A Guide to General Liability Insurance

What is General Liability Insurance?

General Liability Insurance is commercial insurance coverage that protects a business from financial responsibility to a third party for liability arising from property damage, personal injury, or advertising injury caused by the services a policyholder provides The insurance company that issues it investigates claims made against the policyholder, determines if they are in the scope of coverage, settles them if possible, and defends the policyholder if a lawsuit is filed. It also pays claims for which the policyholder is found legally responsible.

What Does General Liability Insurance Cover?

A general liability insurance policy covers loss caused by non-professional negligent acts such as:

• Third party bodily injury — loss arising from injuries sustained by non-trespassing third-parties arising from negligent acts that take place on premises the policyholder owns
• Third party property damage — loss property owned by a non-trespassing third-party that occurs because of negligent acts by the policyholder or a person under its control
• Personal & Advertising injury — loss arising from “reputational” torts such as libel, slander, and copyright infringement

A general liability insurance policy also covers:

• Defense of litigation against the policyholder with respect to covered claims
• Indemnification of the policyholder on claims for which it is found legally liable to the extent of policy limits and subject to policy exclusions

Examples of General Liability Insurance

Some examples of typical General Liability Insurance are:

• Product liability insurance — coverage for faulty product or machinery design
• Advertising liability insurance — coverage for slander or libel
• Aviation liability insurance — coverage for claims arising from ownership, operation, manufacture, and maintenance of aircraft
• Landlords’ liability insurance — coverage for a rental property owner’s specified acts
• Bailee liability insurance — coverage for claims against persons or entities that store the property of others

What General Liability Insurance Doesn’t Cover

General Liability Insurance typically excludes:

• Deliberate Acts — Bodily injury or property damage arising from the policyholder’s intentional acts
• Contractual Liability — Bodily injury or property damage for which the policyholder must pay because it has agreed to assume liability under a contract
• Alcoholic Beverages — bodily injury or property damage caused by a person’s intoxication or for specified related reasons

What Are the types of Liability Insurance?

Types of GLI include:

• Professional liability insurance — covers lawyers, physicians, and financial experts for acts or omissions in the performance of professional duties
• Employment Practices Liability Insurance — covers employers for specified wrongs arising out of an employment relationship
• Directors and Officers Liability Insurance — covers leadership for wrongful acts committed in the course of performing organizational duties
• Garage & Garage Keepers’ Liability Insurance — covers car dealers, gas stations, repair shops, parking garages and similar entities for liability arising from specified damage to vehicles during the course of operations

Why Do Businesses Need General Liability Insurance?

A business needs CGL to:

• comply with local, state, or federal law that require liability insurance for conduct of the business
• comply with provisions under a contract with a customer or another entity
• attract or retain clients
• protect a business from individual financial liability
• protect business assets

What should I look for in a strong GLI policy?

To ensure the retention of fully comprehensive CGL coverage, a prospective policyholder should:

• Ascertain the issuing insurer’s financial ratings through authoritative sources such as A.M. Best, Moody’s or Standard & Poor’s
• Verify the issuing insurer is admitted in the jurisdiction in which the policyholder conducts business and is accordingly required to participate in the jurisdiction’s insurance guaranty program
• Seek a sufficient general aggregate limit offering for its needs and within its budget
• Seek out carriers with sufficient product options and completed operations limits that are within budget
• Seek out coverage with sufficient medical payments limits that are within budget

Additional General Liability Insurance FAQs

Is general liability insurance tax deductible?

The ordinary and necessary costs of insurance are currently tax deductible.

How do I get proof of general liability insurance?

An insurance producer or issuing company provides proof of insurance by furnishing a “certificate of coverage” followed by the insurance policy

What factors affect the cost of a commercial general liability policy?

The cost of a CGL is impacted by various factors, such the policyholder’s business or profession, where it conducts business, its loss history, the amount of insurance purchased, and the self-insured retention, if any.

Do contractors need to buy commercial general liability coverage?

Some jurisdictions, such as Florida, require that a contractor have liability insurance as a condition of licensure

What is the difference between general liability and professional liability insurance?

The main difference between general liability and professional liability insurance is that CGL provides coverage for a wide variety of individuals and business types, whereas professional liability insurance protects specified experts such as doctors, lawyers, and financial intermediaries from damage that clients suffer because of faulty professional services.