Commercial general liability (CGL) pays a third party when your work injures someone or damages their property. It is the core liability policy every Canadian contractor carries, and the market standard limit is $2 million per occurrence with a $4 million aggregate. The single most important thing to understand is what it does not do: CGL does not cover your own tools, equipment or van contents. For that you need a separate tool and equipment floater (see Tool and Equipment Insurance).
What CGL actually covers
CGL responds to third-party bodily injury and third-party property damage arising out of your operations. If a client trips over your extension cord and breaks a wrist, or your work floods the unit below, CGL is the policy that answers. In Canada it is almost always written on an occurrence form, meaning it covers injury or damage that happens during the policy period no matter when the claim is filed. That matters for trades, because a construction defect can surface years after you finish.
The $2 million norm, and when you need more
A $2 million per-occurrence and $4 million aggregate limit is the de facto Canadian standard for most small contractors, and many licensing bodies require it. For example, electrical contractors typically must carry a minimum of $2 million to hold a licence with the Electrical Safety Authority in Ontario or Technical Safety BC. Larger commercial clients, public-private partnership (P3) projects, and infrastructure or pipeline work commonly require $5 million or more. The contract sets the number. As a cost indication only, a basic $2 million policy for a small, lower-risk contractor often sits in the few-hundred to roughly $1,000 a year range, with roofing, demolition and excavation paying multiples; these are benchmarks, not quotes.
What CGL does NOT cover (read this twice)
This is where contractors get hurt. CGL covers other people's property, never your own. It will not pay when:
- Your tools, equipment or van contents are stolen or damaged. That is the job of an equipment floater (inland marine). Relying on CGL to replace a stolen drill leaves you with nothing.
- Your own workmanship is defective and you simply have to redo it. Pure rework on your own work is generally excluded, although damage a subcontractor causes to the wider completed project can be a different story (the subcontractor exception, below).
- You give negligent design or professional advice. Design and specification errors are a professional liability (errors and omissions) exposure, not a CGL one. Design-build contractors need separate cover.
- Pollution, intentional acts and contractual liability you took on voluntarily. These are standard exclusions.
Endorsements a contract will demand
Construction contracts routinely require you to bolt extras onto your CGL:
- Additional insured: the general contractor or owner is added by endorsement so the policy also protects them for claims connected to your work. It only responds where there is a nexus to your scope.
- Primary and non-contributory: your policy must pay first, before any cover the hiring party carries.
- Waiver of subrogation: your insurer gives up its right to recover from the other contract parties after paying a claim, to stop cross-litigation. Failing to add it when the contract requires it does not void your policy but can breach the contract.
- Completed operations: confirm this is included and kept in force for the period the contract names (often two to five years), so latent damage after handover is still covered.
The "your work" exclusion and the subcontractor exception
CGL excludes property damage to "your work" arising out of that work. But there is a critical carve-out: if the damaged work, or the work that caused the damage, was done by a subcontractor, coverage may be restored once the project is complete and the products-completed operations hazard applies. This is why general contractors who sub out trades must keep completed operations cover live, and why they should confirm their subs carry their own CGL.
A worked example
You are a plumber roughing in a second-floor bathroom. A fitting you installed fails three weeks after handover and floods the kitchen below, ruining the cabinets and the owner's flooring. The damage to the owner's kitchen is third-party property damage, and your CGL responds to that, subject to your limit and deductible. But the cost of pulling out and redoing your own defective pipework is generally your problem, not the insurer's: pure rework on your own work is excluded. And if your $4,000 pipe threader was stolen from the van the same week, CGL does nothing for that at all; only your equipment floater would. One incident, three very different coverage outcomes, is exactly why contractors need to understand the edges of this policy rather than assume it is a catch-all.
A note on professional liability
If your work includes any design, engineering review or specification writing (common on design-build jobs), be aware that CGL excludes professional negligence. A wrong specification that causes expensive rework is an errors and omissions (E&O) exposure, sold as Contractors Professional Liability. It is a separate, claims-made policy, and design-build contractors typically carry it alongside CGL to close the gap.
Common mistakes
- Believing CGL covers your gear. It is third-party only. Your tools need a floater. This is the costliest misconception in the trade.
- Carrying the wrong limit. A $2 million policy does not satisfy a contract that demands $5 million. Check the tender before you bid.
- Letting completed operations lapse. Drop it and a defect claim that surfaces next year has no cover behind it.
- Forgetting the endorsements. Missing additional-insured or waiver-of-subrogation wording can put you in breach of contract even when the loss itself is covered.
Know someone who needs this?
Keep reading
Was this guide useful?
Didn't find what you were looking for?
Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.
In crisis? 988 Suicide Crisis Helpline (call or text 988) ·