What is the commercial general liability coverage?


Commercial general liability coverage provides insurance against business liability exposures which may arise out of the commercial operations of the insured and result in the business owner losing substantial assets. It is important for a business to carry adequate commercial liability insurance since firms are exposed to liability on a daily basis, and the percentage of commercial liability lawsuits is quite high.

What Commercial General Liability Exposures are Covered

Every business is exposed to different liability risks which Commercial General Liability (CGL) policies try to cover. The following common risks can be insured against under the commercial general liability coverage:

  • Premises and Operations Exposure refers to the liability risk that could arise out of the business operations, or occur at the business location of the insured.
  • Product Operations Exposure is the risk pertinent to businesses that are involved in the manufacture, distribution, wholesale or retail of products. If the products are found to be faulty by design or defective, businesses could be made to pay huge settlement amounts.
  • Contingent Liability Exposure refers to the risk of a business owner to be held liable for the errors of others such as contractors and employees.

There are, of course, many other liability risks a business is exposed to, such as pollution liability, liability for occupational injuries to employees, contract liability, commercial auto liability, aircraft liability, and watercraft liability. These liability risks are typically specifically excluded from a commercial general liability policy: there are special types of insurance you can purchase if you wish to be covered against these exposures.

Coverages of a Commercial General Liability Policy

A Commercial General Liability policy consists of three basic coverages which may be offered on an occurrence or claims-made basis:

  • Coverage A - Bodily Injury and Property Damage Liability pays on behalf of the insured any legal damages the insured might owe a third party for causing them bodily injury or property damage as a result of the business activities of the insured. Under Coverage A, the insurer is also obligated to provide the insured defence in the event of a liability lawsuit.
  • Coverage B - Personal and Advertising Injury Liability pays the damages on behalf of the insured for liability that may cause personal or advertising injury to a third-party, such as slander, libel, false imprisonment, etc.
  • Coverage C - Medical Payments comes into force when a third party suffers from bodily injury on the commercial premises of the insured. Coverage C pays the medical expenses of the injured party, regardless of whether the insured is guilty or not.

All these coverages of a commercial general liability policy have a lot of exclusions, and there are a number of supplementary payments that are available under Coverages A and B.

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