What general liability insurance covers
Commercial general liability (CGL) insurance protects a business against lawsuits and claims brought by customers, visitors, landlords and other third parties. The SBA lists bodily injury, property damage, medical costs, libel and slander, defense costs, settlements and judgments among the losses it can cover. Most U.S. insurers use a form based on the Insurance Services Office (ISO) commercial general liability coverage form, which has three main insuring agreements:
- Coverage A, bodily injury and property damage: a customer slips on a wet floor, or your crew damages a client's building.
- Coverage B, personal and advertising injury: claims of libel, slander, false arrest or use of another's advertising idea.
- Coverage C, medical payments: small medical bills for people injured on your premises, regardless of fault.
Defense costs are generally paid in addition to the limits, which is an important difference from most professional and management liability policies.
Policy limits explained
A CGL policy has several separate limits: an each-occurrence limit, a general aggregate for the policy period, a products-completed operations aggregate, a personal and advertising injury limit, a limit for damage to premises rented to you and a medical expense limit. Leases and contracts often specify minimum limits, so check them before you buy. Higher limits are usually purchased through an umbrella or excess policy.
Occurrence versus claims-made
Most general liability policies are written on an occurrence basis: the policy in force when the injury or damage happened responds, even if the claim is filed years later. Some classes are written on a claims-made basis, where the policy in force when the claim is made responds, subject to a retroactive date. Switching between the two requires care to avoid gaps.
Common exclusions
- Expected or intended injury and contractual liability, except for an "insured contract"
- Injuries to your own employees, covered by workers compensation
- Autos, aircraft and watercraft, covered by commercial auto and specialty policies
- Pollution, with narrow exceptions
- Professional services, covered by professional liability
- Damage to your own product or work, product recall, and most data breach losses, covered by cyber insurance
What drives the price
Insurers assign each business a class code and apply a rate to an exposure base, typically annual sales, payroll, square footage or number of units. Premium also depends on the limits chosen, the deductible, the state and county, prior claims and safety practices. Contractors and product manufacturers usually pay more than office-based firms because of completed operations and product exposures. For a first estimate, use the general liability calculator.
How to choose
Read the contracts you sign: clients often require you to add them as an additional insured, to waive subrogation and to make your coverage primary and non-contributory. Confirm that the insurer offers these endorsements. Ask whether the policy is occurrence or claims-made, whether defense is outside the limits and how products-completed operations are handled. Many small businesses buy general liability inside a business owners policy.
How claims work
Report any incident or demand letter promptly, even if you think it is minor. Late notice can jeopardize coverage. Do not admit fault or agree to pay; the insurer has the right and duty to defend covered suits and will appoint counsel. Keep incident reports, photos, witness names and contracts.
State and international notes
State law shapes liability exposure through rules on comparative fault, damage caps and venue. Under the standard ISO form, the coverage territory is the United States, its territories and possessions, Puerto Rico and Canada, with limited worldwide coverage for products sold in that territory and short business trips, provided the suit is brought in the territory. Companies operating abroad usually add a foreign liability policy or local admitted policies under a multinational program. Polis Re helps you compare insurers and request quotes; coverage is issued by licensed insurers.
