Commercial General Liability

A Commercial General Liability (CGL) policy provides your business protection from lawsuits brought by third parties alleging bodily injury, property damage, personal injury, and advertising injury.  In addition, the policy pays any sums you are legally obligated to pay in damages up to the applicable policy limit.

The CGL coverage form typically contains six different limits of insurance. Each limit represents the maximum amount the insurer will pay for a particular type of covered loss. The six policy limits are listed on the policy declarations page (information page) and typically appear as follows:

General Aggregate Limit

General Aggregate limit is the most that the insurer will pay for the sum of all personal injury, advertising injury, medical expense, bodily injury, and property damage claims, to which this insurance applies, sustained during the policy period, other than those involving the products and completed operations hazards.

Products-Completed Operations Aggregate Limit

Products-Completed Operations Aggregate limit is the most that the insurer will pay for the sum of all bodily injury and property damage claims that arise out of both the products and completed operations of your business, to which this insurance applies, during the policy period.

Each Occurrence Limit

Each Occurrence limit is the most that the insurer will pay for the total of all bodily injury, property damage, and medical expenses incurred for any one accident, to which this insurance applies. An occurrence is commonly defined as “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”  Bodily injury is defined in the policy as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”

Property damage is defined as “physical injury to tangible property, including all resulting loss of use to that property,” as well as “loss of use of tangible property, including all resulting loss of use to that property,” as well as “loss of use of tangible property that is not physically injured.”  All loss of use included within this definition is considered to occur at the time of the physical injury or in the case of loss of use, not accompanied by physical injury, at the time of the occurrence.

The monetary measure of a property damage claim includes the value of the property, if it is destroyed or must be replaced, and the cost to repair the damage if such repair can be made.  If the property is income producing, or if there are necessary costs associated with a temporary replacement of the damaged property until it is restored to use, then damages for loss of use can also be forwarded.

Personal and Advertising Injury Limit

Personal and Advertising Injury limit is the most that the insurer will pay for the total of all personal injury and all advertising injury sustained by any one person or organization.  Losses paid under the personal and advertising injury limit are also deducted from the policy’s general aggregate limit.

The personal injury coverage protects against suits brought by third parties alleging your business committed any of the following offenses: libel, slander, defamation of character, false arrest, disparagement of goods, and similar allegations, provided the offense was not done intentionally by or at the request of your business.

The advertising injury coverage insures against disparagement of goods, slander, right infringement, and similar allegations, which may arise in connection with your advertising. Advertising is the dissemination of information or images for the purpose of selling goods or services using print or other media with widespread public distribution. If your business is an advertising or publishing company, this coverage does not apply. For businesses in these industries, coverage is provided through a Professional Liability policy, which can be purchased separately.

Fire Damage Legal Liability Limit

The CGL property damage exclusion, which eliminates coverage for damage to property that you rent, does not apply to damage by fire.  The coverage that remains intact by virtue of this exception is subject to its own limit of insurance.  That limit applies to damage arising out of any one fire, and many policies provide a $300,000 limit.  This limit is a subset of the each occurrence limit, which applies to all property damage in any one occurrence.  Higher limits are generally available.

Medical Expense Limit

Medical Expense limit is applicable to all first aid and covered medical expenses for bodily injury to any one person resulting from any one accident. Medical Expense coverage is a type of “no fault” insurance.  This coverage will pay reasonable medical bills of third parties who are injured on your premises or by your operations, subject to the per person limit listed on the policy. The limit for Medical Expense is typically $5,000.00, but this limit can be increased up to a maximum of $25,000.  Medical Payments coverage pays for injuries sustained by a third party at your premises or by their operations regardless of legal liability. Taking this approach to medical expenses is thought to reduce the likelihood that injured parties will bring a lawsuit against you.

The policy’s limits of insurance apply regardless of the number of:

• Insureds against whom the claim is made
• Claims or suits brought against the insured(s)
• Persons making a claim or bringing a suit

The policy covers the insured business’s activities within the United States of America, Puerto Rico, and Canada.

Exclusions are things that are not covered by the policy because they are:

• Better covered elsewhere
• Insurable under a different policy
• Uninsurable

Examples of exclusions include:

• Damage or injury expected or intended from the standpoint of the insured
• Contractual liability for contracts, in which the insured agrees to “hold harmless and/or indemnify” the other party. This Exclusion does not apply to contracts for a lease of premises, railroad sidetrack agreement, easement or licensing agreement, elevator maintenance agreement, and the part of any other agreement under which the insured business assumes the liability of another party for damages to a third party.
• Liquor liability if the insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages
• Pollution liability, that is liability arising out of the discharge or escape of pollutants

Policy Conditions

Policy conditions are miscellaneous coverage provisions that:

• Clarify the way in which other parts of the policy will be interpreted
• Spell out additional duties that either you or the insurer must meet in the event of a covered loss

The following two separate sets of policy conditions apply to the CGL policy:

• Common policy conditions is made a part of standard liability and property coverages.  This set imposes conditions that transcend a particular line of insurance, such as who is responsible for paying premiums or how either party may cancel the policy.
• CGL conditions address such subjects as your duties in the event of an occurrence, the way other policies that might cover the same loss, and the way in which the policy’ s coverages will apply to multiple insureds.

An insurer may have a number of legitimate reasons for examining your financial and business records. One reason is to audit your records that relate to the premium basis to adjust the cost of the insurance coverage to better reflect your actual exposure. Not all CGL policies are auditable. Generally, audits are done on coverages where the premium, at the beginning of the coverage period, is based on estimated units of exposure  (for example, payroll and/or sales record).

The insurer has the right (but not any obligation) to inspect your operations and business facilities at any time, to prepare reports on its findings, and to make recommendations to the insured. Inspection by a liability insurer can help by alerting you to business practices that increase the chance of a liability claim.  Also, an inspection can identify specific liability exposures that fall outside the scope of general liability insurance and should be separatelyinsured. The insurer owes you no duty to report on unsafe conditions or practices that could result in a loss or claim.

Other Insurance

The CGL “other insurance” condition prescribes how the policy will respond to a covered loss when other insurance policies also cover the same loss. Options include:

• The CGL policy is the primary (it pays up to its applicable limit for a covered claim before the other policy is called upon)
• The CGL policy is excess (it does not pay until the other policy has paid its available limits)
• The CGL and the other policy to share responsibility for paying the claim on some proportional basis