General Liability Insurance can step in to financially protect your company if it is held liable for third-party incidents involving unintentional personal or bodily injury, property damage, and advertising injury. It is a critical coverage to consider if you regularly host visitors or consult at other locations, but even companies that perform most work remotely and rarely come into contact with third parties could benefit from this type of insurance. In general, most companies will need to have General Liability Insurance, and it is often required when you do business with other companies.

What is General Liability Insurance?

General Liability Insurance, also commonly known as Commercial General Liability Insurance or CGL, covers accidental damage or injury to third parties and third-party property. If your business unintentionally causes bodily injury, personal injury, advertising injury, or property damage, CGL will pay for legal fees and damages. In cases where someone else is harmed by your company and sues, this insurance can help your company by providing a financial safety net. It’s important to remember that this coverage only applies to claims made by third parties, such as clients, landlords, or vendors. It does not cover injury or damages to your own employees, your business, or your property.

Example:

• A client visits your financial consulting firm to discuss a financial plan. While at your offices, she slips on a wet floor in the breakroom, injuring her back. General Liability Insurance will cover medical costs and any legal fees if the client sues.

Why do consultants need General Liability Insurance?

General Liability Insurance can protect your firm from a variety of possible risks. As a consulting firm, it’s likely that your employees host clients at your offices or visit other companies to provide advice and services, opening up the possibility for accidents that may lead to injury or property damage. Even if you perform most of your work remotely, you may come into contact with third parties if you receive deliveries or require repair services. If an accident that occurs during the course of your work causes an injury or property damage, your company could be sued. CGL can cover the costly legal fees and settlements that could result if such an accident happens.

Aside from bodily injury or property damage, CGL can also protect your firm from lawsuits due to non-physical personal injury. For example, if you or an employee is accused of slander, libel, or copyright infringement, General Liability Insurance would provide coverage. If your firm does any marketing or advertising in the public arena, CGL is a useful coverage to have and can provide ample protection against personal and advertising injury liability.

What does General Liability Insurance cover?

General Liability Insurance covers claims of accidental third-party property damage, bodily injury, personal injury, and advertising injury as a result of your products, premises, or operations. If your company is involved in a lawsuit relating to these types of claims, CGL will cover damages, medical payments, and legal and defense costs. This coverage can provide your company with crucial financial support during a lawsuit, allowing you to continue to operate without being overwhelmed by legal costs.

Property Damage

If you or your employees accidentally damage another person or company’s property, CGL will cover the costs of replacement or repair.

Example:

• An employee of your management consulting firm visits a client company to discuss its business needs and meet with its employees. While at the client company’s offices, the employee accidentally damages an expensive work of art. Your insurer would pay for damages.

If your company works with third-party electronic property such as data and software, it’s important to note that CGL only applies to physical property damage. Causing the loss or damage of a client’s electronic data would not be covered by CGL but may be addressed through cyber liability insurance or errors and omissions insurance. Additionally, General Liability Insurance does not provide coverage for damage to your own business property, only for damage to the property of others. You would need commercial property insurance to cover your business’s property.

Bodily Injury

Physical injuries may be rare in the consulting world, but they can still occur. In the office environment, common causes of bodily injury include slip-and-fall accidents, tripping, falling objects, and collisions with people or objects. If someone who isn’t employed by you is injured on your property or during the course of your business operations, CGL will pay for damages. Coverage could include medical expenses, lost wages, pain and suffering, funeral expense, and legal costs if there is a lawsuit.

Example:

• Your market research consulting firm is conducting a focus group. One of the focus group participants trips on uneven carpeting near your staircase and falls down the stairs, causing broken ribs. Your insurer would pay for medical costs and damages if the participant sues.

Personal & Advertising Injury

Personal and advertising injury coverage provides protections for non-physical injuries made by you or your employees during the course of business. In the consulting industry, the most relevant types of offenses are slander, libel, disparagement, and copyright infringement. False arrest, wrongful eviction, and malicious prosecution also fall into this category of CGL insurance, though this is likely to be rare in consulting. Companies should be aware that CGL covers personal and advertising injury claims only if the offenses were committed unknowingly. For example, if your consultancy published untrue statements while aware that they were false, your CGL policy would not cover you.

