In this article, we are going to discuss one important 'kavach’ for protection mechanisms offered by the Indian insurance industry for your business. Yes, we are going to talk about commercial general liability insurance and how it can protect your business.

  • Comprehensive Protection: Commercial General Liability (CGL) insurance provides broad coverage against various liability risks faced by businesses.
  • Bodily Injury Coverage: CGL insurance protects businesses from claims or lawsuits arising from bodily injuries suffered by third parties, such as customers, visitors, or vendors, on the business premises.
  • Property Damage Coverage: It also covers property damage caused to third-party properties, including buildings, vehicles, or other assets, as a result of the business operations or negligence.
  • Products and Completed Operations Coverage: CGL insurance extends coverage for liabilities arising from products sold or services rendered by the business, including injuries or damages caused by defective products or completed work.
  • Personal and Advertising Injury Coverage: CGL policies typically include coverage for personal and advertising injuries, such as defamation, libel, slander, copyright infringement, or invasion of privacy in the course of business advertising or promotions.
  • Legal Defense Costs: CGL insurance covers the legal defense costs, including attorney fees, court expenses, and settlements or judgments, incurred in defending against covered liability claims or lawsuits.
  • Medical Payments Coverage: It may provide coverage for medical expenses incurred by third parties who sustain injuries on the business premises, regardless of fault, helping to mitigate small injury claims and fostering goodwill with customers.
  • Additional Insureds: CGL policies can often be extended to include coverage for additional insured parties, such as landlords, contractors, or vendors, providing liability protection for their activities related to the insured business.
  • Contractual Liability Coverage: CGL insurance may cover liabilities assumed by the insured under contractual agreements, such as indemnification clauses or hold harmless agreements, subject to policy terms and conditions.
  • Tailored Coverage Options: CGL policies can be customized to meet the specific needs and risks of different businesses, including coverage limits, deductibles, endorsements, and additional insureds, ensuring comprehensive protection against liability exposures.

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CGL insurance is highly recommended for businesses to safeguard themselves against potential legal liability that may arise from their operations. The policy is suitable for businesses of all sizes and types, including small businesses, startups, and large corporations. This coverage is provided to company owners, managing directors, operations heads, and anyone who is engaged in business operations. It also protects sellers, distributors and manufacturers. The premium for CGL policy depends on various factors, such as the nature of the business, the size of the business, and the extent of coverage required. CGL insurance contains both the public and the product liability.

Here are a few instances of situations in which your company could be held liable for a variety of costs, including medical and legal expenses and compensatory and punitive damages:

  • A customer slips on loose flooring while visiting your establishment and gets hurt.
  • One of the employees in your construction or painting company leaves the water running by accident, causing significant damage to a customer's home.
  • A lawsuit has been filed against your company, alleging that your advertisements contained false and misleading information.

An example of Commercial General Liability Insurance

The following is an insurance coverage example of a CGL policy.

A. B Textiles Ltd. has obtained a large international order of INR 500 crores. The foreign client insists on sending Mr. Martin, a senior executive, to the manufacturing unit of A. B. Textiles Ltd. for a thorough examination of the stocks. Mr. Martin trips and falls while going around the manufacturing unit, injuring his back.

Now the client sues A. B. Textiles Ltd., stating that they should have taken better care of the work premises. Fortunately, A. B. Textiles had purchased a CGL coverage that covered both the compensation and the legal costs resulting from the suit.

Types of policies under CGL Insurance

CGL policies can be classified into two types:

  1. Claims-made Policy: A claims-made CGL policy offers general liability insurance coverage only when a claim is made, regardless of when the claim event occurs. This form of business liability coverage is useful for claims where there is a date gap or a lag between the occurrence of the incident and the date on which the claim was submitted. However, please keep in mind that the CGL policy covers only those claims made while the policy is in effect. The retroactive date is defined as the date of first coverage. The retroactive date would be indicated on subsequent policy renewals to indicate the continuity of coverage.
  2. Occurrence Policy: An occurrence CGL policy is a type of CGL insurance that covers any claims for injuries received while the CGL policy is in effect. Under these contracts, the insured has the right to seek compensation for damages incurred during the policy's active period, even if several years have passed and the insurance agreement is no longer in effect. If there is evidence that the cause or triggering event occurred during the period when the insurance was in force, a claim can be filed long after the contract expired.

An occurrence policy covers events that occur years later and might be responsible for injury or damage. For example, if a person is exposed to hazardous chemicals, he may become unwell years later.

What does Commercial General Liability Insurance cover?

A CGL insurance policy will often cover the costs of your legal defence as well as all damages if you are held liable—up to the policy limits. Because of the detrimental impact that a lawsuit can have on a business and the frequency with which such liability suits occur these days, CGL coverage is one of the most significant insurance products. A typical CGL coverage includes:

  • Bodily Injury and Property Damage Liability

This coverage protects against losses resulting from the insured's legal liability for bodily injury or property damage to others. Such injury or damage should originate from non-professional negligent acts or liability resulting from their premises or business operations. In the absence of physical bodily harm, mental injuries and emotional discomfort can be considered bodily injuries.

