Key Takeaways
- The Commercial General Liability (CGL) policy is the FOUNDATION of business liability protection, covering third-party bodily injury, property damage, and personal/advertising injury.
- CGL policies are written on either an OCCURRENCE basis (covers incidents during policy period regardless of when claim is made) or CLAIMS-MADE basis (covers claims made during policy period).
- The NAMED INSURED includes the business entity, its partners, members, managers, and employees—but only while acting within the scope of their duties.
- CGL premiums exceeded $50 BILLION annually in the U.S., making it one of the largest commercial insurance lines.
- Over 75% of CGL claims are related to PREMISES-OPERATIONS liability (slip and fall, customer injuries), not products liability.
CGL Policy Overview
What is Commercial General Liability?
Commercial General Liability (CGL) insurance protects businesses against third-party claims for:
- Bodily injury (physical harm to non-employees)
- Property damage (damage to others' property)
- Personal and advertising injury (defamation, copyright infringement)
Key Concept: CGL covers the insured's legal LIABILITY to others—not damage to the insured's own property (that's commercial property insurance).
CGL Policy Structure
The standard CGL policy (ISO form CG 00 01) contains:
| Section | Content |
|---|---|
| Coverage A | Bodily Injury and Property Damage Liability |
| Coverage B | Personal and Advertising Injury Liability |
| Coverage C | Medical Payments |
| Supplementary Payments | Defense costs, bail bonds, appeal bonds |
| Who Is An Insured | Persons and organizations covered |
| Limits of Insurance | Coverage limits structure |
| Conditions | Policy conditions and duties |
| Definitions | Key terms defined |
| Exclusions | What is NOT covered |
Occurrence vs. Claims-Made
The CGL policy uses one of two coverage triggers:
Occurrence Form
| Feature | Details |
|---|---|
| Trigger | Injury/damage must OCCUR during policy period |
| When Claim Filed | Doesn't matter—can be years later |
| Tail Coverage | Built-in (no additional cost) |
| Best For | Most businesses; provides long-term protection |
Example: Policy period is 2024. Customer slips and falls in December 2024 but doesn't file suit until 2026. The 2024 occurrence policy responds.
Claims-Made Form
| Feature | Details |
|---|---|
| Trigger | Claim must be MADE during policy period |
| Retroactive Date | Limits how far back coverage extends |
| Tail Coverage | Must purchase Extended Reporting Period (ERP) |
| Best For | Professional liability, products with delayed claims |
Example: Policy period is 2024 with retroactive date of 2020. Claim filed in 2024 for injury occurring in 2021 is covered. Claim for 2019 injury is NOT covered.
Comparison Chart
| Factor | Occurrence | Claims-Made |
|---|---|---|
| Coverage Trigger | When injury occurs | When claim is filed |
| Long-tail Claims | Covered automatically | Need prior acts coverage |
| Switching Insurers | Easier | Gaps possible |
| Premium Pattern | Stable | Starts lower, increases |
| Tail Coverage | Included | Must purchase ERP |
Who Is An Insured?
The CGL policy covers these persons and organizations:
Named Insured (Listed in Declarations)
| Entity Type | Who Is Covered |
|---|---|
| Individual | Named individual and spouse (business conduct only) |
| Partnership/Joint Venture | Partners and members |
| LLC | Members and managers |
| Corporation | Officers, directors, stockholders, employees |
| Trust | Trustees |
Automatic Insureds
| Category | Coverage |
|---|---|
| Employees | Acting within scope of employment |
| Volunteer Workers | Acting at direction of named insured |
| Real Estate Managers | Managing covered premises |
| Legal Representatives | If named insured dies |
| Newly Acquired Organizations | For 90 days (unless longer specified) |
Who Is NOT Automatically Insured
- Independent contractors (must be added by endorsement)
- Additional insureds (requires endorsement)
- Subcontractors (separate policies required)
The Two Duties of the Insurer
1. Duty to Defend
- Insurer provides and pays for legal defense
- Applies even if lawsuit is groundless, false, or fraudulent
- Defense costs are IN ADDITION to policy limits (supplementary payments)
- Ends when policy limits are exhausted
2. Duty to Indemnify
- Insurer pays damages the insured is legally obligated to pay
- Subject to policy limits
- Only applies when insured is LEGALLY LIABLE
Important: The duty to defend is BROADER than the duty to indemnify. If ANY allegation in the lawsuit COULD be covered, the insurer must defend.
Supplementary Payments
These are paid IN ADDITION to policy limits:
| Payment | Purpose |
|---|---|
| All Defense Costs | Attorney fees, court costs, expert witnesses |
| Bail Bonds | Up to $250 for traffic law violations |
| Appeal Bonds | Bond cost and up to $250/day for lost wages |
| Prejudgment Interest | Interest from date of judgment |
| Post-Judgment Interest | After judgment, before insurer pays |
| First Aid Expenses | Reasonable first aid costs |
Under an occurrence-based CGL policy with a policy period of January 1-December 31, 2024, which of the following claims would be covered?
Which of the following is included as a supplementary payment under a CGL policy and is paid IN ADDITION to the policy limits?
A CGL policy's duty to defend applies in which of the following situations?
8.2 Coverage A: Bodily Injury and Property Damage
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