Commercial General Liability Insurance Policy - Definition, Coverage, Exclusions, Add-On Covers, Cost, Types, Limits, Claims Process, Companies, Quotes

What is a Commercial General Liability Insurance Policy? – Definition

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

What does a Commercial General Liability Insurance Policy Cover?

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: A CGL Insurance Policy provides coverage for Defence Costs and Compensatory Damages arising out of Lawsuits alleging Bodily Injury caused to other people or damage caused to Third-Party Property. Bodily Injury or Property Damage can happen on Insured’s Business Premises or on account of Insured’s Completed Operations or even because of use of the Insured’s Products. Bodily Injury and Property Damage to Third Parties can arise out of the following risk exposures:

• Premises Liability: The Insured Company can be sued for Bodily Injury or Property Damage that occurs on the Insured Company’s Business Premises.
• Products Liability: The Insured Company can be sued for Bodily Injury or Property Damage that occurs when a Consumer uses the Company’s Products which will be covered under a CGL Policy.
• Completed Operations Liability: A Commercial General Liability Insurance Policy provides cover for Completed Operations which covers liability arising out of Bodily Injury or Property Damage occurring away from premises owned or rented by the Insured and arising out of Insured’s work (other than products) that a Company has finished and/or has been accepted and put to its intended use by the Customer.

Bodily Injury under a CGL 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 Wordings to ascertain the exact definition of Bodily Injury.

Property Damage under a Commercial General Liability Insurance Policy means:

• 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
• 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.

2. Coverage B - Personal and Advertising Injury Liability: Section B of a CGL Policy provides coverage for Personal and Advertising Injury Liability which includes cover for Defence Costs and Compensatory Damages that the Insured Company becomes legally liable to pay on account of Personal and Advertising injury caused while advertising the Insured Company’s Products or Services. Personal Injury implies injuries arising out of offenses other than advertising. The Personal and Advertising Injury under a Commercial General Liability Insurance Policy is defined as Injury, including Consequential Bodily Injury arising out of 7 specific offenses listed below:

• False Arrests, detention or imprisonment
• Malicious Prosecution
• The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
• Oral or written publication of material that Slanders or Libels a person or organization or disparages a person’s or organization’s goods, products or services;
• Oral or written publication of material that violates a person’s Right of Privacy
• The use of another’s advertising idea in Insured’s advertisement; or
• Infringing upon another’s copyright, trade dress or slogan in Insured’s advertisement.

3. Coverage C - Medical Payments: The Medical Payments Section of a CGL Policy pays the Medical Expenses for a Bodily Injury caused by an Accident on the Insured’s Premises or because of Insured’s Operations. This is a No-Fault Liability Cover and does not require the Insured to be legally obligated to pay damages. The Medical Payments are made regardless of the Insured’s fault or negligence. The Medical Payments section covers things like First Aid administered at the time of an accident, X-Rays, Ambulance Service etc. This Section will not cover the complete medical expenses for the Insured Party but it will pay only the Emergency First Aid Expenses which the Insured had to incur on account of the Third Party’s Injury to mitigate loss which might arise due to the Injury.

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

The Commercial General Liability Insurance Policy does not cover losses because of the following:

1. Bodily Injury or Property Damage occurring due to willful misconduct of the insured
2. Damages that the insured person becomes obligated to pay on account of Liability assumed in a contract
3. Exemplary or Punitive Damages
4. Expenses or Loss incurred on recall or disposal of product
5. Fines or Penalties
6. Multiplied Portion of any multiplied Damages
7. Bodily Injury or Property Damage arising out of actual or Alleged discharge of Pollutants
8. Damages or Loss arising out of the rendering of insured’s professional service or advice
9. Bodily Injury or Property Damage occurring on account of infringement or violation of any intellectual property laws or rights
10. Bodily Injury or Property Damage to the insured’s employee while performing duties related to the conduct of the insured person’s business

What are the Add-On Covers under a Commercial General Liability Insurance Policy?

The 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 such 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 for their custody and control.
5. Valet Parking Liability: This extension covers the liability arising out of damage to the vehicle while the valet parking personnel drives the vehicle.
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 the Insurance Policy does not cover Gradual Pollution.
7. Liquor Liability: Liquor Liability covers the liability that arises if the customer consumes liquor in a hotel/restaurant and causes Bodily Injury or Property Damage to Third Parties in an intoxicated state.
8. Incidental Medical Malpractice: This is another important add-on cover in a CGL Policy. 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 because of which the guest suffers from illness or injury. The liability falls on the hotel and 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, Subcontractors, 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 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 Extension covers liability expenses for accidents caused by vehicles which are hired and not owned by a company for its work purposes

How much does a Commercial General Liability Insurance Cost?

