Commercial General Liability

National Insurance Academy, Pune

25.04.23

Ms. Rinku Chaudhuri, Faculty Member, NIA

Commercial General Liability Policy
Commercial General Liability

• CGL Policy is a combination policy having elements of property &

casualty liabilities & financial liability within its fold.
• Public , Product , are covered under this policy as also financial
liabilities.
• Most of the corporates prefer CGL Policy (with broader cover) instead
of individual Public & Product Liability Policies.
CGL – Origin

➢Commercial General Liability (CGL) Policy was first introduced in USA in 1941 by
AIG & has become the most trusted & followed-by liability policy world –wide
because of its well-tested definitions, wordings , clauses etc.
➢In 1986,the American Association of Insurers filed & replaced the old version
with a simplified CGLPolicy with two distinct versions “Occurrence based” &
“Claims based” which has been adopted in toto by the Insurers operating in
Indian market.
➢The two new versions differ from each other in terms of coverage of claims only
on following lines
Commercial General Liability Coverage Form:

▪ Section I- Coverage :
• Coverage A-Bodily Injury & Property Damage Liability :
i. The policy pays if the insured is legally obliged to pay damages for
bodily injury or property damage covered under the policy . This
occurrence must take place in the covered territory . It should
happen within the policy period .
ii. The Insurer has the right & duty to defend the case . However, this
right will be exercised only where the law of land permits the
Insurer to defend the case.
Exclusion

i. Expected or intended injury.

ii. Contractual Liability
iii. Workmen’s Compensation & employer’s liability
iv. Pollution liability
v. Use of ownership of Aircraft , auto or watercraft owned & mobile equipment.
vi. War.
Exclusion

Property owned ,rented ,occupied or leased or being worked upon.

vii. Damage to own product.
viii. Damage to work included in the Products-completed operations hazard ; unless
performed by sub-contractor on insured behalf.
ix. Damage to impaired property or property not physically injured.
x. Recall of products.
xi. Employment related practices.
xii. Personal & advertising injury.
xiii. Asbestos.
Note: Exclusions iii to x do not apply to damage by fire if premises are rented or
temporarily occupied by insured , In such cases , the limit of insurance for this
coverage applies.
Coverage B- Personal & Advertising Injury Liability

Coverage B- Personal & Advertising Injury Liability :

Pertains to false arrest, detention or imprisonment, Malicious
prosecution.
❖ Wrongful eviction.
❖Oral or written publication of material that slanders or libels a
person or organization.
❖ Oral or written publication of material thatviolates a person’s right
to privacy.
Advertising Injury

Advertising injury – Pertains to offenses attributable to the insured’s advertising activities

arising out of oral or written publication of material that slanders or libels a person or
organization or disparages persons or services. It also includes violations of a person’s
right to privacy, mis-appropriation of advertising ideas & infringement of copyright title
or slogan. Advertising injury coverage does not apply to those companies in the business
of advertising; a separate stand-alone policy must be purchased for this exposure.
Exclusions:
i. Personal & advertising injury directed or caused by deliberate acts of insured, false
oral or written publications ,criminal acts, publications made prior to policy.
ii. Assumed liability ,breach of contract.
iii. Failure of product or goods or services to perform or quality as advertised.
Advertising Injury

iv. Wrong description of goods, products or services prices advertised.

v. Committed by Insureds whose business is advertising & other media.
vi. Arising out of pollution or asbestos related exposures.
vii. War & kindred perils including civil war , terrorism.
viii. Employment related practices.
ix.Costs of losses arising out of removal of pollutants or similar
procedures.
Coverage C- Medical Payments

Coverage C- Medical Payments

❖Medical expenses for bodily injury caused by an accident within the covered
territory & within the policy period .Expenses are incurred & reported to insurers
within one year of the accident . The injured will be subject to examination by
insurer’s appointed physicians as & when required

(a) on premises owned or rented.

