A general liability policy covers your business against various liability claims, including bodily injury, property damage, personal injury, and advertising injury. The claims may be triggered by your operations, premises, products, or services. A general liability policy is your best bet when your business is threatened with a civil lawsuit by a third party.
Your business can suffer financially if you don't have Commercial General Liability Insurance. Without CGL insurance, a single claim can be devastating. You'll be safe against many of the risks you face every day with a CGL policy, which allows you to focus on running your business and serving your customers.
Who all need Commercial General Liability Insurance Coverages?
CGL insurance is helpful for the following kinds of businesses -
- Retail store owners
- Cafes and Restaurants
- Construction companies and contractors
- Fitness centers like yoga studios, gyms
- Cleaning services
- Event planning companies
- SaaS Companies
- Manufacturers and distributors
- Event planners
- Professional service providers ( lawyers, accountants & consultants)
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Example of Commercial General Liability Insurance in India
Slip and Fall Accident
A customer slipped and fell on a wet floor, requiring medical attention in a store. A big financial hit was spared for the store owner as he had purchased a CGL policy and the insurer covered medical expenses and legal defense costs.
Product Damage Incident
Mr. Ravikant purchases a smartphone from an electronics store in Mumbai. However, shortly after using the phone, it malfunctions and explodes, causing injury to Ravikant and damaging his property. He decides to file a lawsuit against the phone manufacturing company, claiming that the defective smartphone caused him physical harm and financial loss. In this case, the electronics company’s product liability insurance policy would come into play. The insurance policy would cover the costs associated with defending against the lawsuit, including legal fees, court expenses, and any potential settlement or judgment amounts if the electronics company is found liable.
What is Included in the Commercial General Liability Insurance?
1. Advertisement and Personal Injury
The insurer will pay the insured's legal damages (as sought by a lawsuit) resulting from advertising injury or personal injury as per policy terms. It will pay the cost of legal defence and judgments or settlements only if the advertising injury is caused by an offense committed while advertising the goods, products, or services of the insured. Similar costs will be covered for the personal injury only if the injury is caused by an offense arising out of the business operations of the insured.
However, this insurance does not apply to injuries originating from oral/written publication of material done by/on behalf of the insured with knowledge of its falsity, wilful violation of any penal statute by/on behalf of the insured, discharge/release of pollutants, breach of contract, failure of products/services to conform with advertised performance and wrong description of the price of the products/services.
2. Damage to Rented Premises
This coverage in commercial general liability insurance covers damage caused by the negligence of the insured, to premises rented to the insured. For this coverage to take effect, the business of the insured must be liable for the damage caused. The coverage is usually comprised of two parts:
- Coverage for claims or lawsuits that originate from fire damage to rented premises. However, if the insured is obligated by a contract /lease to indemnify the landlord for fire damage to the rented premises, the claim will not be covered.
- Coverage for claims or lawsuits arising from damage by a cause other than fire, to premises rented for 7 or fewer days.
3. Hired Or Non-Owned Motor Vehicle Liability Coverage
It can cover the damages for a business if an employee or representative of the business is involved in an accident while driving/using, for work purposes, a vehicle that the business does not own, such as a rental car or a vehicle owned by an employee.
For example, if an employee of the insured business drives his car to the bank to drop off a business cheque and causes an accident, the related expenses (such as medical treatment and vehicle repair damages) are covered by this policy.
4. Medical Expenses
This policy covers the medical expenses for bodily injury caused by an accident originating from the business operations of the insured, on-premises the insured owns or rents. Such payments will be made regardless of fault, up to the policy limits. Expenses related to first aid administered at the time of an accident, medical, x-ray, surgical, and dental services, prosthetic devices, hospital, professional nursing ambulance, and funeral services are also covered. However, bodily injury to the insured or someone working on behalf of the insured and injuries caused by war or war–like situations are excluded from this coverage.
