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General liability insurance: what it covers and what it does not
General liability pays third-party injury, property damage and advertising claims and defends the suit. What the ISO form excludes and what drives price.
General liability insurance pays when someone outside your business says you injured them, damaged their property or wronged them in your advertising, and it pays for the lawyer who defends the lawsuit. It is written on the ISO commercial general liability form, CG 00 01, or on a carrier's own version of it. It does not cover your own property, your employees' injuries, your vehicles, your professional advice or pollution; each of those has its own policy.
What the policy actually promises
The insuring agreement in commercial general liability form CG 00 01 is one sentence long. The insurer will pay "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage'," and it has "the right and duty to defend" any suit seeking those damages. (Quotations here come from a public copy of CG 00 01 04 13; your carrier's wording may differ.) Four phrases in that sentence decide most claims.
- Legally obligated. The policy responds to liability, not to every accident on your premises. If you are not legally responsible, there is nothing to indemnify, though the duty to defend can still apply to a groundless suit.
- Bodily injury means bodily injury, sickness or disease, including death. Property damage means physical injury to tangible property and the loss of use of it, or loss of use of tangible property that is not physically injured. Electronic data is not tangible property under the form.
- Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The injury or damage must happen during the policy period. That is what makes it an occurrence policy: a claim filed in 2029 for an injury in 2026 goes to the 2026 policy. A claims-made version exists (CG 00 02) but is the exception. See occurrence vs claims-made policies.
- Defend. The insurer hires and pays defense counsel. Under the standard form those defense costs are "supplementary payments" that do not reduce the limits, although the duty to defend ends once the insurer has paid the applicable limit in judgments or settlements.
The three coverages
Coverage A, bodily injury and property damage. The core. A customer falls on your wet floor; your crew's work floods a client's basement; a product you sold injures a user. It includes the "products-completed operations hazard" for injury that happens after you have left a job or sold a product, covered in products and completed operations coverage.
Coverage B, personal and advertising injury. A defined list of offenses: false arrest, malicious prosecution, wrongful eviction, defamation and disparagement, invasion of privacy, use of another's advertising idea, and infringing copyright, trade dress or slogan in your advertisement. Detail in personal and advertising injury coverage.
Coverage C, medical payments. No-fault payment of reasonable medical expenses for a person hurt on your premises or because of your operations, if the expenses are incurred and reported within one year of the accident. It is meant to settle small injuries quickly, before they become claims. It excludes your employees and anyone covered by workers' compensation. The three coverages are taken apart in Inside the CGL policy: Coverages A, B and C.
The six limits on the declarations
| Limit | What it caps |
|---|---|
| Each occurrence | All Coverage A damages plus Coverage C medical expenses from one occurrence |
| General aggregate | The most paid in a policy year for Coverage A (except products-completed operations), Coverage B and Coverage C combined |
| Products-completed operations aggregate | Coverage A damages from the products-completed operations hazard |
| Personal and advertising injury | Coverage B damages for any one person or organization |
| Damage to premises rented to you | Property damage to any one premises you rent, chiefly fire damage |
| Medical expense | Coverage C expenses for any one person |
The pairing most leases and customer contracts ask for is $1 million per occurrence and $2 million general aggregate, but the contract in front of you sets the number, not custom. Two practical points. First, the general aggregate is shared by every location and every job unless an endorsement splits it, such as CG 25 04 (designated location general aggregate) or CG 25 03 (designated construction project general aggregate). A contractor with ten active jobs and one aggregate is one bad year away from an empty tank. Second, if one claim could exceed the per-occurrence limit, that is the job of an umbrella; see commercial umbrella insurance.
What general liability does not cover
The form's exclusions are lettered a through q under Coverage A. The ones that surprise owners most:
| Exposure | Standard CGL position | Where cover usually sits |
|---|---|---|
| Your employee hurt on the job | Excluded (workers' compensation and employer's liability exclusions) | workers' compensation insurance: how it works and employers' liability |
| Vehicles, aircraft, watercraft you own, operate, rent or borrow | Excluded, with limited exceptions such as parking a non-owned auto on your premises | commercial auto insurance: what it covers and what it leaves out |
| Advice, designs or services that fail to deliver | The base form has no blanket professional services exclusion, but carriers add one for many classes, and a purely financial loss is not "bodily injury" or "property damage" | Professional liability (E&O) insurance explained |
| Property you own, rent, occupy or hold for others | Excluded (care, custody or control, among others) | Commercial property, bailee and inland marine |
| Your own product or work, a recall | Excluded: damage to your product, your work, impaired property, and recall costs | Product recall insurance; builder's risk; warranty |
| Pollution | Excluded at premises you own or occupy, waste sites and contractor jobs, with narrow exceptions | Pollution liability insurance |
| Liquor liability if you sell, serve or furnish alcohol | Excluded | Liquor liability insurance |
| Data loss, breaches, TCPA, CAN-SPAM and FCRA claims | Excluded | cyber insurance: what it covers for a business |
| Discrimination, wrongful termination | Not bodily injury or property damage; carriers often attach the CG 21 47 employment-related practices exclusion | Employment practices liability insurance |
Two more exclusions to know by name. Contractual liability removes liability you take on by contract, except liability you would have anyway and liability assumed in an "insured contract" (a lease, an easement, a sidetrack agreement, or the part of another contract where you assume someone else's tort liability). That exception is why indemnity clauses in leases and subcontracts are insurable. Expected or intended injury removes harm the insured meant to cause, with an exception for reasonable force to protect people or property.
