Benefits of Commercial General Liability Insurance


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’ comp claims.
  • 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

At 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 and actions.

Call Allen, Semelsberger & Kaelin, LLP at 888.998.2031 or contact us online for a free consultation today.