A Commercial General Liability Insurance Policy with a Limit of Liability of Rs15 Crores costs Rs1.5 lakhs to Rs2 lakhs in India. The Cost of a Commercial General Liability Insurance Policy depends on the following factors:

1. Nature of Business and Industry: CGL Insurance Premiums will be higher for high-risk businesses
2. Limit of Liability Required: The Policy Limit of Liability also impacts the premium of the CGL Insurance Policy. Higher the limit of liability, higher will be the premium of the Commercial General Liability Insurance Policy.
3. Coverage: The level of coverage sought is also an important factor which impacts the Cost of Commercial General Liability Insurance Policy.
4. Prior Claims Experience: The Prior Claims Experience of the Insured will also impact the Cost of Commercial General Liability Insurance Policy

What are the types of Commercial General Liability Insurance Policy?

There are 2 types of Commercial General Liability Insurance Policies available in India:

1. Claims Made Policy: A Claims Made CGL Policy requires that the Covered Incident happens within the Policy Period and the Notification of the Incident also must happen within the Policy Period. As long as the Covered Incident happens after the Policy’s Retroactive Date, the Insurance Company provides coverage under the Policy.

Consider an example where a Company has a CGL Policy with a Policy Period of 1st Jan 2019 to 31 December 2019. A customer of the company suffers a Bodily Injury because of a Defective Product on 1st March 2019 and a claim was reported on 10th March 2019. This means that the Incident happened within the Policy Period and the Notification of the claim also happened within the Policy Period. This is a Covered Claim under the Comprehensive General Liability Insurance Policy.

Now, if the injured individual reported the incident 1 year later on 10 March 2020, the claim would be covered only if the company had continued its CGL Policy Coverage by renewing its Policy and if the Company had opted for a Retroactive Date Cover. This means that the Insured Company must renew its CGL Policy with a Retroactive Date Cover to ensure coverage under the Policy.

2. Occurrence Based Policy: An Occurrence Based Policy provides coverage if the Covered incident happens within the Policy Period regardless of when the Claim was filed. This means that an Occurrence Based Policy will provide coverage even if the Claim was filed after Policy Expiry as long as the Covered Incident happened within the Policy Period. An Occurrence Based Policy is more expensive than a Claims Made CGL Policy.

Consider an example of a Company which has an Occurrence Based CGL Policy with a Policy Period of 1st Jan 2019 to 31 December 2019. A customer of the company suffers a bodily injury because of a defective product on 1st March 2019 and a claim was reported on 10th March 2022. An Occurrence Based Policy will provide coverage since the Incident happened within the Policy Period.

What are the various limits of liability in a Commercial General Liability Insurance Policy?

1. General Aggregate Limit: General Aggregate Limit in a CGL Policy is the maximum amount that the Insurance Company will pay in case of a CGL Claim.
2. Premises and Operations Limit: Premises and Operations Limit in a CGL Policy specifies the amount that the Insurance Company will pay in case of a claim alleging Bodily Injury or Property Damage within the Insured’s Business Premises or because of the Insured’s Operations.
3. Products and Completed Operations Limit: Products and Completed Operations Limit in a CGL Policy specifies the amount that the Insurance Company will pay in case of a claim alleging Bodily Injury or Property Damage because of using the Insured’s Products or because of the Insured’s Completed Work.
4. Personal and Advertising Injury Limit: Personal and Advertising Injury Limit in a CGL Policy specifies the amount that the Insurance Company will pay in case of a claim alleging Personal Injury or Advertising Injury such as Libel, Slander, Breach of Privacy etc.
5. Medical Expenses Limit: The Medical Expenses Limit pays the Medical Bills for small injuries/first aid for Bodily Injury to the Injured Party irrespective of the fault of the Insured Party. The limit applies to each person separately and does not have a deductible.
6. Damages in Premises Rented to You Limit: A Commercial General Liability Insurance Policy provides a reduced limit for Damage to the Premise rented to the Insured. A CGL Policy excludes coverage for damage to property owned, rented or occupied by the Insured and only provides coverage for Third-Party Property Damage. However, this exclusion is carved back by providing coverage for Damage to Premises rented to the Insured.

Key Components of a Commercial General Liability Insurance Policy

The Key Components of a Commercial General Liability Insurance Policy are as follows:

1. Limit of Liability: Limit of Liability in a Commercial General Liability Insurance defines the maximum amount that the Insurance Company would pay in case of a Claim. Companies should choose their limits of liability prudently so that their risk exposures are adequately covered.
2. Deductible: Deductible in a CGL Insurance Policy is the amount that the Insured must pay out of his own pocket before an Insurance Company starts paying out the loss.
3. Retroactive Date: Retroactive Date is the earliest date from which your Commercial General Liability Insurance Policy will cover Insurance Claims arising under the Policy. A Retroactive Date is only applicable to a Claims Made Policy. A CGL Insurance Policy will not provide any Coverage for Claims arising prior to Retroactive Date.
4. Terms and Conditions: It is important to thoroughly read through the Terms and Conditions of the Policy by going through the Commercial General Liability Insurance Policy Wordings in detail. The exclusions should be carefully read to avoid any gaps in coverage in case of a claim.

