General liability insurance covers third-party claims against your business for bodily injury, property damage, and certain non-physical harms such as defamation, privacy violations, and copyright infringement in your advertising. Most policies follow a standardized form published by the Insurance Services Office and organize coverage into three parts: bodily injury and property damage liability (Coverage A), personal and advertising injury liability (Coverage B), and medical payments (Coverage C). The typical small-business policy carries a $1 million per-occurrence limit and a $2 million aggregate. What the policy pays for, and where it stops, is defined by those three coverage parts and by a long list of exclusions that push several common business risks onto separate policies.
Bodily Injury and Property Damage
Coverage A is the core. It pays sums you become legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence connected to your business operations.1ISO Properties, Inc. Commercial General Liability Coverage Form A customer slips on a wet floor in your store. An employee knocks over a client’s equipment while working on site. Coverage A responds to the medical bills, repair costs, and lawsuits that follow.
The insurer also takes on the duty to defend you against any lawsuit seeking those damages, even if the suit ultimately turns out to be groundless. That duty is broad. If even one allegation in a complaint falls within potential coverage, the insurer generally must defend the entire claim. The defense obligation continues until the applicable limit of insurance has been exhausted by payments of judgments or settlements.1ISO Properties, Inc. Commercial General Liability Coverage Form
Coverage A excludes injuries or damage you expected or intended. Reasonable force used to protect people or property is a narrow exception and does not trigger that exclusion.2ISO Properties, Inc. Commercial General Liability Coverage Form
Personal and Advertising Injury
Coverage B handles non-physical harms tied to specific offenses committed in the course of your business operations or advertising. The standard policy defines those offenses to include defamation (libel, slander, and product disparagement), invasion of privacy, wrongful entry or eviction, false arrest or detention, malicious prosecution, and infringement of another party’s copyright, trade dress, slogan, or advertising idea in your own advertisement.
These claims come up more often than many business owners expect. A social media post that makes a false claim about a competitor can trigger a Coverage B claim. So can a marketing campaign that uses someone’s photo without permission. The coverage extends to material published online, not just print or broadcast advertising.
Coverage B carries its own set of exclusions. Material you publish knowing it is false is not covered. Breach of contract is not covered. Advertising infringement committed with knowledge that it violated someone’s rights is not covered either. Businesses that rely heavily on content and advertising should audit their materials regularly, because the line between aggressive promotion and actionable defamation is thinner than most people realize.
Medical Payments to Injured Visitors
Coverage C works differently from the other two parts. It pays medical expenses for someone injured in an accident on your premises, on adjacent sidewalks, or because of your operations, regardless of who was at fault. The typical limit is $5,000 per person, and policies can be written with limits up to $10,000. Covered expenses include first aid, necessary medical and surgical services, X-rays, dental work, ambulance costs, hospital stays, and professional nursing services.1ISO Properties, Inc. Commercial General Liability Coverage Form
The practical value of Coverage C is preventing small incidents from becoming lawsuits. When a visitor trips in your parking lot and needs an emergency room visit, a quick medical payment often settles the situation before attorneys get involved. The injured person must report the expenses within one year of the accident, and the insurer can require medical examinations. Coverage C does not apply to your employees, who fall under workers’ compensation, and it excludes anyone hired to do work on your behalf.
Products and Completed Operations
Products and completed operations coverage is built into Coverage A but has its own aggregate limit on the policy declarations page. It applies when someone is injured or property is damaged by a product you manufactured, sold, or distributed, or by work you completed away from your premises.
A contractor whose finished deck later collapses, a bakery whose product causes an allergic reaction, and a manufacturer whose tool malfunctions months after sale are all facing products-completed operations claims. Because the aggregate for this category is separate from the general aggregate, claims here do not eat into the pool of coverage available for premises and operations claims, and vice versa. Once you hit the products-completed operations aggregate for a policy period, no further coverage is available for that type of claim until the next period begins.3The Hartford. Products-Completed Operations For construction, manufacturing, and food service businesses, this is where much of the real exposure lives.
Contracts and Additional Insureds
Most commercial leases, service contracts, and subcontractor agreements include indemnification clauses that make one party financially responsible for certain risks. The standard CGL includes a contractual liability exclusion but then carves back coverage for liabilities assumed under an “insured contract.”2ISO Properties, Inc. Commercial General Liability Coverage Form In plain terms, the policy covers bodily injury and property damage liabilities you agree to take on in most standard business contracts, including leases, easements, and construction agreements.
The coverage has limits. It generally applies only to liabilities you would have even without the contract. If you contractually assume liability that goes beyond what common law would impose on you, the policy may not cover that broader obligation. Before signing any contract with an indemnification clause, compare the language against what your policy actually covers.
