What does commercial general liability insurance cover?

Commercial general liability — CGL — is the policy most often named in contracts, and the one most often misunderstood by the businesses that carry it. The short version: it responds to claims made against you by someone outside your business, alleging that your operations injured them or damaged their property.

What a CGL policy is built to respond to

Broadly, and always subject to the wording of the specific policy, a CGL responds to:

• Bodily injury to a third party arising from your premises or operations
• Damage to property belonging to someone else
• Claims arising from your completed work, where completed operations coverage is included
• Claims involving a product you made, sold or distributed, where products coverage is included
• Defined personal and advertising injury offences, such as libel and slander
• The cost of defending a covered claim — which is often the larger part of the file

Four things a CGL usually does not cover

This is where most surprises live. In general terms, a CGL is not designed to cover:

1. 1Your own property. Your building, contents, stock, tools and equipment are property coverages, not liability coverages.
2. 2Damage to your own work. Rectifying defective workmanship is commonly excluded or narrowly treated, even where resulting damage to other property may be covered.
3. 3Professional advice. If a claim alleges that your advice, design or professional service caused a financial loss, that is errors and omissions territory, not CGL.
4. 4Employee injuries. Workplace injuries in Alberta are generally handled through the Workers' Compensation Board system rather than a liability policy.

What contracts usually ask for

When a general contractor, landlord, property manager or municipality asks for proof of insurance, they are typically asking for four things at once: a limit per occurrence (commonly $2 million or $5 million), completed operations included, their organisation added as an additional insured for your work, and a period of notice before the policy can be cancelled.

It is worth reading all four rather than only the limit. A certificate showing the right number and the wrong wording gets rejected just as quickly as one showing the wrong number.

The practical checklist

• Know your per-occurrence limit and your aggregate limit — contracts often specify both
• Confirm completed operations is on the policy if you build, install or service anything
• Read the exclusions that apply to your industry, because every CGL has them
• Send the contract to your broker before you sign it, not after the certificate is refused
• Remember that a certificate is evidence of coverage, not the coverage itself — the policy wording governs

If you are not sure what your policy actually says, send it over. Reading it back to you is part of the job.