What Does General Liability Insurance NOT Cover?

General liability insurance is the foundation of business protection. It shields your company from some of the most common and costly risks you face every day. But here is a truth that catches many business owners off guard: general liability does not cover everything. It has significant exclusions that can leave your business dangerously exposed if you are not aware of them.

Understanding what your GL policy does not cover is just as important as understanding what it does. A single uncovered claim can wipe out years of hard work and savings. Business owners who assume their GL policy is a catch-all often discover the gaps at the worst possible time, when a claim is denied.

This guide walks through every major exclusion in a standard GL policy, explains why each gap exists, and shows you how to fill those gaps so your Washington State business is fully protected.

Quick Recap: What General Liability DOES Cover

Before diving into the exclusions, it helps to understand what general liability insurance is designed to do. A standard CGL (commercial general liability) policy covers five main categories:

• Third-party bodily injury: If a customer, vendor, or member of the public is injured on your premises or because of your operations, GL covers their medical costs and any resulting legal claims. A customer who slips on a wet floor, a passerby hit by debris at your construction site, or a client who trips over equipment are all examples.

• Third-party property damage: If you or your employees damage someone else's property during business, GL covers repair or replacement costs. A painter who splatters paint on a client's hardwood floors or a delivery that knocks over expensive equipment are covered.

• Personal and advertising injury: This covers non-physical harm claims such as libel, slander, defamation, copyright infringement in your advertising, and invasion of privacy.

• Medical payments: This pays small medical bills for third parties injured at your business, regardless of fault. It typically covers up to $5,000 or $10,000 per person and handles minor injuries quickly without a lawsuit.

• Legal defense costs: GL pays for your legal defense even if the claim is completely groundless. Attorney fees, court costs, and expert witness fees are covered in addition to your policy limits.

These five coverages handle a wide range of everyday business risks. But notice a pattern: every one of them involves harm to someone else or someone else's property. That is where the exclusions begin.

What General Liability Insurance Does NOT Cover

Your Own Injuries

If you are a sole proprietor or business owner and you get hurt while working, your GL policy will not pay toward your medical bills or lost income. GL only covers injuries to third parties. To protect yourself, you need personal health insurance or workers' compensation through Washington's Department of Labor & Industries (L&I). Many sole proprietors skip electing workers' comp coverage on themselves and are left completely exposed if seriously injured on a job.

Your Own Property and Equipment

General liability insurance does not cover damage to, theft of, or loss of your own business property. If a fire destroys your office furniture, a thief steals your inventory, or a storm damages your building, GL will not help. You need commercial property insurance to protect fixed business assets at your location, or inland marine insurance to protect tools, equipment, and materials that travel with you to job sites or client locations. This is one of the most common and costly misconceptions among small business owners.

Professional Mistakes and Bad Advice

If a client suffers financial harm because of an error in your professional work or flawed advice, general liability will not cover the resulting lawsuit. GL covers physical injury and property damage, not financial losses from professional services. You need professional liability insurance, also known as errors and omissions (E&O) insurance. This is critical for consultants, accountants, architects, engineers, IT professionals, and anyone whose clients rely on their expertise.

Employee Injuries

When an employee is injured on the job, general liability does not apply. Employee workplace injuries are covered by workers' compensation insurance. In Washington State, workers' comp is managed through L&I and is mandatory for nearly all employers. Operating without workers' comp when you have employees can result in fines, stop-work orders, and personal liability for the injured employee's medical bills and lost wages.

Auto Accidents

If you or an employee causes an accident while driving for business purposes, your general liability policy excludes the claim entirely. This is true whether you are driving a company vehicle, a personal vehicle used for business errands, or a rental car on a business trip. Commercial auto insurance is a separate policy that covers liability, collision, and comprehensive losses for vehicles used in your business operations. Washington State requires auto liability insurance for all vehicles on the road, and personal auto policies typically exclude business use.

Cyber Attacks and Data Breaches

If your business suffers a data breach, ransomware attack, or other cyber incident, your general liability policy will not cover the costs of notifying affected customers, credit monitoring, forensic investigation, regulatory fines, or lawsuits from affected individuals. Cyber liability insurance is a separate policy designed for these risks. Any business that stores customer names, email addresses, payment information, or health records should strongly consider this coverage.

Intentional Acts and Criminal Behavior

No insurance policy covers deliberate wrongdoing. If you or an employee intentionally causes harm, commits fraud, or performs any criminal act during business, your GL insurer will deny the claim. Insurance covers accidental and unforeseen events, not intentional misconduct. This exclusion applies across virtually all types of insurance.

Damage to Your Own Work

If you complete a project and it later fails due to poor workmanship, your general liability policy will not pay to redo the work. For example, if a contractor installs a roof and the roof leaks six months later because of improper installation, GL will not cover the cost of tearing out and reinstalling the roof. It may cover damage that the leak caused to the homeowner's interior (under the completed operations coverage), but the cost of correcting your own defective work is excluded. This distinction matters enormously for contractors and tradespeople who perform physical work on client properties.

Pollution and Environmental Damage

Standard GL policies contain a pollution exclusion that eliminates coverage for claims arising from the release or dispersal of pollutants. If your business accidentally releases chemicals into the soil, contaminates a water supply, or creates an air quality hazard, GL will not cover cleanup costs, injury claims, or regulatory fines. Businesses that handle hazardous materials, fuel, or chemicals need environmental liability insurance (also called pollution liability insurance). Even businesses that do not consider themselves "polluters" can face claims, such as a contractor whose excavation ruptures an underground fuel tank.