5. Defense cost within the limits of indemnity
This policy covers the legal expenses incurred by the insured while defending the business against a liability claim or suit. It will also cover the lawyers’ fees, and other costs related to legal proceedings, judgments, and in the settlement of the claim. For example, if someone sues your business because they were injured on your property, this coverage can help pay for the cost of hiring a lawyer and other legal expenses to defend against the lawsuit.
6. Right to Defend
This clause specifies that the insurer will pay the sums the insured becomes legally obligated to pay as damages because of “property damage”, “bodily injury”, and “personal & advertising injury” to which this policy applies. The insurer will have the right and duty to defend the insured against any suit seeking those damages.
The insurer may, at its discretion, investigate the occurrence and settle any resulting claim or suit. But, the amount the insurer will pay for damages will not exceed the limits of insurance mentioned in the policy. Also, the insurer’s right and duty to defend ends in using up the applicable limits of insurance in the payment of judgments or settlements against the above-mentioned damages.
7. Transportation Liability
Transportation Liability coverage in commercial general liability insurance covers bodily injuries or property damage caused by the transportation of goods/equipment by a vehicle owned, operated, or rented by the insured.
For example, if a trucking company hauling goods for your business is involved in an accident and causes damage to someone else's property or injures someone, this coverage can help cover the cost of damages or injuries caused by the accident.
8. Non-manual employee visit clause
A Non-Manual Employee Visit Clause covers the liability arising out of third-party injuries or damages that occur because of non-manual work performed by an employee of the insured while visiting a third-party location. This type of coverage is typically intended for professional service providers such as consultants, engineers, and architects who may visit a client's location as part of their job.
For example, if an employee of an engineering firm visits a client's construction site to accomplish non-manual work and an accident occurs resulting in injury or damage, this coverage can help pay for the cost of any damages or injuries caused by the accident.
9. 72 Hours of sudden and Accidental Pollution cover
This cover provides protection for a business in case of sudden and accidental pollution incidents that occur on the business's property or as a result of its operations. The 72 hours refers to the time frame within which the incident must be identified and notified to the insurer. Please note that this policy will not cover gradual pollution.
For example, if a chemical spill occurs at a manufacturing plant, this coverage can help pay for the cost of cleaning up the spill and any damages or injuries caused by the incident.
10. Amended Care
This policy would provide coverage in case of any wrongful acts, errors, or omissions that may happen during the provision of care or professional service. For example, if a childcare centre is sued by a parent because of injury or damages to their child, this coverage can help pay for the legal expenses and any damages or settlements that may result from the suit.
11. Valet Parking
Valet parking is a service in which an attendant accepts a vehicle from its owner and keeps it in a parking area. The valet parking coverage in this policy can help pay for damages or injuries that may occur while a vehicle is parked or retrieved by the valet service offered by the insured. For example, if a valet parking personnel damages a customer's vehicle while parking or retrieving it, this coverage can help pay for the cost of repairs.
12. Auto Acquisition of newly acquired Subsidiaries
It includes newly acquired subsidiaries ( incorporated or registered in India) by the insured, under the main policy, without the need for additional paperwork. However, at the start of the policy period and at the time of loss, the insured must declare that the insured controls, directly or indirectly, more than 50% of the interests entitled to vote in the election of the governing body of such a subsidiary organization. Also, this coverage is extended only for the damage/injury that occurs within 30 days after such acquisition/formation or at the end of the policy period, whichever is earlier. It is the duty of the insured to declare such acquisition/formation of a new entity within 30 days.
For example, if a company acquires a subsidiary and the subsidiary is involved in an incident that results in a liability claim, this coverage can help pay for the cost of damages or injuries caused by the incident, even if the subsidiary was not originally covered under the main policy.
13. Non Cancellation Clause
Get protection from the risk of your insurance policy being cancelled by the insurer without a valid reason, before the policy's termination date. In other words, the insurer cannot cancel the policy unless the policyholder has breached the terms and conditions of the policy, has failed to pay the premium or committed a deliberate insurance fraud.
