General Liability Insurance for an LLC in Texas

Short answer: a Texas LLC protects you from the company's debts and obligations. It does not protect you from your own negligent acts, and the Texas Supreme Court said so directly in 2024. General liability insurance is what responds when you or your employees injure someone or damage property, and it is what pays to defend the claim. The entity and the policy do different jobs.

This comes up constantly, usually phrased as a question about whether the insurance is really necessary now that the LLC exists. It is a fair question, and the answer is not a sales line. It is in the statutes, and in a recent opinion that settled an argument people had been having for years.

What Section 101.114 actually says

Business Organizations Code Section 101.114 is headed Liability for Obligations. The operative text reads that except as and to the extent the company agreement specifically provides otherwise, a member or manager is not liable for a debt, obligation, or liability of a limited liability company, including a debt, obligation, or liability under a judgment, decree, or order of a court.

Read the scope precisely. The shield runs to debts, obligations, and liabilities of the company. The statute says nothing at all about a member's own conduct. And note the opening clause, because a company agreement can contract out of the shield, which is a reason to have someone read the agreement you downloaded.

That is a real protection and it is worth having. If the company signs a lease it cannot pay, or takes on a vendor debt it cannot service, members are generally not on the hook personally. That is the function.

The veil-piercing rules are better than most people think

Texas Business Organizations Code Sections 101.002 and 101.114 govern an LLC owner's entity-liability protection and incorporate specified corporate provisions. Section 21.223 limits certain attempts to hold owners liable for contractual obligations, with an actual-fraud/direct-personal-benefit exception. It is not a blanket defense for an individual's own torts.

For an insurance decision, the useful distinction is simpler: entity formation and insurance do different jobs. Counsel should analyze guarantees, contracts, and personal conduct. Your agent should confirm that the entity and operations needing coverage are actually insured.

Keyes v. Weller: your own negligence is still yours

In 2024 the Texas Supreme Court addressed the point squarely in Keyes v. Weller, No. 22-1085, decided June 28, 2024.

The Court held that individuals are personally liable for torts they commit as corporate agents. It stated that Section 21.223 does not limit an individual's liability under the common law for tortious acts, that Section 21.223 has no effect on the independent common-law principle, and that the statute simply does not address the individual liability of corporate agents for their own tortious acts. The Court also characterized veil piercing as a method to impose personal liability on shareholders and corporate officers rather than a standalone cause of action, and described the statute's focus as having always been on the liability of shareholders for contractual obligations.

The practical translation is short. A person can be liable for a tort they personally commit while working for an LLC. An employee's conduct can also expose the company, but does not automatically make every owner personally liable. Ask counsel which duties and parties are involved.

CGL may fund defense and damages for a covered injury or property-damage claim. Vehicle accidents ordinarily need auto coverage; a CGL policy does not replace commercial auto. The entity statute supplies no defense fund.

What a general liability policy covers in Texas

TDI's commercial general liability page is the plain-language reference, last updated January 20, 2021.

Coverage is for liability claims for bodily injury, property damage, and personal and advertising injury, which TDI identifies as including slander and false advertising. Premises and operations coverage addresses injury or damage occurring on your premises or resulting from your business operations. Products and completed operations coverage pays for bodily injury and property damage that occurs away from your business premises, caused by your products or completed work.

TDI also sets out the structure difference. Occurrence policies cover injury or damage happening during the policy period regardless of when the claim is made. Claims-made policies cover claims that both occur and are reported during the policy period, with prior acts coverage and run-off or tail coverage available to close the gaps.

The exclusions TDI lists are the ones to know:

• Damage to your work, generally excluded, with an exception where a subcontractor caused the damage
• Damage to your product, meaning property damage to your product or any part of it is not covered
• Contractual liability, excluded, with exceptions for liability you would have had absent the contract and for insured contracts
• Recall of products, work, or impaired property, not covered, but addable by endorsement for an additional premium
• Workers' compensation and employer's liability, not covered
• Pollution, excluded with listed exceptions, and total pollution exclusions remove all coverage including premises and operations and products and completed operations

TDI adds that policies contain additional exclusions and endorsements and should be reviewed carefully. Our general liability explainer walks through the coverage parts in more detail.

Ask how the actual policy treats defense: which allegations trigger a defense obligation, who selects counsel, and whether legal costs reduce the liability limit. TDI specifically warns about defense inside limits on some surplus lines policies. Do not assume all admitted or surplus lines forms treat costs alike.

Why an LLC still buys general liability

Beyond the tort exposure, there are four practical reasons the policy exists.

Contracts require it. Clients, general contractors, and purchasers routinely specify limits and coverages. Our requirements by contract type guide covers what those clauses typically ask for.

Leases require it. A commercial landlord will specify limits and usually ask to be named as an additional insured.

Licensing requires it, in some trades. See the next section, because the amounts are set by rule and are specific.

Defense costs. The entity shield is not a defense fund. Even a claim you win costs money to win.

Does Texas require your business to carry it?

Generally, no. There is no broad statutory mandate requiring Texas businesses to carry general liability insurance, and TDI's commercial general liability page contains no purchase requirement of any kind.

A license, customer agreement, or lease can still require insurance. For example, TDLR's air-conditioning contractor requirements distinguish Class A limits of $300,000 per occurrence/$600,000 aggregate, with $300,000 products/completed operations, from lower Class B limits of $100,000/$200,000/$100,000. Other licensed trades have their own rules.

Verify the current rule for your exact license and every contract you intend to sign. Meeting a licensing minimum does not show that the limit is enough for your jobs. General liability also does not replace workers compensation or commercial auto; compare those exposures separately.

