Just Got Sued in New Jersey? Here’s What Your Liability Insurance Might (And Might Not) Cover
If your summons has a docket number with an “L,” “DC,” “SC,” or “LT,” it’s a sign you’re now part of a civil dispute in the Law Division of New Jersey’s Superior Court. In plain terms, the other side wants money, and it’s your business that’s being asked to pay.
One of the first things you may be thinking about right now is your liability insurance. That policy, sitting in a folder or inbox somewhere, is supposed to be the first layer of protection for business owners like you. But not every general liability insurance policy works the same way, and coverage limits, exclusions, and the way the claim is framed will all affect what you’re actually entitled to.
The First Question Every Business Owner Asks: “Will My Insurance Cover This?"
The answer, like most things in insurance, depends on the details. General liability insurance, sometimes labeled as GL or CGL, is the first line of protection for most small businesses in New Jersey.
If your business operates out of a physical location, welcomes clients on-site, or performs services at customer homes or offices, there’s a good chance you’re required to carry general liability coverage. But just because you hold a policy doesn’t mean you’re covered in every lawsuit.
What general liability insurance covers is narrow by design. It exists to defend your business from third-party claims involving physical harm or property damage. In those cases, the insurer may pay for legal defense, legal fees, court costs, and even settlement amounts, depending on the claim and your coverage limits. But that protection only activates under specific conditions laid out in the policy itself.
If you’re being sued for something that falls outside those bounds, you may find that your general liability insurance coverage doesn’t apply.
Covered Claims Under a General Liability Policy
These are the types of third-party claims that can trigger your insurer’s duty to defend:
Bodily injury
A customer slips on a wet floor in your shop, breaks a wrist, and sues you for medical expenses, lost wages, and pain. This is the classic claim for which general liability is built. If your policy is active and the event fits the definition of “occurrence,” your liability coverage may step in to cover legal defense costs, court costs, and the settlement.
Property damage
Your crew accidentally crashes a company van into a client’s fence during a delivery. If your business is responsible for damage to someone else’s property, your general liability policy may cover the repair or replacement costs — plus legal fees if they sue.
Personal and advertising injury
A competitor claims your ad campaign copied their tagline or defamed them. Most CGL policies include coverage for personal and advertising injury, which may include copyright infringement, libel, or false advertising if the claim falls within your policy’s scope.
When You’re on Your Own: Common Exclusions and Misconceptions
Holding a general liability insurance policy may offer peace of mind, but it shouldn’t give you false confidence. If your lawsuit falls into any of the categories below, your insurer likely won’t step in.
Breach of contract
General liability insurance coverage is built to protect your business from third-party claims involving bodily injury or property damage, not broken promises. If someone sues your company for failing to deliver on a deal, that’s a contract dispute, not an accident. Even if the financial loss feels just as real, general liability doesn’t cover lawsuits tied to your own business obligations.
Payment disputes
If someone says you didn’t pay them, that’s a financial dispute, not something general liability insurance covers. You’ll likely need a different policy or be prepared to pay out of pocket.
Employee injuries
General liability insurance only covers third-party claims, not claims from your own team. If an employee gets hurt on the job, that’s handled under employment law, and you’ll likely need workers’ compensation insurance instead.
Professional advice gone wrong
If someone sues you because your advice cost them money, but no one was injured and nothing was physically damaged, that’s considered a professional services error. General liability coverage doesn’t apply. You’d need professional liability insurance for that.
Common Add-Ons or Companion Policies for Better Protection
Saying, “I’ve got general liability, so I’m covered,” is like saying, “My car has great seatbelts, so I don’t need airbags.” It’s not that your policy won’t help —but it’s built for specific risks, not every scenario. Lawsuits come in all shapes and sizes, and one type of insurance rarely covers them all.
Business Owner’s Policy (BOP)
Think of this as a prepacked bundle that combines two core types of business insurance: general liability insurance and commercial property insurance. If you’ve got a storefront, equipment, inventory, or even leased office space, this policy helps protect your physical location and business assets from covered events like fire, theft, vandalism, or winter storm damage. It’s often the starting point for small businesses that want a simple way to protect both people and property.
Professional Liability Insurance
If your business delivers services, offers advice, or produces work your clients rely on for results, professional liability insurance is essential. Also called Errors & Omissions (E&O), this policy protects you when a client sues over mistakes that caused financial loss, like missed deadlines, faulty recommendations, or service failures. It covers professional errors that your general liability insurance policy won’t touch.
Workers’ Compensation Insurance
This policy, often referred to as workers’ comp, is legally required in New Jersey if you have at least one employee. It covers medical expenses, lost wages, rehab, and death benefits when someone on your payroll is injured or becomes sick due to work. General liability insurance only applies to third parties, while workers’ comp is the protection that covers your own team.
Cyber Liability Insurance
If your business stores personal data, uses cloud-based systems, or accepts online payments, cyber liability insurance is a safeguard. It covers legal defense costs, breach notifications, data recovery, and even regulatory fines after a cyberattack or data breach. It also helps with business interruption and PR repair, which general liability insurance won’t provide.
Umbrella Insurance
Every liability insurance policy has coverage limits. If you’re ever sued for an amount that exceeds those limits, umbrella insurance steps in to cover the rest up to a higher threshold. It acts as a financial buffer when claims get expensive, especially in lawsuits involving serious bodily injury or large-scale property damage.
Contractual Liability Coverage
Most general liability policies include limited “contractual liability” coverage, but they often exclude broad indemnification clauses, especially in leases, construction contracts, or vendor agreements. A contractual liability endorsement may be required to ensure adequate protection.
Final Words
Insurance isn’t something you scramble to understand after the lawsuit hits. It’s a layer of protection you build in advance, so when a claim lands, you’re not relying on hope. Whether this is your first time dealing with the Law Division or you’ve already called your attorney, you now have a clearer sense of what general liability insurance covers, where it stops, and which business insurance policies can fill the gaps.
In our next article, we’ll move from the Law Division to the General Equity Part of the Chancery Division in New Jersey’s Superior Court.
Are you wondering about any of the issues mentioned above? Please email us at Info@staturelegal.law or call (732) 320-9831 for assistance.
At Stature Legal, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®
FAQs
How Do I Know if My Commercial General Liability Insurance Covers the Lawsuit I Just Received?
Check the allegations in the complaint and compare them to the coverage section of your general liability insurance policy. Look for mentions of bodily injury, property damage, or advertising injury. If the lawsuit involves a contract dispute, professional mistake, or unpaid bill, your general liability coverage likely won’t apply.
What Should I Do if My Insurer Denies Coverage for the Claim?
First, request a written explanation. Then, have an attorney review the denial. It may still be worth pushing back, especially if the insurer is interpreting exclusions too broadly or if there’s overlapping coverage in another policy.
Can I Buy a New Insurance Policy Now to Cover This Lawsuit?
No. Insurance generally doesn’t apply retroactively. If the claim arises from something that happened before your policy started, or if you already knew about the issue when you applied, it’s unlikely any new policy will cover it.
What Happens if the Claim Amount Is Higher Than My Policy’s Coverage Limits?
If the legal costs or damages exceed your general liability policy limits, your business is responsible for the difference. That’s where an umbrella policy could help if you already had one in place before the lawsuit.