Business Insurance

Commercial General Liability

Commercial General Liability (CGL) insurance is transacted quite differently in the USA compared to other countries.

While other countries may look to provide one single combined Public & Products Liability limit for a business (e.g. $5M, $10M, $20M), the USA offers an ‘unbundled’ CGL liability program whereby you can tailor the coverage to the specific liability limits needed for each facet of the program. This makes the liability product highly customizable, but also means great care needs to be shown in choosing the appropriate limits of coverage.

Below is a summary of some main CGL exposures, what they cover and the typical method of transaction. While it is not usually mandatory to have CGL coverage in place, most businesses take coverage to protect them from potentially devastating liability actions. Conducting business in a foreign country is hard enough without having to respond / defend to liability allegations in an uncertain legal environment. The liability coverages shown below cover the legal defense costs and compensation awarded against you in relation to such claims. Coverage is always subject to the policy terms and conditions of your insurer and your policy wording should be reviewed to understand your coverage.

TYPE OF COVERAGE	Summary	Commentary
COMMERCIAL GENERAL LIABILITY (CGL)	Coverage is offered in a range of sections:	US Insurers will assign “Limits of Liability” for each section of coverage (for example, Coverage A – $1M, Coverage B – $1M and Coverage C – $10K). Coverage A & B typically run in $1M increments, whereas Coverage C is usually a small limit like $10K. These limits will apply per claim or per occurrence. The Insurer will then apply a “General Aggregate Limit” to all claims arising from these General Liability coverage sections (for example, $2M). This Aggregate Limit is the maximum the Insurer will indemnify for during the policy period. Some policies may provide defense costs ‘in addition’ to the limit of liability.
COVERAGE A – Bodily Injury & Property Damage	Protects your company against 3rd party Bodily Injury & Property Damage claims/allegations arising out of your premises and business operations. Emotional Distress and Mental Injuries are often considered bodily injuries as well.
COVERAGE B – Personal and Advertising Injury	Extends the CGL policy to include claims / allegations relating to libel, slander, false arrest, malicious prosecution, copyright or brand infringement, unlawful eviction and privacy violations.
COVERAGE C – Medical Payments	Provides some limited medical payment coverage for injury to non-employees sustained in the workplace or due to the business operations. This coverage is triggered without the need to provide legal negligence on a ‘no fault’ basis, enabling prompt settlement and thereby averting the need for litigation on medical claims.
PRODUCTS / COMPLETED OPERATIONS LIABILITY (PCO)	This coverage is usually included in the CGL policy, but with a separate limit of liability. The PCO section responds to 3rd party bodily injury and/or property damage claims made against you that: (1) occur away from your premises and (2) arise out of your products that are no longer in your possession, or from work that has been completed.	US Insurers will assign a separate ‘Limit of Liability’ to apply to PCO claims, plus an ‘Aggregate Limit’ for all PCO claims for the given policy period. These limits are separate to the General Liability limits mentioned above. Coverage is typically in $1M increments.
DAMAGE TO PREMISES RENTED TO YOU	This coverage is, once again, usually be included in your General Liability policy. It is noted as a separate limit because Coverage A does not extend to provide coverage where you are held legally liable for damage to a premise you rent solely due to a contractual agreement.	US Insurers will assign a separate limit on this at a suitable level required by you. Often good to check your rental contracts to understand this liability exposure and how much to insure for.
EMPLOYEE BENEFIT LIABILITY	Protects your company against any claims made by employees or former employees caused by a negligent act, error or omission in the administration of the insured’s employee benefit program.	An essential consideration for companies that run employee benefit programs – group health, life, disability, 401K and similar retirement plans. Limits of coverage can be negotiated in to your general liability policy in $1M increments.
COMMERCIAL AUTOMOBILE	Coverage can be negotiated on scheduled vehicles that you own or lease. The coverage should include damage to your vehicle, as well as 3rd parties via bodily injury or accident. Importantly, this coverage should be carried even if your firm owns no vehicles. There are liabilities that can arise from the operation of hired rental vehicles by your employees for corporate purposes (Hired Auto), as well as employees using their own vehicles for work purposes like outside sales work (Non-Owned Auto).	A basic $1M Hired & Non-Owned Auto (HNOA) limit is essential for businesses to consider where an occasional rental vehicle or employee vehicle may be used for work purposes. The insurance premium will be small and can coverage be bought in $1M increments, usually added to your general liability policy, or sometimes as a separate policy. Where the business has its own vehicles, those vehicles must get scheduled on the policy with details on all drivers.
EXCESS LIABILITY	An excess liability policy is often sought to “top up” the underlying level of general liability insurance to a desired limit of coverage. In many cases the required limit may be specified under contract. For instance, a $2M General Liability limit may exist with the underlying general liability insurer, but a $5M limit is requierd. A $3M Excess Liability could be sought to increase the limit of coverage to $5M. The Excess Liability policy will only extend the underlying cover of one of the various liability coverages the a business may have in place, so works well where it is only say ‘General Liability’ that a higher limit is sought for.	In the USA, liability coverage is often provided at relatively low levels of cover ($1M, $2M, $5M) compared to other countries like the UK or Australia where higher limits of coverage are common ($5M, $10M, $20M). An Excess policy is suitable to increase the underlying limits to required levels. If you are a multinational company, you may also work with your global insurer to provide the higher levels of coverage under the global policy with a Difference in Conditions / Difference in Limits (DIC / DIL) extension on the global policy.
UMBRELLA LIABILITY	Umbrella liability is a type of excess liability coverage. The main difference is an umbrella policy can sit across multiple liability policies that a business may hold – the most common being: General Liability, Auto Liability, and Employers Liability (part of the Workers Compensation underlying policy). Coverage is also provided for some uninsured liability losses, often subject to a self-insured retention noted under the umbrella policy.	The Umbrella policy is a useful coverage form for multinational companies who have a US subsidiary they need local coverage on. The reason being is it can be extended to top up statutory covers like Auto Liability and Employers Liability that can not be obtained in non-US insurance markets.

The above is just a snapshot of some of the main CGL areas. There are other important considerations to draft appropriate coverage, for example:

SAMPLE CGL PLAN:

Below is an example of what a US CGL policy schedule looks like.

CGL Policy—Limits of Liability
$2,000,000	General Aggregate Limit (Other Than Products-Completed Operations)
$2,000,000	Products-Completed Operations Aggregate Limit
$1,000,000	Personal and Advertising Injury Limit — Any One Person or Organization
$1,000,000	Each Occurrence limit
$100,000	Coverage for damage to premises rented to you Limit—Any One Premises
$10,000	Medical Expense—Any One Person

This may appear quite strange / different for international businesses entering the USA. At first it may seem confusing, but once we explain the composition of the policy to international businesses it begins to make sense.

The covers integrate to provide essentially the same coverage you may be used to in your home country, but with some angles on the coverage that are unique to the USA market.

Coverage can differ quite significantly between USA insurers. Some may offer Hired & Non-Owned Automobile coverage, Employee Benefit Liability and other such risks that are unique to the USA market. There is also numerous extensions / endorsement that apply to the standard CGL policy forms that need to be reviewed to ensure coverage is well suited to your needs.

If you have a US entity (or are considering setting up one), a local US CGL policy should be sought to ensure you have the right coverage in place. Given the complexities and nuances to the local US cover, this is best done in the USA.

USE A BROKER:

We recommend using a qualified insurance broker to assist you in formulating the right CGL plan for your business. Beach Financial Group has specialized in this area for 10 years and will be able to present an option suitable to your needs.

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