What general liability insurance is
Commercial general liability (CGL) insurance protects a business when someone claims it caused bodily injury or property damage. The Washington State Office of the Insurance Commissioner describes it as coverage that protects business owners against losses due to bodily injury or property damage, and the US Small Business Administration adds that it also responds to medical costs, defamation claims and the cost of defending or settling lawsuits. It is the foundation of almost every business insurance program, and clients, landlords and project owners often require proof of it before signing a contract.
The main coverage parts
Most US CGL policies are based on standard forms developed by Insurance Services Office (ISO) and are organized into three parts:
- Coverage A: Bodily injury and property damage. Covers injury to people and damage to their property caused by an "occurrence," usually defined as an accident, including continuous or repeated exposure to the same harmful conditions. Examples include a customer slipping on a wet floor or a contractor damaging a client's building.
- Coverage B: Personal and advertising injury. Covers specific offenses such as libel, slander, false arrest, invasion of privacy and certain injuries arising from your advertising.
- Coverage C: Medical payments. Pays small medical bills for people injured on your premises or by your operations, regardless of fault, which can prevent lawsuits.
Defense costs are generally paid in addition to the limits under standard forms, which is a valuable feature. Products-completed operations coverage, included within Coverage A, protects against injuries caused by your products or finished work after it leaves your hands.
Occurrence vs claims-made
| Feature | Occurrence form | Claims-made form |
|---|---|---|
| What triggers coverage | Injury or damage that happens during the policy period | A claim first made during the policy period |
| Claims reported years later | Covered by the policy in force when the injury occurred | Covered only if a current policy or extended reporting period applies |
| Retroactive date | Not applicable | Injuries before the retroactive date are excluded |
| Switching insurers | Simple | Keep the retroactive date or buy "tail" coverage |
Most small and mid-sized businesses buy occurrence CGL. Claims-made forms are more common for professional liability and some higher-hazard risks. If you are offered a claims-made policy, never let the retroactive date move forward when you renew.
Limits
A CGL policy usually shows several limits: an each-occurrence limit, a general aggregate for all claims in the policy year, a separate products-completed operations aggregate, and smaller limits for personal and advertising injury, damage to rented premises and medical payments. For larger exposures, an umbrella or excess liability policy sits above the CGL; the Washington insurance commissioner describes these policies as stepping in after a large loss.
Common exclusions
- Expected or intended injury.
- Contractual liability, except for liability assumed in an "insured contract."
- Pollution: according to the Insurance Information Institute, insurers excluded almost all pollution losses from GL policies in 1986. See environmental liability insurance.
- Injury to your own employees, which belongs under workers' compensation.
- Autos, aircraft and watercraft, which need their own policies.
- Professional services, covered under professional liability.
- Damage to your own work or product. Courts in some states have also held that faulty workmanship alone is not an accident; the National Law Review reports, for example, that Kentucky's Supreme Court took that view.
Contracts, certificates and additional insureds
Commercial contracts often require you to name the other party as an additional insured, waive subrogation or provide primary and non-contributory coverage. These require endorsements, so send contract insurance clauses to your broker before signing. A certificate of insurance is evidence of coverage, not coverage itself.
What drives the price
Insurers rate CGL by your industry classification, revenue or payroll, locations, subcontractor use, products sold, claims history and the limits you choose. Written safety programs, contract risk transfer and certificates collected from subcontractors can improve terms.
BOP or standalone CGL?
Small businesses can often buy general liability together with property coverage in a business owner's policy, which the SBA describes as a package combining the typical coverages into one bundle. Larger or higher-risk businesses usually need a standalone CGL. Polis Re can help you compare options and request quotes; policies are issued by licensed insurers and placed through licensed producers in your state.