Commercial General Liability Insurance
What is CGL and why a business needs it ?
In a nutshell, commercial general liability insurance, or CGL, is coverage that will protect your business in the event that you are sued. It is often used to cover claims against your business for injury or property damage. Typical examples include if a customer is injured at your place of business, or say an employee damages property at a client's site.
Without a commercial general liability insurance policy, you are leaving yourself and your company vulnerable to lawsuits that could have a devastating impact on your business. It is, unfortunately, a necessary cost of doing business because the likelihood of being sued is more common than you might think. It is for this reason that commercial general liability insurance is one of the most popular business insurance products sought after by business owners.
What’s covered…?
There are four main types of coverage included in the standard Commercial General Liability (CGL) policy: Bodily Injury and Property Damage Liability, Personal Injury Liability, Medical Payments, and Tenants’ Legal Liability (for those that rent or lease their workspace.) We’ll pick these off one-by-one with what will hopefully be an easy-to-understand explanation.
A. Bodily Injury and Property Damage Liability
Basically, if your company, your product, your work, your employees, or anything else associated with your company causes physical injury to someone like a client, or damages their property or belongings, you could be held legally responsible. If held legally responsible you may be required to pay. It is in cases like these that your coverage will pay for the compensatory damages.
Plainly put, compensatory damages are damages meant to compensate. Its purpose is to put things back the way they were (financially) prior to the injury or damage.
B. Personal Injury Liability
The phrase ‘personal injury’ is confusing because in the insurance world it means one thing, and everywhere else it often means something all-together different. While most people associate ‘personal injury’ with physical injury this is not the case with a CGL policy where it actually means damage (so to speak) of a person’s character, reputation and position in the community as a result of libel (in print) or slander (verbal defamation.) Remember, a liability policy is to protect you if you’re accused of libel or slander, not the other way around.
C. Medical Payments
This part of your CGL policy is interesting, as its purpose is to provide coverage that pays someone’s minor medical expenses from an accident that happens at your company’s premises or as a result of your company’s operations—even though you may never be held legally liable for the accident. In fact, it’s often used as a way to avoid a costly lawsuit.
D. Tenants’ Legal Liability (for those who rent or lease their workspace)
Suppose you don’t own the space where you’ve set up shop and rent your office, shop or retail space. If you are held legally responsible for causing a fire, explosion, smoke damage, or other damage caused by fire protection (like sprinklers going off) then this coverage will pay the compensatory damages (remember, the intent of compensatory damages is to put things back the way they were.) This applies only to damages of the rented premises – not the property (i.e. product, inventory etc.) that you may personally own.
Examples:
• One of your sales people is out on a call at a potential client's store. The owner of this store thinks your product will sell well in their store and is considering placing an order. Unfortunately, in their over-zealous sales pitch your salesperson knocks over a whole display of very expensive figurines valued at over $25,000.
• You've finally opened the doors to your trendy new lighting and fixture showroom and you've got the table and floor lamps, sconces, ceiling fans and chandeliers that all the city’s interior designers want. Unfortunately, unbeknownst to you, a shopper moved a few floor lamps around while deciding on whether they wanted to buy. In doing so, the lamp’s cord is no longer neatly tucked out of the way, and another shopper, a few hours later, trips and falls over the cord, breaking her ankle.
*** For exact terms, definitions, limitations and extensions, please talk to your broker and refer to your final policy wording ***
