What Commercial General Liability Insurance Covers

A commercial general liability policy covers third-party claims against your business for bodily injury, property damage, and personal or advertising injury, and it pays your legal defense on top of those limits. What commercial general liability insurance covers is built around three coverage parts (A, B, and C), plus products and completed operations, contractual liability, and additional-insured protections. The most common configuration provides $1 million per occurrence and $2 million in aggregate limits.¹ The policy has real gaps, and the gaps are where businesses get hurt, so both sides matter.

Bodily Injury and Property Damage

Coverage A is the backbone. It pays when your business causes physical injury to someone or damages property belonging to others. A customer slips on a wet floor and breaks a wrist. A contractor cracks a client’s foundation. A delivery driver knocks over a display case in a retail store. All Coverage A.

Bodily injury claims can include medical bills, lost wages, and pain and suffering. Property damage claims cover the cost to repair or replace what was damaged, whether structures or personal belongings. The policy responds whether the loss happens at your premises, at a job site, or anywhere your operations reach.

One detail catches business owners off guard. CGL policies exclude damage to property that is in your care, custody, or control. A dry cleaner who ruins a customer’s suit, a mechanic who damages a car being serviced — that loss typically falls outside Coverage A.² Businesses that regularly handle other people’s property often need a separate inland marine or bailee’s policy to fill that gap.

Coverage A also includes a built-in sublimit for damage to premises you rent. If your business accidentally starts a fire in your leased office or warehouse, this sublimit pays the landlord for the damage. The standard sublimit is $100,000, and it can be increased by endorsement. For spaces you occupy seven days or fewer, such as a conference venue or event hall, coverage extends beyond fire to other kinds of accidental damage.³ Intentional damage and natural disasters are not covered.

One boundary worth stating plainly. CGL protects your business against injuries to the general public, not your own workforce. Injuries to employees on the job are excluded under the employer’s liability exclusion and belong to workers’ compensation.⁴ An employee hurt at work cannot file a claim against your general liability policy.

Personal and Advertising Injury

Coverage B handles a different category of harm: non-physical offenses that cause financial loss or reputational damage. The policy defines personal and advertising injury as injury arising from a specific list of offenses:

Defamation, meaning written or spoken material that slanders or libels a person or business, or disparages their products or services.
Publishing material that violates someone’s right of privacy.
Wrongful eviction from, or wrongful entry into, a room or premises someone occupies.
False arrest, detention, or imprisonment, and malicious prosecution.
Use of another party’s advertising idea, or infringement of copyright, trade dress, or slogan in your advertisement.

If your company publicly accuses a competitor of fraud without evidence and gets sued for defamation, Coverage B responds. If you unknowingly use a trademarked slogan in a marketing campaign, the policy helps cover legal costs and any settlement or judgment. The per-person or per-organization limit for Coverage B claims is subject to the same each-occurrence limit shown on your declarations page, typically $1 million.¹

Coverage B has a significant blind spot in the digital age. Most CGL policies now exclude losses tied to electronic data, including data breaches and cybersecurity incidents. Since 2013, the standard ISO form has excluded loss of, damage to, or inability to access electronic data.⁵ A business that stores customer data or operates online should carry a standalone cyber liability policy rather than rely on CGL.

Medical Payments

Coverage C is the smallest piece of the policy and often the most useful for keeping minor incidents from turning into lawsuits. It pays medical expenses for third parties injured on your premises or because of your operations, regardless of who was at fault. A customer trips over a floor mat and needs stitches. A visitor gets a minor burn from spilled coffee. You report it and the insurer pays the medical bills; no lawsuit needed.

Limits are much lower than Coverage A, typically $5,000 to $10,000 per person. Expenses must be incurred and reported to the insurer within one year of the accident date. Coverage C does not pay for employees, tenants, or people hired to work on your behalf, and it excludes anyone injured while doing something unlawful on your premises.

The strategic value is goodwill. Paying a few thousand dollars for an emergency room visit promptly and without a fight makes it far less likely the injured person hires a lawyer and pursues a much larger bodily injury claim under Coverage A.

Products and Completed Operations

If your business makes, sells, or distributes products, or performs work that is handed off to a client, you face liability long after the transaction ends. Products and completed operations coverage responds when a product malfunctions or completed work turns out to be faulty and causes injury or property damage to someone else.

A contractor who installs wiring that later causes a fire. A food manufacturer whose product sickens consumers. A maintenance company whose roof repair fails and leads to water damage months later. All products-completed operations claims.

This coverage has its own separate aggregate limit, independent of the general aggregate. In a standard policy, both aggregates are $2 million. Paying claims under one aggregate does not reduce the other, which means the insurer’s total potential exposure in a single policy period is the sum of both aggregates.¹

An important limitation: the policy does not cover damage to your own product or your own work. If a defective appliance self-destructs, replacing the appliance is your cost. But the water damage it causes to the customer’s kitchen is covered. CGL covers the collateral damage your work causes, not the cost of redoing the work itself.⁶

Legal Defense Costs

One of the most valuable features of a CGL policy is the insurer’s duty to defend you against any covered lawsuit, including frivolous ones. The insurer selects and pays for legal counsel, attorney fees, court costs, and expert witnesses, as long as the allegations in the suit potentially fall within the policy’s coverage.⁷

Under a standard ISO CGL policy, defense costs are paid in addition to your policy limits. They do not eat into the money available to settle or pay a judgment. This “defense outside limits” structure is a major advantage. If you have a $1 million per-occurrence limit and the insurer spends $200,000 defending you, you still have the full $1 million available for indemnity. Some non-standard or specialty policies use “defense within limits” (sometimes called burning limits), where legal expenses do reduce the indemnity pool, but that structure is more common in professional liability than in CGL.⁸

The trade-off is control. Because the insurer pays for the defense, the insurer picks the lawyer and generally drives strategy. Policyholders who want more say can sometimes purchase an endorsement allowing independent counsel, but that is the exception.

