Commercial General Liability Insurance

Liability & Insurance 750

What's on this Page

Sample ISO CGL
Principal Coverages
- Coverage A
- Coverage B
Concepts & Terminology
- Defense Costs
- Occurrence & the General Liability Coverage Trigger
- Indemnification and Limitation of Liability
- Mutual Indemnification
- Contractual Liability Insurance
- Products / Completed Operations Hazard
- Separation of Insureds Condition
Who is Insured
- Named Insured
- Generic Insureds (Covered by category, not specifically named)
- Additional Insureds
Key Exclusions
- Liquor Liability
- Aircraft, Autos and Watercraft
- Damage to Property Owned By, Rented To, or Occupied By the Named Insured
- Personal Property in the Insured’s Care, Custody or Control
- Damage to a Contractor’s Own Work – Completed Operations
- Pollution
- High Risk Activities

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Sample ISO CGL

Download ISO CGL
(PDF: 269 kB)

Principal Coverages

Coverage A

Bodily injury and property damage
Property damage includes lose of use

Coverage B

Personal and advertising injury: False arrest, detention or imprisonment; malicious prosecution; wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies; libel or slander; oral or written publication of material that violates a person's right of privacy; the use of another's advertising idea; or infringing upon another's copyright, trade dress or slogan in advertising.
Do not confuse this with “personal injury” as used by attorneys is tort litigation. When attorneys use the term it includes bodily injury and property damage claims.

Concepts & Terminology

Defense Costs

Paid in addition to the limits and do not reduce the limits.
Exception: Defense costs for an indemnitee under contractual liability insurance reduce the limits.

Occurrence & the GL Coverage Trigger

Occurrence: an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Two criteria for coverage under the GL policy
- The accident or exposure to harmful conditions must take place during the policy period; and
- The injury or damage must occur during the policy period. That is why we require completed operations coverage with additional insured status to continue for specified periods after completion of work for us.
- Exception: personal and advertising injury claims; the offense must occur during the policy period.

Indemnification and Limitation of Liability

Indemnification: A contract provision that requires our vendor (or licensee, consultant, contractor, tenant, etc.) to respond if we are sued for damages by a third party. The obligation includes paying for our defense and damages. The insurance industry often calls this “liability assumed in a contract.” Example: in construction contracts the County requires the contractor (indemnitor) to indemnify us (indemnitee) with respect to our liability to members of the public who are injured or whose property is damaged as a result of the contractor's negligence. In this situation both the contractor and the County would be liable to injured members of the public. By assuming our liability (agreeing to indemnify us), the contractor agrees to fund damages owed by the County to the injured party. The contractor is also responsible for the County’s related litigation costs.
Indemnification does not eliminate the indemnitee’s liability; it simply shifts the costs (defense and damages) to the indemnitor. If the indemnitor cannot fund its obligation to indemnify, the indemnitee incurs the claim’s costs for defense and damages.
The County’s vendor contracts always have indemnification language.
Sample indemnification language the County imposes on its vendors, contractors, licensees, tenants, etc.
Limitation of liability: A contract provision that principally limits a consultant’s liability for our claims against the consultant to a specific amount. It might be the cost of the contact or some other arbitrary number. Example: Our agreement with a software designer includes a $20,000 limitation of liability. The programmer’s defective work causes our website to shut down for several days and we sustain an economic loss of $250,000 because of our inability to use of the website. Because of the limitation of liability clause the consultant owes us only $20,000.
Limitation of liability clauses are not standard; depending on the wording, a limitation of liability clause might apply to both our claims against the consultant and the consultant’s obligation to indemnify us for third party claims.

Mutual Indemnification

This indemnification language requires each party to a contract to indemnify the other for liability to third parties arising from its negligence.
This is often used in a Memorandum of Understanding (MOU) when the parties are participating in joint activities which benefit both parties.
The decision to use mutual indemnification rests with County Counsel.
Sample mutual indemnification language

Contractual Liability Insurance

Contractual liability insurance covers liability of another that the insured assumed in a contract. In the example above, the contractor’s GL will fund the contractor’s obligation to pick up the tab for damages that the County owes to the injured party because of the contractor’s negligence.
Contractual liability insurance applies only if the agreement requires indemnification.
If the indemnification language in the agreement is limited in scope or amount, contractual liability will not provide broader coverage than what is required by the contract.

Example: If a limitation of liability caps indemnification at $100,000, the contractual liability coverage will not respond beyond that amount, even if the GL policy limit is $1,000,000.
Contractual liability insurance operates independently of additional insured status.
Contractual liability insurance may apply in the absence of an appropriate additional insured endorsement.
An additional insured endorsement can apply in the absence of indemnification language, unless the endorsement has non-standard wording linking it to a contractual obligation to indemnify.
Comparison between contractual liability insurance and additional insured endorsements (PDF: 66 kB).

Products/Completed Operations Hazard

Refers to injury or damage that occurs after a contractor’s work is completed or after a vendor’s (sold) products have left its possession.
The important date for completed operations is the date on which the injury or damage occurs, not the date on which the faulty work was done.
Our Templates require coverage for a specified period of time after work is completed because these claims can occur several months or years later.

Separation of Insureds Condition

States that the insurance applies separately to each insured, allowing coverage for suits brought by one insured against another insured.
Does not apply to the limits which are shared among all insureds. The more insureds and additional insureds, the lower the amount of coverage available to each one.

