Commercial General Liability Insurance

What is commercial general liability insurance?

Commercial general liability insurance protects your business in case of legal actions, covering the expenses of legal representation and claims from third parties for injuries and property damage. It is typically found as part of a business’s comprehensive commercial insurance policy.

There are two basic forms of commercial general liability coverage. Each type has its own advantages and is suitable for different business needs and risk exposures. The two different types of policies are:

Occurrence-based

This type of policy provides coverage for incidents that occur during the policy period, regardless of when the claim is filed. This means if an incident happens while the policy is active, the insurer will cover it even if the claim is made after the policy has expired. Many businesses prefer this form because it provides long-term protection against incidents that might only come to light or be claimed long after they occur.

Claims-made

Unlike occurrence-based policies, claims-made policies only cover claims that are both made and occur during the policy period. This means that the policy must be active both when the incident happens and when the claim is filed. This type of policy often includes a retroactive date, which is the date after which an incident must occur to be covered. Incidents that occur before this date are not covered, even if the claim is made during the policy period and renewals thereafter.

What does commercial general liability insurance cover?

From bodily injury to medical coverage, commercial general liability (CGL) insurance protects against a broad range of common risks businesses face and is a crucial type of insurance coverage for any Canadian business.

Whether you run a restaurant, a retail store, a construction company, or a law firm, unforeseen incidents can occur and affect customers, clients, and other third parties. Items such as collapsing shelves, malfunctioning electrical systems, or even slippery floors and icy steps can lead to personal injuries, including common slips and falls.

Your business might be held responsible for any such mishaps. That’s why understanding the scope and importance of CGL insurance can help business owners safeguard their operations more effectively. Here’s a breakdown of what it typically covers:

Bodily injury and property damage liability

This fundamental aspect of CGL insurance is indispensable for any business. It provides legal and medical expenses coverage if your business is alleged to be liable for causing third-party bodily injury or property damage. This includes a range of scenarios, such as a customer sustaining an injury from a fall due to a wet floor at your premises or damage caused by a malfunctioning product you’ve sold.

The scope of this coverage is broad and critical because such incidents can lead to substantial legal claims. The financial repercussions of these claims, if uninsured, could be severe enough to threaten the survival of a business, especially smaller enterprises. By covering these liabilities, CGL insurance helps ensure that an unforeseen incident doesn’t escalate into a crippling financial crisis for your business.

Personal and advertising injury

This coverage is increasingly vital in the modern business landscape. It protects against claims of libel, slander, defamation, wrongful eviction, or invasion of privacy, which are particularly pertinent risks in the age of social media and online content. Additionally, it covers advertising injury — harm caused by your advertising material, such as accidental copyright infringement or misrepresentation.

This type of injury could stem from a misleading advertisement or a marketing campaign that inadvertently infringes on another party’s rights. The risk of such claims has escalated in the interconnected digital world, where business reputations can be built or broken quickly. Therefore, this coverage is essential for businesses to safeguard against these personal and advertising injuries’ potential legal and financial consequences.

Medical payments

This aspect of CGL insurance offers a proactive way to manage incidents involving non-employees injured in connection with your business. It’s particularly significant because it operates on a no-fault basis. This means that the insurance can cover medical expenses regardless of whether your business is legally at fault for the injury. For instance, if a customer slips and falls in your store, this coverage can quickly address their medical expenses, potentially preventing a more extensive legal claim. This feature is especially beneficial for businesses as it provides an immediate solution to address injuries, which can help maintain good customer relations and mitigate the chance of costly legal disputes.

Legal defence costs

Legal defence costs are a critical component of CGL insurance. Even if a lawsuit against your business has little merit, the costs associated with legal defence can be substantial. CGL insurance covers these costs, including attorney fees, court costs, and any settlements or judgments. This is particularly important for small and medium-sized businesses, where such costs can be disproportionately burdensome. The coverage ensures that a business can defend itself adequately without jeopardizing its financial stability. It offers a form of risk management that allows businesses to operate without the constant fear of being financially overwhelmed by legal fees.

Given the diverse risks that businesses face, it is crucial for Canadian business owners to thoroughly assess their specific needs. This involves considering the nature of their operations, the type of clients they serve, the products or services they offer, and the legal environment in which they operate. Consulting with an insurance professional like the BrokerLink team can provide valuable guidance in choosing an insurance policy to meet the unique demands of your business, ensuring comprehensive protection against a wide array of potential liabilities.

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Why is commercial general liability important?

