8 Surprising Commercial General Liability Insurance Exclusions

Insurers, however, don’t want to pay the maximum amount for every liability claim. That’s why all commercial general liability (CGL) insurance policies have exclusions. Many insurers use these exclusions to deny or reduce claims.

Keep reading to discover eight of the most common – and surprising – commercial liability insurance exclusions that could impact your business.

Liability Related to Intentional Acts or Expected Damages

If a business owner, employee, or anyone with permission intentionally causes damage or injury, then insurance could deny the claim.

Obviously, insurers deny intentional actions – like if the owner deliberately sets the business on fire and causes injuries to people in a neighboring building.

Many business owners, however, are surprised when insurers deny a claim because it’s an intentional act that could reasonably be expected to lead to injury or damage. If you overloaded a delivery truck and drove it on public roads, for example, and caused an accident that injured other people, then your insurer could deny liability because of an intentional act.

Workers’ Compensation Liability & Employers Liability

A standard commercial insurance policy or business owners policy (BOP) does not include workers’ compensation coverage.

Let’s say one of your workers is injured when he/she slips and falls while loading a truck. Typically, commercial liability insurance covers slips and falls at your business. However, because it’s an employee who slipped and fell, the claim falls under workers’ compensation and not general liability. You need extra workers’ compensation coverage to cover this liability.

Employer’s liability exclusions work in a similar way: if an employee or an employee’s family sues the business for an injury, then the business’s general liability policy will not cover the claim.

Contractual Liability Exclusions

Many commercial liability exclusions are related to contractual liability.

Here’s how contractual liability exclusions work:

• If you assume the liability of another party through a contract, then you will not have bodily injury or property damage liability coverage for that party.
• If you’re a large company that takes over a smaller company’s project via contract, for example, then insurance may not cover liability related to that project.

Insurers need to calculate risk, and they analyze your business to determine that risk. If you sign a contract assuming the liability of another party, then insurance did not have a chance to accurately calculate risk related to that party. This can lead to the denial of your claim.

Professional Liability Exclusions

A commercial general liability (CGL) policy does not include professional liability coverage. You must buy additional professional liability coverage – say, as a standalone insurance product or an endorsement.

Without professional liability coverage, your business could be exposed to liability related to the provision of professional services, including situations like:

• Legal malpractice
• Medical malpractice
• Any liability arising from the provision of professional services

Liquor Liability Exclusions

Many liability claims get messy because of liquor liability exclusions.

Even if you have a commercial policy for your bar, nightclub, or other liquor-related business, that commercial policy will not automatically cover liquor-related liability.

If someone is overserved at your bar and crashes their car on the way home, for example, then you may be liable for injuries and damages. Commercial liability insurance does not cover this liability automatically; instead, you need to buy extra coverages like liquor liability insurance.

Damage to Business Property & Products

General liability policies do not cover your business’s building, inventory, or other products. Instead, you need separate property protection coverage.

Some professionals only buy liability coverage because they don’t maintain an office or sell products. A marketing consultant who works from home, for example, may not feel the need to buy commercial property coverage.

This lack of coverage, however, could cause you to pay out of pocket for damage to business property:

• If a fire, burst pipe, or other covered event damages your business’s property or inventory, then liability insurance won’t cover this damage.
• You may try to make a claim under your homeowners or renters insurance policy, which covers certain personal property. However, insurance may deny this claim because the claim involves business property – not personal property.
• To cover business property and inventory, you need property damage liability coverage, a business owners policy (BOP), or similar coverage.

Let’s say you have a $5,000 computer in your home office. You carry a liability insurance policy to cover your consulting business. A fire damages your home office, destroying your computer. You make a claim, but insurance denies your claim because your computer doesn’t fall under commercial liability insurance (which covers liability for your business) or homeowners insurance (which covers personal property not used for business purposes).

Electronic Data Exclusions

Electronic data-related insurance claims have surged in recent years. As claims surge, many businesses are realizing they don’t have sufficient coverage.

Here’s how electronic data exclusion work:

• Electronic data is not considered tangible property.
• Because data isn’t tangible property, it’s not covered in a general liability policy.
• If a customer files a claim for loss of data, corruption of data, inability to access data, or loss of software function, then this claim will not be covered by your general liability policy.

Let’s say you run a computer repair business. While repairing a computer, you inadvertently delete all of the client’s sensitive data from the device, causing significant damage to the client. A general liability insurance policy won’t cover this damage because of electronic data exclusions.

Injury to Independent Contractors & Subcontractors

A general liability insurance policy typically covers injuries for employees, clients, and anyone on a business’s premises.

Some insurers, however, seek to deny liability claims for claims involving independent contractors and subcontractors. This is particularly common in the construction industry.

Check your policy for any provisions referring to “injury to contractors or subcontractors and their workers.” Your policy may specifically exclude damage to the subcontractor, which could force you to pay out of pocket.

Check Your Liability Policy to Avoid Being Underinsured

Many business owners are underinsured. They carry a commercial general liability (CGL) policy and assume they’re covered for most liability – only to realize certain, and often the most important, damages are excluded.

If your insurer has denied or reduced your claim because of a liability insurance exclusion, then consider talking to a public adjuster or attorney.
At ClaimsMate, our public adjusters specialize in navigating claims related to complex commercial policy exclusions. Contact us today for a no-cost consultation and case review.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.