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10.3 Section I – Coverages

Coverage A – Bodily Injury and Property Damage Liability​

Insuring Agreement​

Under Coverage A of a Commercial General Liability (CGL) policy, the insurer agrees to pay damages the insured becomes legally obligated to pay because of bodily injury or property damage to which the coverage applies. For coverage to apply, the occurrence must take place within the coverage territory and during the time period required by the applicable coverage form. This insuring agreement protects the insured against covered damages arising from certain legal liability exposures. It also includes the insurer’s duty to defend the insured against covered claims or suits. However, the insurer has no duty to defend the insured against claims or suits that are not covered under the CGL policy.

Bodily injury and property damage liability arising from the insured’s products or completed operations is known as the products-completed operations hazard. For products-completed operations coverage to apply, the product or completed work must no longer be in the insured’s care, custody, or control. This means the product has generally been sold, distributed, or delivered, or the work has been completed and the insured has left the job site.

Bodily injury means bodily harm, sickness, or disease sustained by a person. The term also includes death that results from the bodily harm, sickness, or disease. Property damage means physical injury to tangible property. It also includes the loss of use of tangible property, even if the property itself is not physically damaged.

The coverage territory for a Commercial General Liability (CGL) policy generally includes the United States, its territories and possessions, Puerto Rico, and Canada. For products liability claims, the policy may provide worldwide coverage in limited circumstances. If the insured’s product was made or sold within the coverage territory, and the related suit is brought within the coverage territory, the policy may respond to a product-related claim even if the injury or damage occurred elsewhere in the world.

Coverage may also apply to occurrences that take place on vacant land, such as undeveloped lots owned or used by the insured. This means the CGL policy may respond if bodily injury or property damage arises from a covered liability exposure involving vacant land.

Exclusions​

Coverage A excludes bodily injury and property damage arising from certain situations. These exclusions are included because the exposure may be covered by another type of insurance policy, addressed under a different section of the CGL policy, or considered outside the intended scope of Coverage A.

Expected or Intended Injury​

Coverage A does not apply to bodily injury or property damage that is expected or intended by the insured. This exclusion prevents coverage for deliberate acts that are meant to cause injury or damage. However, an exception applies to bodily injury that results from the use of reasonable force to protect people or property. In that situation, coverage may still apply, even though the insured intentionally used force.

Contractual Liability​

Coverage A does not apply to bodily injury or property damage for which the insured is obligated to pay damages solely because the insured assumed liability under a contract or agreement. This is known as the contractual liability exclusion. However, this exclusion does not apply in two important situations. First, coverage may still apply if the insured would have been legally liable even without the contract or agreement. Second, coverage may apply when the liability is assumed under a contract that qualifies as an insured contract under the policy.

When the CGL policy provides coverage for liability assumed under an insured contract, defense costs for another party to that insured contract may be treated as damages. This means those defense costs are paid within the applicable limit of insurance and will reduce the amount of coverage available for the claim.

Liquor Liability​

Coverage A does not apply to bodily injury or property damage for which the insured may be liable because of certain alcohol-related activities. This is known as the liquor liability exclusion. Coverage is excluded when the insured is liable because:

  • The insured caused or contributed to a person’s intoxication;
  • The insured furnished alcoholic beverages to a person under the legal drinking age; or
  • The insured violated, or is subject to, a statute or ordinance regulating the sale, distribution, or use of alcoholic beverages.

The liquor liability exclusion applies only to insureds that are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. These businesses have a specialized liquor-related liability exposure and generally need separate coverage, such as a Liquor Legal Liability policy or Dram Shop Liability policy. The exclusion does not apply to all situations involving alcohol. For example, it does not apply to a building owner who leases space to a bar, or to a business that provides alcohol at a fundraiser, company party, or similar event when the business is not in the business of selling or serving alcohol. In these situations, the CGL policy may provide Host Liquor Liability coverage.

