Introduction to Commercial General Liability (CGL)
Commercial General Liability (CGL) insurance is the cornerstone of business protection, providing coverage for third-party claims of bodily injury and property damage. For those studying for the complete Independent Adjuster exam guide, understanding the CGL form is critical, as it is one of the most frequently adjusted policy types in the commercial sector.
The CGL policy is designed to protect a business from financial loss due to liability for its own negligence. Unlike first-party property insurance, which pays the insured for their own losses, the CGL is a third-party coverage. It pays others for damages the insured is legally obligated to pay. This includes not just the final settlement or judgment, but also the significant costs associated with legal defense, which are usually provided in addition to the policy limits.
To prepare effectively, candidates should use practice Independent Adjuster questions to drill down into the nuances of the various coverage triggers and exclusions discussed in this article.
Premises/Operations vs. Products/Completed Operations
| Feature | Premises and Operations | Products and Completed Operations |
|---|---|---|
| Location | At the insured's location or job site | Away from the insured's premises |
| Timing | While work is in progress | After work is finished or product is sold |
| Example | Customer slips on a wet floor in a shop | A deck collapses two weeks after construction |
| Limit Applicable | General Aggregate Limit | Products-Completed Operations Aggregate Limit |
Coverage A: Bodily Injury and Property Damage
Coverage A is the primary section of the CGL policy. It covers sums the insured becomes legally obligated to pay as damages because of Bodily Injury (BI) or Property Damage (PD). For a claim to be covered under Coverage A, the injury or damage must be caused by an "occurrence."
- Bodily Injury: Includes sickness, disease, or death resulting from physical injury.
- Property Damage: Includes physical injury to tangible property (including loss of use) and loss of use of tangible property that is not physically injured.
- Occurrence: Defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Adjusters must pay close attention to the Care, Custody, or Control exclusion. Generally, the CGL policy will not cover damage to property that is in the insured's possession for repair or storage, as that is better handled by a Bailee's policy or Inland Marine coverage.
Common CGL Exclusions
Coverage B and Coverage C
Coverage B: Personal and Advertising Injury
Coverage B protects against liability arising from specific offenses such as libel, slander, false arrest, invasion of privacy, and copyright infringement in the insured's advertisement. Unlike Coverage A, which requires physical injury or property damage, Coverage B focuses on non-physical personal injuries.
Coverage C: Medical Payments
Medical Payments coverage is unique because it is no-fault coverage. It pays for small medical expenses (typically up to a specific limit like $5,000) for bodily injury caused by an accident on the insured's premises or because of the insured's operations. This is often used as a "goodwill" payment to prevent a larger lawsuit, as the claimant does not need to prove the insured was negligent to collect.
Adjuster Tip: The Duty to Defend
Understanding Policy Limits
Adjusters must be proficient in calculating how limits apply to multiple claims. The CGL policy typically features two types of aggregates:
- General Aggregate Limit: The maximum amount the insurer will pay for the sum of all damages under Coverage A (except products-completed operations), Coverage B, and Coverage C during a single policy period.
- Products-Completed Operations Aggregate Limit: A separate bucket of money specifically for claims falling under that category.
- Each Occurrence Limit: The most the insurer will pay for any one occurrence, regardless of the number of persons injured or the number of claims made.
Once the aggregate limit is exhausted by the payment of claims, the insurer's obligation to defend and pay for future claims ends for the remainder of that policy period.