The certificate of insurance is not coverage

This is where LLC owners most often think a requirement has been met when it has not, and Texas has a dedicated statutory chapter on it.

Insurance Code Section 1811.002 applies the chapter to a certificate holder, policyholder, insurer, or agent with regard to a certificate of insurance issued on property or casualty operations or a risk located in this state, regardless of where any of those parties is located.

Section 1811.051 provides that a property or casualty insurer or agent may not issue a certificate of insurance if the certificate alters, amends, or extends the coverage or terms and conditions provided by the policy referenced on it, and that a certificate of insurance or any other type of document may not convey a contractual right to a certificate holder.

Section 1811.152 is one sentence and settles the question: a certificate of insurance is not a policy of insurance and does not amend, extend, or alter the coverage afforded by the referenced insurance policy.

The certificate is evidence of the referenced insurance, not a substitute for the policy and endorsements. An additional-insured requirement needs coverage in the actual policy, including an applicable blanket endorsement where its conditions are met. Ask for the endorsement, not merely a certificate checkbox.

So when a general contractor or a landlord asks your LLC for a certificate, understand what changes hands. The certificate evidences that a policy exists. It confers nothing. If the contract requires additional-insured coverage, confirm the applicable endorsement and its conditions rather than relying on a box on the certificate. Our additional insured versus certificate holder explainer covers the distinction and the trap in blanket endorsements.

Named insured mechanics

The named-insured and Who Is An Insured provisions must fit the actual operation. Ask the agent to confirm covered entities and people, including the conditions on members' and managers' status. A general consumer page cannot answer that for your policy.

The questions that matter in practice:

• Does the named insured match the legal entity exactly as formed, including the LLC designator?
• If you operate under an assumed name, does that name appear on the policy?
• If you have more than one entity, is each one that could be sued over the operation listed, and does the policy contemplate the relationship between them?
• If the LLC operates out of property you hold personally, or uses equipment titled personally, is that accounted for on both the commercial and personal policies?
• Do you understand the difference between an additional named insured, which generally receives the policy's coverage broadly, and an additional insured, which is usually limited to liability arising from a specified relationship?

These sound administrative. They decide whether a claim is covered, and a mismatch between the entity that got sued and the entity on the declarations page is a bad thing to discover after a loss.

What drives the premium

Texas insurers set their own rates and file them with TDI rather than using a state-set price, so there is no single answer. The largest structural input is your classification, because classification determines what the rate is multiplied by.

In the standard classification system, the premium bases run by group:

• Manufacturing or processing classifications are rated on gross sales, commonly per $1,000 of gross sales
• Mercantile classifications are rated on gross sales, per $1,000
• Contracting or servicing classifications are rated on payroll, per $1,000
• Building or premises classifications are rated on area, per 1,000 square feet, or on units
• Miscellaneous classifications vary by classification
• Other bases include admissions, meaning people admitted to an event, and total cost for subcontracted work, per $1,000 of total costs

That distinction explains a lot of confusion. If sales or payroll is the agreed rating base, changes can affect an audited premium. Minimum premiums, classifications, and the policy's audit provisions also matter. Two LLCs with identical revenue in different classifications are not comparable risks and will not be priced alike.

On top of the base sit the limits and aggregate you choose, the deductible, your claims history, the operations and states described on the application, and whether any required endorsements such as additional insured or waiver of subrogation are in play. The general liability cost guide covers the Texas rate-setting framework in more detail.

Checklist for an LLC buying general liability

• Does the named insured match the entity exactly, including every assumed name and affiliated entity that could be sued?
• Is the classification on the policy an accurate description of what you actually do, and is the rating base sales or payroll?
• Do your limits meet every contractual and lease requirement you have signed?
• Does your license, if you hold one, carry a specific insurance rule, and do your limits satisfy it?
• Are the additional insured and waiver of subrogation endorsements your contracts require actually issued, by endorsement rather than by certificate?
• Is the insurer admitted or surplus lines, and if surplus lines, do defense costs erode the limit?
• Does your company agreement contain anything that contracts out of the Section 101.114 shield?
• Have you separated what the entity protects, meaning company debts, from what the policy protects, meaning your own negligence?
• Do you carry commercial auto, given that auto liability is mandatory under Transportation Code Section 601.072 and personal auto treatment depends on vehicle use, exclusions, and endorsements?
• If you have employees, have you decided on workers' compensation deliberately, knowing it is optional for most private Texas employers?

Frequently asked questions

Does forming an LLC replace insurance?

No. Entity protections and insurance serve different functions. The business can face covered liability claims, and individuals can be liable for torts they personally commit.

Is an owner automatically liable for an employee's mistake?

No. Liability depends on the parties, duties, and conduct. An employee's act may expose the company without making every member personally liable.

Does CGL cover an LLC's vehicle accident?

Do not rely on CGL for vehicle liability. Review commercial auto and any hired or non-owned auto exposure separately.

Is general liability required for every Texas LLC?

There is no universal LLC requirement. Contracts, leases, or particular licensed trades can require specific insurance and limits.

Does a certificate cover my landlord?

The certificate cannot create coverage. If the lease requires additional insured protection, confirm the endorsement and its conditions.

Who should appear as the insured?

The legal entity and assumed names must be accurate. Ask how the policy covers members and managers; each person does not necessarily need a separate declarations listing.

Where Argo fits

Bring the LLC's legal name, operations, contracts, and current policies so Argo can check insured entities, classifications, limits, and requested endorsements.

Request a business insurance quote to compare your options.

This is general information about insurance and is not legal advice. Entity liability, veil piercing, and licensing requirements turn on the specific facts and the current rule, coverage varies by carrier and form, and the policy issued controls. Consult a Texas attorney on entity and contract questions.