Examples:

• Slander or libel: Your environmental consulting company regularly publishes a blog. One of the blog entries includes false statements about another company. They sue you for libel.
• Copyright infringement in advertising: Your education consulting firm launches an advertising campaign using artwork that looks similar to the work of a professional artist. Your firm is sued for copyright infringement.

Legal Defense

Commercial General Liability Insurance provides coverage for attorney fees, court costs, expert witness fees, and other expenses for defending liability claims brought against your consulting business, regardless of who is at fault. Your insurer will cover the funds to defend your case up the limits of your policy. Legal fees typically do not count against the limits of insurance.

Example:

• Your CGL policy has a limit of $1 million per year, and in one year, your company is found liable for two judgments. One judgment is for $500,000 and the second for $400,000. Your total legal fees for both cases are $250,000. In this case, the insurer will cover all costs, even though the legal fees are greater than the limit of insurance.

Medical Payments

Medical payments coverage can help prevent lawsuits by paying for first aid, ambulance service, and other medical or dental services that may be required if someone is injured on your property, even if your business is not at fault. If an accident that causes bodily injury occurs on your property, adjacent to your property, or as a result of your business operations, your CGL insurance will pay medical expenses up to the insurance policy’s medical expenses limit. This aspect of CGL coverage differs from bodily injury coverage, which pays if your company is found to be at fault.

What are the exclusions to General Liability Insurance?

Commercial General Liability Insurance has a number of common exclusions. They include:

• Professional errors. For professional errors that cause financial loss, you will need errors and omissions insurance.
• Employment discrimination lawsuits. Employment practices liability insurance covers your company if current, former, or prospective employees bring lawsuits accusing your firm of wrongful treatment.
• Employee injuries. Workers’ compensation insurance covers your employees if they are injured or fall sick on the job.
• Property belonging to your business. You will need property insurance to cover your business property.
• Loss of electronic data. CGL insurance does not cover damages related to the loss or damage of electronic data. Loss of electronic data can be covered through an endorsement on your General Liability policy, cyber liability insurance, or errors and omissions insurance, depending on how the data is lost.
• Damage or injury caused intentionally.
• Liability resulting from crimes or fraud.
• Automobile incidents. If your company owns any vehicles, you will need commercial auto insurance to cover them.

What are the limits of General Liability Insurance?

The limits of liability are the maximum amount of funds your insurer will provide for losses during a policy year. When you purchase an insurance policy, you can choose the policy’s limits; you will have to pay higher premiums to receive higher limits.

CGL insurance policies typically have both a per year maximum and a per occurrence limit. The per year maximum is the amount the insurer will pay for all incidents over a single year, while the per occurrence limit is the maximum amount the insurer will pay for a single incident.

Example:

• Your cybersecurity consulting firm has a CGL policy with a limit of $1 million per year and $500,000 per incident. Two claims are filed against your company in one year. The first settlement is for $500,000 and the second is for $800,000. Your insurer will cover the entire amount of the first claim because it is within the occurrence limit. It will pay $500,000 of the second claim, but it will not cover the remaining $300,000 because the claim is greater than both the occurrence limit and the yearly limit.

Pricing and Quotes

AdvisorSmith found the average cost of General Liability Insurance for consulting businesses was $366 per year. This average cost was based on consulting businesses with up to $500K in revenue for coverage of $1 million per occurrence and $2 million in aggregate.

Pricing for General Liability Insurance is based upon the unique risks your business faces. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a consulting business with a history of multiple claims will probably have higher liability premiums than one with relatively few past claims. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer General Liability Insurance:

Provider	General Liability	Business Owner's Policy	Product Liability
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??
Embroker	??	??	??

Final Word

Commercial General Liability can provide consultants with a wide range of necessary liability coverage. Even if your work is not physically dangerous, it’s always possible that accidents could occur and cause bodily damage or property damage, leading to costly lawsuits, damages, and settlements. Personal and advertising injury is another common risk that could lead to expensive legal proceedings. Commercial Liability Insurance is a great choice for companies that wish to protect themselves from the financial losses that could result from these incidents. CGL insurance can give you and your clients confidence that your business will be able to manage unexpected accidents.

This article may feature links to partners who compensate our business, but these partnerships in no way impact our research, recommendations, or advice.