What is the Claims Process for a Commercial General Liability Insurance Policy?

The Insured needs to follow the below mentioned steps to file a Claim under a Commercial General Liability Insurance Policy:

1. Step 1: Intimate the Claim to the Insurance Company as soon as possible
2. Step 2: Submit the necessary details such as Policy Number, Date and Time of Accident, Description of the Accident, legal notice received etc.
3. Step 3: Submit the documents required for a Commercial General Liability Insurance Claim such as ID Proofs, GST Certificate, Claim Form, Legal Notice etc.
4. Step 4: The Insurance Company appoints a surveyor to examine the facts of the incident.
5. Step 5: If the claim is admissible, the Insurance Company has a Duty to Defend the Insured against the lawsuit by providing an advocate to defend him

Examples of Claims covered by a Commercial General Liability Insurance Policy

A Commercial General Liability Insurance Policy provides coverage for a wide range of claims faced by businesses when they are conducting their normal business operations. Some examples of Commercial General Liability Insurance Claims covered by the CGL Policy are as follows:

1. Slip and Fall Accidents: If a customer trips and falls on your business premises and sustains injuries as a result, the customer might sue the business owner. A CGL Policy will provide coverage for Defence Costs and Compensatory Damages in such a case. Such claims are common for restaurants, hotels and malls.
2. Product Liability Claims: If a product manufactured or sold by the company is defective and causes Injury or Illness to the Consumer, the Consumer might sue the Company. A Commercial General Liability Insurance provides coverage for such claims.
3. Advertising Injury Claims: A Commercial General Liability Insurance Policy also covers claims alleging Libel, Slander, Copyright Infringement arising while advertising the Insured Company’s products. Thus, a CGL Policy provides coverage against a wide range of claims likely to be faced by businesses in everyday situations.

Which Insurance Companies provide a Commercial General Liability Insurance Policy in India?

The list of Insurance companies providing Commercial General Liability Insurance Policy in India are as follows:

1. HDFC Ergo General Insurance Company
2. New India Assurance Company
3. SBI General Insurance Company
4. Bajaj Allianz General Insurance Company
5. ICICI Lombard General Insurance Company
6. Oriental Insurance Company

What are the Benefits of a Comprehensive General Liability Insurance Policy?

A CGL Insurance Policy offers the following benefits:

1. Coverage against Bodily Injury and Property Damage Claims: Accidents are common and if an Injured Party sues the Company for Bodily Injury or Property Damage, the Company might have to pay Crores of Rupees in damages. This might put financial strain on the company.
2. Coverage against Personal and Advertising Injury: An additional Coverage offered under a CGL Policy is that of Personal and Advertising Injury. For example, if the Insured Company gets sued for Copyright Infringement in an Advertisement, such a claim would be covered by a Comprehensive General Liability Insurance.
3. Peace of Mind: A CGL Policy offers Peace of Mind since the Insured is secure in the knowledge that the business is protected against various claims which are increasingly common in everyday scenarios.

Who needs to purchase a Comprehensive General Liability Insurance Policy?

Every business, whether small or large, should purchase a Commercial General Liability Insurance Policy to protect itself against claims of Bodily Injury or Property Damage on the Insured Company’s business premises or on account of using the Insured Company’s Products. A Commercial General Liability Insurance Policy is a must for following Businesses:

1. Schools
2. Hotels
3. Cinemas
4. Malls
5. Pharmaceutical Manufacturers
6. Auto Component Manufacturers

Get Best Quotes for your Commercial General Liability Insurance Policy with Qian!

A Commercial General Liability Insurance Policy is a must-have Insurance Policy for a business. In today’s times of increasing litigation, business owners are at a greater risk of getting sued by third parties like their Customers for any Bodily Injury or Property Damage they might suffer. Companies have been sued for small incidents like a Customer slipping and getting injured within the Business Premises or on account of Company’s Advertisements containing Misleading Information about competitor products.

Though these incidents are small, an adverse ruling by the Court can result in the Company having to pay substantial money towards defending such claims in courts and also towards Compensatory Damages. Such cases are only likely to increase in future. A CGL Policy protects you from such lawsuits and saves you from Crores of Rupees in damages. You can get a FREE 1 Hour Consultation for your Commercial General Liability Insurance at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.

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