Between protection against financial loss, legal defence coverage, a better business reputation, and more, there are many reasons why commercial general liability (CGL) insurance is important for Canadian business owners. Additionally, it helps maintain operational continuity and customer trust, which are essential for any business’ long-term success and stability. After all, CGL insurance is not just a business expense; it’s an investment in the company’s future. Here we discuss these reasons in more detail:

Protection against financial loss

At its core, CGL insurance safeguards a business from severe financial consequences arising from various claims. This coverage spans across liabilities like bodily injuries, property damage, and personal and advertising injuries inflicted on third parties. For instance, if a customer slips and falls in a store or if a company’s advertising inadvertently slanders another business, CGL insurance can cover the resulting costs. Without this protection, a business might face devastating out-of-pocket expenses for legal fees, settlements, and judgments, potentially threatening its financial stability.

Legal defence coverage

A key feature of CGL insurance is covering legal costs. Legal proceedings can be expensive and time-consuming, and even if a lawsuit is baseless or frivolous, defending it requires resources. CGL insurance provides the necessary financial support for these defences, including attorney fees, court costs, and any settlements or judgments. This aspect is vital for businesses as it ensures that legal disputes do not drain their financial and operational resources.

Enhanced business reputation

Having CGL insurance not only offers financial security but also contributes positively to a business’s reputation. It demonstrates to clients, customers, and partners that the business is responsible and prepared for unforeseen liabilities. This is particularly important in industries where the risk of third-party injuries or property damage is higher. A business that can quickly and effectively address claims may maintain better relationships with its clients and community, which is invaluable for long-term success.

Operational continuity

The repercussions of a significant legal claim can extend beyond immediate financial loss. Without adequate coverage, businesses may face operational interruptions or even closure. CGL insurance helps ensure that a business can continue its operations uninterrupted in the face of legal claims, maintaining the continuity essential for growth and stability.

Comprehensive risk management

CGL insurance is a key element of a broader risk management strategy. It provides a way for businesses to transfer some of their most significant and common risks to an insurance provider, allowing them to focus more on their core activities and growth.

Meeting contractual obligations

Many businesses encounter situations where CGL insurance is a contractual necessity. This can include leasing a property, securing financing, or entering into client contracts. In these cases, CGL insurance isn’t just a protective measure—it’s a requirement for conducting normal business operations.

Building trust with customers

Accidents involving customers or third parties can occur, and how a business responds to these incidents can affect its reputation and customer relationships. CGL insurance allows a business to handle claims efficiently and responsibly, demonstrating a commitment to rectifying any harm caused by its operations.

Peace of mind

Perhaps one of the most underrated benefits of CGL insurance is the peace of mind it offers business owners. Knowing that they are protected against a range of liabilities allows them to focus on strategic decision-making and business development without the constant worry of potential legal issues.

CGL provides a safety net that enables businesses to operate confidently, knowing they are protected against a multitude of risks that could otherwise threaten their financial stability and operational viability. This insurance is an essential tool in any business's arsenal, helping to navigate the complexities and uncertainties of the business environment.

What does commercial general liability insurance not cover?

Commercial general liability (CGL) insurance provides broad protection for businesses, but it’s important to note that it does not cover every type of business liability or incident. As such, understanding its limitations is also important for businesses to ensure they have comprehensive protection through additional or specialized insurance policies. Businesses must recognize that while CGL insurance forms a significant part of their defensive strategy against liabilities, it’s not an all-encompassing solution.

Below we explore some of the key exclusions from standard CGL policies:

Vehicle liabilities

CGL policies do not cover liabilities related to the use of vehicles. This is a significant exclusion, as many businesses use vehicles for various purposes, from transportation to deliveries. Automobile accidents, damages, or injuries related to business vehicle use require separate commercial auto insurance or fleet insurance. This type of liability insurance is specifically designed to cover vehicles used for business purposes, including collisions, liability claims from accidents, and other vehicle-related incidents.

Professional errors and omissions

CGL policies do not cover liabilities arising from professional errors, mistakes, or negligence. This is typically covered under professional liability insurance or errors and omissions (E&O) insurance, which is important for businesses that provide professional services or advice.

Damage to own property

CGL insurance does not cover damage to property owned, used, or in the care of the business. For this type of protection, businesses need commercial property insurance, which covers buildings, equipment, inventory, and other business property.

Certain product liabilities

CGL insurance often covers general liability claims arising from products, including bodily injuries or property damage caused by a product a business sells or manufactures. However, this coverage is typically limited to incidents that occur away from the business premises and after the product has been sold or distributed. It does not cover the costs associated with product recalls, quality control, or guaranteeing a product’s performance.

Employment practices and injuries

Issues like wrongful termination, discrimination, sexual harassment, and other employment-related issues are not covered under CGL policies. In addition, CGL insurance does not cover injuries to a business’s own employees as it is designed to cover third-party bodily injury or property damage claims from customers, clients, and other third parties.