An Insurance Story

The Furniture Company hosts a holiday party for its employees to celebrate the company’s success during the past year. At the party, the company provides champagne for employees and guests.

After having several drinks, one of the company’s sales representatives leaves the party early and attempts to drive home. On the way, the employee causes an auto accident, resulting in serious bodily injury to another driver and damage to that driver’s vehicle.

Because The Furniture Company is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages, the liquor liability exclusion does not apply. The company only provided alcohol incidentally at a company event. As a result, the CGL policy may provide Host Liquor Liability coverage for liability claims brought against The Furniture Company by the injured driver.

The same general principle may apply when a business provides alcohol at a fundraiser, company party, or other incidental event, as long as the business is not in the alcohol-related business.

Workers’ Compensation and Employers Liability​

Coverage A does not apply when the insured is legally required to provide benefits under a Workers’ Compensation, disability benefits, or unemployment compensation law. These benefits are handled through separate statutory coverage, not through the Commercial General Liability policy. Coverage is also excluded for bodily injury to an employee of the insured when the injury occurs in the course of employment. This exclusion also applies to claims made by the employee’s relatives as a consequence of the employee’s work-related injury. These exposures must be insured under separate coverage, such as a Workers’ Compensation and Employers Liability policy.

Pollution​

Coverage A does not apply to bodily injury or property damage arising out of the actual, alleged, or threatened release, discharge, escape, or dispersal of pollutants. This exclusion also applies to pollution-related clean-up costs. Because pollution exposures can create significant liability, coverage must generally be provided through a separate pollution liability policy or added to the CGL by endorsement.

A pollutant is any solid, liquid, gaseous, or thermal irritant or contaminant. Examples include smoke, vapor, soot, fumes, acids, chemicals, and waste materials. For purposes of the Commercial General Liability (CGL) policy, these substances may trigger the policy’s pollution exclusion when they cause bodily injury, property damage, or pollution-related clean-up costs.

Aircraft, Auto, or Watercraft​

Like many liability policies, the CGL excludes liability arising out of certain vehicles because those exposures are more appropriately covered under separate insurance policies, such as Commercial Auto, Aircraft Liability, or Watercraft Liability coverage. However, the CGL gives back limited coverage for certain vehicle-related exposures, including:

  • Watercraft while ashore on premises owned by or rented to the named insured;
  • Non-owned watercraft less than 26 feet long, as long as it is not being used to carry people or property for a fee;
  • Parking an auto on or next to premises owned by or rented to the named insured, provided the auto is not owned by, rented to, or leased to any insured; and
  • Mobile equipment, such as land motor vehicles designed primarily for off-road use or vehicles that travel on crawler treads, including bulldozers, forklifts, and power cranes.

Mobile Equipment​

Although the CGL policy may provide bodily injury and property damage liability coverage for the use of mobile equipment, this coverage does not apply to every mobile equipment exposure. Coverage is excluded for the transportation of mobile equipment by an auto that is owned by, operated by, rented to, or leased to any insured. This exposure is intended to be covered under a Commercial Auto policy. Coverage is also excluded when mobile equipment is used in any prearranged racing, speed, demolition, or stunting activity.

War​

For purposes of the CGL policy, war includes civil war, warlike action by a military force, rebellion, revolution, and similar hostile actions. Bodily injury or property damage arising from these types of war-related events is excluded from coverage.

Damage to Property​

Coverage A does not apply to damage to property owned by the insured, property rented to the insured, or property in the insured’s care, custody, or control. These types of property exposures are not intended to be covered as liability claims under the CGL policy. Instead, coverage for the insured’s own property, rented property, or property in the insured’s possession is generally provided under a Commercial Property Coverage Part or a Commercial Inland Marine Coverage Part.

This exclusion generally does not apply to property damage to premises rented to the insured for 7 or fewer consecutive days. In other words, the CGL policy may provide coverage for damage to short-term rented premises. However, this exception does not apply to damage caused by fire or explosion. Those exposures are addressed separately under the CGL policy.

