Commercial General Liability (CGL) Insurance: The Business Guide

Commercial General Liability Insurance: The Business Guide

The business landscape is changing and safeguarding your enterprise against unforeseen risks is more crucial than ever. Commercial General Liability (CGL) is one of the important types of business insurance if you are considering a risk management strategy for your business. 

Whether you’re a startup, a small business or a well-established business, understanding the nuances of CGL insurance can be a game-changer. In this blog, we will understand the essentials of CGL insurance, helping you make informed decisions to secure your business’ future.  

Let’s begin by understanding the basics first!  

Also read: What is Directors and Officers (D&O) Liability Insurance?

CGL Insurance: Definition and Meaning  

Commercial General Liability (CGL) is a type of business insurance that provides essential protection against variety of claims that can arise from regular operations. This type of commercial insurance is crucial as it safeguards businesses from significant financial losses by covering legal fees, settlements, and medical expenses related to accidents or injuries that occur on business premises or during business operations.   

CGL insurance policy typically includes 3 main coverage areas:  

1. Bodily Injury and Property Damage Liability

This aspect of the coverage provides insurance for third-party injuries or property damage caused by business operations. For example, if a customer slips and falls at a business’ location, resulting in an injury, the CGL policy would cover the medical expenses and any legal fees if the customer decides to sue the business. 

2. Personal and Advertising Injury Liability

3. Medical Payments

This part of the policy pays for immediate medical expenses for injured third parties. If a visitor to a business premises gets injured, a CGL insurance policy can quickly cover the medical costs, which helps in avoiding potential lawsuits and maintaining good customer relations. 

Quick read: Group Health Insurance for Employees

Who Should You Buy Commercial General Liability Insurance?  

Every professional or business offering services should prioritize a Commercial General Liability (CGL) insurance policy. Here are some key professions and companies that particularly benefit from CGL coverage:  

1. Professions

• Contractors and Construction Workers: Contractors often work on-site, where accidents like property damage or slip and fall can occur. CGL protects against such liabilities.

• Consultants and Freelancers: Professionals offering advice or services can face claims of negligence or errors. CGL covers legal costs and damages.

• Event Planners: Organizing events involve risks like bodily injury or property damage. CGL helps manage liability arising from such events.

• Fitness Instructors: Injuries during sessions can result in lawsuits. CGL covers claims related to bodily injury.

• Photographers: Equipment damage or accidents during shoots can lead to liability claims. CGL safeguards against such risks.

2. Industries and Businesses  

• Retail Stores: Slip-and-fall accidents are common. A Commercial General Liability (CGL) insurance policy covers medical expenses and legal fees associated with such incidents.

• Restaurants: Food-related illnesses or accidents on premises can result in lawsuits. This insurance protects against these liabilities.

• Manufacturers: Defective products can cause harm. CGL provides coverage for product liability claims.

• Healthcare Providers: Claims of malpractice or patient injury lawsuits pose significant risks. Commercial General Liability (CGL) insurance offers financial protection in such cases.

• Technology Companies: Data breaches or intellectual property disputes can lead to legal claims. CGL includes coverage for cyber liability.

Also read: What is Cyber Insurance?

Commercial General Liability Coverages Inclusions and Exclusions 

1. Inclusions of CGL Coverage

• Medical expenses of the third party: Covers costs for medical treatment required by a third party because of an incident involving your business.

• Legal expenses and defense costs: Pays for legal fees and defense costs if a third party sues your business.

• Damages awarded in the court of law: Compensates for any damages that a court awards to a third party because of your business’ actions.

• Out-of-court settlement cost: Covers the cost of settling a claim with a third party outside of court.

• Repair costs for damaged property of the third party: Pays for repairs to a third party’s property that your business has damaged.

• Replacement cost for lost or destroyed property of the third party: Compensates for the cost of replacing a third party’s property that your business has lost or destroyed.

2. Exclusions of CGL Coverage

• Work-related injuries sustained by your employees: Excludes coverage for injuries employees sustain while performing their job duties.

• Personal injury claims made by your employees: The policy does not cover claims made by employees for personal injuries.

• Costs related to product guarantee/warranty or product recall: Excludes costs associated with product guarantees, warranties, or recalls.

• Faulty workmanship: The policy does not cover claims arising from poor-quality work or services provided by your business.

• Pure contractual liability: Excludes liabilities that are solely based on the terms of a contract, without any underlying legal wrongdoing.