Contractual liabilities

While some contractual liabilities may be covered, CGL policies often exclude certain types of liabilities arising from the business’s contracts or agreements.

Equipment breakdowns

CGL insurance does not cover losses or damages resulting from equipment breakdown. This is a significant exclusion, especially for businesses that rely heavily on machinery or technological equipment. Equipment breakdown can lead to significant operational disruptions and financial losses. To protect against such risks, businesses often require a separate Equipment Breakdown Insurance policy.

What other types of insurance coverage should your business have?

Whether it’s commercial auto, business interruption, or cyber liability insurance, businesses should consider a variety of other insurance coverages to ensure comprehensive protection. A diversified insurance portfolio is essential not just for meeting legal requirements and contractual obligations but also for providing a safety net that can absorb shocks from various unforeseen events. Here’s a list of other key insurance types that businesses often need:

• Commercial property insurance
• Commercial auto insurance
• Professional liability insurance
• Product liability insurance
• Equipment breakdown insurance
• Business interruption insurance
• Cyber liability insurance
• Employment practices liability insurance
• Contractual liability insurance
• Umbrella insurance
• Directors' and officers' liability insurance

Each business, from a small startup to a large corporation, must carefully evaluate its risk exposure and consult with insurance experts to build a comprehensive insurance plan. This plan will help build a multi-layered defence strategy where each insurance type addresses a different facet of risk, be it related to property, employees, professional services, or specific business activities. While CGL insurance lays the groundwork for risk protection, the inclusion of other insurance products completes and strengthens the business’s overall insurance armour, ensuring thorough and robust protection in an ever-evolving business landscape.

Why choose BrokerLink to handle your insurance needs

As your local insurance brokerage, we completely understand how overwhelming insurance can seem, especially for busy business owners managing countless tasks. This is precisely where our outstanding team at BrokerLink comes into play. Our goal is to simplify your insurance decision-making process, eliminating any headaches or confusion. By choosing to work with our brokers, you’ll have the assurance of knowing that we leverage our broad network of insurance providers to scrutinize policies, ensuring we find the most appropriate coverage for you at an optimal price.

Our commitment lies in delivering reliable and tailored insurance solutions that meet your specific business needs. We aim to give you the confidence to concentrate on expanding your business.

Navigating the intricacies of business insurance in Canada can indeed be complex and sometimes stressful. However, we’re here to guide you every step of the way, ready to offer all the support you need. If you ever feel overwhelmed or daunted by the process, please remember we’re just a call away. Our primary mission is to assist you throughout your insurance journey, providing a sense of support and ease. Your peace of mind is our highest priority, so feel free to reach out to us at any time.

Get your commercial general liability insurance policy today

Having a commercial general liability insurance policy is a critical step for any business looking to safeguard its operations against a wide array of potential liabilities. While commercial general liability insurance covers many risks, it’s important to remember it doesn’t cover everything, such as employee injuries and equipment breakdown. This is where BrokerLink can help. Our insurance experts will assist you in choosing the right CGL policy and offer advice on additional coverages to ensure your business is fully protected. With BrokerLink, gain the confidence of comprehensive protection so you can focus on your business’s growth and success. Contact BrokerLink today to safeguard your business’s future.

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FAQs for commercial general liability insurance

What is covered by a commercial general liability policy?

Commercial general liability insurance typically covers bodily injury, property damage, personal and advertising injury claims made against your business, medical payments for non-employee injuries occurring on your premises or due to your operations, and legal defence costs.

Who does commercial general liability insurance cover?

Commercial general liability insurance covers the business entity, its owners, and employees against liability claims for third-party bodily injury, property damage, and personal injury caused during business operations. How much does CGL insurance cost in Canada?

The cost of commercial general liability insurance in Canada varies depending on factors like the type of business, size, location, industry risks, and coverage limits. It can range anywhere from a few hundred to several thousand Canadian dollars annually.

What is an example of a commercial general liability claim?

An example of a commercial general liability claim could be a customer slipping and falling in a retail store and sustaining an injury. The store could be held liable for medical costs and other damages, and the insurance policy would cover these expenses.

Do I need CGL insurance for my small business?

Commercial general liability (CGL) insurance offers financial protection by covering expenses related to liability claims, bodily injuries, or property damage caused by your business activities. It safeguards your business against the financial impact of lawsuits or legal disputes resulting from incidents such as customer injuries on your premises or damages due to your products or services. This type of insurance is essential for a small business owner to protect your small business from the financial consequences of various liabilities, ensuring stability and peace of mind in the face of unforeseen events.