Occurrences and accidents can happen unexpectedly. A food delivery boy who came to deliver to your office fell from the stairs; your next door office premises got damaged because of repair work undertaken in your office, or an advertisement you published hurt your competitor’s business. These are all incidents that can leave your company legally liable if the third party files a lawsuit against your company. That is when the Commercial General Liability Insurance (CGL) Insurance can provide some relief to the company.
CGL is one of the most basic business liability insurance that every company must consider. From the time a company is formed and the business starts operation, it becomes liable. A failure to understand this or the lack of awareness could cost a company, money or even a shutdown.
Whether you are a small manufacturing unit, a stationery store or an individual contractor, if you think you are “too small” to the possibilities of legal risks, you might be being ignorant. Here are some key points about CGL Insurance that will change the way you think about your business and insurance needs:
What is CGL Insurance?
CGL is a liability insurance that covers third party losses only. CGL Insurance provides financial cover against liabilities arising due to bodily injury or property damage to a third party. A third party could be anyone- a vendor, a stranger, a visitor, a person working in the next-door office, a neighboring office premise or a passerby. Damages could be caused by a product or service that a company provides on or off the business site.
The CGL coverage provided by the policy would be related to the expenses such as payment towards the repair of property damage, medical and hospital expenses of an injured person, and claims against psychological damages faced by the third party, among others.
Here’s an example: Recently, a business owner invited his friend for a post-work jam session in his office. His friend fell off a ladder. The visitor sued his friend (the business owner), the company to which the office premises belonged and a third company that owns the building. In this case, the injured made sure that he filed claims against all the parties involved. In a nutshell, every business is liable.
What are liabilities for a business?
Liability in business means a company is responsible for any damages occurring to a third party due to the company’s business activities. As soon as people decide to start a business, they are exposed to a large variety of liability risks. In a number of cases, even though a business might not be at fault, the verdict in a court of law could still be against the business. In such a case, insurance coverage can help ease the burden of losses and expenses that a company might face.
What are the risks covered by the CGL Insurance?
The Commercial General Liability Insurance policy covers both, public and product liability. What does that mean? It means that the insurance covers losses arising due to bodily injury or property damage to a third-party due to:
- A company’s business activity
- A company’s products or services
- Due to advertising injury
Medical expenses of the third party, personal or psychological injury to the third party and property damage expense claims are risks that can be covered by the CGL Insurance.
What are the types of losses/expenses covered by CGL Insurance?
Now we know that the Commercial General Liability insurance policy covers liabilities arising due to third party injuries and property damage.
These are the costs it could cover:
- Medical expenses of the injured
- Legal expenses in case of a lawsuit
- The lawyers’ fees
- Court-related expenses
- Settlement expenses in case the company loses the lawsuit
- Damage caused by the product or service of a company
- Legal costs of product liability lawsuits
- Expenses arising from advertising injury such as the invasion of privacy
- Reputational injury lawsuit
- Infringement of copyright or trademark
- Legal costs
Why should a business have Commercial General Liability insurance?
Every business has general liabilities and hence it would make sense that all kinds of enterprises – small businesses, individual contractors, distributors, manufacturers, wholesalers and retailers, and large corporations – should consider having a business risk insurance such as CGL.
The industries most susceptible to claims that fall under CGL are manufacturing units, advertising and media firms, companies providing services and products, and businesses that operate out of office premises, among others. Even individual contractors such as architects, business development consultants, and freelance professionals could give themselves a safety cushion in uncertain occurrences with the help of CGL Insurance.
What are the claims that the policy might not cover?
- In case fines and penalties are charged
- When a product is recalled by a business
- If a product or a part of it is repaired or replaced
- In case of willful or deliberate non-compliance with statutory provisions
- When there is a copyrights, patents or trademarks infringement
- In the case of radioactive toxic explosives or other hazardous materials
- If the claims are made prior to policy inception
- Under the circumstances of war risk and terrorism
Why do SMEs need CGL policy?
No matter how large or small a company, businesses have several liabilities. SMEs operate in vigorous and fast-moving market environments. Many business owners assume that they might not need the CGL Insurance or that it is just an unnecessary expense for the company. But what about the liabilities mentioned above? Business owners fail to understand that they are susceptible to risks.
Imagine that your neighboring office premise is damaged because of repair work in your office. Upon inspection, the neighboring office is deemed unfit for occupying it and has to be brought down. Even the smallest of damages can cost your company a fortune.
In such a scenario, an expensive lawsuit could have severely debilitating effects on the company’s worth. To protect the company from severe losses and expense, it would help if small and mid-sized enterprises purchase a CGL policy.
If you’re looking to purchase a CGL policy for your business, PlanCover would address your queries and concerns, and help you with your business insurance plans. Moreover, PlanCover’s approach of transparency at every stage of the policy’s life cycle ensures that you know what’s happening with your policy. For more details visit our website.