A Commercial General Liability Insurance Policy (CGL Policy) protects an insured company from claims of bodily injury or property damage caused on the business premises or because of using the company products or because of company’s operations.
A Commercial General Liability Insurance a combination of Product Liability Insurance and Public Liability Insurance Policy. An important provision under a Commercial General Liability Insurance Policy is the Duty to Defend and this blogpost will attempt to explain the same.
What is the Insuring Agreement of Commercial General Liability Insurance Policy?
The Insuring Agreement of a CGL Insurance Policy states:
“The Policy will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.”
Suit is defined as:
“Suit” means a civil proceeding in which damages because of “bodily injury, property damage” “personal injury,” or “advertising injury” to which this insurance applies are alleged. “Suit” includes:
- An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
- Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent
What does the term “Duty to Defend” mean?
The term “Duty to Defend” means that the Insurer is obligated to defend the Insured against claims or lawsuits that fall under CGL Insurance Policy Coverage.
Under the Duty to Defend Provision in a CGL Insurance Policy, the Insurance Company is required to defend a claim if the allegations mentioned in the suit and if proven to be true, would require the Insurance Company to indemnify the insured. It is irrelevant that the allegations are later proven or not. Just the mere possibility that the allegation falls within the ambit of Commercial General Liability Insurance Coverage obligates the Insurance Company to indemnify the Insured under the Duty to Defend Provision.
Thus, the Insurance Company’s obligation to defend the insured depend on the allegations mentioned in the suit and not on the fact that it is later established that the claim is not covered under the CGL Insurance Policy.
The only circumstances where the Insurer can refuse his duty to defend would be if the allegation itself does not fall under the CGL Policy Coverage or if the allegation falls within the list of exclusions. In that case, the Insurance Company is under no Duty to Defend.
Under the Duty to Defend Provision, the Insurance Company is obligated to hire a lawyer for the Insured and bear the costs for defending the Suit as per the Limits under the Commercial General Liability Insurance Policy. Duty to Defend is a contractual right and obligation of the Insurance Company.
What does the term “Right to Defend” mean?
The term “Right to Defend” or “Duty to Indemnify” means the Insurer’s obligations to pay the legal costs and damages after the merits of the lawsuit have been decided or a settlement has been reached. The Insurance Company will pay the costs once the Insurer’s liability is established and the quantum of damages covered under the Policy have been determined.
A Duty to Defend thus offers broader coverage than Right to Defend since the Policy under the Duty to Defend Provision is triggered once the allegations are within the ambit of the Policy while the Right to Defend Provision requires that the merits of lawsuit have to be established before the Insurance Company can indemnify the Insured under Right to Defend Provision.
Get the Best Commercial General Liability Insurance Quotes with Qian!
Today, a CGL Insurance Policy is a must have insurance policy to protect the business from claims of bodily injury or property damage. The cost of a Commercial General Liability Insurance Policy is very reasonable which makes it a prudent investment for all businesses. Qian is an Insurance Broker for Commercial General Liability Insurance and can assure you of comprehensive coverage and best quotes for CGL Policy.
If you wish to purchase a CGL Policy for your business, pls email us at insurance@qian.co.in or call us on 022-22044989. We would be glad to assist you.
- Commercial General Liability Insurance
- Secure your Business from Claims of Bodily Injuries and Property Damage
- What is a Commercial General Liability Insurance Policy?
- What are the coverages under a Commercial General Liability Insurance Policy?
- What does Bodily Injury and Property Damage Section of a Commercial General Liability Insurance Policy Cover?
- What are the Add-On Covers under a Commercial General Liability Insurance Policy?
- What is Personal and Advertising Injury Liability under a Commercial General Liability Insurance Policy?
- What are the Coverages under the Personal and Advertising Injury Liability section of a Commercial General Liability Policy?
- What does the Medical Payments Section of a Commercial General Liability Insurance Cover?
- What are the exclusions under a Commercial General Liability Insurance Policy?
- Will my Commercial General Liability Insurance Policy Cost be higher if I purchase the Policy through an Insurance Broker?
- Get a FREE 1 Hour Consultation for your Commercial General Liability Insurance Policy