Commercial General Liability (CGL)

What it is

Commercial General Liability insurance, earlier called Comprehensive General Liability and shortened to CGL, combines several third-party liability covers in one policy. These are usually premises and operations liability (the public liability part), products liability and completed operations. Personal and advertising injury is often available as an extension.

The form originated in the US market and has been adapted by Indian insurers. Many medium and large businesses use it. Whether a combined policy or separate ones suit a particular business depends on its exposures, the limits and the policy wording.

The parts

Premises and operations liability deals with injury or damage to third parties arising from the insured's premises and day-to-day activities. Products liability deals with harm caused by goods the insured has supplied.

Completed operations covers the insured's liability for work that has been finished and handed over. If a defect in the completed work causes injury or damage later, this section responds. It is often part of the policy but sometimes has to be added, so the schedule must be checked.

Personal and advertising injury, in India often an extension and not part of the base policy, protects against claims such as defamation (libel and slander), wrongful eviction, false arrest, invasion of privacy and copyright infringement in advertising. These are injuries to reputation or rights, not to body or property.

What it leaves out

CGL covers third-party bodily injury and property damage, and defence costs. It excludes the employer's liability for injuries to its own employees, which is covered by employees' compensation (Workmen's Compensation) or employer's liability insurance.

Standard CGL excludes pollution liability except for sudden and accidental pollution events, such as a tank rupture. Gradual pollution, like industrial effluents released over time, requires separate environmental liability insurance.

Many CGL policies now carry a cyber exclusion, removing cover for liability arising from data breaches and cyber attacks. That exposure is insured under a separate cyber policy, and the wording of each has to be checked.

Limits and who asks for it

The aggregate limit is the total maximum amount the insurer will pay for all claims during the policy year. Once the aggregate is exhausted, no further claims are covered until renewal.

CGL is commonly required by multinational companies, exporters, contractors and businesses bidding for corporate or government contracts. For a construction company it can cover liability to third parties while work is going on, such as injury to passers-by or damage to neighbouring property, and, with a completed-operations extension, liability after handover. Project contracts usually also require Contractors' All Risks cover, which has its own third-party section.

Rules at a glance

Key points

• CGL combines premises and operations liability, products liability and usually completed operations in one policy.
• Completed operations covers liability arising from finished work after it has been handed over.
• Personal and advertising injury covers claims such as defamation and copyright infringement in advertising, and in India is often an extension.
• Injuries to the insured's own employees are excluded and belong under employees' compensation or employer's liability insurance.
• Pollution is excluded except for sudden and accidental events, and cyber liability is often excluded.
• The aggregate limit caps the total paid for all claims in the policy year.

Common misunderstandings

• The older name Comprehensive does not mean everything is covered: employees' injuries, gradual pollution and often cyber liability are excluded.
• The aggregate limit is not a limit for each claim: it is the total for all claims in the policy year.
• Personal injury in this policy does not mean bodily injury: it refers to claims such as defamation, false arrest and invasion of privacy.
• CGL does not replace Contractors' All Risks cover on a project: contracts usually require that as well.

Questions people ask