(b) on ways next to premises owned or rented.
(c) Because of operations.
Coverage C- Medical Payments

Exclusions
i.Expenses for injury to insured, employees, tenants or occupiers of
insured owned or rented property.
ii. Persons eligible under WC policy or similar laws.
iii. Participation in athletics.
iv. War & allied perils.
Supplementary Payments-Coverage A & B

• Supplementary Payments-Coverage A & B

The Insurers will pay for all expenses incurred by them in investigation,
defense & settlement of suits including:
i. Bail bonds up to a limit for traffic violations or accidents arising out of
use of vehicles to which bodily injury liability coverage applies.
ii. Costs of bonds to release attachments within the applicable limit of
insurance.
iii. Reasonable expenses incurred by the insured on request of insurer to
assist in investigation or defence including actual loss of earning upto a
per day limit as decided for time off work.
Supplementary Payments-Coverage A & B

iv. Costs taxed against the insured in the suit.

v.Pre-judgement interest awarded against the insured on that part of the judgement
payable by Insurers.
vi.All interest on the full amount of any judgement that accrues after entry of the
judgement & before insurers have paid, offered to pay or deposited in court the
part of the judgement that is within the applicable limit of insurance.
Section II- Who is an Insured ?

➢ Section II- Who is an Insured ?

This section lists each person or organization that qualifies
automatically as an insured under the policy.
The purpose of this section is to outline who, other than the named
insured listed in the policy declarations, may qualify for coverage
under the policy.
Automatic insureds are partners & spouses of individual named
insureds, employees, and persons driving the insured’s mobile
equipment.
Commercial General Liability contd..

• Newly acquired or formed organizations are automatically insured for

90 days . It is important to note that partnerships & joint ventures are
not insureds unless specifically scheduled as such under the policy .
Additional insureds are commonly added to the policy by
endorsement.
Commercial General Liability contd..

➢ Section III-Limits of Insurance :

The limits of insurance payable under the policy is the maximum
liability of the insurer irrespective of number of a) Insureds b) Claims
made or suit brought c) persons or organizations making claims.
➢ Section IV- Conditions :
i.Bankruptcy- States that the bankruptcy or insolvency of the insured
does not relieve the Insurer from its obligations.
Commercial General Liability contd..

ii.Duties in the event of occurrence, claim or suit-Immediate notice,

details of occurrence of event, injured persons & witnesses & nature
of injury or damage, notify claims received by the Insureds ,forward
copies of all demands ,notices, summons in connection with the
claim, authorize for additional information, cooperate for
investigation, assist & enforce rights against person or organizations.
iii.Legal action against Insurer – No legal action against insurers by any
person or organization to join or be conjoined in any suit ,to sue for
recovery of settlement or damages unless coverage terms fully
complied.
Commercial General Liability contd..

iv. Other Insurance- Coverage is limited to

(a)Primary Insurance- If insurance is primary ,it will pay or share in
equal proportion if other primary cover exists.
(b)Excess Insurance- In such case , it will be in excess of any
primary insurance.
(c)Method of sharing- Equal sharing if permitted under other policies
: each insurer contributes equal amount until its applicable limit is
paid or no loss remains ,whichever first occurs If equal sharing not
permitted, it will pay in proportion.
Commercial General Liability contd..

(v) Premium Audit – Recognizes the insurer’s right to conduct an audit of the
insured’s books & the requirements for the insured to keep appropriate records.
(vi) Representations- Confirms that the insurance policy has been issued based on
the representations made by the insured in the application.
(vii)Separation of Insureds - Except with respect to the Limits of Insurance & rights
or duties specifically assigned in the Coverage Part to the Named Insured , this
insurance applies to each Named Insured independently & separately to each
insured against whom claim is made.
Commercial General Liability contd..

(viii)Transfer of rights of recovery against to other to insurers – This gives the

insurer the right of subrogation if it makes payment under the policy . The insured
is obligated to protect this right & do nothing after loss to impair it.
(ix)When policy not renewed- Requires the Insurer to provide a 30 day notice of
cancellation of its intent not to renew coverage.
(x) Cancellation- 10 days notice in case of non-payment of premium in all other
cases 60 days. Insurers cancel with pro rata refund as agreed .
(xi) Changes- Change in terms can be amended with insurer’s consent
Commercial General Liability contd..

