Commercial General Liability Insurance: what is it?
If business insurance were a value meal at McDonalds, Commercial General Liability insurance would be the Quarter Pounder with Cheese. Before you add the fries and the drink, before the napkins and the ketchup, you must have the burger. Without it, there's no meal.
Almost all business insurance in Arizona begins with a business liability policy. It's the policy that keeps you from being sued out of existence. It's the first building block of your insurance. It's where you start building the unique protection plan that's just right for your business.
It's been known by several different names: Commercial Liability, Business Liability, General Business Liability, General Liability (GL), Commercial General Business Liability, and of course, its current and best known name, Commercial General Liability Insurance (CGL).
It's also called by a common term: "slip and fall insurance." The obvious reason for that is the banana peel scenario. We'll see in a minute how a CGL policy works in a slip and fall.
Are you required to have business liability insurance in Arizona?
However, many (maybe most) contractors and other businesses are required, by contracts that they sign, to carry minimum business liability coverage before beginning work.
That's why learning more about CGL insurance in Arizona is so important.
How does a CGL policy work?
CGL insurance is the basic building block for the rest of your business coverage.
Most insurance companies use a standard "template" for structuring a business liability policy. This template is provided by the ISO (Insurance Services Office). They break down the standard CGL policy into three sections:
Coverage A: Bodily Injury and Property Damage Liability
This section protects you from liability when bad things happen to someone else, and they sue you for damage to their body, mind, or property. Or all three. This is the "slip and fall" part of your Commercial General Liability insurance in Arizona.
Let's take the case of the proverbial banana peel to see how this works:
Sam, your delivery guy, is in his usual hurry to get to his next stop. He doesn't see the banana peel that Bob, your employee, left lying on the floor. (Bob was in a hurry to get back to work and couldn't find the trash can. Hurry is often at the foundation of many liability claims.)
Ok, back to Sam, who is in a hurry.
Sam slips on Bob's banana peel. He falls.... hard.
Sam hits his head, gets a concussion, and drops his iPhone too. The phone cracks (just like his head) and off Sam goes to the Emergency Room.
Sam can sue you and your company for the medical bills to fix his body, the cost to replace his phone, and the cost to see a therapist to deal with his new phobia of banana peels.
Part A of your GCL policy is designed to cover these liabilities.
Coverage B: Personal and Advertising Injury
This section is a bit more confusing. And full of "exclusions." But in general, this section of your Arizona liability insurance policy provides coverage for:
- Copyright infringement
- Using another company's advertising ideas
- Wrongful eviction, or invasion of privacy
Let's continue with the story of Sam's banana peel incident.
You get sued by Sam. You are not happy. After all, it was *Sam's* fault because he was in a hurry. As a matter of fact, it's his company's fault for pushing their employees too hard.
You decide to take it to Twitter. You'll tell the world all about how mean his company is for making people rush everywhere. That'll teach them. And maybe you'll feel better.
You go all "Tweetstorm" on Sam's company.
You get Sam's company's attention.
Then you get served. You are being sued by them for libel.
Part B of your CGL policy is designed to handle this lawsuit.
Coverage C: Medical Payments
Sometimes you just need to "settle out of court" for smaller medical bills. That's what this section was designed to cover. The good thing about this coverage is that it requires no legal action in order to pay a claim.
Let's finish the story of Sam and the banana peel to see how this works.
Sam's replacement (we'll call him Sam Jr) pays more attention than Regular Sam. There are no more banana peels, and since you are being sued under both Section A and Section B coverages, you are glad this new Sam is being careful.
But no one can be perfectly careful at all times. Accidents are always just around the corner.
Sam Jr is leaving your building, and as he rounds the corner, he barks his shins on a chair that Bob just placed there. For no good reason. (Bob needs some additional safety training.)
Fortunately, Sam Jr only suffers a badly bruised shin. And clearly, your business is responsible. So off Sam Jr goes to the ER.
He's bruised, but nothing broken. Whew. He's back at work the next day.
You contact your insurance company. They agree to settle this without legal hassle or argument. Sam Jr's ER visit bill is covered under Section C.
7 things typically covered by a CGL policy:
Bur remember, articles about an insurance policy are not the policy themselves, so don't rely on this general information to guarantee a future claim. (Always consult your local agent to explain your particular policy benefits.)
These 7 things are generally covered under most standard GCL policies:
- Bodily injury, accidents and death.
If you are a business that interacts with other people, whether on your own property, or on a job site, this coverage lets you sleep at night. If your employee accidentally knocks someone down and they sue you... this coverage goes to work.
- Property damage that your company causes.
Any business, and especially contractors in Arizona, run the risk of causing property damage to their clients. This is a common day to day exposure.
- Copyright infringement.
You decide to run a new advertising campaign. You have the BEST slogan, and a great graphic to go with it. Your printer thinks it's awesome too. You print 10,000 postcards and mail them out. Unfortunately, a competitor in another part of town used the same slogan and a similar graphic last year. It probably got stuck in your subconscious. But now you are being sued for violating his copyright. This coverage protects you from financial ruin over the whole accidental incident.
- Slander, libel and defamation.
It's EASY to get sued for something you say or write about someone else. "Thick skin" is a thing of the past. People sue for the slightest offense to their reputation. This coverage helps you when your mouth (or keyboard) betrays you.
- Product liability.
If you make widgets, your widget could have a flaw no one could foresee. A safety concern. If so, the lawsuit it creates could put you out of business. You need product liability protection.
- Completed operations.
Have you ever made a promise that you couldn't keep, through no fault of your own? We all have. But when that happens in a business relationship, it can be grounds for a lawsuit. Completed operations coverage is there to protect you from this risk.
- Legal defense.
"Anyone can sue anyone for anything" is the old saying. And it's true. You need protection not just from legitimate lawsuits, but from the frivolous ones too.
8 things NOT covered by a CGL policy:
- Work injuries.
You have (or should have) workers compensation for this.
- Employment discrimination.
You can add coverage for this, but it's usually not included in a standard CGL policy.
- Professional negligence.
Doctors, lawyers, insurance agents and many other professionals need separate coverage for "errors and omissions" that can occur in their fields.
- Damage to your own property.
CGL polices don't cover damage (like fire) to your property. If you have a building or expensive equipment, you will need an additional policy that covers property as well.
- Damage to your vehicles.
If you have company vehicles, you'll need separate Commercial Auto insurance.
- Pollution liability.
Oil spills and ground water contamination... these are not normally covered under a CGL policy. You can often add separate coverage for this risk.
- Liquor liability.
CGL policies sometimes offer a small amount of coverage for this. But often, it's just not enough. Make sure you have additional coverage for this if you are a restaurant.
- Officers and directors liability.
The owners, officers, and directors are not normally protected on a standard CGL policy if they are sued personally for actions they took. Some companies need this as a separate coverage. Discuss this with your agent.
What's the difference between a Commercial General Liability policy and a Business Owners Policy (BOP)?
Your experienced, local insurance agent can help you decide which is best for you.
How often should you review your business insurance policy?
I've been helping business owners in Arizona for over 20 years review their insurance and make sure they don't have any unnecessary gaps in coverage. I can help you too.