GENERAL LIABILITY INSURANCE
And Operations Exposure
General Liability insurance covers business liability exposures.
Business liability is liability that arises out of the conduct
of a business. A business has a number of liability exposures,
one of the most important of which is its premises and operations
exposure: liability arising out of the business location or
the activities of the business. This includes liability for
bodily injury, property damage and personal and advertising
injury. Personal and advertising injury includes such things
as slander, libel, copyright infringement, invasion of privacy,
false arrest, wrongful entry onto another’s premises,
and malicious prosecution.
example of the premises and operations liability exposure
is a claim against Sandle Appliances for injuries a customer
suffers when she slips and falls on a newly waxed floor inside
the store. Another example is a claim against Breckenridge
Manufacturers for libelous statements made about a competitor’s
- Completed Operations Exposure
business may also be exposed to liability by defects in its
products or completed operations. Examples of this exposure
include a claim against Hooks Bakery for injury resulting
from the sale of spoiled cream puffs and a claim against Magic
Carpets Inc. for injury that results when a customer steps
on a carpet tack left behind by Magic’s workers.
/ Contingent Liability Exposure
business may not only be held liable for its own actions,
but in certain cases, may be held liable for the actions of
others. A business may have indirect or contingent liability
for the actions of its employees, agents, contractors, or
subcontractors. An example is a claim against First National
Bank when a passerby is injured at the construction site of
a new bank branch being built by Rolland Construction Company.
This liability exposure is sometimes called owners and contractors
Covered By Commercial General Liability Insurance
are other types of liability exposures faced by businesses,
Work-related injuries to employees
Contractual agreements in which the insured assumes liability
Ownership, maintenance or use of autos, watercraft and aircraft
because of the unique nature of these liability exposures,
they are either excluded outright from the Commercial General
Liability policy or may be covered only in certain circumstances
or for limited amounts. More complete protection for these
liability exposures is available under contracts specifically
designed to cover them.
business’s liability for the premises and operations
exposures, products-completed operations exposure and indirect/contingent
liability exposure can all be covered by the Commercial General
Liability (CGL) policy.
GENERAL LIABILITY COVERAGE PART
Commercial General Liability policy may be included in the
CPP (Commercial Package policy) or issued as a stand-alone
policy. The coverage provided by the Liability section of
the Businessowners policy is similar to that provided by the
Commercial General Liability coverage part must include the
Common Policy Declarations
Common Policy Conditions
One or more CGL coverage forms
Any mandatory endorsements
AND CLAIMS-MADE FORMS
are two primary CGL coverage forms: the occurrence form and
the claims-made form. While the two forms contain basically
the same coverages, exclusions and conditions, they differ
in how coverage under the form is activated, or “triggered”.
Liability policies have been written on an occurrence basis.
Coverage under the occurrence form is triggered by damage
or injury that occurs during the policy period.
Joe Street is injured when a small piece of steel from the
defective motor of a Niftycare lawnmower hits him in the eye.
Provided the claim is otherwise covered, Niftycare’s
occurrence policy that was in effect at the time the injury
occurred will apply to the loss, whether Joe makes his claim
against Niftycare during the policy period or years later.
There is coverage for any covered occurrence that happens
during the policy period, even if the claim is made after
the policy expires.
on April 7, 1995, a ladder on which Brian Barker is standing
falls apart. He lands on his back and complains of some slight
pain, but nothing major. Because the injury seems so slight,
Brian does not file a claim for the injury. In 1997, however,
he experiences recurring back pain and consults a physician,
who decides the problem is a result of the 1995 injury. Brian
files a claim against the manufacturer of the defective ladder,
Newstep Ladder Company. Newstep had an occurrence CGL with
Company A from 1990-1996; it took out a new occurrence CGL
with Company B in 1997. Company A would pay for Brian’s
occurrence form is suitable for many insureds, but for others,
it is not the best choice.
an individual who owns and renovates rental properties. From
1961-1971, he painted his properties with a lead-based spray
made by a well-known manufacturer. In 1998, he is diagnosed
as having developed lead poisoning from exposure to the lead-based
paint. This individual may be able to recover damages from
the paint manufacturer under all of the occurrence policies
in effect between 1961 and 1971. This insurance may be interpreted
in several ways as to how it should be paid, and the insurance
companies may not have set aside adequate reserves to take
care of such long-range exposures since there is no way of
adequately predicting such losses. The claims-made form was
developed to address these types of considerations.
