General Liability Insurance Explained in 10 Minutes

Are you wondering what General Liability insurance is and why it may be needed for your business?

Confused by what is and what’s not covered by general liability insurance, sometimes called GL insurance?

Trying to figure out the difference between general liability and business liability insurance in a BOP policy?

Business insurance can be complex and confusing. In this video and post, I’m going to explain what general liability insurance is, and what it’s not, coming right up

Okay General Liability Insurance

Sometimes it’s called business liability, comprehensive general liability, commercial general liability or just GL for short. Whatever phrase it goes by is inconsequential for the moment.

General Liability insurance is a form of business insurance intended to protect your company from lawsuits and other claims which may arise from three key areas:

Bodily Injury

Property Damage

Advertising or Personal Injury.

I’ll explain that in a moment, but first I want to explain that the most common manner in which general liability insurance is provided to small businesses is through a Business Owners Policy – commonly called a BOP policy.

You can see more about BOP Policies Here Video: What Does Small Business Insurance Cost?

In a nutshell, a BOP policy combines general liability with property insurance to form a package policy and adds in a bunch of extra fringe coverages that are most commonly needed by a business owner.

Okay back to why businesses need general liability insurance.

Businesses never intend to have accidents or intend to have someone get injured, but accidents do happen and the consequences of accidents can have a significant impact on a business in the form of lawsuits.

The more serious someone’s injuries or the more people that are injured in a common accident, the greater dollar amount the lawsuit maybe for those injuries.

General Liability insurance is intended to pay for legal and court costs to defend you if you are sued and to pay settlements if you lose that lawsuit.

Here are the common exposures and claims that business owners face, demonstrating the need for general liability insurance protection.

1. Premises and operations liability – if you own premises such as an office, a retail shop, or a service business and someone enters your premises and slips, or trips and falls and sustains an injury, they can sue you for their injuries, pain, and suffering.It’s important to point out that a feature in the general liability policy called medical payments can step in to pay for or reimburse that injured party for their medical bills (not pain and suffering claims) without the injured party having to sue you for their injuries.This is limited usually to $10,000 to $20,000 depending on the policy form.Operations Liability – I just discussed premises claims such as slips and falls. But what about operations liability – such as a contractor who drops a hammer on a construction site and hits another sub-contractor, injuring them?
   

   That is an example of the operations portion of the liability policy and is covered as well for the medical bills incurred, pain and suffering, and legal costs to settle a claim of this nature.

2. The next section is products and completed operations liability – here, if you make or produce a product, or just sell products there is the potential that your product could cause harm or injury to the user of that product.
   Product liability lawsuits can arise from faulty products which cause injury, or consumable products which harm someone. These types of claims are also covered under the general liability policy.Completed Operations liability goes back to the conversation around contractors. When a contractor completes a job there can be damages that arise from the work performed.
   An easy example is that a window is not fastened to a structure properly and falls out injuring a pedestrian on a sidewalk. This is a form of completed operations liability also covered by General Liability insurance.
3. Advertising and Personal Injury – This is often the most confusing part of general liability insurance because it doesn’t involve bodily injury or property damage.
   Instead, it involves claims arising from libel, slander, false arrest, copyright infringement, use of another’s advertising ideas, and invasion of privacy. These sort of claims could be their own video since they are pretty complex issues.
   If you have specific questions on advertising and personal injury contact me and let’s chat.

Okay, so that’s what is covered.

What’s not covered?

If there are specific policies designed to protect a firm from specific hazards, or claims, it’s generally not covered under the general liability policy, and here are a few:

Auto Liability – While you can often include hired and non-owned automobiles in a BOP policy’s liability section, owned autos are excluded from the GL policy.

Employers Liability – Employers Liability is a section of the workers’ compensation policy and is not covered under the GL.

Employment Practice Liability – claims to allege wrongful employment acts such as harassment, discrimination, wrongful termination is excluded under the GL policy.

Bodily Injury or Property Damages you intend to cause or expected to happen.

D&O claims – again a D&O or directors and Officers Liability policy is suited to pick up claims which allege wrongful acts in the management of a company and are excluded in the GL policy.

Pollution – claims arising from pollution are generally excluded as well.

Product recall – this is a big one for manufacturers and distributors. If your product causes an injury or harm to a third party those claims would be covered, but the cost to recall that potentially dangerous product from the marketplace is not covered.

Then there are specific policy exclusions that are added to the standard policy form that you need to watch out for. Many of these do not occur regularly on BOP policies but more often on liability policies purchased in the non-standard or excess and surplus lines marketplace.

Here are just a few common exclusions to watch out for:

Designated Premises endorsement – this exclusionary form limits coverage just to the premises listed in the policy

Designated Operations endorsement – like the designated premises exclusion, this limits the scope of coverage to the operations described in the endorsement.

In the contracting and construction industries, there are dozens of possible exclusions and limitations to watch out for and to understand before making the purchase.

In New York, the most frequent exclusion is for what is known as action over claims, I did a video on that which you can see here
Video: What is Action Over Liability

The most critical part of any business insurance policy, including general liability insurance, is you – the buyer.

What I mean is that you should read your policy to understand what is and what’s not covered. I know, it’s super boring – so instead, it makes sense to ask your agent to go through it with you.

I’m not suggesting having the policy read to you, but instead a high-level overview of some of the points I just mentioned here. The more educated and informed you are about what is and what’s not covered, the better decisions you can take down the road.

One last thing before I finish on the topic of general liability insurance.

I mentioned earlier that no business intends on having accidents or situations where someone or multiple people are injured, but accidents do happen, making the need for insurance important.

But general liability has its limitations – typically you purchase limits of $1,000,000 or $2,000,000 per occurrence which may be insufficient in the event of a serious claim. That’s why I recommend that business owners consider purchasing excess liability or umbrella liability coverage in addition to their general liability insurance.

An umbrella will provide extra coverage over and above your general liability and other policies if scheduled properly. It is economical and effective to provide high-level protection for you and your business.

Alright, that wraps up the discussion on general liability insurance. I hope you found that helpful.

If you have specific questions or issues I didn’t address here, or if you’re looking for help with your business insurance, I hope you’ll consider speaking to me about that as well.

Then let’s set up some time to chat. We represent most of the top-rated insurers and I’d love an opportunity to work with you.

Thanks!