General liability insurance
Business liability coverage, also called commercial general liability or CGL, for claims that a business is legally responsible for third-party bodily injury, property damage, or covered personal and advertising injury. It can pay covered damages, medical expenses and defense costs, subject to the policy's exclusions, conditions, endorsements and limits.
Also called: commercial general liability, cgl, cgl policy, commercial general liability policy, general liability
If a customer slips in your shop, a contractor's crew damages a client's property, or an ad draws a libel claim, general liability is the coverage a business usually turns to first. The NAIC (opens in a new tab) lists four categories it addresses: bodily injury, damage to others' property, personal injury including slander and libel, and false or misleading advertising. It can also pay the medical expenses of an injured person. The policy's declarations, exclusions, conditions, endorsements and limits decide what a given claim actually receives.
How the payment works, with real numbers
The standard ISO form, CG 00 01 (opens in a new tab), says the insurer will pay the damages the insured becomes legally obligated to pay for covered bodily injury or property damage, and will have the right and duty to defend the insured against a suit seeking those damages. Take a $1,000,000 each-occurrence limit, a figure used in a City of Calexico public contract requirement (opens in a new tab). The damage and defense amounts below are illustrative, not average losses.
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| Scenario | Covered damages | Defense and claim expenses | Insurer pays | Left for the business |
|---|---|---|---|---|
| Customer injury | $180,000 | $35,000 | $215,000 | $0, if no deductible, retention, exclusion or dispute applies |
| Larger injury | $1,200,000 | Not shown | Up to the $1,000,000 limit | $200,000 of damages above the limit |
After the first claim, $820,000 of the each-occurrence limit remains ($1,000,000 minus $180,000). On the ISO form, supplementary defense payments do not reduce the limits, though endorsements or other forms can change that. Damages above the limit fall to the business or to another policy that applies.
Limits and options that change the payout
- Each-occurrence limit. The most the policy pays for covered bodily injury and property damage from one occurrence. Public contract examples commonly specify $1,000,000.
- General aggregate limit. The most for covered claims subject to it during the policy period. Public contract examples commonly specify $2,000,000, and the ISO form says the limits apply regardless of how many insureds, claims, suits or claimants there are.
- Products-completed operations aggregate. This applies to injury or damage arising from products or finished work, commonly $2,000,000 in public contracts.
- Personal and advertising injury limit. Commonly $1,000,000 in public contracts.
- Occurrence or claims-made wording. Occurrence coverage generally responds to injury or damage during the policy period, while claims-made coverage generally depends on when the claim is made and reported, according to the Texas Department of Insurance (opens in a new tab). Oregon's contracting guidance (opens in a new tab) calls for occurrence coverage.
- Deductible or self-insured retention. This sets what the business pays before or alongside the insurer.
- Endorsements. Additional insured, waiver of subrogation, designated premises, contractual liability, pollution and cyber endorsements can expand, restrict or redirect coverage.
The guide to what insurance a small business needs shows where general liability sits among other coverages.
Where you meet the term
General liability is mainly a business term. It appears in commercial general liability policies, in business owner's policies where it is packaged with commercial property and sometimes business interruption, in commercial package policies, and in contractor insurance requirements. Personal and auto policies carry their own liability sections, which are not commercial general liability.
On paper, it shows up on a quote, the declarations page, a binder, a renewal notice, a certificate of insurance, an endorsement schedule or claim correspondence. A certificate is evidence of insurance and does not replace the policy, so coverage is decided from the policy contract itself. The ISO form requires notice of an occurrence that may lead to a claim as soon as practicable.
What Connecticut and New York law change
Neither state requires every business to carry general liability; requirements come from a license, contract, lease or public contract. The state rules that matter govern cancellation and renewal. Under Conn. Gen. Stat. § 38a-324 (opens in a new tab), after a commercial risk policy has been in effect for more than 60 days, or after a renewal takes effect, the insurer may cancel only for statutory reasons such as nonpayment of premium or fraud.
In New York, Insurance Law § 3426 (opens in a new tab) requires written notice of cancellation and conditional renewal on covered commercial policies. Conditional-renewal notice is required for changes such as reduced coverage, an increased deductible, an added exclusion or a premium increase above 10 percent, subject to the statute's qualifications, and the notice period for nonrenewal or conditional renewal is generally 60 to 120 days before expiration. The guide to Connecticut small business insurance covers local specifics.
Questions to ask an agent or insurer
- "What are my each-occurrence, general aggregate, products-completed operations and personal-and-advertising-injury limits?" The limits set the most the policy can pay for each category of loss.
- "Is this policy occurrence-based or claims-made, and what dates control coverage?" Claims-made wording turns on retroactive dates, reporting rules and any extended-reporting coverage.
- "Which exclusions or endorsements remove coverage for my actual work, products, vehicles, professional services, pollution, cyber incidents, employees or employment claims?" Standard coverage does not replace commercial auto, workers' compensation, professional liability, employment practices, property or cyber coverage.
- "Are defense costs inside or outside the liability limits, and is there a deductible or self-insured retention?" The answer changes how much of a judgment or defense bill the business pays.
- "What must I do, and how quickly, after an occurrence, claim, demand or lawsuit?" Failing to follow the policy's conditions can affect how the claim is handled.
Frequently asked questions
Standard general liability has defined edges, and other commercial coverages are built to fill them.
Does general liability cover professional mistakes?
Usually not. Professional liability, also called errors and omissions insurance, addresses claims from professional services or the failure to provide them, according to the Texas Department of Insurance (opens in a new tab). A business can need both coverages. The guide to general liability vs professional liability compares them.
Is general liability included in a BOP?
A business owner's policy commonly includes general liability, commercial property and business interruption coverage, per the NAIC (opens in a new tab). It does not automatically include professional liability, commercial auto, workers' compensation, cyber or employment practices coverage.
Does general liability cover employee injuries?
Standard coverage generally excludes employee work-related injuries, because workers' compensation is the usual coverage for them, according to the NAIC (opens in a new tab).
Does general liability cover vehicle accidents?
Standard coverage generally does not cover liability from operating a vehicle, so a business generally needs commercial auto liability for that exposure, according to the NAIC.