Liability Insurance
The liability insuring agreement
Liability insurance responds to the insured's legal liability to third parties for bodily injury, property damage, personal injury or advertising injury. Commercial general liability (CGL) is the backbone: it covers sums the insured becomes legally obligated to pay, plus defence costs, and usually imposes a duty to defend that is broader than the duty to indemnify. Limits are commonly stated per occurrence, with a general aggregate and a products-completed operations aggregate. Defence costs may be inside or outside the limit, so read the declarations.
Occurrence versus claims-made
- An occurrence policy responds to injury or damage that occurs during the policy period, even if the claim is made later.
- A claims-made policy responds to a claim first made during the policy period. A retroactive date bars claims for acts before that date; an extended reporting period can preserve cover for claims made after expiry.
- Exclusions commonly remove expected or intended injury, contractual liability outside an insured contract, auto liability, pollution and professional liability.
- Additional insureds, certificates of insurance and umbrella/excess layers need careful wording; a certificate is evidence, not the policy.
Worked example
A retail tenant has a CGL occurrence policy for 2024. A customer slips in December 2024 and sues in 2026. Because the injury occurred in 2024, the 2024 occurrence policy is the one that responds, subject to its terms and the insured's timely notice. If the policy were claims-made, the 2024 policy would respond only if the claim was first made during the 2024 policy period or within an applicable extended reporting period.
Traps
Claims-made is not the same as occurrence. A CGL policy does not cover the insured's own property. The duty to defend can arise before liability is proven. Not every contract creates covered contractual liability. A certificate of insurance does not amend coverage.