Commercial General Liability (CGL) insurance is a must for contractors. It protects your business from financial loss for bodily injury (somebody you hurt) or property damage (something you damage). It also covers harm you cause to the reputation of others. CGL policies allow your firm to continue operating as usual when faced with both real and fraudulent claims of negligence or wrongdoing. It is also usually required before being awarded a project.
What Does Commercial General Liability Insurance Protect?
CGL insurance covers costs to defend and/or indemnify a claim for:
- Bodily injury or property damage suffered by third parties on your premises or related to your business operations
- Bodily injury or property damage suffered by a third party because of your product
- Contractors added as “additional insureds” (third-party vendors, subcontractors, etc.)
- Medical expenses for a third-party Injury
- Personal and advertising injury (your business is accused of slandering a competitor or vendor)
When might claims arise?
Incidents that lead to bodily injury or property damage that are a direct result of work carried out by your employees (and potentially your subcontractors) on a job site could lead to claims. The same would be true for incidents at your company’s premises.
What is typically excluded?
Policies vary greatly from carrier to carrier, so it is imperative for contractors to review policy forms with a specialist. Exclusions could exclude or limit coverage from certain geographic regions or for specific operations (e.g. residential coverage). CGL also usually does not cover damages from toxic waste/pollution exposure by your business to others, by any design-work performed by your employees or subcontractors, or any property damage to your own business. Other typical policy exclusions include:
- Claims resulting from virus, bacteria, or fungi, lead, silica or silica-related dust
- Contractual liability
- Damage to your work
- Employment practices liability
- Expected or intended injury
- Punitive damages
- Workers’ compensation
What if work is subcontracted?
The subcontractor’s CGL policy provides the primary coverage and your policy would provide excess coverage. It is very important that your subcontractors provide you with a certificate of insurance and policy endorsements to prove that they are adequately covered prior to your hiring them.
How does a policy work and how long should you carry coverage?
Contractors should carry CGL coverage for as long as they are in business. For peace of mind, coverage should continue even after operations cease in the event a claim is filed years later. The CGL policy operates on an occurrence basis, meaning if your company has a claim during a policy period, the carrier insuring you on the date of the occurrence would respond to the claim.
How to determine the right amount of coverage?
In the construction industry, your rating on CGL is based on payroll and pricing is determined by your past loss history, safety culture, and type of operations.
A typical CGL policy will provide a $1,000,000 per occurrence limit with a $2,000,000 policy aggregate. Higher limits can be obtained, and this is usually accomplished by purchasing an Umbrella policy that will sit over the CGL.
What is the typical length of a policy?
This policy is placed on an annual basis and will need to be renewed 12 months after the initial purchase.
What happens if your business situation changes?
Each year your broker should review your exposure using a renewal questionnaire and meet with you to discuss any changes in operations, revenues, geographical areas, etc. Communication is the key to ensuring your company is protected from all angles.