It also compensates for third-party property damage expenses such as repair, replacement and renovation charges. For example, it will cover the expenses if a third-party laptop, phone, or other items are damaged. It would also cover the renovation of adjacent buildings damaged by an unintentional fire on your premises.

Please note that claims related to workers' compensation and employment practices liability are not covered. However, such insurance can be acquired separately. Also, the pollution liability of business is not covered and might be added as an endorsement. This coverage, however, is quite restricted, and high-risk organisations should consider acquiring a separate environmental liability policy. Other risks such as liquor liability and professional liability are also excluded. An experienced insurance professional can assist you in determining the appropriate endorsements for your type of business.

  • Advertising infringement

A CGL policy will come in handy if you commit deliberate or unintentional copyright infringement of the logo or tagline of another brand or product. This includes slander and libel for creating indirect injury to a third party's image. In such circumstances, the insurer will pay the settlement and legal expenses as well as protect your business from closure.

  • Invasion of privacy

In general, CGL insurance does not provide coverage for claims related to invasion of privacy, as these are typically considered intentional acts and not accidental or unexpected events. However, there are some situations where CGL insurance may cover privacy-related claims, such as:

  • Data Breaches: If a business experiences a data breach that results in the unauthorized disclosure of personally identifiable information or sensitive data, the CGL policy may provide coverage for resulting claims.
  • Employee Privacy Violations: If an employee of the business violates the privacy rights of another person while acting within the scope of their employment, the business may be held liable and the CGL insurance policy may provide coverage.
  • Medical payments

Limited medical payments coverage includes compensation for injuries experienced by a non-employee as a result of an accident on the insured's premises or while remaining exposed to the insured's business operations. This coverage can be triggered without the requirement of a judicial order. Minor medical claims can thus be resolved quickly and without the need for litigation. It covers all required and reasonable medical, ambulance, surgical, hospital, professional nursing, and burial expenditures for a person wounded or killed in an accident on the insured's property or originating from business operations. Because coverage is given on a no-fault basis, there is no defence or legal liability coverage—as opposed to bodily injury and property damage and personal and advertising liability.

  • Product quality issues

The coverage for product quality claims under an insurance CGL policy usually falls under product liability coverage. This coverage provides protection for claims arising from the use of the insured's products that cause bodily injury or property damage to a third party. Such claims can arise from defects in the design, manufacturing, labelling, or packaging of a product, as well as failure to warn of potential hazards associated with the product. Examples of product liability claims include injuries caused by faulty machinery, food-borne illnesses caused by contaminated food products, and property damage caused by defective consumer goods.

To be covered under a CGL insurance policy, the product liability claim must have occurred during the policy period, and the policy must not contain any specific exclusions for product liability claims.

What does Commercial General Liability Insurance not cover?

  • Expected or intended injury or any liability the insured is not liable to pay under normal circumstances but is now paying due to the assumption of liability
  • A failure or delay by anyone on behalf of the company to perform an agreement or contract as per its terms.
  • Liabilities already covered by other policies ( such as liabilities under workmen's compensation)
  • Liabilities arising out of the conduct of the Insured’s business
  • Pollution
  • Damage to the work of the insured
  • Damage to the insured’s property
  • Damage to the insured’s product
  • Professional liability
  • A deficiency, inadequacy, defect or dangerous condition in the product
  • Personal or advertising injury
  • Electronic data Recall of products, works or impaired property and product guarantees
  • loss of use of other property originating from sudden and accidental physical damage to the software after it has been put to the intended use
  • Errors and Omissions.

It is common for clients to demand that businesses have a CGL insurance cover before entering into a business tie-up. Many clients require that their suppliers or partners have adequate insurance coverage as a condition of doing business with them. This is because clients want to ensure that they are protected against any potential liabilities that may arise from their business relationship.

Clients may also require businesses to name them as additional insured on the CGL policy. This means that the client is covered under the policy for any liabilities arising from the business operations. By requiring businesses to have a CGL policy, clients can minimize their own risk exposure and protect themselves from potential financial losses.

Therefore, it is important for businesses to have a CGL policy in place and maintain a good business relationship with them. A CGL policy can provide clients with the assurance that the business has taken steps to protect itself and its clients against unforeseen liabilities.

Is general liability insurance market growing?

Let's check some numbers.

  1. Anticipated Annual Growth Rate (CAGR 2023-2028): The market is expected to experience a compound annual growth rate (CAGR) of 6.20% between 2023 and 2028, leading to a market volume of US$0.77 billion by 2028.

The footnote:

Hope from the discussion above, you have got a fair idea of what commercial general liability insurance is and how it can protect your business. We have also discussed other important aspects of a commercial general liability insurance policy in India. For the best recommendation on commercial general liability insurance, you may contact BimaKavach. Here, you can get the best recommendation for any insurance product in just 5 minutes.