Key Definitions
Actual Cash Value (ACV)
Valuation method = Replacement Cost - Depreciation. The value at time of loss.
Example: 5-year-old laptop originally $1,500, now worth $400 ACV due to depreciation.
All Risk / Open Peril
Covers any risk of loss EXCEPT what's specifically excluded.
Better coverage than "named perils" which only covers listed events.
Aggregate
Maximum total amount payable during a policy period.
Example: $2M aggregate means total of all claims can't exceed $2M for the year.
Bailee
Someone trusted with another's property but has no ownership.
Example: Mechanic has your car for repairs - they're the bailee with responsibility for it.
Financial Responsibility
Proof you can pay for damages caused - often fulfilled by purchasing insurance.
Inception
Date at which insurance policy first goes into effect.
Insolvent
Unable to meet financial obligations.
Lessor
A person granting a lease of a motor vehicle (the one who owns it).
Private Passenger Vehicle
Automobile used for private/personal needs rather than business.
SIR (Self-Insured Retention)
Deductible that must be paid to access umbrella policy funds when underlying coverage won't cover the loss.
Statute
A written law passed by a legislative body.
Commercial General Liability (CGL) Overview
CGL comes in TWO forms:
1. Occurrence Form
Standard for most policies
2. Claims-Made Form
Common for professional liability
Important CGL Exclusion:
CGL will NOT cover liability you agreed to take on in a contract...
EXCEPT for 6 specific types of contracts (covered below)!
Basic Hazards in CGL
Premises & Operations
Covers ownership, maintenance, and use of your premises and business operations.
Premise Examples:
- • Customer slips on wet floor in your store
- • Visitor trips on broken sidewalk at office
- • Someone injured by falling merchandise
- • Dog bites customer at grooming location
Operations Examples:
- • Painter falls off ladder at client's house
- • Plumber floods basement while fixing pipe
- • Construction worker drops tools on someone
- • Landscaper mower throws rock through window
Note: Excludes products and completed operations hazards.
Products & Completed Operations
Covers injuries/damage after you've completed a job or relinquished control of a product.
KEY: Product has LEFT your control, THEN causes harm
Products Examples:
- • Bakery sells contaminated cake - customer sick 3 days later
- • Store sells defective toaster - catches fire in customer's home
- • Manufacturer makes faulty car part - causes accident months later
Completed Operations Examples:
- • Electrician finishes wiring job - fire starts a month later due to faulty work
- • Roofer completes job - roof leaks during first rain
- • HVAC installer leaves - system malfunctions and floods home
Independent Contractors
An individual/entity that agrees to perform specific work for the insured and is responsible for completing the work, but is NOT subject to the direction of the insured.
Important: Independent contractors are only covered under the insured's General Liability with an ENDORSEMENT.
Owners and Contractors Protective Liability (OCP)
May be added to the insured's general liability to provide coverage for claims caused by the negligence of a contractor or subcontractor.
The 6 Types of Contracts CGL WILL Cover
Even though CGL excludes contractual liability, these 6 specific contract types ARE covered:
1. Lease of Premises
When you rent a space like an office, warehouse, or store.
Example:
Lease says tenant is responsible for customer injuries in the store. Customer slips and falls.
✓ Your CGL covers it - even though you agreed in the lease!
Why it matters: Leases usually make tenants liable. This exception ensures you're still covered.
2. Sidetrack Agreements
Agreements about railroad tracks that branch off to serve your business.
Example:
Your factory has a railroad spur for material delivery. Agreement says you're liable for accidents on that spur.
✓ CGL covers it!
Note: Only applies if you have railroad access (rare for most businesses).
3. Easement or License Agreements
Agreements for using others' property (except within 50 ft of railroad).
Example:
You get an easement to run utilities across your neighbor's land. Agreement says you're liable for damage to their property.
✓ CGL covers it!
Exception: NOT covered if construction/demolition within 50 feet of railroad track.
4. Obligations to Indemnify a Municipality
EXCEPT for work done FOR the municipality.
Covered Example:
You're having a street festival. City permit requires you to indemnify the city. Someone gets hurt and sues the city.
✓ CGL covers the city!
NOT Covered Example:
City hires you to replace a road. Contract says you indemnify the city for your work.
✗ NOT covered (you're doing work FOR the municipality).
5. Elevator Maintenance Agreements
When you agree to maintain/service elevators.
Example:
You're an elevator service company. Contract says you're liable for malfunctions. Elevator breaks, someone gets hurt.
✓ CGL covers it!
Note: Only relevant for elevator service companies.
6. Liability You'd Have Anyway By Law
If you would have been liable even without signing a contract, it's covered.
Covered Example:
Contract says "Contractor liable for injuries caused by their negligence." You drop a hammer, hit someone.
✓ Covered - you'd be liable for your negligence anyway (basic tort law).
NOT Covered Example:
Contract says "Contractor liable for injuries by ANYONE on project, even if not contractor's fault." Homeowner's friend trips on their own shoelaces.
✗ NOT covered - you wouldn't normally be liable for that.
Exception: Does NOT apply to indemnifying:
- Railroads
- Architects
- Engineers
- Surveyors
Quick Summary: What CGL Covers
Everything else? If you sign a contract assuming liability beyond these, CGL probably won't cover it.
Occurrence vs. Claims-Made: Deep Dive
Occurrence Form
- • Happening right now - someone slips TODAY
- • During an active policy, even if claim shows up YEARS later
- • Don't care when claim was made
- • Insurance from the time of occurrence responds
Example:
Policy: 2020-2021. Leak happens in 2020. You discover $50k mold damage in 2025.
✓ 2020 policy pays - damage OCCURRED in 2020.
Claims-Made Form
- • Might not show immediately
- • Things that happen some time later
- • Can only go back to RETROACTIVE DATE
- • Policy must be active when claim is FILED
Example:
Policy: 2020-2021. Sold defective product in 2020. Sued in 2025.
✗ 2020 policy WON'T pay - no active policy when claim was made.
Coverage Trigger = What makes a policy respond to a claim
Occurrence: When damage happened | Claims-Made: When claim filed
Retroactive Date & Tail Coverage
Only Claims-Made policies have a retroactive date!
Retroactive Date
The earliest date for which coverage applies. Starts as the inception date of the claims-made policy.
Example Timeline:
Each year renews, but the retroactive date stays July 2022. Claims for incidents back to July 2022 can be covered.
Tail Coverage (Extended Reporting Period)
When you cancel a claims-made policy, you should get "tail insurance" to cover claims filed after cancellation for incidents that occurred during your coverage period.
Cost:
Typically 1.5x to 2x the price of your last premium
If you get a NEW claims-made policy later:
- • New inception date = date you start the new policy
- • Tail coverage from previous policy protects the gap years
- • New retroactive date begins fresh
Visual: Claims-Made Timeline
Policy Start
(Retroactive Date)
Renewal
Cancel Policy
Covers claims
filed after cancel