What Does General Liability Insurance Actually Cover for a Small Business?

What does general liability insurance cover? It is the policy that every landlord, general contractor and client contract in Connecticut asks you to carry, and it is the one most business owners understand least. People assume it covers “liability,” which sounds like everything. It does not. Here is what a general liability policy actually pays for, what it leaves out, and what a small business in the Farmington Valley usually needs alongside it.

What general liability covers

A commercial general liability policy (CGL, or just GL) covers your business’s legal responsibility for injury or damage to other people and their property. It has three main coverage parts.

Bodily injury and property damage. A customer slips on a wet floor in your shop in Bristol. A painter’s drop cloth catches a homeowner’s antique table on the way out. A landscaper’s mower throws a rock through a car window on Route 4. These are the everyday claims GL exists for. It pays the injured party’s medical costs and damages, and, critically, it pays your legal defense, which in a lawsuit is often the larger number.

Products and completed operations. Injury or damage caused by something you made, sold or finished. The deck a contractor built in Simsbury collapses two years later. A bakery’s product makes someone sick. This is why general contractors want completed operations included when they ask to be named as additional insured.

Personal and advertising injury. Libel, slander, copyright infringement in your advertising, wrongful eviction, and similar claims. Small but real, especially for businesses that market online.

Medical payments. A small no-fault benefit for someone injured on your premises, paid without a lawsuit. Keeps a twisted ankle from becoming a claim.

Most small business GL policies carry limits of $1 million per occurrence and $2 million in aggregate, which is also what most contracts in Connecticut require.

What general liability does not cover

This list is longer than most people expect.

Your own property. GL covers damage you do to other people’s property. Your tools, your truck, your inventory, your building are covered by property, inland marine and auto policies, not GL.

Injuries to your employees. That is workers’ compensation, which Connecticut requires for essentially every employee.

Professional mistakes. If a client says your advice, design or service cost them money, GL does not respond. Consultants, bookkeepers, designers, IT firms and real estate professionals need professional liability (errors and omissions).

Vehicles. Accidents in a work vehicle are covered by commercial auto. Personal auto policies typically exclude business use, which is a very expensive thing to discover after a crash in a lettered van.

Data breaches and cyber losses. A separate cyber liability policy.

Liquor. If you sell or serve alcohol, GL excludes claims that arise from it. Restaurants and bars need liquor liability.

Work you were told not to do. Many contractor GL policies carry exclusions for specific operations: roofing, work above a certain height, blasting, subcontracted work, snow plowing. If you do any of those and they are excluded, a claim will be denied. Tell your agent everything the business does.

Pollution, mold, asbestos and lead. Typically excluded or heavily limited. Relevant for contractors working in older Connecticut housing stock.

What a Connecticut small business usually needs alongside GL

For a service business with no employees working from a laptop, GL plus professional liability may be the whole program. For most others, the typical package is:

• General liability for third-party injury and damage
• Workers’ compensation the day you hire your first employee
• Commercial property or a business owner’s policy (BOP), which bundles GL with property and business interruption, once you have a location, equipment or inventory
• Commercial auto for business vehicles
• Professional liability if you sell advice or services
• Cyber liability once you hold customer data or take payments
• An umbrella when a contract asks for more than $2 million

The right combination depends on what the business does, not on its size. A one-person electrician has a very different program from a one-person marketing consultant.

Reading a certificate request

When a general contractor or landlord asks for a certificate of insurance, the fine print is where the money is. “Additional insured” means they want your policy to protect them too, and it requires an endorsement. “Primary and non-contributory” means your policy pays first. “Waiver of subrogation” means your carrier will not go after them to recover a loss. If your policy does not carry those endorsements, no certificate can invent them. That is why we read the contract before we issue the certificate. More on certificates of insurance.

The short version

General liability covers what you do to other people. It does not cover what happens to you, your employees, your stuff, or your professional advice. If your business has been asked for a certificate and you are not sure your policy matches what they want, send us the request or call (860) 672-1733. We will tell you the same day. More on our general liability insurance page, business insurance in Connecticut and contractor insurance.