What is commercial general liability insurance?

Commercial general liability insurance (also known as business liability insurance) is designed to protect you if a third party makes a claim of harm related to bodily injury, property damage, personal injury or advertising injury. Running a business comes with enough worries—commercial general liability insurance can take a major source of stress off your plate by helping cover legal defence costs, settlements and damages, even if a third-party claim turns out to be unfounded.

Commercial general liability insurance makes sense for businesses of all sizes, including small and very small businesses. In the early days when you’re still figuring things out, mistakes are bound to happen. This type of coverage can protect your business if something goes wrong.

If your company interacts with clients or the public, or if it has care, custody or control of third-party property, you can be exposed to risks. Here are some industries that commonly require commercial general liability coverage, along with examples of situations where a business in that sector might face liability claims:

• Professional services and beauty care businesses

A client slips on a wet floor or trips over an electrical cord.

• Construction

You could accidentally puncture a water pipe while installing drywall, causing extensive damage to your client’s property.

• Retailers and wholesalers

Your employee accidentally injures a customer while handling merchandise or unintentionally causes damage during a delivery to a client. Or a customer trips over some merchandise.

Real estate firms, condominium corporations, healthcare service providers and manufacturers are also strong candidates for commercial general liability insurance.

On the other hand, companies that provide professional advice, expertise or services rather than physical products are often good candidates for errors and omissions insurance. This includes businesses like consultants, IT companies and financial service providers, where a mistake or oversight could lead to financial loss for a client.

Commercial general liability insurance isn't mandatory for most businesses in Canada, but it is highly recommended. In practice, landlords often require proof of insurance as part of commercial lease agreements. Clients may also require it before they agree to do business with you.

Commercial general liability insurance can help protect your company if a third party makes a claim or takes legal action after suffering bodily injury, property damage, or certain types of losses. Dealing with a claim can be stressful, but it can be reassuring to know you’ve got protection to help cover legal costs if you’re sued. Not to mention coverage for compensation owed if your business is held liable, provided the claim falls within the terms of your policy.

Commercial general liability insurance typically covers four main types of claims:

• Bodily injury and property damage

Claims involving third-party injuries or property damage caused by your business operations, premises, products or completed work. These represent the vast majority of claims

• Personal injury and advertising injury

Covers things like slander, libel, reputational harm and copyright infringement related to your advertising or communications.

• Medical expenses

Covers certain medical costs, such as first aid or ambulance services, for third parties injured on your premises, even if you aren’t responsible.

• Tenant’s legal liability

Protects your business if damage, such as fire or water damage, is caused to the rented space.

Commercial general liability insurance covers many common business risks, but it does have some gaps. Cyber incidents like data breaches and ransomware require separate cyber liability insurance. Commercial general liability insurance doesn’t cover business interruptions either, such as lost income if your business has to shut down for a while due to a covered loss or to equipment breakdown caused by mechanical or electrical failure. Each of these examples would require separate standalone coverage.

Learn more about different types of business insurance coverage.

Commercial general liability insurance costs can vary widely depending on your industry, business size, location and the amount of coverage.

To choose the right coverage and policy limits, you need to think about how your business operates and what your biggest liability risks are. Factors like your size, workforce, risk tolerance and day-to-day activities all influence the type and amount of insurance you need, so be sure to:

• Assess the specific risks your business faces
• Choose a policy limit that aligns with the size and structure of your workforce

Different types of liability insurance serve different purposes. Having coverage that’s a good match for your professional situation can really help protect your business if a claim is ever made against you. Even with the best of intentions, accidents can happen, and they can cause harm to others. Having commercial general liability insurance can give you a little extra peace of mind so you can focus on running your business without having to worry about the “what ifs”.

Not sure which insurance coverage you need? We can help you identify gaps, clarify your needs and choose the right insurance products for your business. Give us a call at 1‑866‑472‑8848 to review your coverage or get a quote today.

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