Commercial General Liability (CGL)
Commercial general liability (CGL) is a type of insurance policy that provides coverage to a business for bodily injury, personal injury, and property damage caused by the business’ operations, products, or injury that occurs on the business’ premises. Commercial general liability is considered comprehensive business insurance, though it does not cover all risks a business may face.
Important:Additional policies to cover certain liabilities, such as sexual harassment and discrimination—covered under employment practices liability, may be needed in addition to GCL policies.
Understanding Commercial General Liability (CGL)
Commercial general liability policies have different levels of coverage. A policy may include premises coverage, which protects the business from claims that occur at the business’ physical location during regular business operations. It may also include coverage for bodily injury and property damage that is the result of finished products. Excess liability coverage can be purchased in order to cover claims that exceed the limit of the CGL policy. Some commercial general liability policies may have exclusions to what actions are covered. For example, a policy may not cover the costs associated with a product recall.
When purchasing commercial general liability insurance, it is important for the business to differentiate between a claims-made policy and an occurrence policy. A claims-made policy provides coverage over a specific time period and covers claims made during that time period, even if the claim event occurred at a different time. An occurrence policy is different in that it covers claims provided that the claim event occurred during a specified time period and does not cover claims stemming from claim events that occurred before the policy came into effect.
In addition to commercial general liability policies, businesses may also purchase policies that provide coverage for other business risks. For example, the business may purchase employment practices liability coverage to protect itself from claims associated with sexual harassment, wrongful termination, and discrimination. It may also purchase insurance to cover errors and omissions made in financial reporting statements, as well as coverage for damages, resulting from the actions of its directors and officers.
Key Takeaways
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Commercial general liability (CGL) is a form of comprehensive insurance that offers coverage in case of damage or injury caused by a business’ operations or products, or on its premises.
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There are two types of CGL policies—a claims-made policy covers claims regardless of when the event took place, while an occurrence policy specifies that the event must take place during a set period.
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Companies can add other companies or individuals they contract with to their commercial liability insurance policy as an “additional insured.”
Special Considerations
Depending on its business needs, a company may need to name other companies or persons as "additional insured" under their commercial liability insurance policy. This is common when businesses enter into a contract with another entity that requires the insuring business to name the additional entity as “additional insured” on the policy. For example, if an automobile repair garage enters into a contract with ABC Co. to provide cleaning services for their facility, ABC Co. may require the garage owners to add ABC Co. as additional insured on their commercial general liability coverage.