Various organizations face a wide range of liability loss exposures covered by a commercial general liability insurance policy. Most importantly, a commercial general liability policy is essential for an organization’s liability insurance policies. In fact, Commercial general liability, general aggregate & umbrella liability insurance should ideally be part of an organization’s annual financial planning.
General liability and umbrella liability are two categories of commercial general liability insurance, covering third-party injury or property damage.
Umbrella insurance is an extra liability insurance cover that offers protection against various claims and lawsuits. It means the policy plays a crucial role by offering you coverage over and above your liability insurance policy. The umbrella insurance policy becomes active when the liability limit of other insurance policies is exhausted.
A general aggregate is the maximum limit of coverage that applies to the commercial general liability insurance policy. Commercial general liability insurance applies the aggregate limit to bodily and property damage, personal injury, and advertising injury. Once losses reach the aggregate limit, no further losses are covered under commercial general liability insurance.
The general aggregate limit restricts payment by the CGL Insurance policy, insurance policy, regardless of the number of claims. Umbrella liability policies cover claims exceeding the primary policy’s per occurrence limit in catastrophic losses. Umbrella insurance provides additional coverage when the general liability limit is exhausted. Usually, an umbrella policy is sold as an individual insurance policy.
If the general aggregate limit is exhausted, the umbrella policy covers remaining claims. Umbrella policies may also cover claims not included in the primary general liability insurance.
Case: commercial general liability Insurance
Since 2010, K.S Construction has established itself as a leading player in the construction market. So far, the company has completed various commercial and residential projects across India. Last year, the company got a contract of constructing a four-story office building in Pune for J.K Jewels. When the construction was in full swing, J.K Jewels sent one of its members, Mr. Jivesh Singh, from the top management to visit and inspect the site. Unfortunately, when Jivesh was inspecting the construction site, he tripped over the electric cord and fractured his leg and arms.
Read more: Who is Insured under Commercial General Liability Insurance?
Here, Jivesh filed a case against K.S Construction and claimed that the accident occurred because the company did not follow safety regulations at the site. Luckily, the construction company had commercial general liability insurance, and therefore, it approached the insurer for the claim settlement. Here, the total claim amount was Rs 1 crore, including compensation and medical expenses. However, the construction company had to pay the remaining Rs 50 lakh as the commercial general liability coverage was limited to Rs 50 lakh.
When the general aggregate limit of Rs 50 lakh was exceeded, the insurer did not provide any payment in this case.
However, here the situation would have been different if the construction company had an umbrella insurance policy. In this case, the umbrella policy would have helped in covering that amount which was above the general aggregate limit of the commercial general liability insurance policy. It means, here, the umbrella insurance policy would have covered the remaining Rs 50 lakh and the construction company would not have to pay anything on its own.
- Commercial general liability insurance had a general aggregate limit of Rs 50 lakh
- Umbrella Insurance Policy had coverage of Rs 50 lakh
