The Essential Guide to General Liability Insurance for Small Businesses

General liability insurance, also known as commercial general liability (CGL) or business owner’s policy (BOP), helps pay for repair costs if your company accidentally damages someone else’s property. It also protects your business if a customer accuses you of reputational harm, like libel or slander, or if a competitor claims that you committed copyright infringement. Find out more at Leading Insurance Outsourcing Company.

Coverage A: Physical Damage

General liability insurance (also called commercial general liability or CGL) offers protection against the financial risks of a lawsuit that alleges your business caused bodily injury or property damage. It covers medical expenses, repair or replacement costs for property that doesn’t belong to your business and legal defense fees in the event of a claim that includes slander, false advertising or copyright infringement. Typically, your policy also offers fire and theft coverage for your company vehicles. This type of coverage is often included in a Business Owners Policy (BOP) that packages liability and property protection for small businesses.

Most CGL policies also include products and completed operations coverage, which provides protection if your business’s product causes physical injury or illness (for example, a customer becomes sick after eating undercooked food served at a restaurant). This is an important component for retailers and other companies that sell or distribute goods. It’s also common for insurance agents to bundle this coverage with professional liability insurance, which protects your business from lawsuits related to errors and oversights in your work.

Coverage B: Property Damage

The property damage component of general liability is designed to protect businesses from lawsuits that claim their work caused physical injury or damage to someone else’s belongings. For example, if a client’s windows are broken during a cleaning service or someone trips over equipment at a storefront event, general liability might cover the repair or replacement costs. This type of coverage also helps pay for legal fees or settlements related to property damage claims. General liability policies don’t generally protect businesses against property damage to their own premises, so consider commercial property insurance or a Business Owner’s Policy (BOP) for this type of protection.

Personal and advertising injury claims are also covered under commercial general liability policies. These claims include libel, slander, false arrest, copyright infringement and more. Typically, these types of claims require a costly legal defense. General liability policies typically don’t pay out for medical expenses related to these claims unless there is a specific time frame in which medical payments are made.

Coverage C: Defamation

A business can face defamation claims for statements that damage a person’s reputation. These claims may be covered under personal and advertising injury coverage on a commercial general liability policy. Defamation coverage is also available under professional indemnity insurance, often called errors and omissions coverage, for certain professionals such as architects, consultants and accountants.

While the pleading requirements and laws differ by jurisdiction, most defamation causes of action involve a false statement that is published or spoken and about an identifiable individual or entity. As the popularity of social media increases, it’s important to consider how the nuances of defamation apply to these new forms of communication. It’s also important to review the specific terms of any specialized policies such as media liability.

Coverage D: Advertising Injury

Often included in commercial general liability policies as part of personal and advertising injury coverage, this protection protects your company from lawsuits related to marketing and other written materials produced by your business. This includes claims like libel, slander, invasion of privacy, copyright infringement and stolen ideas.

For example, let’s say your competitor creates an eye-catching online ad featuring dancing buildings. You decide to use the idea in a marketing campaign for your construction firm. The competitor sues you, claiming your ad defames them and violates their right to privacy. Your general liability policy could help pay for the costs of defending your business.

However, some types of claims don’t fall under this umbrella of coverage. For instance, a claim alleging criminal behavior or a breach of contract wouldn’t be covered. Also, companies that regularly make advertising or public-facing statements need a separate type of insurance called media liability coverage. Those policies typically cover things like a public interview, a news article or a website.