- September 29 2023
- | Insurance
As an entrepreneur, you know how important it is to protect your business. One of the best ways to do that is by purchasing comprehensive commercial general liability insurance. However, many business owners assume that such a policy will cover any and all liabilities that may arise. Unfortunately, that is not the case. There are several significant exclusions commonly found in CGL policies that you need to be aware of.
Failing to understand these exclusions could leave your company vulnerable in the event of a claim. In this article, we will explore some of the major exposures typically not covered under a standard CGL policy so you can make informed decisions about the coverage that is right for your unique business needs. Protecting your company’s assets and future starts with understanding the fine print.
What Is Commercial General Liability Insurance?
Commercial general liability insurance protects your business from financial loss due to liability claims arising from injury or property damage. It covers legal costs if you are sued due to an accident that happens on your business premises or as a result of your operations.
What Does It Cover?
Commercial general liability insurance covers third-party bodily injury and property damage claims, as well as the legal costs to defend against such claims. It includes coverage for:
- Slips and falls on your business property
- Injuries from products you manufacture or sell
- Accidents arising from your operations or services
- Damage to third-party property in your care, custody or control.
What Is Excluded?
Commercial general liability insurance does not cover everything. Common exclusions include:
- Workers’ compensation claims. These require separate workers’ comp insurance.
- Auto liability. This requires separate commercial auto insurance.
- Professional liability. This requires separate professional liability insurance, also known as errors and omissions insurance.
- Pollution liability. This requires separate pollution liability insurance.
- Intentional acts. Damage or injury intentionally caused by you or your employees is excluded.
- Wear and tear. Gradual deterioration or depreciation of property is not covered.
By understanding what commercial general liability insurance includes as well as its limitations, you can make sure you have adequate coverage for your business risks. Consulting with an insurance professional is recommended to determine if additional policies may be needed for complete protection. With the proper insurance coverage in place, you can have peace of mind that your business is shielded from catastrophic financial losses due to unforeseen circumstances.
Key Exclusions in Commercial General Liability Policies
As a commercial policyholder, it is important to understand the key exclusions typically found in commercial general liability (CGL) policies. While CGL policies provide broad coverage for third-party bodily injury and property damage claims, they do contain certain exclusions.
Key Exclusions in Commercial General Liability Policies
One of the most significant CGL exclusions is for expected or intended harm. Injuries or damage that the policyholder intentionally caused will not be covered. Similarly, contractual liability arising from assumed contractual obligations is typically excluded. For example, if you sign a contract agreeing to indemnify another party and then face a claim from them, a CGL policy would likely not provide coverage.
Pollution-related claims are also commonly excluded, though limited pollution coverage can sometimes be purchased as an endorsement. Claims arising from the ownership or use of aircraft and watercraft are typically excluded as well.
Professional services are another area prone to exclusion. CGL policies are not intended to cover claims arising from the provision of professional services, advice or consultation. Medical malpractice, legal malpractice and similar professional errors or omissions would not be covered.
In summary, while CGL policies provide broad coverage for general business liabilities, policyholders should be aware of common exclusions like expected harm, contractual obligations, pollution, aircraft/watercraft, and professional services. Consulting with legal counsel on the specific terms and conditions of your CGL policy is the best way to determine how exclusions may impact your coverage.
Why You Need an Attorney to Review Your Policy
A commercial general liability (CGL) insurance policy provides essential coverage, but it also contains complex legal terms and exclusions that can be difficult to understand. To ensure you have the coverage you need and avoid unpleasant surprises, it’s prudent to have an attorney review your CGL policy.
Complex Policy Language
CGL policies are complicated legal documents filled with ambiguous phrases, undefined terms, and subtle nuances that can be hard to grasp without legal training. An attorney can analyze your policy to determine if any provisions are unclear or potentially problematic. They can also negotiate with your insurance carrier to clarify or amend confusing policy language.
Exclusions and Limitations
CGL policies contain various exclusions, limitations, and caps on coverage that you may not fully comprehend. For example, many CGL policies exclude coverage for claims arising from professional services, pollution, employment practices, and prior known acts or omissions. An attorney can review your policy’s specific exclusions and limits to verify that you understand what is and isn’t covered. They can also try to broaden coverage by removing or modifying unreasonable exclusions.
