Can CGL Insurance Protect You Against Lawsuits?
Understanding how liability insurance supports legal defence, settlements, and financial recovery
When you are running a business, the threat of a lawsuit may feel remote — until it happens. Whether a customer slips and falls, a contractor accuses you of damaging property, or a social media post sparks a defamation claim, legal action can arise when you least expect it.
Commercial General Liability (CGL) insurance is one of the few protections that not only helps cover the costs of damages, but also pays to defend you in court. Even if the claim turns out to be unfounded, CGL provides critical support during the legal process.
How CGL Supports Legal Defense
One of the most valuable features of CGL insurance is that it includes legal defense coverage. If someone sues your business over a covered event, your insurer will appoint a lawyer, manage the case, and pay for the defense — all without reducing your coverage limit for damages.
CGL typically pays for:
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Legal fees and court costs
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Attorney retainers and trial preparation
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Expert witness costs
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Settlement negotiations and awards (up to policy limits)
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Post-judgment interest and certain administrative fees
Note: The defense benefit usually applies even if the claim is later dropped, withdrawn, or dismissed. The insurer covers the cost of defending your business from the beginning.
Examples of Lawsuits Covered by CGL
CGL insurance applies to a wide range of third-party claims that can lead to lawsuits. Common examples include:
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A customer sues after slipping on a wet floor in your retail space.
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A client claims your technician scratched their hardwood floor while installing equipment.
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A competitor files a suit alleging defamation in your advertising campaign.
| Type of Lawsuit | CGL Coverage Applies? | Covered Costs |
|---|---|---|
| Slip-and-fall injury claim | Yes | Legal defense, medical bills, settlement |
| Property damage caused by employee | Yes | Legal fees, repair costs, potential award |
| Personal or advertising injury | Yes | Defense against libel, slander, copyright |
| Breach of contract dispute | No | Not covered — requires other insurance |
| Employee injury | No | Covered under workers’ compensation |
Caution: CGL does not cover everything. If the lawsuit is about a breach of contract, professional mistake, or employment dispute, you will need separate coverage such as Errors and Omissions or employment practices liability insurance.
When You Must Notify Your Insurer
To activate your legal protection, you must notify your insurer as soon as you become aware of a potential claim or lawsuit. Do not wait until you are formally served with court papers. Early notice gives your insurer more time to investigate, appoint legal counsel, and protect your interests.
Failing to report a claim promptly may jeopardize your coverage.
Tip: Keep records of any incident that might lead to a lawsuit, including photos, emails, and written reports. These details will help your insurer build a stronger defence.
Lawsuits Are Expensive But CGL Makes Them Manageable
Even if you win in court, the cost of getting there can be overwhelming. CGL insurance takes the pressure off by funding your legal defense and absorbing the financial burden of settlements, judgments, and legal complexity. It lets you focus on running your business, not fighting claims alone.