Insurance – Difference between Commercial General Liability and Third Party Liability

In a LinkedIn forum an individual asked what the difference was between Commercial General Liability insurance and Third Party liability insurance. While I believed I knew the answer I went to the IMRI Risk Management and Insurance website that contains definitions of insurance terms.

After verifying it there, my response was the difference is in the scope of the coverage. IRMI defines Commercial General Liability (CGL) as “a standard insurance policy issued to business organizations to protect them against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability.” This means that it would cover negligence by the party that causes either personal injury or property damage. Most insurance like CGL all provide some degree of third-party liability coverage for personal injury or property damage. Third party liability insurance is an option to provide coverage against third party claims that do not involve negligence resulting on personal injury or property damage.

Third party insurance protect against other tortious acts other than negligence that could occur by one of the parties. A “tort” is a civil wrong, not a criminal wrong. Libel, slander and intentional infliction of emotional distress are torts where there is no physical injury to the person. Third party insurance would cover claims made by non-employees for these and other wrongs.

For example, a form or third party insurance is employment practices liability (EPL) insurance. It is an optional insurance that would cover claims made by non-employees (e.g., customers, vendors, clients) against the insured company that arise from acts committed by that company’s employees. In employment liability two of the tortious acts would include claims of discrimination or harassment. Both of those are forms of intentional infliction of emotional distress.

The internet has a vast wealth of information available for the user. If you ever deal with insurance issues in contracts, I would suggest you go to IRMI.com and bookmark it for future use.