Contractual Liability and Additional Insureds

Businesses routinely sign contracts that require them to assume liability for another party’s losses, such as hold harmless agreements, indemnification clauses in leases, and subcontractor obligations. A standard CGL policy covers liability you assume under what the policy calls an “insured contract,” which broadly includes most commercial agreements where you take on another party’s tort liability in connection with your business operations. The coverage is blanket, so you do not need to schedule each individual contract.

Qualifying contracts include leases, easement agreements, municipal permit agreements, elevator maintenance contracts, and a catch-all category covering any contract where you assume the tort liability of another party in connection with your business. For coverage to apply, the bodily injury or property damage must occur after you signed the contract.

Closely related is the additional insured endorsement. Many clients, landlords, and general contractors require you to add them as additional insureds on your CGL policy before they will work with you. This endorsement extends your policy’s protection to that third party for claims arising from your operations. Endorsements come in different forms: ongoing operations, completed operations, or blanket endorsements that automatically cover anyone performing a certain role. Adding an additional insured does not give them full rights under your policy; coverage typically responds only to claims connected to your work on their behalf.

What CGL Insurance Does Not Cover

The standard CGL policy contains a long list of exclusions, and understanding what is excluded matters as much as knowing what is covered. These are the gaps that most often surprise business owners.

Employee injuries. All workplace injuries to employees are excluded and belong to workers’ compensation.⁴
Auto, aircraft, and watercraft. Bodily injury or property damage arising from vehicles, aircraft, or watercraft you own, operate, or rent is excluded. You need commercial auto or aviation/marine coverage for those risks.
Professional errors. Mistakes in professional services, such as an architect’s design flaw, an accountant’s calculation error, or a consultant’s bad advice, often fall outside CGL because they do not result in bodily injury or physical damage to tangible property. These exposures require a professional liability (errors and omissions) policy.⁹
Pollution. The standard CGL form provides very little pollution coverage. Cleanup, remediation, and liability from pollution events generally require a separate environmental or pollution liability policy.¹⁰
Expected or intended injury. The policy covers accidents, not deliberate harm. If injury or damage was expected or intended from your standpoint, there is no coverage.
Your own product or work. Damage to your own defective product or faulty work is excluded. The policy pays for collateral damage your product or work causes to other property, not the cost of fixing or replacing your own work.⁶
Electronic data and cyber incidents. Data breaches, loss of electronic data, and cybersecurity failures are excluded from standard CGL forms.⁵
Liquor liability. Businesses that manufacture, sell, or serve alcohol face an exclusion for liability arising from intoxication, serving minors, or violating liquor laws. A separate liquor liability policy or endorsement is needed.¹¹
Property in your care. Personal property belonging to others that you are holding, storing, or working on is excluded under the care, custody, or control exclusion.²

Each of these gaps can be addressed with a separate policy or endorsement. CGL is designed as a broad foundation, not a complete risk management solution on its own.

How the Limits Fit Together

CGL limits are often misunderstood. The policy does not set separate dollar caps for bodily injury, property damage, and advertising injury. It uses a system of interrelated limits that draw from shared pools.

Each occurrence limit. The most the insurer will pay for all Coverage A damages and Coverage C medical expenses arising from a single accident or event. Commonly $1 million.
General aggregate limit. The most the insurer will pay during the entire policy period for all Coverage A, B, and C claims combined, except claims arising from products and completed operations. Typically $2 million.
Products-completed operations aggregate. A separate aggregate that applies only to products and completed operations claims. Also typically $2 million, and independent of the general aggregate.
Personal and advertising injury limit. The most payable for Coverage B claims involving any single person or organization. Usually matches the per-occurrence limit at $1 million.
Damage to rented premises limit. A sublimit for fire or other covered damage to premises you rent. The standard amount is $100,000.
Medical expense limit. The per-person cap for Coverage C, commonly $5,000.

These limits are interrelated. A $600,000 bodily injury payment under the $1 million occurrence limit also reduces the $2 million general aggregate by $600,000. Once an aggregate is exhausted, the insurer has no further obligation for claims that fall under that aggregate, regardless of how many per-occurrence dollars remain.¹ Businesses with significant exposure often buy a commercial umbrella policy that stacks additional limits on top of the CGL.

1
International Risk Management Institute. How the Limits Apply in the CGL Policy
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International Risk Management Institute. Care, Custody, or Control Exclusion in the CGL
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Insureon. Damage to Premises Rented to You Coverage
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International Risk Management Institute. Employers Liability Exclusion in the CGL Policy
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Saxe Doernberger & Vita, P.C. CGL Policy May Not Cover Cybersecurity and Data-Related Losses
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International Risk Management Institute. Faulty Work and the CGL
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International Risk Management Institute. Duty to Defend in the CGL Policy
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International Risk Management Institute. Defense Within Limits
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International Risk Management Institute. The CGL and the Professional Liability Exclusion
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International Risk Management Institute. The CGL Pollution Exclusion
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International Risk Management Institute. Raising the Bar – The Liquor Liability Exclusion in the CGL