Employee Discrimination and Wrongful Termination

If a current or former employee sues your business for wrongful termination, harassment, discrimination, or retaliation, general liability will not cover the defense or settlements. These claims fall under Employment Practices Liability Insurance (EPLI), a separate policy that protects employers against lawsuits arising from the employer-employee relationship. As your workforce grows, so does the likelihood of facing such a claim.

Common Scenarios Where Business Owners Discover the Gap

Here are four scenarios that Washington business owners encounter regularly.

• Contractor's tools stolen from a job site: A general contractor leaves $12,000 worth of tools in a locked trailer at a job site over the weekend. Thieves break in and steal everything. The contractor files a GL claim and is told the policy does not cover their own property. Without inland marine insurance, the contractor is out $12,000 and cannot work until the tools are replaced.

• Accountant gives bad tax advice: A CPA provides tax planning advice to a business client. The advice turns out to be incorrect, and the client faces $40,000 in IRS penalties and back taxes. The client sues the CPA. The CPA's general liability policy does not cover financial losses from professional advice. Without errors and omissions insurance, the CPA must pay for legal defense and any settlement out of pocket.

• Employee injured on the job: A warehouse employee falls from a loading dock and breaks their leg. The employee expects the business to cover their medical bills and lost wages. The business owner's GL policy excludes employee injuries entirely. Without workers' compensation coverage through L&I, the business owner is personally liable for all medical costs, rehabilitation, and wage replacement, which can easily exceed $100,000 for a serious injury.

• Laptop with customer data stolen: A consultant's laptop is stolen from their car. The laptop contains names, email addresses, and financial information for 500 clients. Washington State requires notification of affected individuals when personal data is breached. The cost of notification, credit monitoring, legal counsel, and potential lawsuits can reach tens of thousands of dollars. General liability does not cover any of it. Cyber liability insurance would.

How to Fill the Coverage Gaps

Every gap in general liability coverage can be filled with a readily available and affordable insurance product. Here is your roadmap.

Business Owner's Policy (BOP)

A BOP bundles general liability with commercial property insurance and typically includes business interruption coverage as well. It is the most cost-effective way to combine GL with property protection and is ideal for businesses with a physical location, office equipment, inventory, or any fixed assets that need coverage. Most insurers offer BOPs at a 15-25% discount compared to purchasing the policies separately.

Professional Liability (E&O)

Errors and omissions insurance covers claims arising from mistakes, oversights, or failures in professional services you provide. If your business gives advice, designs systems, manages finances, or provides any professional service that clients rely on, E&O insurance is essential. It covers legal defense costs and settlements when a client claims your work caused them financial harm.

Workers' Compensation

In Washington State, workers' compensation is mandatory for any business with employees. Coverage is obtained through the Department of Labor & Industries (L&I), and premiums are based on your payroll and the risk classification of your workers. Even sole proprietors without employees should strongly consider electing coverage to protect themselves from the financial devastation of a workplace injury.

Commercial Auto

If any vehicle is used for business purposes, whether it is a company truck, a personal car used for client visits, or a rented vehicle, you need commercial auto insurance. Personal auto policies exclude business use, and a denied claim after a serious accident could cost your business everything.

Cyber Liability

Cyber liability insurance covers the costs of responding to a data breach or cyber attack, including customer notification, credit monitoring, forensic investigation, legal defense, regulatory fines, and business interruption. Any business that stores customer data electronically, which is virtually every business today, should carry this coverage.

Umbrella Insurance

An umbrella policy provides additional liability limits that extend across your existing policies, including GL, commercial auto, and EPLI. If a claim exceeds the limits on one of your underlying policies, the umbrella kicks in and covers the excess. For businesses that face larger exposures, an umbrella policy is an affordable way to add a significant layer of protection.

How Much Does It Cost to Fill the Gaps?

Comprehensive insurance is more affordable than most business owners expect.

• General liability alone: Starting from $19.99/month for low-risk businesses
• Business Owner's Policy (BOP): Typically the most cost-effective way to combine GL and commercial property. Bundling usually saves 15-25% compared to purchasing each policy individually.
• Professional liability (E&O): Varies by profession, but many service businesses can secure E&O coverage for $50 to $150 per month
• Workers' compensation: Premiums are paid quarterly to L&I and vary by trade classification and payroll
• Commercial auto: Starting around $99 to $200 per month per vehicle for Washington contractors
• Cyber liability: Available for as little as $30 to $75 per month for most small businesses
• Umbrella insurance: Typically $30 to $100 per month for $1 million in additional coverage

A full coverage package varies by business type, size, and industry, but bundling multiple coverages through a single agency consistently produces meaningful savings. The cost of being properly insured is almost always a fraction of the cost of a single uncovered claim.

Build Complete Coverage for Your Business

General liability insurance is essential, but it is only one piece of the puzzle. The exclusions outlined above are not flaws in the policy; they are deliberate boundaries that define what GL is designed to do. Each gap has a corresponding coverage solution, and building a complete insurance package is the most effective way to protect your business from the full range of risks you face.

SmartInsured helps Washington State businesses identify their coverage gaps and build comprehensive protection at competitive rates. Our team understands the specific insurance requirements and risks that Washington businesses face, from L&I compliance to the coverage demands of general contractors and property managers.

Ready to close the gaps in your coverage? Get your free quote now and find out exactly what coverage your business needs and what it will cost. Our team is available at 425-209-1206 to answer your questions and help you build a complete protection package. Coverage is available the same day for most businesses.