Commercial General Liability (CGL) Insurance

Commercial General Liability insurance is the standard liability policy required by FAR 28.307-2 on federal contracts involving work on government installations or activities with third-party liability exposure, covering bodily injury, property damage, and advertising injury claims.

What is Commercial General Liability (CGL) Insurance?

Commercial General Liability (CGL) insurance is a broad form liability policy that protects the contractor (and, when required, the government as additional insured) from third-party claims arising from contractor operations. CGL is the most common type of liability insurance required on government contracts and is mandated under FAR 28.307-2 for contracts where work is performed on government property.

What CGL covers:

• Bodily injury liability: Claims by third parties (visitors, government employees, the public) for physical injury caused by contractor operations. For example, a government employee injured when a contractor's forklift strikes them on a federal base.
• Property damage liability: Claims for physical damage to third-party property caused by contractor operations. For example, a contractor's crew accidentally damages a government-owned vehicle.
• Personal and advertising injury: Claims for libel, slander, malicious prosecution, or infringement of intellectual property rights in contractor advertising.
• Medical payments: Limited coverage for immediate medical expenses for persons injured on contractor's premises, regardless of fault.

What CGL does not cover:

• Intentional acts of the contractor.
• Professional services errors (E&O insurance required).
• Employee injuries (workers' compensation required).
• Auto accidents (commercial auto insurance required).
• Cyber incidents (cyber liability insurance required).

FAR minimums: FAR 28.307-2 requires at least $500,000 per occurrence for bodily injury on contracts involving work on government installations. Most agency solicitations specify higher limits (typically $1 million to $5 million per occurrence) appropriate to the specific contract risk.

Government contracts typically require the "United States Government" to be named as an additional insured on the CGL policy and require 30 days' prior written notice to the contracting officer of any cancellation or material change.

Why CGL Insurance matters for government contractors

CGL is the baseline insurance requirement for virtually all government contractors performing work on government property or in activities with public liability exposure. Failure to maintain required CGL coverage is a contract default. Contractors bidding on federal work should obtain CGL quotes before submitting proposals to ensure the premium is priced into their bids.

Example

A janitorial services contractor performing work at a federal office building has CGL coverage with $2 million per occurrence limits. During performance, a wet floor condition creates a slip and fall injury to a building visitor, who suffers a broken wrist. The visitor files a $180,000 personal injury claim against the contractor. The contractor's CGL policy covers the claim after the $10,000 deductible, paying the visitor's medical costs and settlement. The government, named as additional insured, is protected from being joined as a co-defendant because the contractor's coverage is adequate.

Frequently Asked Questions

What is the difference between a CGL occurrence form and claims-made form?

An occurrence form covers claims arising from incidents that occurred during the policy period, regardless of when the claim is filed. A claims-made form covers claims filed during the policy period, regardless of when the incident occurred (subject to the retroactive date). Government contracts generally accept either form, but occurrence-form CGL is more common for construction and general services.

What are CGL "aggregate limits" and how do they differ from per-occurrence limits?

The per-occurrence limit is the maximum the insurer will pay for a single incident. The aggregate limit is the maximum the insurer will pay for all claims in a policy year. If a contractor has $1 million per occurrence and $2 million aggregate, it could have two $1 million claims in a year and be fully covered. A third $1 million claim would not be covered because the aggregate is exhausted.

Do subcontractors need their own CGL insurance?

Yes. Prime contractors are responsible for requiring their subcontractors to carry appropriate insurance, including CGL. The prime's policy may provide some coverage for subcontractor operations under the "your work" and "completed operations" provisions, but requiring subcontractors to carry their own CGL (with the prime named as additional insured) is standard practice and provides the clearest allocation of responsibility.

Can a contractor self-insure instead of buying CGL?

Self-insurance (setting aside reserves rather than buying commercial insurance) is permissible under FAR 28.308 when the contractor demonstrates financial capacity to support the self-insurance program. The contractor must establish a formal self-insurance plan with a safety program, claims procedures, and financial reserves approved by the contracting officer. Self-insurance is generally available only to large contractors with strong financial positions.