14. Additional Insured on review of written contract
An "additional insured" is a person or entity that is not the primary policyholder, but is also covered under the policy. This clause specifies that if the additional insured is named in a lawsuit or claim that arises from the policyholder's actions or operations, he will also be protected by the insurance.
For example, if a construction company is working on a building and the building owner wants to make sure they are also protected in case something goes wrong, they can be added as an "additional insured" on the construction company's liability policy. This way, the building owner becomes protected in case of property damage, bodily injury or other such incidents in the building that could lead to an insurance claim.
15. Transfer Of Rights Of Recovery Against Others (Waiver of Subrogation)
This clause refers to the insurer waiving their right to seek recovery from a third party who may be responsible for the loss or damage. In other words, the insurer agrees not to pursue a third party for reimbursement of the payment made under the policy, in exchange for the policyholder's agreement not to seek recovery from the insurer for the same loss. This way, the insured can protect business clients and third parties from recoveries by the insurer. This holds even if the client is wholly or partially responsible for a loss.
16. Designated Premises
This clause limits the coverage of the policy to the specific location(s) or premise(s) that are designated in the schedule of the policy. The liability coverage will be only applied if bodily injury or property damage arises out of the ownership, maintenance or use of the designated premises and all operations incidental thereto.
For example, if a retail store chain has a specific store that they want to ensure is covered under the policy, they can designate that store as a "Designated Premise" in the policy, and the policy will only provide coverage for that specific store and not for the other stores.
17. Designated Product
This clause limits the coverage of the policy to the specific product(s) or product line(s) that are designated in the schedule of the policy. The liability coverage will be only applied if bodily injury or property damage " included in the "products-completed operations hazard" and arising out of any of the products of the insured shown in the Schedule.
For example, if a manufacturer produces multiple products, but only wants to ensure that a specific product line is covered under the policy, they can designate that product line as a "Designated Product" in the schedule, and the policy will only provide coverage for that specific product line and not for the other products.
18. Contingent Employers Liability
This coverage provides additional protection for a business in case of liability claims arising from events related to work-related injuries, illnesses or death to employees that are not covered by worker’s compensation insurance of the insured.
For example, if one of the temporary workers hired by the insured business is injured on the job, the business is held liable for the worker's injuries, Contingent Employers Liability coverage can help pay for the cost of damages or injuries caused to the temporary worker and any legal expenses that may result from the incident.
19. Incidental Medical Malpractices for first aid only
This clause covers the liability that may arise from the provision of healthcare services by the business on an incidental basis, such as minor injuries or illnesses that are treated with first aid only.
For example, if a company provides first aid services to an employee who suffers from a minor injury or illness, and the employee subsequently claims that the first aid provided was inadequate, the company could be held liable for any damages or injuries caused by the incident. Incidental Medical Malpractice for first aid only coverage can help pay for the cost of damages or injuries caused by the incident and any legal expenses that may result from the incident.
20. Terrorism legal liability
This clause covers the liability that may arise from property damage, bodily injury and loss of income due to terrorist incidents. Please note that terrorism means the unlawful act of violence against persons or property to attain political, religious or ideological objectives or intended to coerce or intimidate a government/persons to modify their policies or behaviour or, an act verified by the Government of India as an act of terrorism. It does not include an act of violence motivated by personal reasons and directed at a specific individual or individuals ( such as robbery, murder and so on) and an act of war.
This coverage is usually not automatically included in commercial general liability insurance policies and needs to be purchased as endorsement coverage.
For example, let us assume the business premise of an organization catches fire, as a result of an unlawful act of violence between two groups, causing damages and injuries to some people and properties nearby. The business is sued by the owner of an adjoining property who was injured. The general liability insurance of the organization, which includes coverage for acts of terrorism, will cover any damages awarded to the owner of the adjoining property.
21. Extended Reporting Period
"Extended Reporting Period" (ERP) coverage, also known as "tail coverage," is a type of insurance that provides protection for claims that may arise after the policy has expired or been canceled.
