What is excluded in a general liability policy?

General liability insurance is a foundational coverage, but does not provide comprehensive protection. Often it is the first insurance policy a new business will put in place. Upon it several other types of liability policies are built, and it is applicable to businesses of all sizes and industries. However, one should never assume it covers all claims.

Exclusions and limitations exist in any coverage. Therefore, it’s important to understand what general liability insurance protects and what it doesn’t. In this manner, other coverages can be applied as necessary.

General Liability Coverages

General liability protects not only the business, but also its clients. If a business or product harms a client or a client’s property, that client will likely (and rightfully) demand compensation. The intent of general liability is to cover such costs.

General liability covers 1) bodily injury to people and 2) damage to property caused by your business operations or products. This enables injured parties to pay medical bills and provide supplementary income if out of work. It enables damaged property to be rebuilt or replaced. It also protects against claims of personal injury such as libel or slander, advertising injury, medical expenses, defense costs, and several other important protections. For a more detail, read your policy, visit General Liability Insurance, or ask your insurance agent.

Exclusions and Limitations

Exclusions define the boundary lines of coverage. Most general liability exclusions end protection where more appropriate insurance policies pick up. Since general liability is broad by design, it cannot provide the unique protections needed in specific areas. Below are the most common exclusions and limitations.

Automotive

Most businesses utilize automobiles in some fashion. Some use them extensively, such as a fleet of trucks or vans to deliver product or provide service. Other businesses may only operate vehicles occasionally, such as for sales purposes. Either way, a commercial auto insurance policy is written to cover this exposure and provide necessary protection. Hence, it is excluded from general liability.

Employee Injuries

Though general liability provides bodily injury protection, this only extends to customers and other third parties. If an employee is injured on the job, that is covered by workers compensation insurance, not general liability. Workers compensation laws vary by state, but most allow any employee who is injured on the job the right to receive compensation for medical bills and lost income. General liability policies exclude obligations imposed by these laws.

Errors and Omissions

Professional service providers such as lawyers, accountants, doctors, or architects each have risk associated with their unique professions which necessitate specific coverage. The damages caused by such errors are often not covered by general liability insurance. Such protection is provided through professional liability insurance, also known as errors and omissions coverage. For more detail, reference our article Does Your Business Need Professional Liability Insurance?

Directors & Officers

The directors and officers of a company face risks unique to their positions and the business decisions those stations require. Directors and officers (D&O) insurance guards such people from what otherwise would be considered a personal liability. Though most general liability policies do not explicitly exclude directors and officers liability, it provides no cover since such errors often 1) result in financial loss instead of bodily injury or property damage, and 2) are brought by shareholders or other members of the organization, not 3rd parties. Thus, this risk is properly covered by a D&O liability policy and not general liability.

Employee Disputes

Claims resulting from employee disputes alleging wrongful employment practices such as harassment, discrimination, wrongful termination, or a hostile work environment are not covered by general liability insurance. There are several reasons for this:

1. Such injury does not usually result in bodily injury, therefore general liability does not apply.
2. Such injury is expected or intended, therefore is specifically excluded from general liability insurance. Reference the list of other exclusions below.
3. An employee is a part of the business, not a 3rd party.

Fortunately, employment practices liability insurance (EPLI) is a specific coverage engineered to provide such protection and is readily available for purchase. Ask your insurance agent.

Cyber Attacks

General liability specifically excludes claims associated with the loss of electronic data. Cyber liability insurance is the fastest growing form of liability coverage. It is no longer only purchased by banks and financial institutions, but by businesses of every size and variety.

Other

General liability insurance includes several other exclusions and limitations. The list below is not exhaustive. Please be sure to review your insurance policy or contact your insurance agent with questions.

• Expected or intended injury
• Contractual liability
• Liquor liability
• Pollution
• Liability associated with aircraft, watercraft, or off-premises mobile equipment
• War
• Damage to your product, property, or work
• Recall of products
• Violation of federal, state, or local statue