Commercial General Liability Insurance (CGL)
Commercial general liability insurance – a CGL policy – is the foundation of almost every commercial insurance program in Canada. It responds when a third party alleges that your premises, your operations or your completed work caused bodily injury or property damage, and it funds your defence even when the allegation turns out to be groundless. It is also the coverage a client, a landlord or a municipality will ask to see before you can sign the contract, take the space or pull the permit.
What Is Commercial General Liability Insurance?
A commercial general liability insurance policy is third-party coverage. It does not repair your building, replace your tools or pay your staff – it answers claims brought against you by someone else. Canadian wordings are written on an occurrence basis, which means the policy in force when the injury or damage happened is the policy that responds, even if the claim does not arrive until years later.
Two very different things are paid: the damages you become legally obligated to pay, and the cost of defending the allegation in the first place. On most standard wordings, defence is paid in addition to your limit rather than eroding it.
What a CGL policy pays for:
- Damages you are legally liable for – settlements and judgments awarded to a third party for bodily injury or property damage.
- Defence costs – lawyers, investigation, expert reports and court costs, payable even when the claim against you is groundless.
- Medical payments – reasonable medical expenses for a third party injured on your premises, paid without an admission of liability.
- Investigation and claims handling – the insurer takes carriage of the file, which keeps the matter off your desk and out of your week.
Commonly added by endorsement:
- Non-owned automobile liability – claims arising from vehicles you do not own but use for business, including employee and rented vehicles.
- Employer’s liability – bodily injury to workers who fall outside provincial workers’ compensation coverage.
- Additional insured status – extending the policy to a client, general contractor, landlord or municipality, as most contracts require.
- Broadened territory, liquor, abuse and limited pollution – available where the exposure warrants it, and priced accordingly.
Why You Need Commercial General Liability Insurance
Your Contracts Require It
Most commercial contracts, subcontracts and service agreements specify a minimum limit of commercial general liability insurance before work can start. One million dollars per occurrence is common for low-hazard operations, two million is the figure most often written into commercial agreements, and five million or more is routine on larger public, institutional and construction projects.
Landlords and Lenders Ask For It
Commercial leases almost always require the tenant to carry commercial general liability insurance and to name the landlord as an additional insured. Lenders, franchisors and property managers apply the same test before they sign.
Licences and Permits Depend On It
Municipalities and provincial regulators frequently make proof of liability insurance a condition of a business licence, a street occupancy or excavation permit, or any work in the public right of way.
Defence Begins Before Fault Is Decided
A claim does not have to be valid to be expensive. Legal costs start accumulating the moment an allegation is made, and your policy funds the defence regardless of how the matter ends.
One Loss Can Outweigh a Year of Profit
A serious third-party injury claim can exceed the net profit of an entire year. CGL converts an unpredictable and open-ended liability into a fixed, budgeted premium.
What Commercial General Liability Insurance Covers
Bodily Injury and Property Damage
The core of the policy: injury to a third party, or damage to property belonging to someone else, arising from your premises, your operations or your completed work. A customer slips on a wet floor. An excavator cuts a client’s buried service line. Loss of use of the damaged property is included.
Products and Completed Operations
Injury or damage caused by a product you manufactured, sold or distributed, or by work you finished and left the site. This is the coverage a client relies on years after a project closes, and the reason completed operations limits appear in so many contracts.
Personal and Advertising Injury
Harm that is not physical: libel, slander, malicious prosecution, wrongful eviction, invasion of privacy, or use of another party’s advertising idea. A competitor alleging that your campaign copied their material falls here, not under bodily injury.
Medical Payments
Reasonable medical expenses for a third party injured on your premises, paid on a no-fault basis and without an admission of liability. The sub-limit is modest by design, but it resolves minor incidents quickly before they harden into claims.
Tenants’ Legal Liability
Damage to premises you lease, and the loss of use of them, where it results from your negligence. A fire that starts in your unit and spreads through the landlord’s building is the classic example, and most commercial leases require this coverage by name.
What CGL Insurance Does Not Cover
Injuries to Your Own Employees
Worker injuries belong to provincial workers’ compensation – the WCB in Nova Scotia – not to your liability policy. An employer’s liability endorsement can respond for workers who fall outside that system, but CGL answers third parties, not your payroll.
Your Own Buildings, Stock and Equipment
Property you own is a first-party exposure. Buildings, inventory, tools and mobile equipment belong on a commercial property policy, with lost earnings handled by business interruption insurance.
Repairing Your Own Work or Product
The cost of correcting defective workmanship, or replacing a product that failed, is a business risk rather than an insured loss. Damage that the failure causes to other property may well respond – the rework itself does not.
Professional Advice, Design and Specification
Errors in professional judgment are excluded from the standard wording. That exposure sits with errors and omissions insurance, or contractors professional liability where design-build work is involved.
Pollution and Environmental Impairment
Gradual pollution and most clean-up costs are carved out, with only limited sudden-and-accidental relief. Site owners and contractors need pollution and environmental coverage.