Related Read: Cyber Insurance for Small Businesses

Importance of Commercial General Liability Insurance  

1. Coverage for Bodily Injury and Property Damage  

Bodily Injury: This covers the costs related to physical harm caused to a third party (not an employee) due to your business operations or premises. For example, if a customer slips and falls in your store, CGL insurance would cover their medical expenses.

Property Damage: This aspect covers damage to someone else’s property caused by your business operations or products. For instance, if your equipment damages a client’s property during a service, CGL insurance would cover the repair costs.

2. Advertising and Personal Injury Coverage 

Advertising Injury: This protects against claims of defamation, libel, slander, copyright infringement, and other forms of false advertising arising from your marketing activities.

Personal Injury: Covers non-physical injuries such as wrongful eviction, invasion of privacy, and similar claims that may arise in your business operations.

3. Legal Defense Costs

CGL policies typically cover legal defense costs, including attorney fees, court costs, settlements, and judgments if your business is sued for covered claims. Even if a lawsuit is groundless, the policy can cover the costs of defending your business.

4. Products and Completed Operations  

Products Liability: Protects against claims related to products your business manufactures, distributes, or sells that cause harm or injury to consumers.

Completed Operations: Covers claims related to services your business has completed, such as faulty repairs or installations that cause harm or damage after the service is finished.

5. Medical Payments  

Covers medical expenses if a third party is injured on your business premises or due to your business operations, regardless of fault. This coverage is typically limited and is intended to cover minor injuries without the need for litigation.

6. Additional Coverages and Extensions 

Depending on the insurer and policy specifics, additional coverage and extensions may include provisions for contractual liability, liquor liability (if applicable), and other specialized risks that your business may face.

Also read: Directors and Officers Liability Insurance for Businesses

Commercial General Liability Insurance Policy Structure  

1. Declarations Page  

2. Coverage Parts  

Coverage A: Bodily Injury and Property Damage Liability

Protects against claims of such incidents caused by the business’s operations, premises, or products.

Coverage B: Personal and Advertising Injury Liability

Covers claims related to personal and advertising injuries such as libel, slander, wrongful eviction, copyright infringement, etc.

Coverage C: Medical Payments

Pays for medical expenses incurred by a third party due to an accident on the insured’s premises or because of the insured’s operations, regardless of fault.

Suggested Read: Business Insurance For Tech Startups

3. Supplementary Payments

Covers additional costs such as bail bonds, court costs, and interest on judgments.

4. Who is an Insured?

Defines who is considered insured under the policy, including the named insured, employees, and in some cases, volunteers and partners.

5. Limits of Insurance

• Each Occurrence Limit: Maximum amount payable for each occurrence of a covered claim.

• General Aggregate Limit: Maximum amount payable for all claims during the policy period.

• Products-Completed Operations Aggregate Limit: Maximum amount payable for claims related to products and completed operations.

• Personal and Advertising Injury Limit: Maximum amount payable for personal and advertising injury claims.

• Medical Expense Limit: Maximum amount payable for medical expenses for any one person.

6. Conditions

• Duties in the Event of Occurrence, Claim, or Suit: The insured’s responsibilities in case of a claim.

• Legal Action Against Us: Conditions under which legal action can be taken against the insurer.

• Other Insurance: How the policy interacts with other valid and collectible insurance.

• Premium Audit: The insurer’s right to audit the insured’s records to ensure correct premium calculation.

• Representations: Statements made by the insured that affect the validity of the coverage.

• Separation of Insureds: Each insured is treated as if they are the only insured, with respect to coverage.

Quick read: Asset Insurance for SMEs and Startups

Factors Affecting Commercial General Liability Insurance Cost

1. Industry and Business Type

Different industries have varying levels of risk. For instance, construction companies typically face higher premiums due to the physical risks involved, whereas office-based businesses might pay less.

2. Business Size and Revenue 

The size of the business, measured by revenue and number of employees, impacts the cost. Larger businesses with higher revenues generally face higher premiums due to greater potential exposure.

3. Location 

The geographical location of the business affects insurance costs. Areas with higher litigation rates or more natural disasters may result in higher premiums.

4. Claims History 

Businesses with a history of frequent or severe claims will likely see higher premiums. A clean claims history can lead to lower costs.

5. Coverage Limits and Deductibles  

The amount of coverage and the deductible chosen significantly to influence the cost. Higher coverage limits provide more protection but come at a higher premium, whereas higher deductibles can reduce premiums.

