11.1 CGL Limits of Insurance and Aggregates

The Six Limits of the ISO CGL

The ISO Commercial General Liability Coverage Form (CG 00 01, current 04 13 edition) carries six separate limits of insurance, listed in Section III - Limits of Insurance. Knowing how each limit interacts with the two aggregates is one of the most heavily tested topics on the national portion. A candidate who can recite the limits in order, and explain which pool each loss erodes, will answer most CGL limit questions correctly.

The limits below are illustrative standard amounts used on the exam; an actual policy lists whatever amounts the insured purchases on the Declarations.

How the Each-Occurrence Limit Caps a Single Loss

The Each Occurrence limit is the most the insurer pays for the combined bodily injury (BI) and property damage (PD) arising out of a single occurrence - regardless of the number of persons injured, the number of claims or suits brought, or the number of insureds involved. This is the per-loss ceiling that feeds into the aggregate.

Worked example. A single warehouse fire causes $500,000 of third-party PD and $750,000 of BI, totaling $1,250,000. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000 and the insured absorbs the remaining $250,000. The full $1,000,000 paid then reduces the General Aggregate, leaving $1,000,000 of General Aggregate for the rest of the policy period.

Two Separate Aggregate Pools

The General Aggregate and the Products-Completed Operations Aggregate are independent pools - exhausting one does not touch the other. This separation is a frequent trap.

• The General Aggregate caps total payments for premises-and-operations BI/PD (Coverage A), all Coverage B personal & advertising injury, and all Coverage C medical payments.
• The Products-Completed Operations Aggregate (PCOH) caps losses arising after the insured's product has left its possession or its work is completed - for example, a defective component that fails at the customer's site.

Trap: Damage to Premises Rented to You and Medical Expense are sublimits within - and erode - the Each Occurrence and General Aggregate. They are not separate buckets on top of the occurrence limit.

Worked Aggregate-Erosion Sequence

Assume General Aggregate $2,000,000 / Each Occurrence $1,000,000. Three premises-operations occurrences hit in one policy year:

1. Occurrence 1 pays $1,000,000 (capped at Each Occurrence). General Aggregate remaining: $1,000,000.
2. Occurrence 2 pays $700,000. General Aggregate remaining: $300,000.
3. Occurrence 3 is a $1,000,000 loss but only $300,000 is left in the General Aggregate, so the insurer pays $300,000 and the insured retains $700,000.

Note that the Each Occurrence limit caps each loss individually, while the General Aggregate caps the cumulative total for the period. A products-completed operations claim in the same year would still draw on its own $2,000,000 PCOH pool, untouched by the three premises losses above.

Defense Costs Are Outside the Limits

Under CG 00 01, the insurer's duty to defend is a supplementary payment - defense costs are paid in addition to the limits of insurance and do not erode them. The duty to defend ends only when the applicable limit has been exhausted by the payment of judgments or settlements. This contrasts with many professional-liability (E&O / D&O) forms, where defense costs are inside the limit ('eroding,' 'wasting,' or 'defense-within-limits'). The exam loves to contrast the CGL's outside-the-limits defense with a wasting professional-liability tower.

Supplementary Payments Beyond the Limits

Beyond defense, the CGL pays several supplementary payments that do not reduce the limits, including:

• All costs taxed against the insured in a suit the insurer defends.
• Up to $250 for bail bonds required because of a covered accident or traffic-law violation.
• The cost of appeal bonds and bonds to release attached property (the insurer is not obligated to furnish the bond, only to pay the premium).
• Reasonable expenses the insured incurs at the insurer's request, including up to $250 per day for lost earnings.
• Pre-judgment interest on the amount of any judgment the insurer pays, plus post-judgment interest on the full judgment until the insurer pays its limit.

Knowing the $250 bail-bond cap and the $250-per-day loss-of-earnings figure is a recurring exam detail.

How the Each-Occurrence Limit Interacts With Sublimits

The Damage to Premises Rented to You limit and the Medical Expense limit are carved out of the Each Occurrence limit, not added on top of it. If a fire damages rented premises ($90,000) and also injures a visitor requiring $4,000 of immediate medical treatment, the insurer applies the $100,000 Damage to Premises limit and the $5,000 Medical Expense limit respectively, but the total for that occurrence can never exceed the Each Occurrence limit. The General Aggregate then absorbs the cumulative effect. This nesting - sublimit inside occurrence limit inside aggregate - is exactly what tricky multi-part questions test.