A basic extended reporting period is provided automatically and lasts no more than-
- 3 years for claims originating from events reported to the insurer on or before 30 days from the expiry of the policy period
- 30 days for claims originating from events not reported to the insurer
A supplemental extended reporting period is available only by an endorsement and begins at the expiry of the basic extended reporting period. Such a period lasts no longer than 3 years. The insured must give a written request to the insurer to purchase a supplemental extended reporting period, within 30 days after the end of the policy period.
22. Endorsement-Batch Clause
Batch Clause coverage can be added to a commercial general liability policy as an endorsement. It provides protection for a business for all claims arising out of products produced in a single manufacturing run (or batch), within a single occurrence limit. This clause limits the insurer's liability to a specific number of units or batches of the product.
For example, if a food manufacturer produces 100,000 units of a specific product and discovers that a batch of 10,000 units is contaminated, the Batch Clause will limit the insurer's liability to the 10,000 units of the contaminated batch.
23. Coverage for Alterations, fit outs, and minor civil work by the insured within the Insured premises
This clause covers the liability that may arise from any damages or injuries caused by the insured’s work within its premises, such as the installation of new equipment, remodeling of the premises, or other minor civil works.
For example, if a company decides to renovate its own commercial space and during the renovation process, they cause damage or injury to a passerby, this coverage can help pay for the cost of damage and any legal expenses that may result from the incident.
24. Sanction Clause Endorsement
This is a type of exclusion mentioned in commercial general liability insurance coverage. It specifies that the Insurer shall not be deemed to provide cover and the Insurer shall not be liable to pay any Claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such Claim or provision of such benefit would expose the Insurer directly or indirectly to any sanction, prohibition or restriction under United Nation resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America. All other terms, conditions and exclusions of this policy remain unaltered.
25. Opioids and Narcotics Exclusion
Opioids and Narcotics exclusions in commercial general liability insurance mean that if a claim is made against the insured for the use, sale, or distribution of opioids or narcotics, the same will not be covered under this policy. Claims or allegations in this category include (but are not limited to) falsely marketing opioids as non-addictive by the insured, failure of medical monitoring by the insured, and so on.
26. E Smoking Device Exclusion
This policy excludes any claims or losses that are related to the manufacture, trade, storage, transportation, and advertisement of electronic smoking devices or e-cigarettes by or on behalf of the insured.
For example, if a company is found to have distributed e-cigarettes and that led to an injury or harm to a person, the insurer would not provide coverage for any damages or losses resulting from the incident.
27. War and Civil War Exclusion
This clause specifies that if a claim is made against the insured for events that happened because of war or warlike situations, the same will not be covered under this policy. Such events may include - invasion, acts of foreign enemies, armed conflict or warlike operations by a military force (regardless of whether declared or not), rebellion, revolution, civil war, insurrection, civil commotion amounting to an uprising, military or usurped power, confiscation/nationalization /requisition/ destruction of/ damage to property by the Government, public or local authority and so on.
28. Corporal Punishment, Sexual Abuse, and Molestation
This is a type of coverage that can be added to a commercial general liability policy as an endorsement. It provides protection to a business against claims arising from allegations of corporal punishment, sexual abuse, and molestation made against a policyholder and a policyholder’s employees. Claims , whether true or false, can also be related to abusive behaviors committed by the insured (and/or his/her employees and can involve a failure to supervise when such an inappropriate behavior occurs. Other claims it might cover include failure to investigate allegations of sexual harassment, corporal punishment, molestation, as well as negligent employment.
29. Product Inefficacy Exclusion
This clause excludes coverage for any losses, damages, or liability arising out of a product's failure to perform as intended or advertised. This means that if an insured business is found to be responsible for damages resulting from a product's failure to fulfill its intended function/use and/or meet the desired level of quality, fitness, performance, or durability warranted or represented by it, the insurer would not provide coverage.
30. Cyber Liability Exclusion
This clause excludes coverage for any losses, damages, or liability arising out of a data breach, cyber attack, or other cyber-related incidents. This means that if a business is found to be responsible for damages resulting from a cyber-attack or data breach, the insurer would not provide coverage under this policy.
