Understanding General Liability Limits: How Much Coverage Do Your Vendors Need?

When property managers set insurance requirements for their vendors, Commercial General Liability (CGL) limits are almost always the first line item. But determining the right limits -- and understanding what they actually protect -- requires more than picking a round number. Limits that are too low leave you exposed. Limits that are unreasonably high shrink your vendor pool and increase costs that eventually flow back to property owners.

How General Liability Limits Work

A standard CGL policy has two primary limit structures:

• Per-occurrence limit. The maximum amount the insurer will pay for a single covered event -- one slip-and-fall, one property damage incident, one completed operations claim.
• General aggregate limit. The maximum total amount the insurer will pay across all covered claims during the policy period, typically one year.

A policy with a $1 million per-occurrence limit and a $2 million aggregate will pay up to $1 million for any single incident and up to $2 million total for all incidents combined during the policy term.

It is important to understand that the aggregate limit applies to all of the vendor's work, not just the work they perform at your properties. If a landscaping company carries a $2 million aggregate and has already paid $1.5 million in claims from other jobsites, only $500,000 of aggregate coverage remains available for claims arising at your properties.

Common Limit Thresholds

Across the property management industry, the most common minimum requirements for vendor general liability are:

| Requirement | Typical Minimum | |---|---| | Per-occurrence | $1,000,000 | | General aggregate | $2,000,000 | | Products/completed operations aggregate | $2,000,000 | | Personal and advertising injury | $1,000,000 | | Damage to rented premises | $100,000 | | Medical expense (any one person) | $5,000 |

These figures serve as a reasonable baseline for most vendor relationships. However, they are not universal, and applying a one-size-fits-all standard across all vendors can create problems in both directions.

When Higher Limits Are Warranted

Certain vendor categories and project types justify limits above the standard minimums:

• High-rise or large-scale construction. General contractors and subcontractors performing major capital work should typically carry $2 million or more per occurrence, often with an umbrella or excess liability policy that brings total available coverage to $5 million or $10 million.
• Elevator and fire suppression contractors. The potential severity of failures in these systems justifies higher coverage thresholds.
• Environmental and hazardous materials work. Asbestos abatement, mold remediation, and lead paint removal carry long-tail liability that demands robust coverage, often including specialized Pollution Liability policies.
• Security services. Claims involving security personnel can escalate quickly, particularly if allegations involve excessive force or negligent hiring.

For these higher-risk categories, consult your own insurance broker or risk management advisor to determine appropriate thresholds based on the specific property types and jurisdictions in your portfolio.

When Standard Limits Are Sufficient

Not every vendor relationship requires elevated coverage. A pest control company treating common areas, a locksmith rekeying units during turnover, or a carpet cleaning service are lower-severity exposures where $1 million per occurrence and $2 million aggregate typically provide adequate protection.

Imposing unnecessarily high limits on low-risk vendors creates friction. Small service providers may not carry -- or be able to afford -- $5 million in coverage. If your requirements exclude otherwise qualified vendors, you may end up paying more for services or limiting your options in markets with fewer contractors.

The Role of Additional Insured Endorsements

Liability limits are only meaningful to you if you have standing to make a claim under the vendor's policy. This is where the additional insured endorsement becomes critical.

When your entity is named as an additional insured on a vendor's CGL policy, you are entitled to coverage under that policy for claims arising out of the vendor's work at your properties. Without this endorsement, you would need to pursue the vendor directly for indemnification -- a process that is slower, less certain, and dependent on the vendor's financial solvency.

The additional insured endorsement effectively extends the vendor's liability limits to cover your defense and indemnity costs, up to the policy limits. This is why verifying both the limits and the additional insured status on every COI is essential.

Umbrella and Excess Liability Policies

For vendors performing higher-risk work, an umbrella or excess liability policy provides coverage above and beyond the primary CGL limits. If a vendor carries $1 million per occurrence on their primary CGL and a $5 million umbrella, the total available coverage for a single incident is $6 million.

When reviewing COIs, confirm that the umbrella policy follows form -- meaning it provides the same coverage as the underlying primary policy -- and that your entity is included as an additional insured on the umbrella as well as the primary policy.

Setting Your Standards

The right liability limits for your vendor program depend on your portfolio's specific risk profile: property types, geographic locations, typical project scopes, and the expectations of your property owners and lenders. Document your requirements clearly, tier them by vendor category or risk level, and review them annually with your insurance advisor to ensure they reflect current claim trends and market conditions.

Consistent, well-calibrated standards protect your properties without creating unnecessary barriers to vendor engagement. The goal is adequate coverage, applied systematically, across every vendor relationship.