Original Article Date: 02/05/2022
Last Updated: 02/06/2022
We've all heard the horror stories - the proverbial "hot coffee" lawsuit, the "floor was wet" lawsuit, the list goes on and on. But what you may not realize is that slips, falls and burning hot coffee do in fact happen and without proper liability insurance, your business can be put in a very tight spot financially. Knowing how to properly protect your business in the event of an accident is essential to running any operation.
Read on to discover some insight from our commercial insurance agents regarding general liability - what they have seen and what they recommend to make sure you're fully covered, no matter if you're just a start-up or an established business.
What is General Liability Insurance?
Often referred to as "GL" or "Commercial General Liability (CGL)", General Liability insurance is liability insurance that provides premises and operations coverage for your business enterprise. In the event of an accident on premises, or in the event that your products fail and cause injury. As the name dictates, general liability is just that...general. It is not a catch-all for all operations. Certain industries, such as a doctor or lawyer, may require a more specialized type of insurance as well called professional liability. Chances are, they would still want to have general liability though!
For most businesses, general liability is most utilized in covering their physical space. For some businesses, such as small contractors that don't operate a store-front, general liability is utilized in protecting their work on a job.
General Liability can either be sold by itself or in conjunction with property and equipment coverage. The latter is referred to as a "BOP" - short for Business Owners Package, or a Commercial Package Policy (CPP).
What are the coverages in General Liability Insurance?
There are several coverages under general liability that are important to pay attention to that can help make sure your business is completely covered and not missing anything.
General Liability Each Occurrence - Simply put, the occurrence is an incident or a series of incidents that give rise to bodily injury or property damage resulting in a claim against the insured. This is the maximum the policy will pay for any one occurrence that happens in the insured period.
Example: A customer slips on wet stairs leading down to Steve's business. The customer suffers serious trauma and is hospitalized. If this customer were to sue Steve for bodily injury and the claim paid $50,000, the occurrence would be the payment of $50,000.
General Liability Aggregate - The aggregate is the most the policy will pay over multiple occurrences in a given insured period. There can be multiple occurrences within the aggregate limit that the insurance policy will cover, but will be capped off at the aggregate limit.
Example: Over the course of a year, two separate people fell down Steve's stairs at his business location. Customer A was injured for $50,000 and Customer B was injured for $150,000. The maximum the policy would pay out under a $1,000,000 aggregate policy is $200,000, as the threshold has not been met yet, even if the occurrence limit on either was exhausted.
General Liability Aggregate - The aggregate is the most the policy will pay over multiple occurrences in a given insured period. There can be multiple occurrences within the aggregate limit that the insurance policy will cover but will be capped off at the aggregate limit.
Example: Over the course of a year, two separate people fell down Steve's stairs at his business location. Customer A was injured for $50,000 and Customer B was injured for $150,000. The maximum the policy would pay out under a $1,000,000 aggregate policy is $200,000, as the threshold has not been met yet, even if the occurrence limit on either was exhausted.
Products & Completed Operations Aggregate - This can be written one of several ways, likely depending on the type of business you are engaged in and the carrier writing the policy. Certain businesses are excluded from Products and Completed Operations - like insurance agents. (This is because our product and completed operations liability falls under professional insurance). Some insurance says that this limit is included in the general aggregate, and some policies may state that the coverage is its own limit.
Think of products & completed operations as guaranteeing your workmanship. If you are an electrician and you complete a wiring job that fails and causes injury or property damage to someone, your products & completed operations coverage is what would cover the claim.
There are, however, limitations to completed operations exposures such as when the claim occurs (Occurrence vs. Claims Made), or statutory limits by state/local zoning.
Example: Steve's plumbing repairs a broken wax seal on a toilet at a customer's home. Less than a week later, the wax seal fails and there is water discharge that causes damage to the bathroom floor and baseboards. This would fall under a 'Completed Operation' as the job has already been done but failed.
Personal & Advertising Injury - Exactly as it sounds - this coverage protects your business from various forms of injury in the course of advertisement. All businesses must advertise (or rather, they should) to get customer's attention. However, if you slander another business or infringe on their intellectual property or copyrights, you are responsible for paying the damages.
Example: Steve's billboard says "Scott's Plumbing is the WORST! Never call Scott, he's a crook! Call me instead" - and Scott's business suffers or could suffer because of the false accusation. Steve will be held liable for the slander and defamation of Scott.
Damage to Premises Rented to You - Also known as Fire Legal, this coverage protects you against fire damages caused by you as a tenant in your landlord's building. While this coverage is important, it is not very broad. This does not apply to your contents and can be broadened with certain carriers under the endorsement of Tenant Legal Liability.
It is important to check your policy to see how broad your coverage really is, and to make sure you have adequate contents insurance as the tenant.
Medical Expenses- Medical Expenses, sometimes referred to as Medical Payments, provides emergency medical expense benefits to an injured party. The coverage is unique in that negligence is not a component of the coverage, therefore regardless of who is liable for the bodily injury, the policy will pay the immediate medical expenses up to the limit. This is a form of no-fault insurance. The coverage does not apply for the insured (you) or the employees of the insured. (This is why you need worker's compensation if you have employees).
Summary
Commercial General Liability (CGL or GL) is a required component of operating a legitimate business. Regardless of industry, every business should have a proper commercial general liability policy that protects the business in the event something can and will go wrong.
To get a quote on Commercial General Liability for your business, tap or click the request button below. Our team of dedicated insurance professionals will have a one-on-one consult with you at no cost to review your options.
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About the Author
My name is Taylor Haines and I am the CEO & Principal of Encompass Agency, Inc. (Buffalo) and Jordan First Insurance (Jordan, NY). I grew up in rural Skaneateles, NY and have over a decade of experience in the insurance industry after my first job in 2012 at GEICO as a direct writer. I am passionate about insurance and its relationship to law, and frequently research the latest industry trends regarding the legal implications of insurance. I earned a Bachelor from the University at Buffalo in History and hold a Master of Science from Buffalo State College in Human Resources.