You And Your Commercial General Liability
This is the second in a series of articles about insurance
coverage that affects you and your business. Last month we
discussed some of the general principles of insurance coverage and
surveyed the many types of policies available. In this issue we
will focus on the commercial general liability policy, sometimes
referred to as "CGL" insurance.
Your business can benefit from an adequate commercial general
liability policy. Such a policy protects you if someone is injured
at your place of business. It also covers you for damage or
injuries caused by your employees at a customer or client's place
of business or home. Typically, there are four basic categories of
coverage in a CGL policy. These include: bodily injury; property
damage; personal injury protection; and advertising injury.
Protection is provided for bodily injury and property damage
arising from occurrences. In addition, if personal injury and
advertising injury are included in your coverage, you may enjoy
protection for unintentional defamation, wrongful eviction,
advertising injury, and the like.
The CGL policy also covers the cost to defend or settle claims,
even if the claims are fraudulent. This is of benefit in addition
to the coverage provided, that prevents you or your business from
having to expend money for counsel and litigation costs.
In short, the commercial general liability policy is your first
line of defense for certain types of injuries or damages caused
while conducting your business. Often a commercial general
liability policy is combined in what is known as a "BOP" or
business owner's package. In this type of package, you will
typically see additional coverage for property insurance not
covered under the CGL policy.
Another important point is worthy of note regarding CGL
policies. They typically contain an exclusion for professional
liability, also known as errors and omissions. In performing
professional services, your business may be subjected to liability
for negligent acts, errors, and omissions. As such, professional
liability coverage is required. Unless this type of coverage is
limited and added by an endorsement on a CGL policy, it typically
does not exist in that form, and must be separately insured. If you
or your employees make professional judgments or make
recommendations in the course of your business, you might want to
ask your agent or broker about a professional liability policy or
an endorsement on a CGL policy to cover such recommendations,
judgments, or opinions.
Perhaps most misunderstood about the CGL policy is that it is
not intended to be a guarantee of the quality of a businesses'
products, services, or work. It will typically cover your business
for damage caused by your defective work, but not damage to your
defective work. Let me give you an example. Let's assume you are a
roofing contractor. You purchase a CGL policy, and during the
policy term you install a roof on a school library which shortly
thereafter leaks. The roof needs to be removed and replaced and
there is significant damage to the books, furnishing, and carpeting
in the school library, as well as the drywall, wallpaper and other
wall coverings. Typically, your CGL policy will cover you for the
damage to the books, carpeting, tables and chairs, and wall
coverings, but not for re-doing the work and installing the roof
that was done negligently in the first place.
A CGL policy is a good first step in protecting your business
and its assets. However, understanding what is not covered under
such a policy may cause you to purchase other forms of coverage or
other policies including property coverage, professional liability
coverage, directors and officers' coverage, et cetera.