What is commercial general liability insurance and why do I need it?

Protect your business against financial loss related to bodily injury, personal injury or physical damage to others.

Commercial general liability (CGL) insurance protects businesses against losses that may occur from a non-professional negligent act that causes injury to another person or business.

Negligence is the failure to use appropriate care when carrying out business activities, which leads to injury or damage of some kind. This includes physical harm, property damage, advertising injury and emotional distress caused by your business operations, services or employees.

CGL applies to the insured – the business named on the insurance policy - rather than individual pieces of equipment or people. Because these policies are comprehensive, they offer protection against a wide range of potentially damaging and costly situations.

What does this type of insurance cover?

CGL policies cover a wide range of events, which makes them one of the most important types of insurance that businesses can invest in. Specifically, there are three types of coverages included in CGL policies:

1. Bodily injury and property damage

CGL covers situations where someone who does not work for your company is injured because of your business operations, your services or your employees. It also covers events where someone else’s property is damaged because of your company or workers unintentional acts.

This type of insurance also applies to damages done to property that was rented to you, such as equipment or property. However, CGL is typically applied only to such instances caused by fire.

These types of events can unfold in many ways, such as a client tripping and falling on the jobsite, or an employee damaging a client’s personal property.

When these types of situations occur, there’s a chance the injured person will sue your business. Defense costs and other legal fees can be catastrophic to a business, but CGL can help cover those to protect you and your business.

2. Personal and advertising injury

Personal injury is damage to a person that is not physical, bodily harm. This includes:

Reputational damage, such as through libel or slander.
False arrest or wrongful eviction.
Malicious prosecution.
Wrongful entry or invasion or property.

Advertising injury is related to the inappropriate use of advertising in relation to the business’s products or services. This includes:

Copyright infringement.
Use of another’s advertising idea.
Slander or libel against another company.

Reputational harm lawsuits aren’t the most common insurance claim, but they are typically the most expensive, with an average cost of $50,000, according to Insurance Journal. Having a CGL policy in place in the event of a lawsuit due to personal or advertising injury can save a company from serious losses due to legal costs.

3. Medical payments

If someone, other than you or your employees, is injured on your jobsite, property or because of unintentional acts by your business or employees, they may need medical treatment. CGL helps cover medical costs.

There are many types of medical expenses that can occur following an injury, though CGL may not always cover all of them. As necessary and within reason, this type of insurance policy can cover:

Medical expenses.
Ambulatory services.
Surgical expenses.
Hospital stays.
Nursing expenses.
Funeral costs.

An important note: CGL does not require the injured party to file a lawsuit for the policy to cover their medical payments. Avoiding a legal process can allow the policy to promptly provide compensation for medical payments.

Who needs CGL insurance?

There’s no legal requirement for CGL insurance, but this type of policy can benefit nearly all companies, including small businesses and independent contractors.

Any business has the potential to cause injury or damage to others, whether they’re aware of this risk or not. A simple accident can lead to a serious injury and even a lawsuit. CGL insurance is the best way to protect your business against expensive legal processes.

Additionally, rental, leasing, and subcontractor agreements, plus some financing agreements, require a company to have CGL insurance in place prior to finalizing a contract.

How does commercial general liability insurance affect workers’ comp?

Workers’ comp is required by law for all employers in the U.S. who have employees, as are disability and unemployment insurance, according to the Small Business Administration.

Having a commercial general liability insurance policy in place does not nullify the need for workers’ compensation insurance. CGL does not cover injury to employees; workers’ comp applies to situations like these.

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