Commercial general liability insurance: Overview, definition, and example
What is commercial general liability insurance?
Commercial general liability (CGL) insurance is a type of insurance coverage designed to protect businesses from financial loss due to claims of injury, property damage, or other liabilities arising from the business's operations. It typically covers third-party claims for bodily injury, property damage, personal injury, and advertising injury that may occur as a result of the business's activities, products, or services.
CGL insurance is often considered essential for businesses because it helps safeguard against unexpected events or accidents that could result in costly lawsuits. It provides coverage for legal defense costs, settlements, or judgments, helping businesses avoid significant financial strain from liability claims.
Why is commercial general liability insurance important?
Commercial General Liability Insurance is important because it provides critical protection against a variety of risks that could potentially bankrupt a business. Without proper coverage, a business may be exposed to significant financial and legal risks in the event of accidents, injuries, or damages caused by its products, services, or operations.
For businesses, having CGL insurance helps mitigate the risk of substantial financial losses from lawsuits or claims. It can also be a requirement for securing contracts or working with certain clients, as many companies or government entities require proof of adequate insurance coverage before entering into business agreements.
For small and medium-sized businesses, CGL insurance provides peace of mind, ensuring that they are protected from the financial impact of lawsuits and that they can continue operations with confidence.
Understanding commercial general liability insurance through an example
Imagine a restaurant that experiences a slip-and-fall accident when a customer trips on a wet floor. The customer sues the restaurant for medical expenses and damages. If the restaurant has Commercial general liability insurance, the policy will cover the costs of the lawsuit, including legal fees and any potential settlement or judgment, up to the policy limits. This protection allows the business to continue operating without the financial burden of the lawsuit.
In another example, a company that manufactures and sells kitchen equipment may be sued for product liability if one of its products is defective and causes property damage. If the company has CGL insurance, the policy would cover the costs of defending the claim and any damages awarded to the plaintiff, protecting the company from potentially devastating financial consequences.
An example of a commercial general liability insurance clause
Here’s how a commercial general liability insurance clause might look in a contract:
“The Company agrees to maintain Commercial General Liability Insurance with coverage limits of no less than $1,000,000 per occurrence and $2,000,000 in the aggregate. This insurance shall cover bodily injury, property damage, personal injury, and advertising injury arising out of the Company's business operations. The Company shall provide proof of such coverage upon request and shall ensure that the insurance policy remains in effect for the duration of this Agreement.”
Conclusion
Commercial general liability insurance is an essential coverage for businesses of all sizes, providing protection against a wide range of liability risks that could result in significant financial losses. By covering claims related to bodily injury, property damage, and other liabilities, CGL insurance helps businesses mitigate the financial impact of legal disputes, lawsuits, and accidents. For companies seeking to protect their assets, secure contracts, and ensure continuity in operations, having CGL insurance is a critical component of a well-rounded risk management strategy.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.