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What are the exclusions under a Commercial General Liability Insurance Policy?

Sep 15, 2023

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Commercial General Liability Insurance Policy

What are the exclusions under a Commercial General Liability Insurance Policy?
Contents

A Commercial General Liability Insurance Policy also known as a CGL Insurance Policy is one of the most important insurance policies for a business. A CGL Policy protects the Insured Party from any liability arising from bodily injury or property damage suffered by 3rd parties.

CGL Policy Coverage includes cover for accidents such as a hotel guest falling in the swimming pool of the hotel and injuring himself or a restaurant customer spilling hot coffee and burning himself or even common slip and fall claims within a shopping mall premises.

These kind of injuries and accidents are extremely common and can result in the business owner having to pay crores of rupees in damages. Hence, every business owner should protect himself against such claims by purchasing a CGL Insurance Policy.

What is a CGL Policy?

A Commercial General Liability Insurance Policy (CGL Insurance Policy) is a type of insurance policy which covers the Insured Party for legal expenses and compensatory damages arising from bodily injury or property damage suffered by third parties either on the Insured’s Premises or as a result of using the Insured’s Products.

A Typical form of the Insuring Clause of the CGL Policy usually states that:

“the Policy will pay all amounts that the Insured shall become legally liable to pay by way of Compensation for, Personal Injury, Property Damage or Advertising Injury which happens during the Period of Insurance as a result of an Occurrence within the Geographical Limits in connection with the Insured Business”

CGL Policy Coverage is quite broad. However, it is important to understand the exclusions of the Commercial General Liability Insurance Policy in detail to avoid nasty surprises later on.

This article will cover the CGL Policy Exclusions in detail.

What are the exclusions under a CGL Policy?

The exclusions under a CGL Policy are as follows:

1. Aircraft, Hovercraft, Aircraft Products and Watercraft: Any bodily injury or property damage caused by operation or use of Aircraft, Hovercraft, Watercrafts are excluded under a Commercial General Liability Insurance Policy. A CGL Insurance Policy also excludes any bodily injury or property damage caused because of any components which are intended to for incorporation into any part of an Aircraft’s or a Hovercraft’s structure, engines, electrical systems, computer systems or any other systems

There are separate insurance policies which cover bodily injury or property damage because of Aircraft, Hovercraft, Watercrafts or Aircraft Products.

2. Asbestos: Any liability arising from or connected to asbestos is a common exclusion under a Commercial General Liability Insurance Policy.

3. Contractual Liability: If the Insured Party assumes a liability as a consequence of its participation in a contract, such liability is not covered by a CGL Insurance Policy. Contractual Liability is a common exclusion in a CGL Policy. However, there is an exception to this CGL Policy Exclusion:

The Contractual Liability Exclusion under a CGL Policy would not apply if the Insured would have been anyway held liable even in the absence of the contract. That is, regardless of whether the Insured Party had the contract or not, if the Insured would have been held liable for damages, the CGL Insurance Policy will provide coverage for the liability.

4. Criminal, Fraudulent, Malicious, Wilful or Dishonest Acts: Any liability arising out of Criminal, Fraudulent or Wilful Act are excluded under a Commercial General Liability Insurance Policy.

5. Electronic Data: Commercial General Liability Insurance Policy Coverage does not provide cover for any liability arising out of the following:

  • communication, display, distribution, or publication of Electronic Data;
  • the total or partial destruction, distortion, erasure, corruption, alteration, misinterpretation or misappropriation of Electronic Data;
  • any error on creating, amending, entering, deleting or using Electronic Data;
  • the total or partial inability or failure to receive, send, access or use Electronic Data for any time period or at all
  • Business Interruption Losses arising out of the above

Above mentioned losses can be covered under a Cyber Liability Insurance Policy provided they arise from the breach or compromise of the Insured’s network systems.

6. Employee Injuries: CGL Insurance Policies provide coverage for bodily injury or property damage to Third Parties. These Third Parties include Customers, Vendors, Suppliers etc. Employees of the company do not fall under Third Parties and as such they are not provided coverage for Bodily Injury or Property Damage under the CGL Policy. Any form of employee injuries are covered under Workmen’s Compensation Insurance Policy.

7. Faulty or Incomplete Work: Another common CGL Insurance Policy Exclusion is for Faulty or Incomplete Work. The Commercial General Liability Insurance Policy will not pay for the cost of completing, correcting, improving or repairing any form of faulty or incomplete work performed by the Insured Party.

8. Fines, Penalties, Punitive, Exemplary or Aggravated Damages: Fines, Penalties, Punitive, Exemplary or Aggravated Damages are not covered under a Commercial General Liability Insurance Policy.

