My Framework for Analyzing General Liability Insurance Policies

What This Framework Is (and What It Is Not)

Before diving in, let me clarify the purpose of this framework.

What this framework is not:

• It does not determine whether the policy you’re reviewing is competitive in the marketplace. Every industry and state has unique nuances that I cannot account for.

• You must take your findings from this framework and verify whether the policy is reasonable for your market.

• You should adapt this framework to suit the specific needs of your industry.

• I accept no responsibility for any conclusions you draw from using this framework.

What this framework is:

• A practitioner’s guide for identifying issues in a General Liability policy.

• A checklist I use to ensure a policy passes the initial “sniff test.”

• A method to sift through policy language and uncover potential limitations.

The key to this process is finding the right information so you can ask the right questions. Here are a few examples:

• Is it reasonable for all underground activities to be excluded for an excavator?

• Should a childcare policy include sexual acts liability coverage?

• Why is there a product liability exclusion for an event that occurred three years before the policy started?

• Is it acceptable for a sports league policy to exclude participant liability?

These questions help you pinpoint issues, whether you’re conducting a self-assessment or analyzing a policy for a client. Some issues can be addressed, some are uninsurable, and others highlight the need for a broker specializing in your industry.

I’ve also created a spreadsheet you can download and customize for your needs. This blog post will guide you on how to use it.

A framework is like a miner panning for gold.

The Purpose of a General Liability Policy & The Logic Behind This Framework

A General Liability Policy is designed to cover lawsuits related to:

1. Bodily Injury – When a business causes physical harm. 

2. Property Damage – When a business damages someone else’s property.

3. Personal and Advertising Injury – When a business causes reputational harm.

   
   

Example: A Florist Shop

• Bodily Injury: A customer slips on a wet floor and sues. (Premises Liability)

• Product Liability: A customer has an allergic reaction to a flower. (Product & Completed Operations Liability)

• Advertising Injury: An advertisement offends someone, leading to a lawsuit. (Personal & Advertising Injury)

This framework helps identify whether a policy will provide the necessary coverage for these types of scenarios.

The Framework: Key Areas to Analyze

1. Whose Name Is on the Policy?

• “Insurance follows ownership”—meaning that the right entities must be listed.

• Ensure all subsidiaries and relevant entities are named correctly.  These entities can be listed if there is shared ownership.  There are pros and cons for sharing a liability insurance policy… more than I can get into in this article.

2. Coverage Limits & Deductibles

• General Liability Per Occurrence

• General Liability Aggregate

• Personal and Advertising Injury

• Product & Completed Operations Liability

• Medical Payments

• Are there any deductibles?

3. Classifications

• Classifications determine risk level and business size.

• Errors in classification can lead to inaccurate pricing.  Sometimes agents will intentionally misclassify an organization or sandbag rating numbers to produce artificially low pricing

• Check:

  • Classification name and number—do they match the business?

  • What is the rating basis  for your business?  How does the insurance company measure the size of your operations?  (area, sales, payroll)

  • Value used for rating—does it align with actual business size?

4. Policy Period: Claims Made vs. Occurrence

• Occurrence policies cover claims for incidents that happened during the policy period, even if the lawsuit occurs later.

• Claims Made policies only cover claims if both the incident and lawsuit happen within the policy period.

• Key questions for Claims Made policies:

  • What is the retroactive date?

  • What is the prior and pending litigation date?

5. Is This a Standard ISO Policy?

• If the policy follows an ISO (Insurance Services Office) standard, certain assumptions can be made about:

  • Who is insured

  • What the insurer will pay

  • Exclusions and responsibilities

• A full list of exclusions is on the downloadable spreadsheet.  Common exclusions include:

  • Expected or Intended Injury

  • Contractual Liability

  • Liquor Liability

  • Workers Compensation

  • Pollution

  • Product Recalls

  • Personal and Advertising Injury

6. Exclusions: Understanding Policy Limitations

General Liability policies are tested when:

• The insured operates multiple entities that need coverage.

• The business involves high-risk premises (e.g., trampoline parks, stadiums, construction sites).

• The insured sells hazardous products (e.g., gunpowder, roofing materials).

• The business provides care services (e.g., daycare, senior living, home healthcare).

• The insured produces media or advertisements.

• The business involves long-tail claims (e.g., construction defects, sexual abuse claims).

• The business offers professional services (e.g., doctors, consultants, engineers).

• The business handles other people’s property (e.g., auto repair shops, janitorial services).

• The insured deals with pollutants or hazardous materials.

• The business sells or serves alcohol.

• The insured hosts special events.

7. Endorsements: Custom Policy Adjustments

• If the business is high-risk, underwriters may modify the policy by:

  1. Changing covered premises (e.g., limiting coverage to one location or excluding an undesirable location).

  2. Restricting covered products (e.g., I had a nonprofit that manufactured hand sanitizer during the pandemic.  The liability insurance company excluded this.).

  3. Limiting covered services (e.g., excluding roofing for a handyman or participant injury for a sports league).

  4. Clarifying exclusions (e.g., adding an explicit abuse and molestation exclusion for a daycare).

• The key is evaluating whether these changes are acceptable or require additional policies.

8. Contractual Obligations

Certain organizations will impose specific insurance requirements, such as:

• Grantmaking organizations

• General contractors

• Landlords

• Leasing companies

These entities may require additional coverage provisions, such as:

• Waivers of subrogation

• Additional insured status

• Primary and noncontributory language

• Some insurers include these in a blanket endorsement, while others charge per contract.

Conclusion

This framework is a guide—not a definitive judgment on coverage, company quality, or underwriter competence. It helps sift through policy details to identify potential issues, ensuring nothing important is overlooked.

Without a structured approach, policy analysis can be overwhelming. But just as a miner’s pan helps separate gold from debris, this framework clarifies the key issues within an insurance policy.

Use this guide alongside the provided spreadsheet to systematically evaluate your General Liability policies and make informed decisions.