Does General Liability Cover Property Damage? A Deep Dive

The short answer? Yes, general liability insurance can cover property damage, but with crucial caveats. It primarily covers property damage caused by your business operations to someone else’s property. It does not cover damage to your own property. Understanding the nuances of this coverage is essential for any business owner to adequately protect their assets and manage potential risks. Let’s unpack the intricacies and ensure you’re not caught off guard when the unexpected happens.

Understanding General Liability Insurance

General liability insurance, often referred to as commercial general liability (CGL) insurance, is the cornerstone of protection for businesses against a range of common risks. Think of it as a financial safety net against claims of bodily injury, property damage, personal injury, and advertising injury that your business activities might cause to third parties. While bodily injury often grabs headlines, property damage claims are incredibly common and can be just as financially devastating.

What is Covered Under Property Damage?

General liability policies aren’t catch-all solutions. They focus on damage to the property of others, stemming from your business’s actions or negligence. Consider these scenarios:

• Accidental Damage: A plumber accidentally bursts a pipe while working in a client’s home, causing water damage to the floors and walls.
• Negligence: A landscaping company fails to properly secure a tree it’s removing, and it falls onto a neighbor’s fence, damaging it.
• Faulty Workmanship (Sometimes): Depending on the policy and specific endorsements, general liability may cover property damage stemming from faulty workmanship if it results in further damage beyond the initially poorly performed work. (More on this in the FAQs).

What is NOT Covered Under Property Damage in General Liability?

It’s equally vital to know the exclusions. General liability will not cover:

• Damage to Your Own Property: This is a critical distinction. If a fire breaks out in your office and damages your equipment, your general liability policy won’t cover it. You’ll need a separate commercial property insurance policy for that.
• Damage to Your Products (Usually): If your business manufactures or sells products, and those products cause damage due to defects, the general liability policy may exclude this coverage. Product liability insurance is designed for this risk.
• Intentional Damage: If you or your employees intentionally damage someone’s property, that’s not covered.
• Damage Arising From Contractual Obligations: Liability assumed under contract may or may not be covered.
• Damage to Work You Performed: Usually the policy will exclude the cost to fix the faulty work you performed.

The Importance of Policy Language

Every general liability policy is unique, with its own specific language and exclusions. Carefully reviewing your policy document is absolutely essential. Don’t rely solely on what your agent tells you (though a good agent is invaluable!). Understand the definitions of key terms, such as “property damage,” “occurrence,” and “insured.” Pay close attention to any endorsements, which are modifications to the standard policy language.

Common Endorsements Affecting Property Damage Coverage

Several endorsements can significantly impact your property damage coverage. Some common examples include:

• Damage to Premises Rented to You: This endorsement modifies the standard exclusion for damage to property you rent. It may provide limited coverage, often subject to a specific limit, for damage to the premises you rent caused by fire, for example.
• Care, Custody, or Control Exclusion: This exclusion denies coverage for damage to property in your “care, custody, or control.” This can be particularly relevant for businesses that handle or store other people’s belongings.
• Contractual Liability Endorsement: This endorsement can broaden coverage for liability assumed under a contract.

Why Adequate Coverage Limits Matter

Even if your general liability policy covers property damage, having sufficient coverage limits is crucial. Imagine your business is responsible for a fire that causes significant damage to a large commercial building. If your policy has a low limit, you could be personally responsible for the remaining damages. Accurately assess your potential risks and choose policy limits that provide adequate protection. Consider an umbrella policy for an extra layer of liability protection.

Frequently Asked Questions (FAQs)

1. What’s the difference between general liability and commercial property insurance?

General liability covers damage or injury you cause to others. Commercial property insurance covers damage to your own buildings and business personal property (equipment, inventory, etc.) from covered perils like fire, theft, and vandalism. You typically need both for comprehensive protection.

2. Does general liability cover damage caused by subcontractors?

Generally, yes. As long as the damage arises from the subcontractor’s work on your behalf and within the scope of your business operations, your general liability policy should respond. However, it’s critical to ensure your subcontractors have their own insurance coverage as well (and that you obtain certificates of insurance from them).

3. My tenant caused damage to the building I own. Does my general liability policy cover it?

No. Your general liability policy would not cover damage that you as landlord caused. You would need a separate landlord policy or commercial property insurance policy. If it was the tenant’s negligence that caused damage to another tenant’s property, the tenant’s general liability policy should cover it.

4. What does “occurrence” mean in a general liability policy?

An “occurrence” is generally defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. This is important because your policy typically covers property damage that occurs during the policy period, regardless of when the claim is made.

5. Is there a deductible for property damage claims under general liability?

Yes, most general liability policies have a deductible. This is the amount you pay out-of-pocket before the insurance company pays the rest of the covered claim. Deductibles can vary significantly.

6. What is a “certificate of insurance,” and why is it important?

A certificate of insurance (COI) is a document that provides proof of insurance coverage. It shows the type of coverage, policy limits, and policy period. Requesting COIs from your subcontractors is essential to ensure they have their own liability coverage in case they cause damage.

7. Does general liability cover water damage?

It depends. General liability can cover water damage if it’s the result of an accident or negligence, such as a burst pipe caused by your employee’s carelessness. However, it typically excludes damage from floods, sewer backups (unless endorsed), or gradual leaks.

8. What is the “products-completed operations hazard?”

This refers to liability arising from your products or completed work, after they have left your control. If a product you manufactured causes property damage after being sold to a customer, or if faulty workmanship results in damage after the job is finished, this hazard comes into play.

9. Does my general liability policy cover damage to a customer’s car parked on my property?

Potentially. If the damage is due to your negligence (e.g., a falling tree branch that you failed to maintain), your general liability policy might cover it. However, if the damage is caused by something unrelated to your business operations (e.g., another customer hits the car), your policy likely wouldn’t respond.

10. What if my policy has a “care, custody, or control” exclusion? How does this impact property damage coverage?

This exclusion can significantly limit property damage coverage. It means that if you damage property that is in your care, custody, or control (meaning you are responsible for it, even if you don’t own it), your general liability policy likely won’t cover the damage.

11. How can I minimize the risk of property damage claims?

Prevention is key. Implement robust safety protocols, thoroughly train your employees, regularly inspect your equipment and premises for potential hazards, and use reputable subcontractors with adequate insurance coverage.

12. My general liability policy includes an exclusion for damage to work you performed, but the faulty work caused other damage to a client’s property. Does the policy cover the additional damage?

Typically, a general liability policy covers the ensuing damage from faulty workmanship, but not the faulty workmanship itself. For example, if a contractor installs a roof incorrectly, the policy would not cover the cost to fix the roof; however, if the improperly installed roof caused water damage to the inside of the home, the resulting damage would be covered by a general liability policy, subject to the policy provisions, conditions, and exclusions.

Conclusion: Protect Your Business from Property Damage Risks

General liability insurance is an indispensable tool for protecting your business from the financial consequences of property damage claims. However, a thorough understanding of the policy’s coverage, exclusions, and limitations is crucial. By carefully reviewing your policy, securing adequate coverage limits, and implementing proactive risk management strategies, you can safeguard your business against costly property damage losses. Don’t leave it to chance—consult with a knowledgeable insurance professional to ensure you have the right coverage in place.