9. Loss of Use: Another Exclusion under a CGL Policy relates to a loss of use of a Product resulting from the following points:

  • A Delay or Lack of Performance of any Contract or Agreement by the Insured
  • Failure of the Product or Work performed by the Insured to perform at the level which has been implied or expressly promised by the Insured.

The Loss of Use Exclusion under a CGL Insurance Policy does not apply to loss of use of property which has been caused from accidental physical loss or damage to any Product of the Insured Party after the Product has been put to use by a person or organisation other than the Insured.

10. Owned Property: CGL Policy Coverage includes cover for Third Party Bodily Injury or Property Damage. It does not cover damage for the Property owned by the Insured Party itself. The intent behind this exclusion is to prevent providing first party coverage to the Insured.

11. Pollution: Pollution-related claims are another exclusion in a CGL Insurance Policy. A CGL Policy will not cover any liability arising out of the following:

  • Actual or Alleged Discharge, dispersal, release or escape of Pollutants into or upon land, the atmosphere or any watercourse or body of water;
  • the cost of testing and monitoring for, removing, nullifying, or cleaning up of Pollutants

Such Pollution Related damage is covered under another type of insurance policy.

12. Products Defect and Product Guarantee: Another important CGL Policy exclusion relates to any form of liability arising from Property Damage caused by a fault or defect in the Insured’s Products. However, this exclusion only applies to Property Damage to the specific part of the Product which directly causes the damage due to its faulty or defective nature.

Product Guarantee is also an exclusion under a Commercial General Liability Insurance Policy Exclusion. The CGL Policy does not cover any liability arising from any warranty or guarantee by the Insured in relation to its Product.

13. Product Recall: A CGL Policy will also not pay for any liability for damages, costs or expenses arising out of the withdrawal, recall, inspection, repair, reconditioning, modification, reinstallation, replacement or loss of use of any Products, where such Products are withdrawn or recalled from the market or by any person or organisation because of any known or suspected defect or deficiency in the Insured’s Products.

Product Recall can be covered under the Product Recall Insurance Policy.

14. Professional Liability: Professional Liability is also an important exclusion of a Commercial General Liability Insurance Policy. The CGL Policy does not cover liability arising out of any breach of duty owed in a professional capacity. The coverage for Professional Liability is provided under a Professional Indemnity Insurance Policy.

15. War: Any liability arising from war, invasion, hostilities, act of foreign enemy, civil war, mutiny, insurrection, rebellion, revolution, military or usurped power are also excluded from CGL Policy Coverage.

Other common exclusions under CGL Policy relate to Liquidated Damages, Radioactive Contamination, Vehicles, Terrorism, Property in Physical or Legal Control etc. Some of these exclusions of a Commercial General Liability Insurance Policy can be removed by means of an endorsement.

Final Take:

This article covers the exclusions under a Commercial General Liability Insurance Policy in detail. If you wish to purchase a CGL Insurance Policy for your business, we would be glad to help. The cost of a CGL Insurance Policy is very reasonable which makes it a must-have insurance policy for your business.

If you have any queries regarding CGL Policy Exclusions or various limits in a Commercial General Liability Policy, you can reach out to one of our insurance experts. Qian Insurance Broking is an experienced insurance broker for Liability Insurance such as Commercial General Liability Insurance, Directors and Officers Liability Insurance Policy, Cyber Liability Insurance Policy, Trade Credit Insurance and other commercial insurances as well.

You can email us at 📧 insurance@qian.co.in or call us on 📞 022-35134695 for a free CGL Insurance Policy quote.

  1. Commercial General Liability Insurance
  2. Secure your Business from Claims of Bodily Injuries and Property Damage
  3. What is a Commercial General Liability Insurance Policy?
  4. What are the coverages under a Commercial General Liability Insurance Policy?
  5. What does Bodily Injury and Property Damage Section of a Commercial General Liability Insurance Policy Cover?
  6. What are the Add-On Covers under a Commercial General Liability Insurance Policy?
  7. What is Personal and Advertising Injury Liability under a Commercial General Liability Insurance Policy?
  8. What are the Coverages under the Personal and Advertising Injury Liability section of a Commercial General Liability Policy?
  9. What does the Medical Payments Section of a Commercial General Liability Insurance Cover?
  10. What are the exclusions under a Commercial General Liability Insurance Policy?
  11. Will my Commercial General Liability Insurance Policy Cost be higher if I purchase the Policy through an Insurance Broker?
  12. Get a FREE 1 Hour Consultation for your Commercial General Liability Insurance Policy

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