Generally speaking the commercial general liability insurance policy covers liability for your premises and operations, for your products and completed operations liability and for some miscellaneous liability coverage that are specifically listed. The CGL or Commercial General Liability policy can be issued on either and occurrence form or on a claims made form. A simplistic differentiation of the forms is that the occurrence form covers an occurrence that occurs during the policy. Whereas the claims made form covers claims that are presented during the policy period. Usually accounts that are considered more of a high risk are offered the claims made form and those risks where exposures are not as high are offered the occurrence form by the insurance carriers.
No matter which form you offered if you as the business owner have prior knowledge as to an injury, a claim, or potential loss both forms are going to exclude coverage for that incident. Even though there’s an automatic exclusion for known potential losses failing to disclose those losses can be misrepresentation and thus void your entire contract.
All CGL insurance policies basically have two parts to the insuring agreement, the duty to defend and the duty to pay damages. The duty to defend does not diminish if the suit is groundless nor has no basis. There is a limit as to the amount of damages that will be paid. This is specifically indicated on the policy declarations page. The duty to defend does stop if none of the allegations or claims that are being made would be covered under the CGL policy. The insurance carrier can settle any claim, unless agreed to beforehand by all parties, as they see fit and at their discretion. Their duty to defend you ceases once they pay the policy limits for the damages agreed to. The insurance carrier will defend the named insured and all parties indemnified by the insured with the carrier’s approval. These indemnities could be by endorsement and/or by contract.
In regards to the duty to pay damages some insuring agreements agreed to pay on behalf of whereas others agreed to indemnify in paying damages. Clearly it is in your best interest to have an agreement that pays on behalf of otherwise you’ll have to pay damages and wait to be reimbursed. Typically the types of damages that will be covered have to do with bodily injury claims that can also be sickness, disease, and/or death claims. Intentional acts are not covered nor are claims that result in punitive damages. Special damages and general damages will be covered up to the policy limits.
Property damage claims includes physical injury to tangible property including the loss of use of that property discovered. If tangible property is not physically injured there’s usually no claim paid. The usual definition of occurrence means an accident and also includes repeated exposures to basically the same ongoing conditions.
The coverage territory is usually the United States and its territories and possessions. It also includes the territory of Canada and Puerto Rico and Guam and the air and water space in between these places. The products completed operations coverage territory is usually worldwide but the claims must be brought within US territories. This has been a general overview of the Commercial General Liability insurance policy better known as the CGL policy. We have more in depth articles on the subject throughout our website.