Key Takeaways
- The CGL policy has MULTIPLE LIMITS: Each Occurrence, General Aggregate, Products-Completed Operations Aggregate, Personal/Advertising Injury, Damage to Premises Rented, and Medical Expense.
- The GENERAL AGGREGATE limits total payments for premises-operations, personal injury, and medical payments—but NOT products-completed operations, which has its own aggregate.
- Standard limits are often $1,000,000 per occurrence and $2,000,000 general aggregate—but these can be increased or decreased.
- KEY CONDITIONS include duties after loss (prompt notice, cooperation), legal action conditions (no action until loss is settled), and other insurance provisions.
- The SEPARATION OF INSUREDS provision means each insured is treated separately—coverage for one insured isn't voided by another's actions.
CGL Limits and Conditions
CGL Limits Structure
The CGL policy has a layered limit structure:
Primary Limits
| Limit | Standard Amount | What It Covers |
|---|---|---|
| Each Occurrence | $1,000,000 | Maximum for any single occurrence |
| Damage to Premises Rented | $100,000 | Fire damage to rented premises |
| Medical Expense | $5,000 | Per person for Coverage C |
Aggregate Limits
| Aggregate | Standard Amount | What It Covers |
|---|---|---|
| General Aggregate | $2,000,000 | Total for premises-operations, Coverage B, Coverage C |
| Products-Completed Operations | $2,000,000 | Total for products and completed work claims |
How Limits Apply
The Occurrence Limit
The Each Occurrence limit is the maximum paid for any single occurrence, regardless of:
- Number of persons injured
- Number of claims arising from it
- Number of insureds involved
Example: A fire causes $500,000 in third-party property damage and $750,000 in bodily injury claims. Total occurrence = $1,250,000. With $1M limit, policy pays $1,000,000.
The General Aggregate
The General Aggregate limits total policy-period payments for:
- Premises-Operations (Coverage A, except products)
- Personal and Advertising Injury (Coverage B)
- Medical Payments (Coverage C)
Not Subject to General Aggregate:
- Products-Completed Operations (has its own aggregate)
- Fire damage to rented premises
- Defense costs (supplementary payments)
Products-Completed Operations Aggregate
This separate aggregate limits total payments for:
- Products liability claims
- Completed operations claims
Why Separate?: Products claims can be massive (recalls, defects). Separating them protects premises-operations limits.
Limits Diagram
| Type of Claim | Subject to Occurrence Limit? | Subject to General Aggregate? | Subject to P-CO Aggregate? |
|---|---|---|---|
| Slip and fall | ✓ Yes | ✓ Yes | ✗ No |
| Product defect injury | ✓ Yes | ✗ No | ✓ Yes |
| Libel claim | ✓ Yes (P/A limit) | ✓ Yes | ✗ No |
| Completed operations | ✓ Yes | ✗ No | ✓ Yes |
| Medical payments | ✓ Yes ($5K per person) | ✓ Yes | ✗ No |
| Fire damage to rented | Separate $100K limit | ✗ No | ✗ No |
Policy Conditions
Duties After Occurrence
The insured must:
| Duty | Timing |
|---|---|
| Notify insurer | As soon as practicable |
| Provide details | Time, place, nature of occurrence |
| Identify witnesses | Names, addresses of injured parties |
| Forward legal papers | Immediately upon receipt |
| Cooperate | In investigation, defense, settlement |
| Assist in enforcement | Of any right against third parties |
| Not voluntarily pay | Without insurer's consent |
Other Insurance
When other valid insurance exists:
| Situation | How CGL Pays |
|---|---|
| Primary insurance | CGL pays first |
| Excess insurance | CGL pays only after other insurance exhausted |
| Contributing insurance | CGL shares with other policies |
Method of Sharing:
- Contribution by equal shares: Each policy pays equal amounts until exhausted
- Contribution by limits: Each policy pays proportional to its limits
Legal Action Against Insurer
No action can be brought against the insurer unless:
- All policy terms have been complied with
- Insured's obligation has been finally determined by:
- Judgment after trial
- Written agreement (insured, claimant, insurer)
Separation of Insureds
Each insured is treated separately:
| Principle | Application |
|---|---|
| Separate treatment | Coverage evaluated for each insured independently |
| One insured's conduct | Doesn't void coverage for other insureds |
| Exclusions | Applied separately to each insured |
Example: If Employee A intentionally causes injury, the employer may still be covered even though the employee is excluded.
Transfer of Rights of Recovery (Subrogation)
| Requirement | Details |
|---|---|
| Assignment of rights | Insured must transfer recovery rights to insurer |
| Cooperation | Must help insurer recover from responsible parties |
| No waiver without consent | Can't waive rights against third parties |
Premium Audit
| Feature | Details |
|---|---|
| Audit right | Insurer may audit books and records |
| Premium adjustment | Final premium based on actual exposures |
| Basis | Payroll, sales, square footage, etc. |
Common Limit Combinations
| Package | Per Occurrence | General Aggregate | P-CO Aggregate |
|---|---|---|---|
| Minimum | $300,000 | $600,000 | $600,000 |
| Standard | $1,000,000 | $2,000,000 | $2,000,000 |
| Enhanced | $2,000,000 | $4,000,000 | $4,000,000 |
| High | $5,000,000 | $10,000,000 | $10,000,000 |
A slip-and-fall injury at a retail store would be subject to which CGL aggregate limit?
Under the CGL policy conditions, when can a claimant bring legal action directly against the insurer?
The Separation of Insureds condition means that:
9.1 Business Auto Policy Overview
Chapter 9: Commercial Auto Insurance