In our many years of providing business insurance in Las Vegas, we have found that commercial general liability insurance (CGL) coverage is one of the most commonly requested, and yet least understood types of policy. Part of the problem may be in the name: “general liability”. It sounds broad, all-encompassing, and comprehensive. In many respects the CGL policy does offer very broad coverage, however, it is important that business owners understand that the CGL policy contains exclusions that narrow the scope of coverage to specific circumstances.
First, let’s talk about the basics of what the CGL policy covers. There are several editions of the CGL policy in common use and ISO tends to update the verbiage every few years. For the purpose of this article, we will use the 2007 edition, CG0001 12/07. Section 1.1.a – Coverages, provides the policy insuring agreement (what is covered). It reads as follows:
We will pay those sums that the insured be-comes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.
The basic coverage provided by the CGL policy is “bodily injury” and “property damage”. Subject to a few other provisions in the insuring agreement such as occurrence date and policy territory, that is the essence of general liability insurance. If you become obligated to pay for bodily injury or property damage then the CGL policy will respond. The claim can be a result of your ongoing operations at a job site, such as an artisan or service contractor. Or your premises exposure, such as a retail store, office or warehouse. The entire insuring agreement (sections 1.a-e) takes up just over 1 page. Section 2, Exclusions, takes up the next 4 pages and are critically important for a business owner to understand.
There are 17 specific coverage exclusions in the CGL policy form, listed as A. thru Q:
A. Expected or intended injury
B. Contractual liability
C. Liquor liability
D. Workers compensation and similar laws
E. Employers liability
G. Aircraft, auto or watercraft
H. Mobile equipment
J. Damage to property
K. Damage to your product
L. Damage to your work
M. Damage to impaired property or property not physically injured
N. Recall of products, work or impaired property
O. Personal and advertising injury
P. Electronic data
Q. Distribution of material in violation of statutes
Every exclusion in the CGL policy has a specific intention. In some cases, such as exclusion O. personal and advertising injury, a separate limit of coverage is provided elsewhere in the policy. Other exclusions, such as D, E, F & G are typically covered by other types of insurance (commercial auto insurance, workers compensation, and pollution liability). Exclusions J, K, and L are intended to limit or remove coverage for defective workmanship or a bailee exposure. Not every business needs this type of coverage and many insurers will offer a buy-back by endorsement or a separate policy. For a more detailed explanation of exclusion J, read our blog posting The Damage to Property Conundrum.
Liquor liability, exclusion C, only applies if “you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages”. So, if you serve booze at a company party or other social function and a claim occurs you probably have coverage. For businesses that sell, manufacture or distribute alcoholic beverages, specialized liquor liability coverage is available.
Exclusion F, pollution liability, is very broad and eliminates coverage for any release or escape of “pollutants”. An exception is made for pollutants released by a “hostile fire”. Pollution, in the context of the CGL policy, can include not only chemicals, fumes, and vapors but also mold, mildew, and other environmental contaminants. The intent here is for businesses that have a pollution exposure to consider purchasing specialized environmental insurance.
You can download and review the entire CGL policy form here. As a business owner, it is critically important you understand the coverage provided to you by a general liability policy. At Safeguard Insurance, we have the experience necessary to evaluate your business, explain your options, and ensure you have a policy that fits your operations. Contact us today for a no-obligation proposal or review of your Nevada business insurance.