Who is Insured

Named Insured:

Person or entity named in the policy declarations.
Policy refers to a named insured as “you”.
There can be multiple named insureds; coverage is acceptable if any one of the named insureds is the party with whom we are contracting.
The certificate of insurance does not always list all named insureds; we must get evidence either on the certificate of insurance or on an endorsement that the party with whom we are contracting is a named insured.

Generic Insureds (Covered by category, not specifically named)

Employees and volunteers of a named insured.
The outside real estate manager of any named insured.
Note: the term “generic insureds” is not standard insurance terminology; it is Cazden’s short-hand terminology for this class of insureds.

Additional Insureds

Definition: person or entity that does not qualify as an insured unless added by endorsement.
Coverage for additional insureds is limited in scope, based on the relationship with the named insured. Example: if the landlord is endorsed as an additional insured on a tenant’s policy, coverage for the landlord is limited to liability arising from the rental of property to the tenant. The landlord would not be covered for liability arising from other relationships with the tenant. If the landlord purchased products or services from the tenant, the landlord would not be an additional insured.

Key Exclusions

Liquor Liability

Exclusion applies only to insureds who are in the business of manufacturing, selling, distributing or serving alcohol.
Not excluded for entities that are not is the liquor business that occasionally serve alcohol at events without charge.
If a not-for-profit charges for liquor at a fund raising event, we should demand evidence of liquor liability insurance. It may be provided by the entity or by its caterer.

Aircraft, Autos and Watercraft

Excludes injury or damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading. Example: our permittee is a club whose members drive their personal autos as part of the event. The permittee’s GL will cover the permittee (and us, as additional insureds) if the auto is not owned or operated by or rented or loaned to the permittee or anyone who qualifies as an insured under the permittee’s GL. However, if the permittee’s policy covers club members as insureds or additional insureds, the exclusion applies because the autos are owned/operated by insureds. That is why we require non-owned auto coverage for events that involve autos.
Under an exception to the Aircraft/Auto/Watercraft exclusion, the GL covers contractual liability for aircraft & watercraft, but not for autos. Therefore, if the indemnification in our agreement applies to the use of aircraft (including drones/unmanned aircraft) or watercraft, our vendor’s GL will fund the indemnification obligation. The vendor is not covered for the use of aircraft or watercraft; the coverage funds the vendor’s obligation us indemnify us. This exception does not apply to autos; coverage for autos, including contractual liability, is in the Business Auto Policy, not in the GL.
Mobile equipment is covered by the GL and is not subject to the automobile exclusion.
It is becoming common for ISO policies to have an endorsement specifically excluding drones/unmanned aircraft. Endorsements are available to add the coverage. If the scope of work or event involves the use of drones/unmanned aircraft, we must get evidence that the policy covers this exposure. Sample Exclusion - Unmanned Aircraft (PDF: 36 kB)

Damage to Property Owned by, Rented to, or Occupied by the Named Insured

Our long-term tenants are not insured for most damage to the property we rent to them. Damage caused by fire is usually covered, subject to a sublimit between $100K - $300K. If the lease makes them responsible to damage to our property, they can insure for this only through a property policy, not through a liability policy.
Short term licensees and renters are insured for damage to rented or occupied property if the rental period is less than 7 consecutive days, subject to a sublimit between $100K - $300K.

Personal Property in the Insured’s Care, Custody or Control

If we contract with a party that uses, operates, stores or repairs County’s personal property, that party could be liable for damaging it. However, their GL will not cover damage to that property because it is deemed to be in the insured’s care, custody or control.
Most insurers will not endorse the GL to cover this exposure.
There are property and inland marine policies that can cover this exposure.

Damage to a Contractor’s Own Work – Completed Operations

A contractor is not insured for damage to its own work that occurs after the work is complete. Example: An electrical contractor rewires our building. Three months after job is complete the building sustains substantial fire damage because of the contractor’s faulty wiring. The contractor is liable for the damage to the wiring (his work) and to other parts of the building (not his work). The GL will not cover the wiring, but will cover resulting damage to the rest of the building.
There is no way to cover this through standard insurance products.
The exclusion does not apply to a contractor when the actual work was done by its subcontractor. Example: in the above situation, if a general contractor subcontracted the electrical work, the general contractor’s GL policy covers the general contractor, who is liable for all work done by its subcontractors. The subcontractor’s policy will not respond for the subcontractor.

Pollution

Although the GL covers some pollution claims, we should not rely on the GL’s potential coverage.
Pollution claims might be covered if the contractor did not bring the pollutants to the jobsite in connection with the work. This potential coverage is eliminated if the policy has a total pollution exclusion endorsement.
If an accident causes operating fluids to spill from mobile equipment fluid reservoirs, the GL covers the claim unless the policy has the total pollution exclusion endorsement.
If the work has the potential for a pollution claim we should require pollution liability insurance.
The CGL might cover a pollution claim if the substance that escapes does not meet the definition of “pollutant”: any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
The pollution exclusion applies only to traditional environmental pollution into the air, water, and soil, but not to all injuries involving the negligent use or handling of toxic substances that occur in the normal course of business. (MacKinnon v. Truck Insurance Exchange, 2003)

High Risk Activities

The standard ISO GL does not exclude high risk exposures such as bounce houses, bungee jumping; fireworks; amusement rides, swimming pools; slides and water slides.
Principal insurance company methods for dealing with non-excluded high risk activities:
- Decline to write coverage.
- Add a specific exclusion endorsement.
- Issue coverage, usually specialty markets using non-standard, restricted policy language, with a premium appropriate for the high risk.