Cyber Incidents and Licensed Vehicles
Data breaches, ransomware and network interruption fall to cyber insurance. Anything with a licence plate belongs on a commercial auto policy, with non-owned automobile liability bridging vehicles you do not own.
Who We Insure
Who Needs Commercial General Liability Insurance?
If your work brings you into contact with the public, a client’s property or a job site, you are carrying a third-party exposure. These are the sectors where a certificate of commercial general liability insurance gets requested most often.
Construction and Development
- Contractors and developers
- Trades, subcontractors and specialty installers
- Property owners and managers
- Renewable energy and infrastructure
Manufacturing, Distribution and Retail
- Manufacturers and wholesalers
- Distributors and importers
- Retail, service and trade counter operations
- Warehousing, transport and logistics
Hospitality, Marine and Professional
- Hotels, restaurants and licensed venues
- Seafood processing and fishing operations
- Technology and professional services
- Associations, non-profits and event organisers
Send the insurance clause before you sign. Most disputes start when a contract calls for limits, additional insured status or a waiver of subrogation that the policy in force does not actually provide. Reviewing the clause first is far cheaper than amending a policy after the certificate has been requested.
Building the Program
Coverages That Work Alongside CGL
A commercial general liability insurance policy is the base layer. These are the coverages most often built around it, and the ones worth raising when your contracts, your assets or your operations outgrow the standard wording.
Liability Extensions
Property and Operations
Project and Contract Requirements
- Wrap-up liability
- Builders risk / course of construction
- Surety bonds
- Certificates of insurance and additional insured status
When the primary limit is not enough. Excess and umbrella liability sits above your commercial general liability insurance and any other underlying policies, and it is almost always cheaper per million than raising the primary limit. If a contract asks for five or ten million, this is usually how it gets built. Talk to a broker about the structure your contracts call for.
Commercial General Liability Insurance FAQ
Is commercial general liability insurance mandatory in Canada?
No statute requires a business to carry commercial general liability insurance. In practice it is close to compulsory: contracts, subcontracts, commercial leases, municipal permits, licensing bodies and franchise agreements routinely require it, and almost all of them want a certificate on file before work begins.
How much CGL coverage do I need?
Limits for commercial general liability insurance are usually set by the agreements you sign rather than by your own risk appetite. One million dollars per occurrence remains common for low-hazard small businesses, two million is the figure most often specified in commercial contracts and leases, and five million or more is standard on larger public, institutional and construction projects. Excess or umbrella liability sits above the primary policy and is generally the least expensive way to buy height.
What is the difference between a per-occurrence limit and an aggregate limit?
The per-occurrence limit is the most the insurer will pay for any single claim. The aggregate is the most it will pay for all claims during the policy term, and it resets at renewal. A two million by four million policy can pay two million on one loss, but no more than four million in total that year.
Are legal defence costs paid inside my policy limit?
On most standard CGL wordings, defence is paid in addition to the limit rather than eroding it, which is much of what makes the coverage valuable on nuisance claims. It is not universal – some specialty and claims-made wordings include defence within the limit. Confirm it in the policy wording, not on the certificate.
What is the difference between CGL and errors and omissions insurance?
Commercial general liability insurance responds to bodily injury and property damage caused by your operations. Errors and omissions insurance responds to financial loss caused by your professional advice, design or service. An engineer whose scaffold injures a passerby has a CGL claim; the same engineer whose calculation is wrong has an E&O claim.
Is CGL written on an occurrence or claims-made basis?
Standard CGL is occurrence-based. The policy in force when the injury or damage happened is the one that responds, even if the claim arrives years later. Most professional liability and cyber policies are claims-made instead, which is why continuous coverage matters so much on those lines.
What does adding someone as an additional insured actually do?
It extends your commercial general liability insurance to that party for liability arising out of your operations. Clients, general contractors, landlords and municipalities commonly require it, and it is usually endorsed at little or no cost. The wording matters: read what obligations the contract is asking your insurer to assume before you agree to it.
Does CGL cover my products after they leave my hands?
Yes. Products and completed operations coverage responds to injury or damage caused by a product you sold or by work you completed. It does not pay to repair or replace the defective product itself, and it does not fund a recall – that requires separate product recall coverage.
How are CGL premiums calculated?
Commercial general liability insurance is priced on exposure: annual revenue, payroll, the nature of the work, where it is performed, your claims history, the limits and deductible you select, and the subcontractors you rely on. Two businesses with identical revenue can price very differently if one works at height and the other works from an office.
Do home-based and part-time businesses need CGL?
Yes, and often more urgently than they expect. A homeowner’s policy excludes business activity almost entirely, so a client injured at your home office, or a delivery that damages a customer’s property, would be uninsured. A small standalone commercial general liability insurance policy or a home-based business endorsement closes the gap.
Schedule a Consultation Today
Whether you are placing commercial general liability insurance for the first time, reviewing limits against a new contract, or working out which policy answers a specific exposure, our brokers can walk you through it.
Reach out today and experience the Stanhope difference.