6. Risk Management Practices 

Implementing effective risk management practices and safety protocols can reduce the likelihood of claims and may result in lower premiums. Insurers may offer discounts for businesses with robust safety programs.

7. Type of Products and Services 

The nature of the products or services provided by the business also impacts the cost. Businesses dealing with hazardous materials or high-risk products may face higher premiums.

8. Policy Customisation 

Additional endorsements or riders added to the standard CGL policy can increase costs. Tailoring the policy to cover specific risks unique to the business will affect the overall premium.

9. Insurance Provider  

Different insurers have varying pricing models and risk appetites. Shopping around and comparing quotes from multiple insurers can help find a competitive rate.

10. Economic Conditions 

Different insurers have varying pricing models and risk appetites. Shopping around and comparing quotes from multiple insurers can help find a competitive rate.

Also read: What is Workmen Compensation Policy?

Claims Process for Commercial General Liability (CGL) Insurance

Navigating the claims process for a Commercial General Liability (CGL) insurance policy can be daunting for businesses. Here’s a concise guide to help you understand and streamline the process.

1. Immediate Incident Reporting

• Report Promptly: Notify your insurer immediately after an incident occurs to avoid delays in the claims process.

• Gather Information: Collect all necessary details such as date, time, location, and nature of the incident, along with contact information of any witnesses.

2. Documentation

• Photographs and Videos: Take clear pictures and videos of the incident site and any damage or injuries.

• Written Statements: Record detailed statements from all parties involved, including employees and witnesses.

• Official Reports: Obtain copies of any police reports or official documents related to the incident.

3. Contact Your Insurer

• Dedicated Representative: Reach out to your insurance representative to inform them about the incident.

• Claims Form: Fill out and submit the required claims form provided by your insurer.

4. Investigation

• Insurer’s Investigation: Your insurer will conduct a thorough investigation to assess the validity and extent of the claim.

• Provide Cooperation: Cooperate fully with the insurer’s investigation, providing any additional information or documentation they may require.

5. Damage Assessment

• Adjuster’s Visit: An insurance adjuster may visit the site to evaluate the damages and gather more details.

• Estimation of Losses: The adjuster will estimate the cost of repairs, medical expenses, and any other related costs.

6. Claim Review

• Review Process: The insurer reviews all gathered information, the adjuster’s report, and the claim form.

• Determination: The insurer determines whether the claim is covered under your policy and the amount to be compensated.

7. Claim Settlement

• Settlement Offer: If approved, you will receive a settlement offer from the insurer detailing the compensation amount.

• Agreement and Payment: Once you agree to the settlement terms, the insurer will process the payment.

Related read: Claim Settlement Ratio in Health Insurance

Why Onsurity for CGL Insurance? 

When it comes to safeguarding your business against a variety of risks, choosing the right insurance provider is crucial. Onsurity distinguishes itself as a comprehensive insurance provider tailored to meet the unique needs of businesses. We offer different types of insurance as per the business module.

Here’s why Onsurity is the ideal choice for your CGL insurance:

1. Comprehensive Coverage

We offer tailored insurance solutions for broader protection against a range of liabilities, including bodily injury, property damage, personal injury, and advertising injury. This ensures your business is well-covered from all angles.

2. Tailored Policies 

Understanding that every business is unique, Onsurity provides tailored policies that fit your specific needs. This personalized approach ensures you’re not paying for unnecessary coverage and only getting what’s crucial for your business.

3. Affordable Premiums 

Onsurity offers competitive pricing, making it easier for MSMEs and startups to access high-quality insurance without breaking the bank. Our aim is to provide maximum protection at minimal costs.

4. Easy Claims Process 

A straightforward and hassle-free claims process is one of Onsurity’s hallmarks. We believe in swift resolutions and minimal paperwork, ensuring you can focus on running your business while we handle the claims.

5. Expert Support

With Onsurity, you gain access to a team of insurance experts who are always ready to assist you. Whether it’s understanding your policy or navigating a claim, our support team is just a call away.

6. Risk Management Guidance 

Onsurity doesn’t just offer insurance; we provide valuable risk management advice to help you minimize potential liabilities. Our proactive approach means fewer claims and a safer business environment.

Also read: Group Term Life Insurance for Employees

Conclusion

Investing in the right insurance is not just a financial decision; it’s a strategic move that safeguards your business’s future. Choosing Onsurity means opting for comprehensive coverage, personalized service, and expert support. Our affordable premiums, streamlined claims process, and proactive risk management make us the perfect partner for protecting your business against unforeseen liabilities.

FAQs: