Get a quote on General Liability Insurance
For IT businesses that regularly host visitors or perform work at other locations, General Liability Insurance is a critical coverage to consider. General Liability Insurance can cover your business for unintentional third-party injury or damages.
What is General Liability Insurance?
General Liability Insurance, also called Commercial General Liability Insurance or CGL, is a common type of business insurance that covers accidental damage to third parties. If your business unintentionally causes property damage, bodily injury, personal injury, or advertising injury, the insurance company will pay for any resulting legal fees and damages. This insurance can help protect your company if someone else is harmed by your business and sues.
Example:
- A client visits your web design company to review plans for a new website and trips on an uneven entrance mat, causing an injury. General Liability Insurance will cover medical costs and any legal fees if the client sues.
It’s important to note that General Liability Insurance only provides coverage for claims made by third parties, such as clients, vendors, or landlords. It does not cover damages to your business, property, or employees.
Why do IT professionals need General Liability Insurance?
If your IT firm performs services at other locations or has meetings with clients at your offices, there’s always a chance that an accident could occur. Even if your business does not typically require your employees to visit other locations or host clients, it probably receives deliveries or requires the services of technicians at times. If an incident involving personal injury or property damage occurs and your company is sued, it can result in costly legal fees and settlements, which CGL can cover.
General Liability Insurance covers risks that almost all companies are exposed to and provides a layer of financial security that can provide business owners with some peace of mind. Although it’s not legally required, many clients and leases may require businesses to have CGL, and holding the coverage may also give your customers more confidence in your business, knowing that you’ve taken the prudent step of securing basic insurance coverage.
What does General Liability Insurance cover?
General Liability Insurance typically provides coverage for three categories of claims: property damage, bodily injury, and personal and advertising injury. CGL covers damages, medical payments, and legal and defense costs related to these lawsuits. A primary benefit of General Liability Insurance is that it allows your business a financial cushion in the face of a lawsuit so that you can continue to operate without being bogged down 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.
Examples:
- An employee of your telecom cabling installation business visits a customer’s office to install cabling. While moving equipment on site, your employee accidentally rams a ladder into the glass doors of the customer’s lobby, shattering the doors.
- Your network technology business installs a part incorrectly in your client’s on-site server, causing an electrical fire that spreads to the entire office building. Your client’s office suffers serious fire damage.
IT professionals should note that this coverage only applies to physical damage to property and would not apply to electronic forms of property, including data or software programs. It’s also important to remember that 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.
General Liability Insurance also excludes personal property belonging to others that is under your care, custody, or control. If your business centers on working with others’ property, you may want to consider additional coverage.
Example:
- You are hired to install a new storage and networking system at a client’s office. As you and your team are moving one of the client’s servers, you accidentally drop it, damaging the server beyond repair. Property damage would not cover the damage to the server as it would be considered under your care, custody, or control.
For IT businesses that want to protect against such incidents, consider adding voluntary property damage, which should cover the standard CGL exclusion for personal property that is under your care, custody, or control. For businesses that take temporary possession of customers’ property, like an electronics or computer repair business, consider bailee’s customer insurance.
Bodily Injury
If a person who isn’t one of your employees is injured on your property or during the course of your business operations, CGL will pay for damages. This might include medical expenses, pain and suffering, lost wages, funeral expenses, and legal fees if a suit is filed.
Examples:
- While visiting your web design company to review plans for a new website, a client slips on a wet floor and falls down the stairs. General Liability Insurance will cover medical costs and any legal fees if the client sues.
- While delivering new computers to your digital marketing company, a delivery person trips on some loose carpeting, injuring his back.
Products and Completed Operations
If your company makes a product or provides a service that is found to cause property damage or bodily injury, Commercial General Liability Insurance typically provides coverage under the products and completed operations hazard. This coverage specifically applies to property damage or injuries that take place away from your business’s premises and are caused by your product or completed work. If the incident occurs on your premises or while your work is in progress, it would be covered by the bodily injury and property damage sections of your CGL policy.
Products and completed operations coverage does not cover damage to your product or completed work itself; it only applies if the product causes damage to a customer’s other property.
Example:
- Your company installs a new networking system at a client’s office. The networking system malfunctions and overheats, and many of the circuit boards are damaged. If the client sues for damage to the networking system, this would not be covered by your General Liability policy, as the system counts as your completed work. If the malfunctioning networking system ended up damaging the client’s computers, that damage could be covered by CGL.
Personal & Advertising Injury
The personal and advertising injury portion of CGL differs from property damage and bodily injury coverage in that it covers actions that may be intentional but cause unintended consequences. The most relevant examples for IT businesses are slander or libel and copyright infringement. False arrest, wrongful eviction, and malicious prosecution also fall into this category of CGL insurance. It’s important to remember that CGL covers personal and advertising injury claims only if the offenses were committed unknowingly. For example, if your business published false statements while aware that they were false, you would not be covered by CGL.
Examples:
- Publications that violate privacy: Your mobile app development company creates an app for a celebrity. It then uses the celebrity’s image in advertisements without permission.
- Slander or libel: Your SEO consulting company regularly publishes a blog. One of the blog entries includes false statements about a competitor. They sue you for libel.
- Copyright infringement in advertising: Your IT firm creates a logo that looks similar to the logo of a more established competitor. Your firm is sued for copyright infringement.
Legal Defense
If a claimant sues your company for a reason covered by your CGL insurance policy, the insurer will pay for your attorney fees, court costs, expert witness fees, and other expenses for defending the case. They will defend your case up the limits of your insurance 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 of $500,000 each. Your total legal fees are $100,000. In this case, the insurer will cover all costs, even though the judgment reached the limit of insurance.
Medical Payments
If an accident causing bodily injury happens on or adjacent to your property or is caused by your operations, your CGL insurance will pay medical expenses up to the insurance policy’s medical expenses limit, regardless of fault. This part of CGL coverage differs from bodily injury coverage, which pays if your company is found to be at fault. Medical payments can help avoid 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.
What are the exclusions to General Liability Insurance?
Commercial General Liability Insurance has a number of common exclusions. They include:
- Property belonging to your business. You will need property insurance to cover your business property.
- Professional errors. For professional errors that cause financial loss, you will need professional liability insurance. For example, if your web hosting company causes a DNS error on a client’s e-commerce site, resulting in financial losses, professional liability insurance would cover it.
- Employee injuries. Workers’ compensation insurance covers your employees if they are injured or fall sick on the job.
- Automobile incidents. You will need commercial auto insurance to cover company vehicles.
- Employment discrimination lawsuits. Employment practices liability insurance covers employee lawsuits accusing your firm of wrongful treatment.
- Damage or injury caused intentionally.
- Liability resulting from crimes or fraud.
- Loss of electronic data. CGL insurance does not cover damages related to the loss or damage of electronic data. For example, if your database administration company makes a mistake while updating a client’s database, corrupting their records, CGL would not cover the claim. Loss of electronic data can be covered through an endorsement on your General Liability policy, cyber liability insurance, or professional liability insurance, depending on how the data is lost.
- Personal and advertising injury for certain internet and media company types. If you design or create content for clients’ websites, or if your company is an internet service provider or internet search engine company, you may not be covered for the slander, libel, injuries to privacy, or copyright infringement sections of personal and advertising injury. If your company falls in this category, you will need an endorsement on your General Liability policy or a separate media liability policy.
What are the limits of General Liability Insurance?
The limits of liability are the maximum amount the insurance company will pay for losses during a policy year. You can choose the limits of your policy with your insurance company; higher limits will require higher premiums.
CGL insurance policies typically have a per occurrence limit as well as a per year maximum. The per occurrence limit is the maximum the insurer will pay for a single incident, while the per year maximum is the amount the insurer will pay for all incidents over a single year.
Example:
- Your IT consulting firm has a CGL policy with a $1 million per incident limit and a $2 million per year limit. Three claims are filed against your company in one year. The first settlement is for $1 million, the second is for $1.5 million, and the third is for $500,000. Your insurance will cover the first claim in its entirety because it is within the occurrence limit. It will pay $1 million of the second claim, but because the claim is greater than the occurrence limit, it will not cover the remaining $500,000. The insurer will not cover the third claim at all because the per year limit has been reached.
Pricing and Quotes
AdvisorSmith found the average cost of General Liability Insurance for IT businesses was $418 per year. This average cost was based on IT 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 computer repair 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
Although CGL is not legally required, most companies carry some level of risk for the incidents it covers. No matter how careful you are, accidents can occur and cause bodily injury or property damage, leading to costly lawsuits, damages, and settlements. If you want to protect your company from potential financial losses relating to these common risks, Commercial General Liability Insurance is helpful. Whether your company meets with clients and works at customers’ offices regularly or just has occasional visitors, CGL insurance can give you and your clients confidence that your business will be able to handle unforeseen circumstances.