(xii)Examination of Books & Records-Insurers right to examine during

the policy period & upto three years thereafter.
(xiii)Inspection & Surveys- Insurers have right to conduct inspection
& surveys & provide insured with the report & recommendations.
Inspections are merely for insurability & premium purposes.
(xiv)Premium- First named Insured responsible for premium
payment & entitled to refund premium.
(xv) Transfer of Rights & Duties-Insured cannot transfer without
Insurer’s consent . In the event of the death of the Insured ,rights
transferred to legal representatives only or temporarily to executors.
Commercial General Liability contd..

➢ Section V – Definitions :
(a) Advertisement- a notice that is broadcast or published in the general
public or specific market segments about the insured’s goods , products
or services for the purpose of attracting customers or supporters.
(b) Auto means a land motor vehicle trailer or semi trailer designed for
travel on public roads, including any attached machinery or equipment.
But not mobile equipment.
(c) Bodily injury means bodily injury sickness or disease sustained by a
person including death resulting from any of these at any time.
(d) Coverage territory means the territory specified in the schedule
Commercial General Liability contd..

Section V – Definitions
(e) Employee is permanent employee or contract employee.
(f) Executive Officer means a person holding office as per Company Law.
(g) Hostile fire means one which becomes uncontrollable or breaks out from where
it was intended. (h) Impaired property means tangible property other than the
insured’s product or work.
(i)Insured contract means a contract for lease of premises. However, it does not
include the part of the contract that indemnifies the landlord or owner of the
property for fire damage to the premise leased to or temporarily tenanted by the
insured.
 Commercial General Liability contd..

Section V – Definitions
(i) Leased worker is a person leased to you by a labour leasing firm under agreement to perform
duties related to the insured’s conduct of business.
(j)Loading or unloading means movement into or onto an aircraft, watercraft or auto ,whilst in
such craft or whilst being moved from such craft. It does not include movement by means of a
mechanical device other than hand truck not attached to such craft or auto.
(k)Local underlying policy means a primary policy effective on or after the inception of this
policy which has been issued at insurer’s direction or coordinated specifically for this insurance
programme.
Commercial General Liability contd..

Section V – Definitions
(i) Leased worker is a person leased to you by a labour leasing firm under agreement
to perform duties related to the insured’s conduct of business.
(j)Loading or unloading means movement into or onto an aircraft, watercraft or
auto ,whilst in such craft or whilst being moved from such craft. It does not include
movement by means of a mechanical device other than hand truck not attached to
such craft or auto.
(k) Local underlying policy means a primary policy effective on or after the
inception of this policy which has been issued at insurer’s direction or coordinated
specifically for this insurance programme.
Commercial General Liability contd..

(l) Mobile equipment means land vehicles including attached machinery or

equipment like bulldozers, forklifts used on private land ,power cranes, road
construction or resurfacing equipment crawlers or other vehicles that are self
propelled. As also air compressors, pumps generators spraying welding equipment
s. Any equipment not used for carriage of persons or cargo.

(m)Occurrence means an accident including continuous or repeated exposure to

substantially the same general harmful conditions
Commercial General Liability contd…

(n) Personal & advertising injury means injury, including consequential bodily
injury arising out of the following offences like false arrest ,detention or
imprisonment, malicious prosecution, wrongful eviction from or entry into or
invasion of the right of private occupancy of a room, oral or written publication of
material that slanders or libels a person or organization or disparages a person or
organization’s goods, products or services , oral or written publication of material
that violates a person’s right of privacy etc.
Commercial General Liability contd…

(o)Pollutants mean solid, liquid, gaseous or thermal irritants or contaminant

including smoke, vapour soot, fumes, acids, alkalies , chemicals & waste .
Wastes include materials to be recycled , reconditioned or reclaimed.
(p)Products –completed operations hazard includes all bodily injury & property
damage occurring away from premises insured owns or rents & arising out of the
product or work except product that are still in physical possession of insured or
work that has not been completed or abandoned.
Commercial General Liability contd…