For the full list and the carve-backs, read CGL exclusions: what a general liability policy does not cover.
Endorsements and the 2026 form changes
The base form is rarely the policy you receive. Carriers attach endorsements that add (additional insured, waiver of subrogation, primary and noncontributory wording) and endorsements that subtract (assault or battery, habitability, residential work, designated operations). ISO has also been revising the program. According to ISO circulars summarized by PropertyCasualty360, ISO announced on July 14, 2026 that a revised CGL multistate forms package applies to policies written on or after October 1, 2026 in 48 jurisdictions (circular LI-GL-2026-208), and a separate classification, rules and forms overhaul carries an April 1, 2027 date in many states. Optional endorsements in ISO's 01 26 edition, proposed for January 1, 2026, include exclusions for generative artificial intelligence and for assault or battery; PropertyCasualty360 noted that attaching them generally reduces coverage.
Do not assume your renewal matches expiring. Check the edition date printed beside each form number on the forms schedule and ask your broker to list what changed.
How the premium is built
General liability is rated on an exposure base tied to the class of business: gross sales per $1,000 for retailers and restaurants, payroll for many trades, square footage for building owners, cost of subcontracted work for general contractors, or units for things like apartments. Those rates are multiplied by the base, then modified for the limits you choose, any deductible or self-insured retention, loss history, location and the carrier's judgment of your operation. Underwriters ask what you sell, whether you use subcontractors and whether they carry insurance, what work happens at height or on other people's property, and what claims you have had.
The policy's premium audit condition makes the advance premium a deposit only; the final premium is computed from actual sales or payroll after expiration. Underreported estimates produce a bill at audit. See premium audits: how they work and how to prepare.
A hypothetical example
Say a neighborhood bakery-café with eight employees holds a $1 million per occurrence, $2 million aggregate policy. The figures and events below are invented for illustration.
| What happens | What responds |
|---|---|
| A customer slips on a wet floor and breaks a wrist | Coverage A, plus Coverage C for her emergency room bill regardless of fault, within the medical expense limit |
| A fryer fire spreads to the neighboring shop's inventory and damages the café's leased space | Coverage A for the neighbor's inventory; the damage to premises rented to you limit for the leased space |
| A delivery employee rear-ends a car | Commercial auto policy, not the CGL |
| A baker burns a hand on the oven | Workers' compensation |
| A mislabeled cake triggers a customer's allergic reaction | Coverage A under the products-completed operations hazard, which erodes the separate products aggregate |
| A competitor says the café's social post falsely disparaged its cakes | Coverage B, unless the post was made with knowledge of its falsity |
One café, six events, four different policies. That is the point of reviewing general liability next to the rest of the program rather than alone. Many small businesses buy the CGL inside a business owner's policy; the comparison is in BOP vs general liability: which one do you need?.
Where claims go wrong
- Late notice. The conditions require notice "as soon as practicable" of an occurrence that may result in a claim, and immediate forwarding of any suit papers. Send the summons the day it arrives.
- Voluntary payments. An insured who pays a claim or assumes an obligation without the insurer's consent does so at its own cost, except for first aid.
- Wrong class or understated exposure. A misdescribed operation can be rated wrongly, or excluded by a designated operations endorsement you never noticed.
- Certificates mistaken for coverage. A certificate proves a policy existed on the day it was issued. Additional insured status comes from the endorsement. See certificates of insurance: what they prove and what they do not.
Key takeaways
- General liability responds to third-party bodily injury, property damage and personal and advertising injury, and the insurer defends the suit, usually outside the limits.
- It is an occurrence form: the injury must happen during the policy period, whenever the claim is later made.
- Employees, vehicles, professional advice, pollution, data and your own property sit outside it. Build the rest of the program around those gaps.
- The general aggregate is shared across every location and job unless endorsed otherwise, and a $1 million per occurrence limit is where umbrella coverage starts to matter.
- Read the edition dates and endorsements at every renewal, particularly this year with ISO's 2026 revisions taking effect.