Damage to Your Product​

Coverage A does not apply to property damage to the insured’s own product. This includes goods or products that the insured manufactured, sold, handled, distributed, or disposed of. This exclusion is intended to prevent the CGL policy from acting as a warranty or product replacement policy. The CGL may cover bodily injury or damage to other property caused by the product, but it does not cover damage to the product itself.

Damage to Your Work​

Coverage A does not apply to property damage to the insured’s own work or operations. This includes damage to materials, parts, or equipment furnished in connection with the insured’s work. This exclusion prevents the CGL policy from covering the cost to repair or replace the insured’s defective work. However, the exclusion does not apply if the damaged work, or the work that caused the damage, was performed by a subcontractor on the insured’s behalf.

Damage to Impaired Property or Property Not Physically Injured​

Coverage A does not apply to property damage to impaired property. Impaired property is tangible property that cannot be used, or is less useful, because it includes the insured’s defective, inadequate, or dangerous product or work. Coverage is also excluded when property has not been physically damaged but cannot be used, or is less useful, because of a defect, deficiency, inadequacy, or dangerous condition arising out of the insured’s product or work. This exclusion prevents the CGL policy from covering economic loss or loss of use when the problem is caused by the insured’s defective product or work, rather than by physical damage to other property.

Product Recall​

Coverage A does not apply when the insured’s product or work is withdrawn or recalled from the market because of a known or suspected defect, deficiency, inadequacy, or dangerous condition. This exclusion applies to the costs and losses associated with removing, recalling, inspecting, repairing, replacing, or disposing of the product or work. This exclusion is commonly known as the Sistership Exclusion. It prevents the CGL policy from covering recall-related losses when a product or completed work is removed from use because it may be defective or unsafe.

An Insurance Story

The Furniture Company sells several models of Murphy beds. One of its best-selling models is later recalled because the beds may detach from the wall, creating a crush hazard. As part of the recall, The Furniture Company must repair its existing inventory and provide free inspections and repairs for customers who already purchased the recalled beds. These recall-related expenses are not covered by the company’s CGL policy. This is an example of the Sistership Exclusion, which excludes coverage for losses involving the withdrawal, recall, inspection, repair, replacement, or disposal of the insured’s product because of a known or suspected defect or dangerous condition.

Personal and Advertising Injury​

This exposure is addressed under Coverage B – Personal and Advertising Injury Liability, rather than Coverage A.

Electronic Data​

Coverage A does not apply to damages arising out of the loss of electronic data. This includes the loss of use of data, corruption of data, or the inability to access or use the data. Electronic data exposures are generally excluded because they are not intended to be covered as bodily injury or property damage under Coverage A.

Recording and Distribution of Material or Information in Violation of Law​

Coverage A does not apply to bodily injury or property damage arising out of any act or omission that violates a law prohibiting or limiting the distribution of material or information. This exclusion may apply to violations of laws such as the Telephone Consumer Protection Act (TCPA), the Fair Credit Reporting Act (FCRA), or similar laws that regulate how information may be collected, used, or shared.

Exception to the Exclusions: Fire Damage Liability​

Many Coverage A exclusions include an exception for fire or explosion damage to premises rented to the insured or temporarily occupied by the insured with the owner’s permission. This exception is commonly referred to as fire legal liability coverage. Fire legal liability coverage protects the insured when the insured is legally liable for fire or explosion damage to premises it rents or temporarily occupies. A separate limit of insurance applies to this coverage.

Coverage B – Personal and Advertising Injury Liability​

Insuring Agreement​

Under Coverage B of a Commercial General Liability (CGL) policy, the insurer agrees to pay damages the insured becomes legally obligated to pay because of personal and advertising injury. To be covered, the offense must be committed during the policy period and within the coverage territory. This coverage also includes the insurer’s duty to defend the insured against covered suits seeking damages for personal and advertising injury. However, the insurer has no duty to defend suits that are not covered under the policy.