(q) Property damage means physical damage to tangible property including

consequential loss , such loss deemed to occur at the time of physical injury.
( r) Suit means a civil proceeding & includes an arbitration proceeding for
such injury or damage or an alternative disputes resolution proceeding for
the same purpose.
(s) Temporary worker is a substitute for seasonal or short term work
conditions.
(t ) Product means goods or products other than real property manufactured
sold handled distributed or disposed by insured or trading under insured
name or insured acquired business or assets & includes containers ,
materials parts or equipments furnished in connection with such goods or
products.
Commercial General Liability
contd..
Rating
Basis of Rating

Premium is charged based on following factors:

▪ Indemnity limits.
▪ Risk exposure relating to nature of business & activities.
▪ Employee strength.
▪ Geographical area of operations.
▪ Financial Status.
Case II
• Insured:
Manufacturer of fertilizers
Loss Description:
Damage to crops due to use of insured product
Quantum Paid:
INR 4876325
Details of the Claims:
Supplied Metamitron to Importer in Switzerland
Sugar Beet Yield adversely impacted
Farmers sued Importer
Expert found defect in Metamitron
Primary claim handled by Importer's Insurer
Subrogation claim against us
Case III
Insured:
Manufacturer of chemicals
Loss Description:
Property damage due to wrongful delivery by transporter
Quantum Paid:
Not pursued by claimants
Details of the Claims:
Local Agent of Shipping Line delivered wrong tank to client.
Contents of wrong tank caused damage to their plant and equipment.
Client blames our Insured who contracted the Transport Company that made wrong
delivery
Client claims 53,000 Euros for cleanup costs + ProductionStoppage
Liability Claims Management
Claims Public Liability Insurance (Industrial & Non-Industrial
Risks) :
➢ Public Liability Insurance (Industrial & Non-Industrial Risks) :
▪ Intimation of Event:
• Upon intimation of the happening of an event which may give rise to a
claim under the policy, the claim processing office has to check the
following:
(a)Whether the loss has taken place during the period of insurance & the
claim is made during the policy period or within 90 days from the date of
expiry in the event of non-renewal or cancellation of the policy ?
(b) Retroactive date in the policy.
(c) Limit of indemnity applicable under the policy.
Public Liability Insurance (Industrial & Non-Industrial Risks)

➢ Public Liability Insurance (Industrial & Non-Industrial Risks) :

▪ Intimation of Event:
• Upon intimation of the happening of an event which may give rise to a
claim under the policy, the claim processing office has to check the
following:
(a)Whether the loss has taken place during the period of insurance & the
claim is made during the policy period or within 90 days from the date of
expiry in the event of non-renewal or cancellation of the policy ?
(b) Retroactive date in the policy.
(c) Limit of indemnity applicable under the policy.
Public Liability Insurance (Industrial & Non-Industrial Risks)

• Claim processing office should also immediately call for full details of the event
(if not already provided) & depending upon the circumstances & extent of
injuries/loss reported to have been caused ,may also appoint an independent/in-
house agency “without prejudice” to verify the facts & collect all evidences for
defense in a discreet manner without alerting the affected parties or other agencies
to lodge claim which otherwise may not have been lodged.
• Simultaneously, the insured is also to be advised to pass on to the insurer any
notice of claim that may be received by them without admitting liability.
Public Liability Insurance (Industrial & Non-Industrial Risks)

• Investigator’s Report & the related documents may be preserved at Claims Processing Office till a
regular claim is preferred by the claimant against the insured. Thereafter, the general procedure as
described below may be followed in dealing with the claim.
➢ Claim Processing :
• On receipt of formal claim intimation, procedure as enumerated above may be followed.
• In cases wherein notices or summons are received directly from the court whether or not any
intimation has been given by the insured ,a competent advocate should be engaged to defend the
case effectively . Generally , defence is taken on lack of privity of contract between the claimants
Public Liability Insurance (Industrial & Non-Industrial Risks)

and the insurer , as the insurer is liable to indemnify the insured only subject to the
terms & conditions of policy of insurance.
• To verify whether the claim is barred by limitation placed by statute or policy
condition.
➢ Documents :
• Depending on individual case, following documents may be obtained:
(a) Detailed version about the incident.
(b)Details of loss caused/injury/death/property damage including all available
information on victims as well as estimated liability.
Public Liability Insurance (Industrial & Non-Industrial Risks)

(c ) Steps taken by the insured to mitigate the loss.

