Does General Liability Cover Settlements?

A CGL policy may pay a settlement for covered bodily injury, property damage, or personal and advertising injury, subject to the insurer’s obligations and the limits shown in the declarations. The ISO specimen addresses the insurer’s authority to investigate and settle claims, and the defense and settlement provisions are tied to the policy’s conditions. A settlement of a contract performance dispute or an excluded employment, auto, or professional claim is not made covered merely because the business agreed to pay it.

Before agreeing to settle, review the policy’s consent and cooperation requirements and contact the insurer or claims representative. Check whether the claimed damages fall within coverage, whether the settlement includes covered and uncovered matters, and how any deductible, retention, or aggregate limit applies. Never assume an informal agreement or contractual promise is reimbursable without checking the issued form and getting the insurer’s direction.