Commercial General Liability (CGL) policies are the most common form of business liability policies. CGL policies cover many risks faced by businesses, from slip-and-fall claims to class action lawsuits, to skirmishes over advertising slogans. Most businesses carry CGL coverage of some kind.
What is Covered by Commercial General Liability Policies?
CGL policies provide broad protection against third-party liability, but it’s important to understand what it does—and does not—protect. Commercial General Liability policies provide three core coverages:
- Protection against claims for bodily injury, such as when an individual is injured and alleges a business’s activities caused or contributed to the injury.
- Protection against claims for property damage, such as when a claimant alleges that a business’s activities caused physical injury to tangible property or the loss of the use of tangible property.
- Protection against claims alleging “personal and advertising injury,” including a variety of personal torts (e.g., wrongful eviction, defamation, and some intellectual property violations).
There are many business risks that CGL policies do not cover. These risks may be covered by separate, specialized risk-specific policies (e.g., pollution liability policies, employment practices liability policies, etc.).
CGL policies contain exclusions and other limitations that narrow the scope of coverage. For example, Commercial General Liability policies often eliminate coverage for losses due to virus or bacteria, contractual liability, expected or intended injury, and data breaches or other cyber risks. CGL policies provide coverage only for losses that occur during the policy period and are always subject to limits on the amount the company will pay. These exclusions and limitations are often the source of disputes between the policyholder and its insurer and can raise nuanced factual and legal issues that require the assistance of experienced coverage counsel.
How Do Commercial General Liability Policies Work?
Knowing how commercial general liability policies protect businesses is as important as knowing what kind of risks they cover. Every insurance policy is a promise by an insurer to protect its insured when disaster strikes. Arguably the most important benefit of CGL insurance is the promise that an insurer will defend its insured against third-party lawsuits. This means that, subject to various conditions in the policy, an insurer has the duty to fully defend its insured against any potentially covered claim. Insurers often owe a defense to their insured regardless of whether the allegations ultimately are found to be covered by the policy.
CGL insurance also promises to indemnify—or make whole—the insured after it suffers a covered loss. This duty to indemnify the insured is narrower than the duty to defend, but obligates the insurer to fund a settlement or satisfy a judgment when the claim is covered.
In addition to the express duties to defend and to indemnify, every insurance policy imposes an implied duty of good faith and fair dealing. This implied duty includes the duty to settle a potentially covered claim within policy limits when the insured faces a substantial risk of a judgment in excess of its policy’s available limits and may provide useful leverage against the insurer when attempting to resolve the matter.
Commercial General Liability Policies: How We Can Help
Landmines lurk that may result in an unwary policyholder forfeiting its rights under its CGL policy. For example, policyholders must, when making a claim, give prompt notice and cooperate with the insurer. And policyholders must religiously avoid doing or saying anything that may waive or compromise their policy rights. We know where these landmines lie and how to avoid them.
Even when policyholders faithfully comply with their obligations, insurers may find reasons to deny a claim that should be paid. The claims process can be frustrating and stressful, especially because it compounds an already difficult experience. But policyholders need not face this process alone. This is what we do—we navigate the claims process, we negotiate aggressively with insurers, and, when necessary, we litigate to resolve claims.