Understanding the Two Types of CGL Policies

Commercial general liability insurance (or CGL insurance) is one of the most vital types of insurance policies for businesses. This type of insurance covers a wide range of claims associated with third-party bodily injuries, third-party property damage, and even reputational/advertising injuries. Ultimately, it protects a business from various third-party lawsuits — making it a necessity in an increasingly litigious society. 

There are two types of CGL policies: the occurrence policy and the claims-made policy. If you’re looking to get CGL insurance for your business, being familiar with these types of CGL policies is a must. 

In this guide, you’ll find out everything you need to know about claims-made policies and occurrence policies, including their differences. 

Let’s begin!

What Do The Two Types of CGL Policies Cover? 

The differentiating factor between a claims-made policy and an occurrence policy is the period or time frame when claims are considered valid. We will discuss this in further detail in the next section. 

The above difference aside, claims-made policies and occurrence policies have the same coverage points, which include the following:

1. Third-Party Bodily Injury

If bodily injury to a client, member of the general public, and other third-party individual arises in connection with your business operations, CGL insurance has your back. It will cover the medical and legal bills, up to the coverage limit. Third-party injuries within your business premises are also covered by CGL insurance.

2. Product Liability

If your product causes third-party illness, injury, or property damage, CGL insurance can cover medical, repair, and legal bills.  

Products that can be covered by CGL policies include the following, among others: 

• Food and drinks from restaurants; 
• Goods or raw materials that are manufactured, sold, or distributed by a company; and
• Constructed/renovated structures or fixtures installed by a company. 

3. Third-Party Property Damage

Whether your business operations or your products cause third-party property damage, both types of CGL policies will protect you from losses. CGL insurance will cover repairs, replacements, and legal costs. 

4. Reputational /Advertising Damage

Last but not least, CGL insurance will cover legal fees associated with reputational and advertising damages. A few examples of covered claims include slander, libel, copyright infringement, and so on. 

As mentioned earlier, coverage for any of the above will depend on the following factors:

• The time that the incidents and claims occurred; and
• Which of the two types of CGL policies you have. 

Claims-Made Policy vs. Occurrence Policy

In the earlier section, we discussed the similar coverage points that the two types of CGL policies have. Now, we look into what sets them apart. 

Whether or not a claim is covered by a claims-made policy or occurrence policy depends on when the incident happened and when the claim was reported. These are the key questions to ask: 

Let’s explore these differences further. 

An occurrence policy is designed to cover losses that happen within the policy period. It does not matter when the claim was reported. In fact, the claim for an incident can happen years after the policy has expired, and it would still be covered — as long as the incident itself happened while the policy was active. 

On the other hand, a claims-made policy will only provide coverage if both the incident and claim occur within the policy period. This means that if the policy has ended or expired, no coverage will be given — even if the incident happened when the policy was active. 

Because the coverage of claims-made policies is within a more limited timeframe, this is typically the more affordable option when considering the two types of CGL policies.  

Examples of How The Two Types of CGL Policies Respond to Claims 

Product Liability Incident Examples 

1. A restaurant was sued for food poisoning. This counts as product liability. The incident itself happened on March 3, 2022. The claim was made on April 3, 2022 — which was just a few days after the policy expired. The policy was not renewed. 
   • If the CGL policy is an occurrence policy = COVERED
   • If the CGL policy is a claims-made policy = NOT COVERED 
2. A roofing company was sued because the ceiling collapsed after a few days and injured one person. This counts as product liability. The incident happened while the policy was active and the claim was filed immediately. 
   • If the CGL policy is an occurrence policy = COVERED
   • If the CGL policy is a claims-made policy = COVERED 

   Third-Party Bodily Injury Incident Example

   A store was sued for not having a safe staircase, resulting in the injury of a customer. This counts as injury within the premises. The CGL policy was only purchased a month after this incident. The customer reported the injury when the new policy was already active. 

   • If the CGL policy is an occurrence policy = NOT COVERED
   • If the CGL policy is a claims-made policy = NOT COVERED 

   Note: For claims to be covered, the incident itself must occur after a CGL insurance plan is purchased. This applies to both standard occurrence and claims-made policies. Most insurance companies do not provide backdated liability insurance.  

   Get CGL Insurance That Your Business Can Count On

   This wraps up our guide on the two types of CGL policies available. Deciding which policy you purchase is a big decision — one that could impact the future of your business greatly. If you’re still uncertain whether to opt for an occurrence or claims-made policy, we’re here to help. 

   KASE Insurance is an award-winning, Toronto-based insurance brokerage firm. We specialize in providing fully customized business insurance that fits your needs. Furthermore, our dedicated team is here to give insights and assistance at every stage of your journey. 

   If you would like to get started, contact us today or request a FREE quote.