(d)Statements from witnesses ,sketch plans, photographs, visual
records of evidence/circumstance, video etc.
(e) Any other evidence in support of claim.
(f) Press Reports.
(g) FIR/Investigation Report of Police.
Public Liability Insurance (Industrial & Non-Industrial Risks)

(h) Survey/Investigation Report

(i) All notices/summons of the court.
(j) Weather (Meteorological) Report.
(k) Pollution Control Board Report.
(l) Postmortem Report/Medical Certificate.
(m) Details of other insurance(if any).
(n) Legal Opinion/expert Opinion on admission of liability/appeal.
(o)Details of claims ,if any , preferred by the affected party/insured for the same
loss from any other source.
Public Liability Insurance (Industrial & Non-Industrial Risks)

(p) Evidence of legal liability of the insured.

• If the legal opinion expresses the likelihood of liability being pinned
on the insurer in terms of the policy , all possibilities must be
explored for out of court/compromised settlement . This will ensure
expeditious settlement , avoidance of possibly large liability & adverse
publicity.
• In the event of an Award being passed by the appropriate authority ,
a copy of the Award may be obtained immediately. A legal opinion
may thereafter be obtained & the merits of the case examined as to
whether it is worthwhile going in for appeal.
Public Liability Insurance (Industrial & Non-Industrial Risks)

➢ Factors to be considered while determining liability :

• Property Damage:
(a ) Nature & extent of loss/damage, valuation, depreciation.
(b) Contributory negligence.
(c ) Loss of use, loss of profits, increased cost of working etc as claimed.
(d) Recovery Rights.
• Bodily Injury/Death :
(a) Age, occupation, status, income, dependency, age of
Product Liability Claims

➢ Special features to be considered for Product Liability Claims :

• Whether the item is covered under the policy .
• Date of sale vis-a –vis Retroactive Date.
• Whether quality control measures as prescribed had been fully
complied with by the Insured.
• Whether manufacturing defect in product is established.
• Whether specific instructions (for use) given by the Insured (if any)
have been complied with or not.
Product Liability Claims

• Whether vendor’s Liability covered & claim has arisen there under.
• Specialist/experts to be engaged to determine whether product is
defective.
• Collaborator’s Liability.
• Whether compromised settlement is worthwhile.
• Recovery Right, if any.
• Loss Minimization Measures- Recall; stoppage of sale/destruction of
the concerned product.
Liability Claims

➢ Claims under Public Liability Policy :

• “No fault” liability provisions as incorporated in the Public Liability Insurance
Act,1991 are in the nature of social welfare measure . Act Liability claims have to
be expeditiously settled & neither the insurer nor the advocates appointed need
contest where it is established that the claim is payable as per the provisions of the
Act.
• Required documents are :
(a) Letter from the insured describing the circumstances leading to the claim.
(b) F.I.R.
Liability Claims

(c ) Postmortem Report or Death Certificate, wherever applicable.

(d) Medical Certificate in case of permanent disability/injury.
(e) Details of property damaged.
• On receipt of notice from the Collector, representation should be
made on behalf of the insured as well as the insurer before the
Collector.
• On receipt of the copy of the Award from the Collector, the same
should be satisfied within the time stipulated by the Act.
Claims under PLI Act

Where the Collector has given the Award, but the liability does not,
strictly fall within the purview of the PLI Act Policy, a competent
advocate should immediately be consulted for further course of action.
However, it must be borne in mind that Act allows a period of 30 days ,
calculated from the date of award for its satisfaction & speed in follow-
up action is therefor of essence.
Thank You