General Liability Insurance Education

A commercial general liability (CGL) policy provides broad coverage for the legal liability your business faces from its day-to-day operations. The standard CGL form — developed by the Insurance Services Office (ISO) — covers three main categories of claims.

Bodily Injury and Property Damage Liability

This is the core of your CGL policy. It covers claims when your business operations cause physical injury to a third party or damage to someone else's property. Examples include a customer who slips on a wet floor in your store, a delivery driver who damages a client's loading dock, or a product you manufactured that injures a consumer. Coverage includes legal defense costs, settlements, and court judgments up to your policy limits.

Personal and Advertising Injury

This coverage protects against non-physical harm your business may cause to others. Personal injury includes claims of false arrest, wrongful detention, malicious prosecution, libel, slander, and invasion of privacy. Advertising injury includes claims of copyright infringement, misappropriation of advertising ideas, and defamation in your advertising materials. These claims can arise unexpectedly and defense costs alone can be substantial.

Medical Payments

Medical payments coverage (sometimes called Coverage C on the CGL form) pays for medical expenses incurred by a third party who is injured on your premises or as a result of your operations, regardless of fault. Limits are typically $5,000-$10,000 per person. This coverage is designed to handle minor injuries quickly and goodwill, without triggering a formal liability claim.

The trigger that activates your CGL coverage depends on whether your policy is written on an occurrence or claims-made basis. This distinction is critical because it determines which policy responds to a claim.

Occurrence basis: The most common form for CGL policies. An occurrence policy covers claims arising from incidents that happen during the policy period, regardless of when the claim is actually filed. If a customer is injured in your store in 2024 but does not file a lawsuit until 2026, your 2024 policy responds. This provides long-term protection because coverage is tied to when the incident occurred, not when it was reported.

Claims-made basis: A claims-made policy only covers claims that are both (1) reported to the insurer during the policy period and (2) arise from incidents that occurred after a specified retroactive date. If you cancel a claims-made policy, you lose coverage for unreported claims unless you purchase an extended reporting period (commonly called a "tail"). Claims-made policies are less common for CGL but are standard for professional liability and directors and officers coverage.

When switching from a claims-made to an occurrence policy, or when canceling a claims-made policy, discuss the gap in coverage with your agent. A tail endorsement can be expensive but is essential to avoid an uninsured gap for claims that arise from past incidents.

CGL policies use a multi-tiered limit structure that every business owner should understand:

• Each occurrence limit — The maximum the insurer will pay for any single claim or occurrence. A standard limit is $1,000,000.
• General aggregate limit — The maximum total the insurer will pay for all covered claims during the policy period. A standard aggregate is $2,000,000. Once you exhaust your aggregate, you have no coverage for additional claims until the policy renews.
• Products-completed operations aggregate — A separate aggregate that applies specifically to claims arising from your products or completed work. This is typically equal to the general aggregate ($2,000,000).
• Personal and advertising injury limit — The maximum per person or organization for personal and advertising injury claims. Typically $1,000,000.
• Damage to premises rented to you — Coverage for damage to premises you rent, typically limited to $100,000-$300,000.
• Medical expense limit — The per-person limit for medical payments, typically $5,000-$10,000.

If your business faces significant liability exposure, standard limits may not be adequate. A commercial umbrella or excess liability policy can extend your limits to $5 million, $10 million, or more for a relatively modest premium increase.

A certificate of insurance (COI) is a one-page document that summarizes your insurance coverage for a third party. It is one of the most frequently requested documents in commercial insurance — landlords, general contractors, clients, and event venues routinely require them before allowing you to work on their premises or enter into a contract.

A standard COI (typically the ACORD 25 form) includes:

• Your business name, address, and policy numbers
• The types of coverage you carry (CGL, commercial auto, umbrella, workers comp)
• Your policy limits for each coverage type
• Policy effective and expiration dates
• The name and contact information of your insurer and agent
• Any additional insured or certificate holder designations

Important: a COI is informational only. It does not modify, extend, or alter your actual policy coverage. If a third party asks you to add specific language to a certificate that goes beyond what your policy provides, consult your agent before agreeing.

An additional insured endorsement adds a third party to your CGL policy, giving them coverage for claims that arise from your operations. This is one of the most common contractual requirements in commercial insurance and is standard practice in construction, real estate, and professional services.

Common scenarios where additional insured endorsements are required:

• Subcontractor relationships — General contractors routinely require subcontractors to add them as additional insureds.
• Lease agreements — Landlords often require tenants to add them as additional insureds on their CGL policy.
• Client contracts — Large clients may require vendors and service providers to add them as additional insureds.
• Event venues — Venues hosting your event may require additional insured status on your policy.

There are several types of additional insured endorsements, and the specific form matters. The most common is the CG 20 10 (for ongoing operations) and CG 20 37 (for completed operations). Some contracts specify which endorsement form is required. Your agent can add the appropriate endorsement, typically for a modest additional premium or at no charge depending on the carrier.

Be aware that adding someone as an additional insured shares your policy limits. If both you and an additional insured face claims from the same incident, the total paid for both cannot exceed your policy limits.