Important
information about
commercial general liability insurance.
Because mistakes happen, we need liability insurance.
Essentially, commercial general liability insurance is there to
clean up after company mistakes, providing coverage for claims
related to negligent business activities or the failure to use
reasonable care. Based on this information, how much commercial
general liability coverage do you need? This can be very difficult
to assess, because there is no one benchmark that works for
everyone. While some commercial insurance brokers recommend that
your coverage match that of the largest court award for a case
relevant to your business, others base recommendations on company
assets. Unlike property, which has a fixed value, liability claims
do not have any limitations. In this lawsuit-crazed society, the sky
could be the limit.
What is Commercial General
Liability Insurance? Most companies obtain basic liability
coverage through a commercial general liability (CGL) form which
covers 4 types of injuries: bodily injury that results in actual
physical damage or loss, property damage or loss, personal injury which would
include slander, and advertising injury which covers the company
from charges of negligence that result from the promotion of its own
goods or services.
Supplemental coverage: Most
companies will need to supplement their commercial general liability
with at least two other types of coverage such as workers comp and
automobile insurance. Companies
requiring higher levels of coverage than provided with their
commercial general liability often add an umbrella liability
insurance policy. Umbrella insurance provides additional coverage
for areas where you are not insured, coming into effect once your
underlying policy has paid out up to its limits.
How is Coverage Defined? One of the most important
decisions you will need to make regarding liability insurance is how
you will define your coverage. Should a claim be covered by a policy
that was in effect at the time the incident occurred, or at the time
the claim was filed? Traditionally,
commercial general liability insurance has been based on the time of
occurrence. Simply put, the policy in effect at the time of the
incident is responsible for handling any resulting claims, even if
you are no longer with the insurance company that originally
provided coverage. With commercial general liability, it is
obviously critical to keep good track of your policies. Linking
coverage to occurrences, however, does have its downside. Unlike
property claims, liability claims can be filed years after the
actual occurrence - years that don't necessarily take into account
inflation or today's the-sky's-the-limit attitude toward legal
awards. As a result, the limits you originally purchased for
coverage may be too low for today. Moreover, time passage usually
makes the actual date of an incident difficult to pin down - and
responsibility for coverage that much more difficult to assign.
Claims-made insurance offers an
alternate way to establish liability coverage. With these policies,
coverage is linked to the policy in force when a claim is filed and
reported. This minimizes the tracking and claim inflation problems
that can occur with occurrence policies. To limit the total risk to
the insurance company, claims-made policies do place some limits on
when an incident had occurred in order to qualify for coverage. If a new claims-made policy
refuses to extend coverage to occurrences far in the past, you may
need to purchase coverage from your previous insurer. This is known
as a supplemental ERP, or tail-end coverage. Tail-end coverage does
not tend to be a very good deal for a company, since the insurer
typically knows you have nowhere else to turn for coverage. It can,
however, be used to fill gaps in coverage that cannot be otherwise
addressed.
As you can see buying commercial
insurance has many options. Let us guide you thru the commercial
insurance maze and get you safely insured. Please feel free to call
or e-mail us with any questions you may have regarding your
commercial general liability insurance.
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