Commercial General Liability (CGL) Insurance in Singapore

There are two common scenarios where Commercial General Liability Insurance is important.

1. CGL Insurance is part of contract requirements:

Commercial General Liability Insurance is very frequently requested for in contracts. Such contracts could be consulting contracts, IT contracts, or contracts that involve you selling your products to retailers/wholesalers. Very often, companies that request CGL Insurance are based in the USA, Canada, UK, European Union, Australia, etc. If you want to win these contracts, you’ll need to meet your client’s insurance requirements.

There are a couple of reasons that CGL Insurance is commonly part of contract requirements. The first concerns wholesalers/retailers who source goods from many different manufacturers. Examples include large retail chains, like Walmart in the US.  These retail chains sell food, soap, over-the-counter drugs, and many other consumer goods. There exists a real risk that these goods could cause injuries, allergic reactions, poisoning, or other kinds of physical harm to their customers. If such bodily harm were to occur, injured parties could easily launch a personal injury lawsuit against the retailer and their suppliers. It’s thus a basic form of risk management to mandate that the suppliers carry CGL Insurance to protect themselves if such a lawsuit were to occur. 

Another reason that CGL Insurance is often stipulated in contracts is to provide clients with financial protection. Sometimes, the work or products that the vendor delivers is unsatisfactory, which causes the clients to suffer losses. CGL Insurance provides clients with an avenue for financial compensation. Clients can initiate legal action against the service provider. If the client wins the lawsuit, then the vendor’s insurer will compensate them for their losses.

Carrying CGL Insurance isn’t just biased in favour of the client, though. Having CGL Insurance for the vendor is a positive outcome too, because the CGL policy will protect them from the costs of the lawsuit and the damages awarded to the client. It’s a win-win scenario. This way, both the client and vendor’s interests are protected by the CGL policy. 

2. You have an inherent business risk that needs to be covered with CGL Insurance, otherwise you may suffer expensive lawsuits:

Commercial General Liability Insurance is also important if your business is exposed to specific types of risk. 

The first risk exposure is your products causing injuries or property damage to others. This would apply if you are either a manufacturer, or wholesaler/supplier, of products. For instance, let’s say you manufacture electronic components. If your electronic components overheat and start a fire, that could easily result in bodily harm to users, and also damage other people’s property. CGL Insurance would thus be crucial to defend you from lawsuits related to such incidents. 

The second risk exposure is your business activities causing injuries or property damage to others. This would apply if you perform installation work, servicing work, or any other kind of physical work at client premises. For instance, let’s say you manufacture hardware systems for use in factories. You also install this hardware in factories. If you damage someone else’s property while performing these installation works, you can be sued. CGL Insurance can defend you from such events. 

Examples of companies with inherent risks that require Commercial General Liability Insurance:

• Companies that both supply construction goods, and perform construction work
• Companies that supply IT hardware, and install this hardware for clients
• Companies that supply engineering/manufacturing equipment, and set up/install this equipment for clients

You get the picture. As long as you perform both the supply of goods, and installation/servicing works related to those goods, you should carry CGL Insurance.