under the claims-made form is triggered when a claim is first
made against the insured during the policy period, even if
the actual injury or damage occurred at another time. This
means that if Joe Street from our earlier example files a
claim against Niftycare, it will be covered under the policy
in effect when the claim is filed, rather than the policy
in effect when the injury occurred. Under the claims-made
form, claims filed during the policy period are covered, even
when the occurrence took place prior to the effective date
of the policy.
we have said that a claim made during the policy period is
covered by a claims-made form even if the injury did not occur
during that period, there may be some date before which a
claims-made policy will not pay. This is known as the retroactive
date, and it provides some measure of protection against previous
losses that may have occurred before the claims-made form
retroactive date is listed in the CGL Declarations. The insured
has three options for the retroactive date:
Use the same date as the policy effective date
Use an earlier date than the policy effective date
Use no retroactive date
agent must be careful when selling a new CGL to avoid creating
a coverage gap (a period of time during which the insured
is without coverage). For instance, if the expiring policy
is a claims-made form and it is being replaced with another
claims-made form, the retroactive date of the new policy should
be the same as the old one to avoid a coverage gap.
the retroactive date can also create a coverage gap. To avoid
this situation, the rules by which claims-made CGL coverage
is governed require that the insured give written consent
to advancing the retroactive date. And, even with the insured’s
consent, the retroactive date may be advanced only for one
of the following reasons:
A different insurance company is writing the new policy.
A substantive change in the insured’s operations has
resulted in a greater exposure to loss.
The insured did not provide the insurer with information the
insured knew or should have known that would have been material
to the insurance company’s decision to accept the risk,
or the insured did not provide information requested by the
The insured requests that the retroactive date be advanced.
gap can also occur when a claims-made policy is replaced by
an occurrence form. However, a special feature built into
the claims-made form, called the extended reporting period,
can help close potential coverage gaps.
reporting periods (ERP) provide coverage for claims made after
the policy’s expiration date. The policy provides an
extended reporting period if:
The claims-made form is cancelled or not renewed
The insurer renews or replaces the form with insurance that
has a retroactive date later than the date shown in the Declarations
of the current form
The insurer renews or replaces the form with an occurrence
an extended reporting period is in effect, it cannot be cancelled.
basic extended reporting period of either 60 days or five
years is available automatically and free of charge under
first consider the 60-day basic ERP. When a claims-made policy
is terminated, a 60-day basic ERP automatically becomes available.
The insured does not have to apply for it, and no premium
is charged. It provides automatic coverage for any valid claim
made during the 60 days after the policy expires, as long
as the incident occurred between the expiring policy’s
retroactive date and its expiration date.
suppose the insured is aware of an event that took place before
the claims-made policy expired, but suspects that claims may
first come in after the 60-day basic ERP. The insured has
up to 60 days following policy expiration to report the occurrence
or offense to the insurer. In this case, the five-year basic
ERP automatically applies. Claims for damages arising from
the reported occurrence can be brought any time during the
Supplemental Extended Reporting Period endorsement is also
available. It provides an unlimited extension of the reporting
period, although the event causing the claim must still occur
between the retroactive date and the policy expiration date.
This ERP takes effect at the end of either the 60-day or five-year
ERP, whichever applies. The insured must request this endorsement
and pay an additional premium.
A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY
CGL forms provide three coverages:
Coverage A - Bodily Injury And Property Damage
Coverage B - Personal And Advertising Injury Liability
Coverage C - Medical Payments
A - Bodily Injury And Property Damage Liability pays
those sums the insured becomes legally obligated to pay as
damages because of bodily injury or property damage to which
the insurance applies. To be covered, the BI (Bodily Injury)
or PD (Property Damage) must be caused by an occurrence, which
is defined in the CGL as an accident, including continuous
or repeated exposure to the same general harmful conditions.
that the occurrence form covers only BI or PD that occurs
during the policy period. The claims-made form covers BI or
PD that occurred on or after the retroactive date, if any,
and for which a claim for damages is first made against the
insured during the policy period. A claim is considered to
have been made when notice of claim is received and recorded
by any insured or by the insurer, whichever comes first.
