage. CGL coverage protects your business
against third-party claims and lawsuits. This article discusses the benefits
and components of standard CGL insurance policies.
What Is CGL Insurance?
CGL coverage is usually a specific coverage that is packaged with a broader
insurance product. CGL coverage protects persons or entities who qualify
as an “insured” under an insurance policy against certain
losses in connection with legal liability for injuries or damages sustained
by third parties.
A typical CGL policy affords policyholders with broad liability coverage
for the following risks:
Premises hazards. CGL policies usually cover accidental “bodily injury” and “property
damage” that arises out of an activity or condition in connection
with insured “premises.” Bodily injury, property damage, and
premises are all terms that are specifically defined by an insurance policy.
As an example, CGL coverage will cover a business’ liability and
defense costs with regard to slip-and-fall accidents.
Operations hazards. A standard CGL policy will cover bodily injury and property damage that
arises out of a business’ operations. For example, third-party injuries
and property damage that results as a result of a company’s construction
activities will be covered by CGL insurance.
Products hazards. A typical CGL policy will cover bodily injury and property arising out
of products that are manufactured, sold, or distributed by a business.
This usually covers certain products liability claims.
Completed operations hazards. Bodily injury and property damage that arises out of the completed operations
of a business are also typically covered by CGL insurance.
What Is Not Covered by CGL Policies?
Although CGL insurance provides broad coverage for certain hazards, such
coverage is limited by specific exclusions that are enumerated in the
policy. Accordingly, claims and lawsuits that allege facts that fall under
a specific exclusion are not covered.
Common exclusions of a standard CGL policy include:
Expected or intended injuries. Bodily injury or property damage caused by a business is not covered. California
law prohibits such coverage in order to avoid “moral hazard”
– a situation that shifts financial responsibility for intentional
misconduct onto insurance companies.
Contractual liability. Liability that a business agrees to assume under a contract is not covered.
Liquor liability. Public policy prohibits coverage for alcohol-related injuries to avoid
moral hazard as well.
Workers’ Compensation claims. Because workers’ compensation claims typically covered under a separate
insurance agreement, a CGL policy will not simultaneously cover workers’
Employer’s liability. Liability that arises out of the violation or non-compliance of employment
or labor laws is also normally covered under a separate insurance agreement.
Thus, CGL policies will exclude coverage for such risks.
Aircraft, automobiles or watercraft. There are also separate insurance policies that cover injuries and damages
arising out of the ownership, use, operation, and maintenance of aircraft,
automobiles or watercraft.
Damage to products. CGL policies preclude coverage for damage to a business’ products
since such risks stem from business risks. Such coverage would function
as a guarantee for the business’ products.
Damage to work. Damage that arises from defective work performed by a business or its subcontractors
is not covered because doing so would serve as a warranty for the business
or subcontractor’s sufficiency of their work.
Product recalls. A standard CGL policy does not cover damages for losses and expenses that
a business sustains due to the recall of its product, work, or impaired
property if issued as a preventative measure. However, damage that has
already occurred is usually covered under California law.
Personal and advertising injuries. Claims and lawsuits for defamation, invasion of privacy, unlawful detainer,
or trademark infringement are specifically covered by a distinct coverage
that businesses can pay an extra premium for.
Electronic data. Standard CGL coverage does not pay for losses, damage, and corruption of
digital information or electronic data. However, businesses can purchase
coverage for such risks separately.
Quality Legal Advice for Businesses
Allen, Semelsberger & Kaelin, LLP, we have the experience and sophisticated understanding of California
laws that commonly affect business, including relevant insurance matters. Our attorneys have dedicated years
of our practice to aid California businesses in understanding and complying
with rules and regulations that touch on a business’ operations
Call Allen, Semelsberger & Kaelin, LLP at 888.998.2031 or
contact us online
for a free consultation today.