Commercial General Liability Insurance

A Commercial General Liability Insurance (also known as CGL Insurance Policy) is a type of an Insurance Policy which reimburses the Insured Person for the Legal Expenses and Compensatory Damages that the Insured becomes legally liable to pay on account of the Bodily Injury or Property Damage suffered by a Third Party by a Company’s Operations, Products or Injuries that occur within the Insured Person’s Business Premises.

Bodily Injury under a Commercial General Liability Insurance Policy is defined as bodily injury, sickness or disease sustained by a person, including death. It is important to read the Commercial General Liability Insurance Policy Wording to ascertain the exact definition of Bodily Injury.

Property Damage under a Commercial General Liability Insurance Policy means

a) Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it, or

b) Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

Property Damage under a CGL Policy specifically covers only tangible property and does not include any damage to electronic data.

A Commercial General Liability Insurance Policy covers the following Risk Exposures:

A Commercial General Liability Policy normally covers Defence Costs and Compensatory Damages occurring on account of the following:

1. Coverage A: Bodily Injury and Property Damage

2. Coverage B: Personal and Advertising Injury Liability

3. Coverage C: Medical Payments

The Bodily Injury and Property Damage Section of a Commercial General Liability Insurance covers the Defence Costs and Damages that the Insured Party becomes legally liable to pay on account of the Bodily Injury or Property Damage suffered by Third Parties.

Bodily Injury means any Injury, Sickness or Disease sustained by a person while Property Damage implies any Physical Injury to Tangible Property resulting in its Loss of Use.

Several businesses have multiple risk exposures from their clients and customers suffering from Bodily Injury and Property Damage.

Consider the case of this guest who died in the swimming pool of a hotel.

The hotel was liable for the Damages on account of the death of guest. Businesses have numerous such exposures to Bodily Injury and Property Damage which make them potentially liable.

Some common Add-On Covers under a Commercial General Liability Policy are as follows:

1. Act of God Perils – This Extension Covers liability arising out of a natural catastrophe affecting the Insured Premises resulting in Bodily Injury and Property Damage of the Third Party
2. Food and Beverages Extension - The Food and Beverages Add-On Cover covers the legal liability arising out of injury/death of the third party which happens on account of consuming food or beverages on the Insured’s premises or after consuming such food products which are sold on the Insured’s premises
3. Swimming Pool, Beauty Clinic, Gyms Extension (and other similar facilities) under Commercial General Liability Policies covers legal liability arising out of bodily injury and property damage because of using the facilities inside the insured premises
4. Care, Custody and Control: This extension covers liability arising out of bodily injury and property damage to third party goods which are handed over to the Insured Party for their custody and control.
5. Valet Parking Liability: This extension covers the liability arising out of damage to the vehicle when the valet parking personnel is driving it and parking it somewhere.
6. 72 Hours Sudden and Accidental Pollution Coverage: The CGL Policy covers sudden and accidental pollution which occurs within 72 hours and has caused damage. That is certainly an accident. Note that this policy will not cover gradual pollution. Gradual Pollution is covered under a separate insurance policy known as Environmental Impairment Liability Policy.
7. Liquor Liability: Liquor Liability covers the liability that arises if the customer consumes excessive liquor beyond his capacity and the hotel/restaurant does not prevent its customer from consuming alcohol beyond his capacity, and after consuming the liquor, the customer causes bodily injury or property damage to third parties. Note that the bodily injury or property damage to third parties can occur even outside the premises.
8. Incidental Medical Malpractice: This is another add-on cover which is important for hotels. Consider a case where a hotel guest falls sick and the hotel doctor treats the guest. However, something goes wrong with the doctor’s treatment as a result of which the guest suffers from illness or injury, the liability will fall on the hotel. This liability will be covered under the Incidental Medical Malpractices Extension of the CGL Policy. This Add-On Cover is more important for places like Malls, Hotels, Cinemas which will have guests.
9. Vicarious Liability covering Contractors, Sub Contractors, Vendors, Suppliers, Agents etc: This Extension covers the liability arising out of Bodily Injury and Property Damage to Third Parties on account of any action of the Contractors, Sub Contractors, Vendors, Suppliers or Agents of the Insured Party.
10. Terrorism Legal Liability: This Add-On Cover covers the liability arising out of Bodily Injury and Property Damage to Third Parties on account of Terrorist Acts.
11. Transportation Extension: Earlier I had shown you the example of a blast resulting in damages. This extension covers liability arising out of bodily injury or damage occurring on account of the product being transported.
12. Lift and Escalator Liability: This extension covers the legal liability on account of Bodily Injury and Property Damage occurring in the lift and escalators of the building.
13. Non-Manual Visits of Employees Overseas: This is another important Add-On Cover. This extension covers the liability arising out of third-party property damage or injury caused by the employee on account of his work when the employee goes overseas on a business tour.
14. Non-owned and Hired Automobiles Liability – This is also a popular Add-On Cover but it is not required in India because a Car Insurance Policy covers the vehicle whereas outside India, Motor Insurance covers the individuals. This Extension covers liability expenses for accidents caused by vehicles which are hired and not owned by a company for its work purposes.