Introduced in 1986 to replace the “comprehensive general liability policy,” a commercial general liability policy is a type of insurance coverage purchased to protect a business from instances of non-professional negligence.
ABCs of CGL Coverage
There are three 'groups' of CGL coverage aptly referred to as Coverage A, Coverage B and Coverage C in the insurance world. Here's a brief breakdown:
Coverage A: Bodily Injury & Property Damage
Bodily Injury is commonly understood to include bodily harm, sickness, or disease, including resulting death.
Example: A painter is working on a building and falls off his ladder, resulting in a bodily injury claim.
Property Damage as it pertains to general liability is defined as:
Physical injury to tangible property including resulting loss of use and loss of use of tangible property that has not been physically injured.
Example: A painter's ladder falls over and shatters a window resulting in a property damage claim.
Coverage B: Advertising & Personal Injury
Under general liability coverage, combined in standard CGL policies, advertising and personal injury constitutes a category of insurable offenses that produce harm other than bodily injury.
Examples of claims covered under advertising & personal injury liability include false arrest, detention, or imprisonment; malicious prosecution; wrongful eviction; slander; libel; and invasion of privacy; copyright infringement; and misappropriation of advertising ideas.
Coverage C: Medical Payments Coverage
Medical payments coverage is liability coverage that ensures medical or funeral expenses be allocated to an injured party, regardless of liability, in the event of bodily injury or death sustained by accident under the conditions specified within the policy.
Note: Other types of liability coverage you may consider are liquor liability, directors & officers liability, or pollution liability. An insurance professional can help you determine endorsements that are right for your unique business.
(Source: International Risk Management Institute, Inc.)
Types of CGL Coverage
On an Occurrence-Basis
An occurrence policy protects a business from any covered incident that happens during the policy period, regardless of when a claim is reported. This type of policy will cover a business even if the claim comes in after the policy is canceled, so long as the incident occurred within the time frame enforced by the initial policy.
On a Claims Made-Basis
A claims-made policy provides coverage for claims that occur, and are reported, within the specific time period set forth by the policy. This means that if a policy is canceled, or a premium isn't paid, any claim that comes through will not be covered, even if the incident occurred during the period when the policy was active.
Difference Between Professional and General Liability
As was mentioned earlier in this post, general liability involves non-professional negligence; so, instances of professional negligence are thereby covered under professional liability policies.
Professional negligence is most applicable within professions where there is a code of conduct or standards against which your business is juxtaposed to determine how your services are judged.
A good rule of thumb is this: General liability insurance typically covers physical damage to your business, whereas professional liability insurance, also referred to as errors and omissions (E&O) insurance, more often concern financial faux pas.
Depending on the nature of your business, you may be advised to purchase both general and professional liability insurance. If you decide to use two different insurance carriers, in the event a claim is made against your business, one insurance company may try to foist the responsibility of the payout onto the other. To avoid this competition, and to encourage maintaining focus on fixing the problem at hand, purchase both general and professional liability policies from the same insurance carrier.