Top 5 Myths About CGL Insurance in the Indian Market

The business landscape in India is evolving rapidly. From bustling tech startups in Bengaluru to large-scale manufacturers in Gujarat, the country is witnessing an unprecedented surge in entrepreneurial ventures. But with growth comes responsibility—and risk. One of the most overlooked yet critical safeguards a business can invest in is Commercial General Liability Insurance (CGL insurance).

CGL insurance is designed to protect businesses from third-party legal liabilities such as bodily injury, property damage and personal or advertising injury claims. Simply put, if your business operations, products, or employees unintentionally harm someone else or their property, a CGL policy can cover the resulting legal and financial consequences.

Unfortunately, despite its significance, there are numerous myths surrounding CGL insurance in the Indian market. These misconceptions often lead businesses to either skip buying the policy altogether or depend on it for the wrong reasons. Let’s debunk the top five myths and clarify this crucial form of business insurance.

Myth 1: “I Don’t Need CGL If I Have Contracts with Indemnity Clauses.”

The Truth: Contracts can help transfer risk, but they don’t eliminate it.

Many Indian businesses, especially service providers, believe that if they have drafted solid contracts with indemnity or “hold harmless” clauses, they are immune from liability. This is a risky assumption.

An indemnity clause in a contract means that one party agrees to compensate another for certain damages or legal liabilities. While it provides a layer of legal protection, it is not a substitute for insurance.

Let’s break it down with a real-world scenario:

Consider a logistics company that includes an indemnity clause in its contracts, stating that clients bear responsibility for any cargo damage. However, if goods are damaged due to the company’s poor handling or lack of proper storage, it can still be held legally liable. The indemnity clause might not shield the company completely in such instances. It may not help the company prevent lawsuits or penalties from the concerned regulators.

Legal processes are complex. Courts might not enforce indemnity clauses in all situations, especially if negligence on your part is proven. Moreover, legal fees and court proceedings can begin long before liability is determined.

A commercial general liability policy ensures that your legal defence, settlements, or judgments are covered, even if contractual indemnity falls through. Relying solely on contract language without CGL is like driving without a seatbelt, assuming the airbag will always save you.

Also read: Types of Business Insurance Policies

Myth 2: “CGL Fully Protects My Business from All Advertising-Related Lawsuits.”

The Truth: CGL provides limited advertising injury coverage—and exclusions apply.

Marketing is a powerful tool. But it also comes with legal risks. Many businesses assume that their commercial general liability policy will fully protect them if a customer claims they have been impacted negatively by their advertisements. That’s not entirely true.

CGL policies include coverage known as “personal and advertising injury liability.” This may cover claims arising from:

• Copyright infringement
• Defamation, slander or libel
• Use of someone’s advertising idea without permission
• Violation of privacy

So far, so good.

However, here’s what CGL insurance typically does not cover:

• Deliberate or knowing violations (e.g., knowingly copying a competitor’s tagline)
• False advertising claims are made intentionally
• Patent or trademark infringement
• Online ad campaigns with questionable content that violate advertising codes or laws

Here is an example. In the famous skincare brand case, Brand A allegedly copied elements of Brand B’s advertising campaign, leading to a legal dispute over copyright infringement. Such intentional acts typically fall outside the scope of Commercial General Liability Insurance coverage.

CGL policies may cover unintentional advertising injuries, but they usually exclude deliberate violations, leaving the business exposed to legal and financial consequences. In such instances, the insurer can deny the commercial general liability claim.

Also, the line between copyright infringement (covered) and trademark infringement (not always covered) is thin and confusing. If advertising is a big part of your business model, consider specialised coverage for intellectual property risks alongside CGL.

Read More: Business Insurance For Tech Startups

Myth 3: “CGL Covers All Types of Business Risks.”

The Truth: CGL insurance coverage is foundational but not all-encompassing.

Another common misconception is that commercial general liability coverage is the “be-all and end-all” of business risk protection. Many Indian entrepreneurs buy a Commercial General Liability Insurance Policy and assume they are fully protected. That’s dangerous.

Here’s what CGL does NOT cover:

• Professional errors or negligence: For instance, if you are a consultant and your wrong advice causes your client a financial loss, CGL won’t help. You need Professional Indemnity Insurance for that.

• Employee injuries or illnesses: These are handled under Workers’ Compensation Insurance.

• Cybersecurity threats and data breaches: You will need Cyber Insurance.

• Damage to your own property or assets: Covered by Property Insurance, not CGL insurance.

• Contractual liabilities beyond standard terms: CGL insurance policies exclude liabilities you voluntarily assume under a contract, unless the contract is considered “insured.”