addition to paying those sums the insured is legally obligated
to pay, the company has the right and duty to defend an insured
against any suit alleging liability for damages to which the
are a number of important exclusions that apply to Coverage
A, including liability:
Arising out of intentional injury
The insured assumes under a contract or agreement
For those in the alcoholic beverage business, any liability
imposed by law concerning alcoholic beverages
For work-related injuries covered under Workers Compensation
or Employer’s Liability laws
For most pollution losses that result in bodily injury, property
damage or clean-up costs
Resulting from the maintenance, operation or use of aircraft,
autos or watercraft, except as specified in the policy
exclusion for liability assumed under contract has some important
exceptions. Liability that the insured would have incurred
even without assuming it under contract and liability assumed
under insured, or incidental, contracts is covered. Insured
contracts include leases, sidetrack agreements, easement agreements,
contracts with municipalities required by ordinance, elevator
maintenance agreements, and contracts relating to the insured’s
business under which the insured assumes another’s liability.
excluded under Coverage A is liability:
Arising out of the transportation of mobile equipment by auto
or the use of mobile equipment in any prearranged racing or
related activity, or while practicing or preparing for such
Assumed under a contract for war or warlike acts
For damage to property owned, rented or occupied by the insured
or in the insured’s care, custody or control (does not
apply to property and its contents for premises rented to
the insured for seven consecutive days or less)
For damage to the insured’s own product arising out
of the product itself
For damage to the insured’s own work
For claims based on:
Defects, deficiencies, inadequacies, or dangerous conditions
in the insured’s products or work; and
Delays or failures to properly perform contracts.
Related to recall of the insured’s products or work
because of a known or suspected defect
For bodily injury arising out of personal and advertising
exception to certain exclusions under Coverage A protects
the insured against legal liability for negligent acts that
result in fire damage to a premises rented to the insured
or temporarily occupied by the insured with the owner’s
B - PERSONAL AND ADVERTISING INJURY LIABILITY
B provides Personal And Advertising Injury Liability coverage.
It covers liability arising out of offenses such as libel
or slander. Like Coverage A, Personal And Advertising Injury
Liability coverage may be offered on either an occurrence
or claims-made basis.
Coverage B exclusions are divided into two categories:
Exclusions that apply to both personal and advertising injury
Exclusions that apply to pollution losses
arising out of any of the following is excluded under both
personal and advertising injury:
Knowingly inflicting injury that violates the rights of another
Oral or written publication of material that the insured knows
is false, but publishes anyway
Material that was published before the effective date of the
Criminal acts committed by or at the direction of the insured
Assumed under contract, except for liability the insured would
have incurred even without assuming it under contract
Breach of contract
Failure of goods, products or services to conform with advertised
quality or performance
Incorrect price descriptions of goods, products or services
Any offense committed by an insured who is involved in the
business of advertising, publishing, broadcasting, or telecasting
B also contains a blanket exclusion for any type of pollution
loss. You may be wondering why an exclusion for pollution
losses is needed for Coverage B. In the past, some insureds
were able to recover pollution liability losses under Coverage
B because the policy’s definition of personal injury
includes “wrongful entry into another’s premises”.
The CGL now contains a pollution exclusion for Coverage B
to prevent insureds from obtaining personal and advertising
injury coverage for pollution liability.
A AND B - SUPPLEMENTARY PAYMENTS
following Supplementary Payments are also available for Coverage
A and B. These are paid in addition to the amounts paid for
Liability claims under Coverage A and B and do not reduce
the limits of insurance available for these coverages.
All expenses incurred by the insurance company
Up to $250 for the cost of bail bonds
Cost of bonds to release attachments
Reasonable expenses incurred by the insured to assist in the
investigation and defense of a claim, including up to $250
per day for loss of earnings
All costs taxed against the insured in a suit
Prejudgment and postjudgment interest
Defense costs for an indemnitee
these costs are classified as covered damages, they will reduce
the policy’s limit of liability. The Supplementary Payments
section provides that, if certain conditions are met, the
pay the defense costs for an indemnitee - a party who is not
an insured who is under contract to provide goods or services
to an insured - in addition to the policy’s limit of
liability, and ;
provide a defense for the indemnitee.
the conditions that must be met for this coverage to apply
are that the insured and the indemnitee must be named in the
same lawsuit and the liability assumed by the insured must
be covered by the policy.
