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10.0 Commercial General Liability Coverage

Learning Objectives​

Upon completion of this chapter, you should be able to:

  1. Identify the major legal liability exposures that may affect a commercial insured.
  2. Explain the difference between the Occurrence Form and the Claims-Made Form.
  3. Describe the coverages and exclusions provided under Section I – Coverages.
  4. Identify who qualifies as an insured under a Commercial General Liability (CGL) policy, as explained in Section II – Who Is An Insured.
  5. Recognize how the policy’s limits of insurance apply under Section III – Limits of Insurance.
  6. Identify the conditions that apply to CGL coverage in addition to the Common Policy Conditions, as provided in Section IV – Commercial General Liability Conditions.
  7. Understand key terms defined in Section V – Definitions and explain how those terms affect coverage.

Overview​

Every business faces certain legal liability exposures that may result in financial loss if the business is held legally responsible for injury or damage to others. For example, a customer may be injured on the business premises, or the business may be responsible for damage to another person’s property. The most common policy used to insure these types of exposures is the Commercial General Liability (CGL) policy. A CGL policy provides important liability protection for businesses when covered claims are made against them. A CGL policy may be written as a monoline policy, meaning it is issued by itself, or it may be included as one coverage part within a Commercial Package Policy (CPP). CGL policies are subject to the Common Policy Conditions discussed in Chapter 9, as well as the specific conditions found within the CGL Coverage Form. When the CGL coverage is included in a CPP, it is also subject to the Common Policy Declarations and the CGL’s own Declarations page.

Commercial General Liability (CGL) coverage is designed to insure many of the common liability exposures faced by businesses. These exposures may include bodily injury or property damage arising from the business premises, daily operations, or products the business manufactures, sells, or distributes. It is important to understand that a CGL policy does not cover every type of business loss. For example, it does not provide coverage for injuries sustained by the insured’s employees. Employee injuries are generally addressed by Workers’ Compensation coverage. A CGL policy also does not provide property insurance for damage to the insured’s own property. Damage to the business’s buildings, equipment, inventory, or other owned property must be insured under an appropriate commercial property coverage form.

This chapter focuses on Commercial General Liability (CGL) coverage, including the policy’s coverages, conditions, and important definitions. It also introduces common legal liability exposures that businesses may face and explains why businesses need appropriate casualty coverage to protect against covered claims.

An Insurance Story

For example, The Furniture Company may face legal liability if a customer suffers bodily injury while shopping in one of its retail stores. The company may also be liable if a customer is injured, or if the customer’s property is damaged, during or after an employee installs furniture in the customer’s home. These types of losses are examples of common business liability exposures. By adding the Commercial General Liability (CGL) Coverage Part to its Commercial Package Policy (CPP), The Furniture Company can obtain essential protection for covered claims involving bodily injury or property damage for which the company is legally responsible.