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Commercial General Liability

Small business liability insurance, known as a commercial general liability (CGL) policy, is designed to cover your small business for events for which the company could be held responsible in several categories including:

  • Bodily injury
  • Property damage
  • Personal injury (such as slander or libel)
  • False or misleading advertising

Companies need liability coverage to protect themselves and their assets for something they did (or failed to do, such as not fixing a hazardous condition) that caused injury or property damage. While most actions leading to a claim aren't intentional, small businesses have to be protected financially against accidents and the resulting costs.

The coverage is designed to pay for legal damages including:

  • Compensatory damages (financial losses suffered by the injured party)
  • General damages (non-monetary losses, such as pain and suffering) or
  • Punitive damages (additional penalties or charges).

In addition to these damages, one of the major benefits offered by liability insurance is the cost of defending against a lawsuit. Even a seemingly groundless lawsuit can be expensive to defend, and the insurance company will pay for this defense (and often provide an attorney to litigate the claim on your behalf).

General liability insurance doesn’t provide coverage for professional liability (which is written under industry-specific policies); auto liability, injuries to employees (covered under workers’ compensation); or health or disability claims. These are all covered under specific forms of insurance that have to be purchased separately.

Commercial general liability coverage also protects your company against any liabilities resulting from damage to any real estate you're renting. If, for instance, your company is sued after a fire occurs at a warehouse you're renting, the liability coverage would pay for the defense costs and any settlement or judgment.

Buying Coverage

Several factors go into determining how much liability insurance your company should purchase, including your industry and any contractual insurance requirements from lenders, landlords or customers.

For companies with relatively simple needs, general liability coverage may be purchased as part of a business owner's policy (BOP) that combines property coverage as well.

If the limits outlined in a BOP package aren't high enough, you can supplement the liability portion by adding an excess liability or umbrella policy to the BOP.

Companies in industries with high or specialized risks may be better served with a dedicated commercial general liability policy from a carrier familiar with their industry and risk exposures.

Given the potential financial implications of a large settlement or verdict, commercial general liability insurance is a sound investment in the ongoing viability of your company.