The commercial general liability (CGL) policy provides remarkably broad coverage for property damage and bodily injury claims. As with all insurance policies, understanding what is not covered is just as important as understanding what is covered. Because the CGL policy is the foundation of most business insurance plans, it is critical to understand general liability exclusions.
For this article, we will examine the most recent ISO commercial general liability coverage form CG0001-0413. Please note that earlier versions of the CGL form have slight verbiage differences and insurance underwriters may not always use the latest edition when issuing a policy.
The CG0001 policy starts off with an insuring agreement that details exactly what type of claims are covered, where they are covered (the “coverage territory”) and for who they are covered (the insured):
We will pay those sums that the insured becomes 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.
Terms in quotations such as “bodily injury” and “property damage” are defined later in the policy:
“Bodily injury” means bodily injury, sickness or disease sustained by a person, including death
resulting from any of these at any time.
“Property damage” means: a. 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 b. 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.
Understand General Liability Exclusions
Seems simple enough, right? In a nutshell, the general liability policy pays for bodily injury and property damage claims for which the insured is legally responsible. An important sentence found in the insuring agreement is “to which this insurance applies” which leads us to the 17 exclusions found in nearly every commercial general liability policy.
- Expected or intended injury
- Contractual liability
- Liquor liability
- Workers compensation and similar laws
- Employers liability
- Aircraft, auto, or watercraft
- Mobile equipment
- Damage to property
- Damage to your product
- Damage to your work
- Damage to impaired property or property no physically injured
- Recall of products, work, or impaired property
- Personal and advertising injury
- Electronic data
- Recording and distribution of material or information in violation of law.
The Intent of Exclusions
Most of these exclusions exist because they are intended to be covered by another type of business insurance or are addressed elsewhere in the policy. For example, the auto exclusion exists because that exposure should be covered by a commercial auto policy. Liquor liability is excluded because that coverage can be purchased separately for businesses that require it. The damage to property exclusion can be mitigated with an installation floater or certain CGL endorsements. Workers compensation and employers liability are also covered by a separate type of policy.
Other exclusions serve to clarify when coverage applies. The mobile equipment exclusion, for example, simply clarifies that coverage is not provided by the CGL policy when (1) the equipment is being transported by auto, or (2) if the equipment is being used in a prearranged race, stunt, or demolition activity. Outside of those circumstances, the use of mobile equipment is covered for “bodily injury” and “property damage” claims.
Lastly, some exclusions exist because the circumstances are not insurable (war) or the cause of the claim is an intentional act (expected or intended injury).
Read and Understand Your Insurance Policy
As a policyholder, it is your responsibility to read and understand general liability exclusions and the terms and conditions of your insurance policies. At Safeguard Insurance we want our customers to be educated and comfortable with the insurance policies we have helped them secure. Please contact us today with any policy or coverage questions.