The coverage limits in your CGL policy determine the maximum amount the insurer will pay for any single claim or in the aggregate over the policy term. If your limits are too low, you could face significant uninsured losses in the event of a large claim. An attorney can evaluate your business risks and recommend appropriate limits to help ensure you have sufficient coverage.
Additional Insured Provisions
If other parties have an interest in your CGL coverage, like a landlord or business partner, your policy may need to include “additional insured” provisions naming them as insureds. An attorney can draft and negotiate additional insured provisions to properly extend coverage in accordance with your contractual obligations.
In summary, a CGL policy is a complex legal contract that requires an attorney’s review to understand fully and help maximize your coverage. Their guidance can be invaluable in avoiding coverage gaps, claim denials, and other unforeseen issues. For comprehensive CGL coverage you can count on, partner with Leverty & Associates.
Why is it important for businesses in Nevada to have CGL insurance?
As a business owner in Nevada, it is crucial to understand what commercial general liability (CGL) insurance covers and, equally important, what it does not cover. CGL insurance protects your company from liability for property damage, injuries, and legal costs that could arise from your business operations. However, there are certain exposures that fall outside the scope of a standard CGL policy.
CGL policies do not provide coverage for liability arising from professional services, advice, or consultations you provide. If your business offers professional services, you will need to obtain separate errors and omissions (E&O) or malpractice liability insurance. For example, a law firm, accounting firm or consulting company would need E&O insurance to cover liability for the professional services they render.
If your company manufactures, distributes, or sells products, CGL insurance does not extend coverage to liability for any damages caused by those products. Product liability insurance is required to protect against such claims. For instance, a company that produces food products, machinery or toys would need product liability insurance.
Property Owned by You
CGL policies do not provide coverage for property that you own. A separate property insurance policy is needed to insure buildings, equipment, vehicles, and other assets your business owns. CGL insurance only covers liability for third-party property damage, not damage to property you own or control.
CGL insurance does not cover liability for injuries or illnesses sustained by your employees. Workers’ compensation insurance is mandated by law in Nevada to provide coverage for work-related employee injuries and occupational diseases. CGL policies only apply to third-party individuals, not your own employees.
In summary, while commercial general liability insurance is essential for any business, it does not constitute a comprehensive insurance solution on its own. Additional policies are required to address professional, product and property exposures as well as workers’ compensation requirements. Speaking with an insurance professional can help determine the appropriate types and limits of coverage needed for your specific business and risks.
Leverty & Associates: Your Nevada Commercial General Liability Experts
Leverty & Associates is a law firm focused on commercial general liability insurance. We have decades of combined experience helping Nevada business owners understand their CGL policies and pursue claims when needed. This expertise allows us to provide tailored guidance to ensure you have the coverage that is right for your company’s operations and risk exposure.
For any business, it is important to understand both what commercial general liability insurance covers as well as what it excludes. At Leverty & Associates, we make it our mission to ensure our clients have a clear picture of their CGL coverage and options to address any gaps through additional specialized policies. Please contact us for an insurance review and to discuss how we can protect your company from risks of liability.
As you have seen, commercial general liability insurance does not cover everything. While it provides essential protections for many common business risks, you need to understand its limitations. Certain types of claims like professional errors, pollution, and data breaches require separate coverage. The policies also do not protect directors, officers, and employees from personal liability in many situations.
Given the potentially catastrophic costs of uninsured risks, you must work closely with legal and insurance professionals at Leverty & Assoiciates to evaluate your unique exposures. They can help determine what additional policies you may need and ensure there are no gaps in your coverage. No business wants to face a major loss only to find that the necessary protection was lacking.
With the right risk-management program in place, you can operate with confidence, knowing your company and its assets are properly shielded from harm. But that program starts with comprehending both what commercial general liability insurance does and does not include. Contact us in Reno at (775) 322-6636 and in Las Vegas at (702) 507-0201 to set up a free consultation to get your business covered correctly.