Additional insured endorsements are closely related. Clients, landlords, and general contractors will often require you to add them as additional insureds before they will work with you. The endorsement extends your CGL coverage to protect the named third party against liability arising from your operations. Ongoing operations endorsements cover projects still in progress, completed operations endorsements cover claims that surface after the work is done, and blanket endorsements cover anyone performing a certain function rather than listing individuals by name. Being listed as a certificate holder is not the same thing. A certificate holder receives notice of cancellation but has no coverage under your policy. If a client or landlord wants to be protected, they need an additional insured endorsement.4The Hartford. What Is a Certificate of Liability Insurance (COI)?
What General Liability Does Not Cover
The list of exclusions is long, and some of the gaps catch business owners off guard.
- Employee injuries arising out of employment are excluded, along with related claims by the employee’s family. Workers’ compensation covers those situations.
- Professional errors are excluded. If a client sues because your advice, design, or professional service caused financial harm, you need professional liability (errors and omissions) coverage.
- Vehicles, aircraft, and watercraft you own, operate, rent, or loan to others are excluded. Commercial auto insurance covers that risk.
- Pollution claims are excluded, with only narrow exceptions for incidents unrelated to normal business operations.
- Damage to property you own, rent, or occupy is excluded. Commercial property insurance fills that gap.
- Intentional and criminal acts void coverage.
- Employment practices claims such as wrongful termination, discrimination, and harassment require separate employment practices liability insurance.
- Alcohol-related injuries are excluded for businesses that serve or sell liquor. A separate liquor liability policy is generally needed.
The professional services gap is the one that trips up the most businesses. A consultant, accountant, architect, or IT firm can carry a solid general liability policy and still be completely uninsured for the claims most likely to hit them. If clients pay you for your expertise or judgment, professional liability coverage is not optional.
How the Limits Fit Together
A CGL policy has several interconnected limits, and understanding how they interact prevents unpleasant surprises when a claim arises. Standard limits on most small business policies are $1 million per occurrence and $2 million general aggregate.
- The per-occurrence limit is the maximum the insurer pays for all damages from a single event, regardless of how many people are injured or how much property is damaged.5IRMI. Per Occurrence Limit
- The general aggregate is the total the insurer will pay for all covered claims during the policy period, excluding products-completed operations. Once exhausted, the insurer has no further obligation for that policy term, including no duty to defend additional suits.6IRMI. How the Limits Apply in the CGL Policy
- The products-completed operations aggregate applies only to claims arising from your products or completed work. It does not reduce the general aggregate.3The Hartford. Products-Completed Operations
- The personal and advertising injury limit is a sub-limit within the general aggregate for Coverage B claims.
- The medical expense limit is the per-person limit for Coverage C, typically $5,000.
The general aggregate is a tank that feeds the individual per-occurrence limits. Every paid claim draws from that tank. Multiple small claims in one year can drain the aggregate just as effectively as one large claim. Businesses with heavy foot traffic or multiple jobsites running at once should consider whether $2 million is enough, or whether a commercial umbrella policy makes sense. An umbrella sits on top of your CGL and kicks in when the underlying limits are exhausted.
Defense Costs Inside vs. Outside the Limits
One of the most valuable features of a CGL policy is the duty to defend. The insurer pays not only judgments and settlements but also your legal defense when you are sued over a covered claim. On a standard ISO form, defense costs are paid in addition to the policy’s liability limits. The limits apply to damages, meaning judgments and settlements, while attorney fees, court costs, expert witnesses, and investigation expenses are handled separately.1ISO Properties, Inc. Commercial General Liability Coverage Form
This matters more than most business owners realize. Legal defense in a bodily injury lawsuit can easily run $50,000 to $100,000 or more, even if you ultimately win. On a standard form, those costs do not reduce the $1 million available for the actual claim. Not every policy follows the standard form, though. Some insurers sell policies where defense costs are inside the limits, meaning every dollar spent on lawyers reduces the amount available to pay damages. If legal defense burns through $200,000, only $800,000 of a $1 million limit is left for a settlement or judgment. When shopping for coverage, ask whether defense costs are inside or outside the limits. The difference can be enormous when a serious claim hits.
Occurrence vs. Claims-Made Policies
General liability policies come in two forms, and the distinction matters when a claim surfaces years after the incident that caused it.
An occurrence-based policy covers any incident that happens while the policy is active, regardless of when the claim is reported. If your policy was in force in 2024 and someone files suit in 2027 over an injury that happened in 2024, the occurrence policy responds even if you have since switched carriers. Most CGL policies sold to small businesses use the occurrence form.
A claims-made policy covers incidents that both occur and are reported while the policy is active. If the policy expires before you report the claim, coverage expires with it. Claims-made policies often use step rating, starting with lower premiums in the first few years and gradually increasing until they reach a rate comparable to occurrence policies. If you cancel a claims-made policy, you may need to purchase tail coverage, also called an extended reporting period, to protect against claims reported after cancellation for incidents that happened while the policy was in force. When switching carriers on a claims-made program, either buy tail coverage from the old insurer or confirm the new policy includes prior-acts coverage for incidents that predate it.