Commercial general liability: Overview, definition, and example
What is commercial general liability?
Commercial General Liability (CGL) refers to a type of insurance that protects businesses from financial loss due to claims of bodily injury, property damage, or other liabilities arising from their operations, products, or services. CGL policies typically cover a range of scenarios, including accidents that occur on the business's premises, damage caused by products sold, or injuries resulting from the business's actions or negligence. It is a broad form of liability insurance that is essential for protecting businesses from third-party claims that could result in significant legal and financial costs.
For example, if a customer slips and falls in a store, the store's commercial general liability insurance could cover the medical costs and any legal expenses if the customer sues for damages.
Why is commercial general liability important?
Commercial general liability is important because it provides businesses with protection against a wide variety of claims that can arise from day-to-day operations. Without this coverage, businesses would have to bear the full financial burden of legal fees, settlements, or judgments from lawsuits related to accidents or damages. For businesses, CGL is a key component of risk management, ensuring that they are financially protected from potential legal claims that could impact their bottom line.
For businesses, maintaining adequate CGL coverage is vital to safeguard against unexpected liabilities and ensure that they can continue operating without severe financial setbacks due to lawsuits or claims.
Understanding commercial general liability through an example
Imagine a restaurant owner who is sued after a customer sustains an injury in the parking lot of the restaurant. The customer claims the restaurant was negligent in maintaining the lot, leading to the injury. If the restaurant owner has a commercial general liability policy, the policy will cover the legal costs, medical expenses, and any potential settlements up to the policy limits.
In another example, a business that manufactures furniture may be held liable if one of their products causes injury to a customer. The business's CGL policy would cover the costs associated with defending the claim, as well as any damages if the business is found liable.
An example of a commercial general liability clause
Here’s how a commercial general liability clause might look in an insurance policy:
“The Insurer agrees to cover any claims arising from bodily injury or property damage caused by the Named Insured’s operations, products, or services, subject to the terms, exclusions, and conditions of this policy. This coverage includes legal defense costs, settlements, and judgments resulting from third-party claims.”
Conclusion
Commercial General Liability insurance is essential for businesses, providing broad protection against claims related to accidents, injuries, and damages caused by the business's operations. It helps protect businesses from financial loss, legal fees, and reputational damage arising from third-party claims.
For businesses, having a solid CGL policy is a crucial part of risk management and ensures that they are prepared for unforeseen liabilities, allowing them to operate with greater security and confidence.
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.