For commercial businesses, commercial general liability (GCL) insurance is a must. The problem is that the policies are often confusing and we aren’t necessarily sure of what we’re paying for, what is covered, and what we’re getting in exchange for our money.
I hope to remove some of the mystery surrounding general commercial liability insurance and to clear up any misconceptions about your policy that you may have had.
The Insuring Agreement
Although the language varies, the standard CGL policy is there to ensure that the following terms are met:
The company will pay for all bodily injury or property damaged for the insured assuming that the incident occurred within normal parameters of operating or being employed at a business. The verbiage is going to change, but essentially it’s stating that should an employee get injured while on the job – or performing job-related duties – the insurance company will pay for any and all of the medical bills and property damage which occurred during said incident. These claims must be filed with the insurance company, and this triggers the policy.
When this happens, the policyholder has two principal obligations: the duty to defend and indemnify, meaning the policyholder has the right to defend against these sorts of lawsuits and/or the amount of money being sought in relation to the lawsuit.
The Duty to Defend
This section of the policy contains language that details what the insurance company can and can’t do in the case of a lawsuit. In general, you’re giving the insurance company the right to fight frivolous or fraudulent claims – or claims they deem to be frivolous or fraudulent – on your behalf. In essence, the insurer is stating that they have the right to conduct their own investigation into the event (or chain of events), collect evidence, and appear in court should the need arise.
This is the insurer’s way of protecting their investment should the need to defend a lawsuit arise.
The Duty to Indemnify
An indemnity clause in the policy, the Duty to Indemnify means that the insurance company is willing to take on your obligation to pay for loss or damage that is incurred after an incident. This falls under the legal definition of “right to indemnity,” which simply means that while under contractual agreement, the insurer agrees to protect the insured from liability, loss or damage.
Other Policy Terms
All contracts are different, and the policy that your business uses might be nothing like the policy that a similar business holds with their insurer. The additional or “other” policy terms merely outlines standard operating procedure for how you give notice of claims, and it may impose various other responsibilities or conditions to the policy.
These four sections are the basic tenets of a commercial general liability contract.
As always, it’s advisable to contact a legal professional to review any language that isn’t immediately apparent should you enter into a contract with an insurer. In the mean time, this should help you to understand the complex language of a CGL policy. And if you run a commercial operation and you aren’t already covered by a CGL policy, it’s a must that you get one immediately. You can get a business general liability insurance quote here.