C - MEDICAL PAYMENTS
C of the CGL coverage forms is Medical Payments. It pays for
medical expenses incurred for bodily injury caused by an accident
on premises the insured owns or rents, on ways next to premises
the insured owns or rents, or arising from the insured’s
operations. To be covered, the expenses must be incurred and
reported to the insurer within one year of the date of the
accident. Medical payments are made without regard to fault,
unlike other coverages under the CGL forms.
under Coverage C of the CGL are injuries:
To any insured or to a tenant or employee of the insured,
including a person injured on a part of the insured’s
premises that he or she normally occupies
Payable under Workers Compensation or related laws
That occur to a person while he or she is taking part in athletics
Included in the products-completed operations hazard (these
would be paid under Coverage A)
Excluded under Coverage A
Related to war
IS AN INSURED
the CGL, who is considered an insured under the policy depends
on how the named insured is designated in the CGL Declarations:
as an individual, partnership or joint venture, limited liability
company, or organization other than a partnership, joint venture
or limited liability company.
Duties in The Events Of Occurrence, Offense, Claim, Or Suit
Commercial General Liability Coverage Forms And Endorsements.
LIABILITY INSURANCE (Excess)
is an excess liability policy introduced in the United States
in 1947 by Lloyd’s of London. Today, numerous
American insurers have their own version of the policy. The
contract is designed to: (1) provide high excess limits of
liability coverage for the business firm, and (2) fill any
gaps of liability coverage, over an amount of self-retention
to be borne by the insured. Policy vary but $10,000 or $25,000
are typical amounts which the insured would have to pay himself
in the case of liability from an uninsured peril. If the claim
exceeded the retention, the umbrella insurer would then pay
up to the policy limits.
excess or policy limits are usually quite large,
ranging from one million dollars up. The insurer requires
that the insured carry a full Comprehensive General Liability
Policy with relatively high limits. These required limits
are typically $100,000 or $300,000. In case of loss, the basic
contract will pay first and when it is exhausted, the umbrella
will pay the next million or up to its particular limits.
The reasons for this requirement are that the umbrella insurer
has the benefits of the basic insurer’s underwriting
and loss prevention activities.
the benefits you get, umbrella policies are the best
buy in insurance today. These relatively cheap policies raise
your liability coverage to a million dollars or more, and
are available as additions to your auto or homeowners policies.
Liability insurance protects you from paying a high legal
award that might be assessed against you by a jury. For example,
if you have injured someone in an auto accident and you are
found negligent in a court of law, the jury could award a
judgement against you of hundreds of thousands of dollars.
Liability insurance makes that payment the insurance company’s
that you have auto insurance of 100/300/50, which is quite
common today. That means that if you are sued and must pay
as the result of an auto accident, the insurance company will
only pay up to $300,000 for bodily injuries to two or more
people. However, with juries routinely awarding much more
than that to accident victims, many people - especially those
with a higher coverages to insulate them from the possibility
of a high jury award.
umbrella policy does just that. For an additional
$100 or so annually, you can be protected up to $1,000,000
or more for liability. There are umbrella policies available
that offer protection up to $5,000,000 for those who really
think they need it.
you buy umbrella coverage, most companies require that you
have either $100,000 worth of liability coverage on your home
or $300,000 worth of liability protection on your car. In
most situations, $100 or so will buy you $1,000,000 worth
umbrella policy increases your liability coverage.
It is not necessary to buy an umbrella that covers auto liability
and another that covers your homeowners. It’s all combined
in one policy.
though you can probably buy an umbrella policy from either
your auto or homeowner’s insurer at a discount, you
may get even a better deal elsewhere on an umbrella. Shop
around for the best umbrella coverage you can find.
policies then, provide a cushion against large negligence
awards that could wipe you out financially. The same company
that sells you your homeowners or auto policy will probably
also offer umbrella coverage. If you purchase your auto and
homeowners policies from the same company, you may be able
to buy an umbrella policy that will cover both at a discount.
note that the precise coverage afforded is subject to the
terms, conditions, and exclusions of the policy as issued.
This explanation is intended only as a guideline. This information
is not intended to be considered investment, tax or legal
advice. It is provided, for your education only. This is not
an insurance contract. All terms and coverages are defined
solely by your policy.
more details, please call a PaulBalep representative toll-free
1-800-964-8614 to receive a free, no-obligation
quote. Like so many satisfied clients, we think you’ll
be happy you did. And to set up a meeting to discuss additional
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or e-mail us at firstname.lastname@example.org.
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