Personal and advertising injury refers to certain non-physical injuries caused by the insured’s business activities. Unlike bodily injury, these injuries do not involve physical harm to a person. Instead, they involve offenses that may harm a person’s rights, reputation, privacy, or business interests. Personal and advertising injury includes:

  • False arrest, detention, or imprisonment;
  • Malicious prosecution;
  • Wrongful eviction, wrongful entry, or wrongful invasion of the right of private occupancy of a room, dwelling, or premises;
  • Defamation, such as libel or slander, against a person or organization, or against a person’s or organization’s goods, products, or services;
  • Oral or written publication that violates a person’s right of privacy;
  • Misappropriation of advertising ideas or style of doing business; and
  • Copyright infringement, or infringement of another’s title or slogan, when committed in an advertisement.

Exclusions​

Like other CGL coverages, Coverage B contains several exclusions. Coverage does not apply to personal and advertising injury arising from known violations of another person’s rights, contractual liability, pollution, war, or violations of laws that regulate the distribution of material or information. Coverage B also excludes personal and advertising injury resulting from:

  • Criminal acts;
  • Publication of material the insured knows is false;
  • Breach of contract;
  • Acts committed by insureds in the advertising, broadcasting, or publishing business;
  • Electronic chat rooms or bulletin boards hosted, owned, or controlled by the insured;
  • Unauthorized use of another party’s name or product in a way that misleads customers;
  • Incorrect descriptions of the price of goods, products, or services in advertisements; and
  • Failure of the insured’s goods, products, or services to conform to statements made in advertisements.

Coverage C – Medical Payments​

Insuring Agreement​

Under Coverage C of a Commercial General Liability (CGL) policy, the insurer pays certain medical expenses for others, such as customers, who sustain bodily injury caused by an accident. The accident must occur on the insured’s premises or arise out of the insured’s operations. Covered medical expenses may include first aid provided at the time of the accident, necessary medical and surgical expenses, X-rays, dental services, prosthetic devices, ambulance services, and hospital services. For Coverage C to apply, the accident must occur within the coverage territory and during the policy period.

Coverage C pays covered medical expenses regardless of fault. The insurer may pay these expenses even if the insured is not legally liable for the accident. However, payment is limited to the applicable Medical Payments limit of insurance. To be covered, the medical expenses must be incurred within 1 year from the date of the accident. The injured person must also submit to medical examinations as often as reasonably required by the insurer. These examinations are conducted at the insurer’s expense by physicians selected by the insurer.

Exclusions​

Coverage C does not pay medical expenses for every bodily injury. Certain injuries are excluded because they are either covered elsewhere, involve persons who are not intended to receive Medical Payments coverage, or arise from exposures outside the purpose of Coverage C. The insurer will not pay medical expenses for bodily injury:

  • Excluded under Coverage A;
  • Sustained by any insured, except a volunteer worker;
  • Sustained by a person hired to do work for the insured or the insured’s tenant;
  • Sustained by a person who normally occupies any part of the insured premises;
  • Required to be covered under Workers’ Compensation or similar laws;
  • Resulting from athletic activities; or
  • Included within the products-completed operations hazard.

Supplementary Payments – Coverages A and B​

Supplementary Payments apply only to Coverages A and B because those coverages include the insurer’s duty to defend the insured. These payments are made in addition to the applicable limit of insurance, meaning they do not reduce the policy limit. Supplementary Payments may include:

  • All claim-related expenses incurred by the insurer;
  • Up to $250 for the cost of bail bonds required because of an accident or traffic law violation arising out of the use of a covered vehicle;
  • The cost of bonds to release attachments, subject to the policy’s limits;
  • Reasonable expenses incurred by the insured at the insurer’s request to assist in the investigation or defense of a claim or suit, including up to $250 per day for loss of earnings;
  • Court costs taxed against the insured; and
  • Prejudgment and postjudgment interest, as provided by the policy.