Comprehensive general liability insurance: Overview, definition, and example
What is comprehensive general liability insurance?
Comprehensive general liability insurance (CGL) is a type of insurance coverage that provides protection for businesses against claims of bodily injury, property damage, and personal injury caused by the business’s operations, products, or services. CGL is designed to cover incidents that occur on the business premises, as well as those arising from business activities off-site. This type of insurance is essential for businesses of all sizes, as it helps mitigate the financial risks associated with lawsuits or claims resulting from accidents, injuries, or damages that occur during the course of doing business.
Comprehensive general liability insurance typically covers a wide range of liabilities, such as accidents involving customers or clients, damage to property caused by the business, and claims of slander or defamation. It is considered a basic form of protection for businesses, providing coverage for common legal and financial risks.
Why is comprehensive general liability insurance important?
CGL insurance is important because it protects businesses from potentially catastrophic financial losses arising from third-party claims. Lawsuits and claims for injuries, accidents, or property damage can be costly, especially for small or medium-sized businesses that may not have the financial resources to pay for damages, legal fees, or settlements out of pocket. CGL insurance helps businesses mitigate these risks by providing coverage for legal costs, settlements, and judgments.
For businesses, having comprehensive general liability insurance offers peace of mind and ensures that they are prepared for unexpected incidents. It also helps businesses meet contractual requirements, as many clients or partners require proof of CGL insurance before entering into business agreements.
Understanding comprehensive general liability insurance through an example
Imagine a restaurant that serves customers on-site. One evening, a customer slips and falls on a wet floor while walking into the restroom, injuring their back. The customer files a lawsuit against the restaurant for medical expenses and pain and suffering. The restaurant’s CGL insurance would cover the legal defense costs, any settlement or judgment resulting from the claim, and the cost of the injured customer’s medical bills, up to the policy’s coverage limits.
In another example, a construction company accidentally damages a neighboring property while performing work on a building site. The property owner files a claim for property damage. The construction company’s CGL policy would cover the costs of repairing the damaged property and any legal expenses associated with the claim.
An example of a comprehensive general liability insurance clause
Here’s how a comprehensive general liability insurance clause might look in a business contract:
“The Contractor shall maintain comprehensive general liability insurance, with a minimum coverage of [$X] for bodily injury, property damage, and personal injury. The policy shall cover all operations and activities performed by the Contractor, including but not limited to, accidents, injuries, and damage caused to third-party property. Proof of insurance shall be provided to the Client upon request.”
Conclusion
Comprehensive general liability insurance is a crucial form of protection for businesses, covering the costs associated with third-party claims for bodily injury, property damage, or personal injury. It ensures that businesses are financially protected in the event of accidents, lawsuits, or other incidents that could otherwise result in significant financial hardship. For businesses, having CGL insurance is not only a wise financial decision but also a necessary safeguard to ensure long-term success and stability, especially in industries where the risk of accidents and claims is higher.
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.