The Commercial General Liability Policy (CGL) typically includes three insuring agreements each with its own limit of coverage. An occurrence form means that the policy that responds is the policy that is in force at the time of the alleged incident. The occurrence form is desired versus a claims made form.
Insuring Agreement A – Bodily Injury and Property Damage Liability
Typical limits of insurance are $ 1,000,000 per occurrence with a $2,000,000 general aggregate limit. For example, if there are people trapped in a burning building the most the policy will pay is $ 1,000,000 for that one occurrence. If another large claim occurs during the policy period, then the policy limits may be exhausted when the aggregate limit is exhausted, and the policyholder may not know that for several years as claims are settled. Purchasing excess limits or an umbrella policy is always wise, and the excess liability/umbrella will be at a lower rate than the primary CGL policy rate. There may also be a separate products / completed operations aggregate limit of $ 2,000,000 depending on the nature of the exposure.
Insuring Agreement B – Personal and Advertising Injury Liability
This insuring agreement typically has a limit of $ 1,000,000 any one person or organization and responds to allegations of libel, slander, false arrest, false detention, false imprisonment, invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, wrongful eviction, the use of another’s advertising idea in your “advertisement”, infringing upon another’s copyright, trade dress or slogan in your “advertisement”. Of course, this is not the complete list and certain exclusions may apply but the reader should get the idea of the nature of this insuring agreement.
Insuring Agreement C – Medical Expenses
Probably one of the more misunderstood features of a CGL policy, medical expense coverage gives the adjuster a separate check book, so to speak, to pay the medical expenses of the claimant who is injured on the property or from the insured’s operations. (aka a goodwill payment to avoid lawsuits) The expenses must be reported within one year so that attorney letter that arrives two years after the alleged slip and fall will not be handled under medical expense. Typical limits are $ 5,000 any one person under this insuring agreement. However, many carriers provide higher limits as part of an enhancement endorsement. The question for a property owner is, do you want to set a claim payment trend for medical expenses even if the allegations have no real merit? The typical policy states” We will make these payments regardless of fault”. An insured can request that this insuring agreement be deleted and many times the insurance carrier will agree to do that if their filing allows it. Retail properties or medical office buildings often have higher claims frequency and these claim payments do appear on the loss history.
In conclusion, when examining a CGL policy make sure that it is on an occurrence form and the defense costs are outside the limits and are not limited. The supplemental payments coverage A and B section of the policy should state “We will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
- All expenses we incur.
The insurance carrier should pay for the defense costs outside the policy occurrence limit.
There may be a reason a policy has a substantially lower premium so be cautious and ask questions. What is the carriers history of fighting allegations that may not have any factual basis.
Sometimes a per claim deductible will lower the premiums and be attractive if loss frequency is low.