Here’s an analogy: Think of commercial general liability insurance as the foundation of your house. It gives you stability. But you also require walls (Professional Indemnity), a roof (Cyber Insurance) and doors (Workers’ Compensation) to be fully protected.

Each policy plays a specific role. Relying on just CGL is like using an umbrella in a thunderstorm—you will stay dry for a bit, but it’s not going to be enough.

Recommended Read: What Is Cyber Insurance?

Myth 4: “CGL Insurance Covers Intentional Misconduct or Fraud.”

The Truth: No insurance policy covers deliberate wrongdoing.

A dangerous myth floating in the market is that CGL insurance can bail you out even if your business or employees commit fraud or engage in unethical practices. This is absolutely incorrect.

Commercial general liability insurance is built to cover accidents, unintentional harm and negligence, not intentional acts or illegal behaviour.

For example, if a manager in your company knowingly sells defective products that later cause injury to customers, the resulting claims are unlikely to be covered under a Commercial General Liability policy. Since the act was intentional and involved prior knowledge of the defect, it falls outside the scope of coverage.

Similarly, if you are accused of committing business fraud, CGL insurers will deny your claim because:

• It violates policy terms.
• It’s considered a criminal act.
• It goes against public policy and established legal principles.

Even if you claim it was a rogue employee, insurers will scrutinise the case. If it’s proven that the business failed to supervise the act, the CGL insurance coverage may still be denied.

Please note that insurance exists to protect businesses from genuine, unforeseen risks, not to excuse or cover up intentional wrongdoing. Policies like CGL are built on the principle of good faith and responsibility.

If a business engages in fraud, deceit or any form of misconduct, the insurer has every right to deny the CGL insurance claim. Simply put, insurance is not—and should never be—a shield for illegal or unethical behaviour. It’s a tool for protection, not permission to cut corners.

Suggested Read: How Onsurity Plus Secures SMEs with Comprehensive Business Insurance

Myth 5: “If a Company Has Employees Working Remotely, They Don’t Need CGL Insurance.”

The Truth: Remote work introduces new risks—not fewer.

The rise of remote and hybrid work in India has led many businesses to believe that the absence of physical premises eliminates liability. But the risk doesn’t disappear just because your team works from home—it simply changes form.

Commercial general liability insurance policies cover this aspect of business operations as well. These policies often include Products and Completed Operations (PCO) coverage, which is crucial in remote setups, especially for service providers.

Here’s a case in point:

A home appliance repair company with technicians working at client locations completes an air conditioner installation, which later malfunctions and causes water damage. Products and Completed Operations (PCO) coverage under their CGL policy can help cover the cost of property damage or legal claims arising after the job is completed.  Such claims fall under Completed Operations, not just “product liability.”This protection is crucial for service providers with remote operations.

Even though the team delivered the work remotely, the company is still legally liable for the damage caused after the completion of operations. Commercial general liability insurance, with a proper PCO extension, will cover legal defence costs, settlement amounts and other court-related expenses.

Bottom line? Remote doesn’t mean risk-free. Irrespective of the type of your business location or set-up, liabilities can follow you.

Also, read: What is Workmen Compensation Policy?

Conclusion

Commercial general liability insurance is not just another checkbox on your compliance list—it’s a powerful financial safeguard that can keep your business afloat during legal storms. But to truly leverage it, you must see through the myths.

Let’s recap the truths:

• Contracts help, but they don’t replace CGL insurance.
• Advertising coverage has limits.
• CGL is foundational, not all-in-one.
• Intentional misconduct voids coverage.
• Remote businesses need CGL insurance just as much, sometimes even more.

Industries in India that rely heavily on commercial general liability insurance include:

• Construction and Infrastructure
• IT and Software Development
• Manufacturing and Exporters
• Retail Chains and Mall Operators
• Event Management and Advertising Firms
• Hospitality and Tourism
• E-commerce and Logistics

These industries face constant exposure to third-party claims—be it physical injury, service errors or property damage. A robust commercial general liability policy helps mitigate those risks and provides a legal and financial buffer.

As a business owner, don’t let misinformation lead to underinsurance. Evaluate your operations, understand your exposures, and consult a qualified insurance advisor. Because when the unexpected hits, a well-structured commercial general liability insurance policy can mean the difference between business survival and business closure.

Need help choosing the right commercial liability coverage for your business?

 Get in touch with Onsurity today for comprehensive insurance coverage and absolute peace of mind! Speak with our expert advisors and build a risk-proof foundation for your business.

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