For example, if a company's network is hacked, and sensitive customer information is stolen, the insurer would not provide coverage for any damages or losses resulting from the incident under this endorsement.
31. Discharge of treated Effluents up to 10 km from the insured premises
This is an endorsement coverage that provides protection for a business against claims arising from the discharge of treated effluents up to 10 km from the insured premises.
For example, if a company's factory discharges treated effluents into a nearby water body, and causes damage or injury, the insurer would provide coverage for any damages or losses resulting from the incident under this endorsement.
32. Promotional Events Extension
This is an endorsement coverage that provides additional protection for a business that holds promotional events, such as trade shows, fairs, and other similar events. This means that if a business is found to be responsible for damages or injuries that occur during a promotional event, the insurer would provide coverage under this endorsement.
For example, if a company's promotional event causes injury to a participant, the insurer would provide coverage for any damages or losses resulting from the incident under this endorsement.
33. Food and Beverage Extension
This is an endorsement coverage that provides additional protection for restaurants, grocery stores, and other businesses that deal with food and beverage products. This means that if a business is found to be responsible for damages or injuries that may occur to a third party on account of consuming food or beverages on the Insured’s premises or after consuming such food products sold on the Insured’s premises, the insurer would provide coverage under this endorsement.
For example, if a restaurant's food causes food poisoning to a customer, the insurer would provide coverage for any damages or losses resulting from the incident under this endorsement.
34. AOG peril
AOG (Act of God) peril Extension in commercial general liability insurance is an endorsement coverage. It covers liability arising out of a natural catastrophe (such as storm, flood and inundation, landslide, earthquake, tsunami, and other natural calamities which are beyond human control) affecting the insured premises and leading to Bodily Injury and Property Damage of the Third Party.
35. Lift Liability
Lift Liability Extension in commercial general liability insurance is an endorsement coverage. It provides additional protection for a business that deals with lifts, such as elevator maintenance companies, building owners, and other similar businesses. This means that if a business is found to be responsible for damages or injuries that occur due to lift or escalator-related incidents, the insurer would provide coverage under this endorsement.
For example, if an elevator maintenance company's negligence causes an elevator accident and causes bodily injury or property damage, the insurer would provide coverage for such damages or losses resulting from the incident.
36. Cross Liability
Cross Liability Extension in commercial general liability insurance is a type of endorsement coverage. When an insurance policy covers multiple parties, cross-liability coverage protects both parties if one submits a claim against the other. This coverage treats the multiple parties covered by the same contract as if they were covered by their own separate policies. Cross-liability coverage is provided as an intrinsic feature of a standard CGL policy by means of the "separation of insureds" condition.
37. Vicarious Liability
Vicarious Liability Extension is a type of endorsement coverage that provides protection for an insured business in the event that it is held liable for the actions of another party. It covers the liability arising out of bodily injury and property damage to third parties on account of any action of the vendors, suppliers, contractors, subcontractors, or agents of the insured party.
Example - A company overseeing the construction may be liable for damages caused by a construction worker mishandling the controls of a crane and damaging a nearby wall.
What does Commercial General Liability Insurance not cover?
Expected or intended injury or any liability the insured is not liable to pay under normal circumstances, but is now paying due to the assumption of liability
- A failure or delay by anyone on behalf of the company to perform an agreement or contract as per its terms.
- Liabilities already covered by other policies ( such as liabilities under workmen's compensation)
- Liabilities arising out of the conduct of the Insured’s business
- Damage to the work of the insured
- Damage to the insured’s property
- Damage to the insured’s product
- Professional liability
- A deficiency, inadequacy, defect or dangerous condition in the product
- Personal or advertising injury
- Electronic data Recall of products, works or impaired property and product guarantees
- Loss of use of other property originating from sudden and accidental physical damage to the software after it has been put to the intended use
- Errors and Omissions.