1. COMMERCIAL LIABILITY HELPS KEEP YOUR BUSINESS IN BUSINESS
CGL is one of the most popular types of insurance policies procured in Canada, and at the same time it is often one of the least understood. Stripped down to its bare essentials, a traditional standard primary CGL policy generally provides the following assurances: if a policy is triggered by bodily injury or property damage taking place during the policy period, then an insurer owes its policyholder two principal obligations: (1) a duty to defend and (2) a duty to indemnify for compensatory damages.
Additional coverage available under a CGL policy are Personal & Advertising Injury Liability, Medical Payments and Tenants’ Legal Liability.
2. ONE SHOE DOESN’T FIT ALL
Coverage under a CGL policy is highly dependent on the type of business your client is in and the risks associated with it. Consider the liability associated with a retail operation (predominately slip & fall) vs. a general contractor and the work performed for others (i.e. blasting). Some provinces award higher damages to third parties, so where your client is located or conducts the majority of their business may be a factor. As always, your client’s years in business and level of experience impacts both premium and coverage. It is always better to fully understand the nature of your client’s operations to ensure adequate protection. We suggest asking relevant questions that affect your client’s business and the industry they represent so that a policy can be tailored to fit their specific needs.
3. KNOW YOUR LIMITS
A CGL policy has, in essence, six different limits. Limits are typically listed separately but it is important to recognize that the limits are all interrelated and payment under one limit impacts coverage under another. Limits included in a CGL policy are:
- Bodily Injury and Property Damage
- Personal & Advertising Injury
- Medical Payments
- Tenants’ Legal Liability(optional)
- General Aggregate Limit
- Products Completed Operations Aggregate Limit
The most important ones are the General Aggregate Limit and Products Completed Operations Aggregate Limit. Once these limits are exhausted by judgment or settlement, there may be no further obligation to the policyholder during the remainder of the Policy Period.
4. THE LINES ARE BLURRING
Increasingly, cases are cropping up that question what is, and what isn’t, a professional service. Is it a CGL coverage trigger or a professional liability (E&O) coverage trigger? There is no definitive black or white answer! What we do know is that decisions are highly fact-intensive and each case is reviewed on the merits of the individual matter.
The need for professional liability coverage could be a new consideration for many clients and may be met with resistance at first. Though it may have a longer sales cycle, offering Professional Liability (E&O) products along with the CGL is prudent in this every changing world we live in.
The CGL policy is designed to protect the insured against liability arising out of bodily injury and property damage to third parties caused by an occurrence. Whereas the Professional Liability (E&O) insurance policy protects the insured when they are sued as a result of negligent acts, errors or omissions that occur during the course of providing advice or professional services that lead to financial loss to a third party.
There are several key differences between the two policy types, some of which include:
- CGL policies are typically, but not always, “occurrence-based” whereas professional liability policies are typically “claims-made” policies;
- CGL policies typically provide defense costs outside the limit of insurance while a professional liability policy typically includes defence costs within the limit of liability;
- CGL policies and professional liability (E&O) policies apply different deductibles;
- CGL coverage responds to bodily injury and property damage, whereas professional liability policies provide coverage against an array of professional services damages, including economic damages;
- CGL insurers traditionally allow certain clients to add additional insureds, to the CGL policy at little additional cost, whereas professional liability carriers generally do not.
5. SOUND RISK MANAGEMENT IS YOUR FIRST LINE OF DEFENSE
No matter how big or small your client is, helping them establish a Risk Management Program can assist in the operation of their business and also help reduce claims activity to a minimum:
- Work closely with clients, whenever possible, to aid in establishing the highest standards for controls and/or product quality within their organization. Depending on the size of the organization, using simple methods to keep controls up to date. Utilizing checklists, step-by-step procedures and flowcharts may be helpful.
- Ensure that all company records are up to date and accurate, including those for any employees, company funds, and all important documents;
- Help your client understand that it may be prudent to be selective in the organizations they partner with or contracts they execute.
- Training shouldn’t stop at new employee orientation. Suggest to your clients that it may be beneficial to implement appropriate training and continuous learning programs to keep employees current on the organization’s procedures and policies;
- Ensure your clients are aware of and seek appropriate guidance in complying with legal and regulatory laws that may affect or impact their organization;
- Suggest your clients become familiar with any systemic risks (i.e. interest rates, purchasing power, liquidity risk, operation risk, etc.) that may profoundly impact your client’s business.