What is CGL Insurance?

Most business owners make huge investments in machinery, renovations or infrastructure. With such a huge investment, it’s common sense that it should be properly insured. But what many business owners miss is their liability risk.

What is my Liability Risk?

Businesses generally owe a duty of care to their customers and to the public. No matter how careful you are or how much experience you have, your day-to-day operations and even your employees have the potential to cause accidental property damage or bodily injury to 3rd parties. Your business premises, operations, products, completed works, and even your advertising can cause harm to a 3rd party.

If someone believes they were harmed by your business, they can sue. If you’re found legally responsible, you can be on the hook for large sums of money. Legal fees are expensive and damages awarded by courts for personal or bodily injury cases have been getting larger and larger in Hong Kong.

To protect against this risk, business owners should consider purchasing a Commercial General Liability (CGL) insurance policy.

What is a Commercial General Liability (CGL) policy?

A CGL is an insurance policy used by businesses to protect themselves against liability claims. It pays for a few things:

Compensatory Damages: these are damages awarded to the plaintiff(s) by the courts. This money is meant to compensate the plaintiff(s) for their financial loss.

Supplementary Payments: these include things like legal fees related to your defense, reasonable expenses incurred by the insured when called to assist in the investigation or defense (i.e. travel costs or lost wages), and costs taxed against the insured after a judgement has been rendered. Examples of these costs include court costs the insured is required to pay or interest accruing on the judgement amounts until the monies are paid to the plaintiff(s).

That being said, there are some important liability exclusions you should be aware of:

• Automobile-related liability: this type of liability would be covered by an automobile insurance policy
• Liability if your business is involved in a cyber-attack: business can be liable if their customer data is disclosed in a cyber-attack. Customers can allege that the business failed to properly protect their sensitive data. This type of risk can be insured by purchasing a Cyber policy.

Do I need a CGL?

Many business owners believe this insurance isn’t necessary because they don’t make mistakes; and rightfully so. They take great pride in their work and expertise so it’s understandable that most business owners would think that. But even if you 100% will never make a mistake, the cost of defending a merit-less lawsuit can still be crippling.

A good business owner knows the difference between a cost and an investment. A CGL insurance policy along with proper risk management ensures that the injured party is fairly compensated without hurting your business.