Virtually all businesses maintain a type of insurance known as Commercial or Comprehensive General Liability Insurance Coverage (CGL). CGL insurance is liability insurance that provides insurance coverage to protect against claims asserted by a third party against you or your business.
Typically, the business is named as the “insured” in the policy, but the policy also may provide coverage for owners and employees of the business who are sued for acts arising out of business pursuits.
Commonly Covered
The standard CGL insurance policy may provide several different forms of coverage. Some of the more common forms of coverage are as follows.
1. Bodily Injury and Property Damage Coverage, which provides coverage for claims arising from an accidental “occurrence” of “bodily injury” or “property damage” to a third party, which is not otherwise excluded. An example would be a patron slipping and falling on the premises of your business.
2. Personal Injury and Advertising Injury Coverage, which covers specific third-party claims that may cause economic injury without bodily injury or property damage. Examples include claims for false arrest and false imprisonment and for defamation.
3. Medical Payments Coverage, which provides limited to no-fault coverage for medical costs incurred by a third person injured on the insured’s property.
4. Product/Completed Operations Coverage, which covers third-party claims for bodily injury or property damage arising out of products manufactured, sold or distributed by the insured (Products Coverage) or caused by defects in completed work after that work has been released for its intended purpose (Completed Operations).
5. Contractual Liability Coverage, which provides coverage for the assumption of another party’s legal liability in situations where the insured’s contract contains a hold harmless or indemnification provision.
Insurance Company’s Duty
An insurance policy is a contract, and an insurance company that writes a CGL insurance policy undertakes two obligations to the insured in exchange for the payment of a premium. The first obligation is the duty to indemnify. The second obligation is the duty to defend.
The duty to indemnify requires the insurer to pay on behalf of the insured any monetary amount that the insured is legally obligated to pay as a result of a covered claim. On the other hand, the duty to defend requires the insurer to pay on behalf of the insured the costs, fees and expenses incurred in defending a third-party claim.
Because these costs may include attorneys’ fees, expert witness fees, investigation costs and court costs, some courts have referred to the CGL insurance policy as “litigation insurance.”
Under a CGL insurance policy, the insurance company has the obligation to defend any claim that is either actually covered or potentially covered under the terms of the policy. CGL coverage is triggered by the happening of an “occurrence,” and the term “occurrence” is defined in the body of the insurance policy.
Terminology
It is important to understand that claims that result from an occurrence are covered under the CGL policy, while claims that do not result from an occurrence are not covered. The term “occurrence” includes accidents, happenings or events that result in bodily injury or property damage that are neither expected nor intended from the standpoint of the insured.
The term “accident” includes negligent acts that cause damage which is unforeseen or unexpected by the insured. Thus, claims that result from unexpected events or accidents are covered by the CGL policy.
On the other hand, claims that result from the insured’s own breach of its contractual obligations typically are not covered because such claims are not considered to be caused by an accident and are to be “expected” in the event one breaches contractual obligations.
Finding an occurrence and “property damage” or “bodily injury” does not automatically mean that the CGL insurance policy will be triggered and that the insurer will be obligated to provide coverage and a defense. CGL policies contain many exclusions and understanding these exclusions is critical.
A non-covered or insufficiently covered occurrence causing loss of life, property or economic damage can be devastating to the person or entity that suffered the loss, as well as to the responsible party. If you have questions about your company’s insurance coverage, you should speak with your insurance professional or your attorney.
David B. Applefeld, Esq., is a member of the law firm of Adelberg, Rudow, Dorf & Hendler LLC. He can be reached at 410-539-5195 or dapplefeld@adelbergrudow.com.
