3.2 Commercial General Liability (CGL)

The CGL Coverage Form

The Commercial General Liability (CGL) policy is the standard liability coverage for businesses, written on Insurance Services Office (ISO) forms. The occurrence version is form CG 00 01; the claims-made version is CG 00 02. The CGL contains three separate insuring agreements, each with its own scope and triggers:

Coverages A and B require the insured to be legally liable; Coverage C does not — it is a no-fault goodwill coverage that can pay small medical bills quickly and head off larger liability claims.

Occurrence vs. Claims-Made, Retroactive Date, and ERP

For Coverage A and B, the CGL is sold two ways:

• Occurrence form (CG 00 01) — responds to injury or damage that occurs during the policy period, even if the claim is filed years later. This is the more common and generally more favorable form for the insured.
• Claims-made form (CG 00 02) — responds only to a claim first made during the policy period, and only if the injury occurred on or after the retroactive date.

Retroactive Date and Extended Reporting Periods

A retroactive date is the earliest date of injury for which a claims-made policy will respond; injuries before it are not covered. When a claims-made policy is canceled or not renewed, an Extended Reporting Period (ERP), or "tail," lets the insured report claims after expiration:

• Basic ERP — automatic, no extra premium; a short "mini-tail" (commonly 60 days for reporting and a 5-year window for occurrences already reported).
• Supplemental ERP — purchased by endorsement for an unlimited reporting period, restoring aggregate limits.

The ERP exists to solve the "gap" created when switching from claims-made to a new insurer or to retirement.

CGL Limits of Insurance

The CGL declarations list several separate limits that interact. Understanding which limit a loss erodes is a frequent exam point.

• Each Occurrence Limit — the most paid for any one occurrence, combining Coverage A damages and Coverage C medical payments.
• Personal & Advertising Injury Limit — the most paid (per person/organization) under Coverage B.
• General Aggregate Limit — the most paid in the policy period for the sum of Coverage A (other than products-completed operations), Coverage B, and Coverage C.
• Products-Completed Operations Aggregate Limit — a separate aggregate for injury/damage arising out of the insured's products or completed work.
• Medical Expense Limit — the most paid under Coverage C for any one person.
• Damage to Premises Rented to You — a sublimit for fire (and certain other) damage to rented premises.

Because aggregates cap total annual payouts, a business with many claims can exhaust its General Aggregate while its Products-Completed Operations Aggregate remains intact — they are tracked separately.

Exclusions and Supplementary Payments

Common CGL Exclusions

The CGL is broad but contains important exclusions, including:

• Expected or intended injury (intentional acts).
• Contractual liability (except liability assumed in an "insured contract").
• Workers' compensation / employer's liability (covered by separate policies).
• Auto, aircraft, and watercraft liability (covered by auto/aviation/marine policies).
• Pollution and the "your work" / "your product" exclusions (damage to the insured's own work or product is a business risk, not insurable liability).
• Damage to property in the insured's care, custody, or control.

Supplementary Payments

The CGL pays certain costs in addition to the limits of insurance — they do not erode the Each Occurrence or aggregate limits. These supplementary payments include:

• All defense costs and attorney fees (the insurer has the duty to defend).
• Up to $250 for bail bonds.
• The cost of appeal bonds and bonds to release attached property.
• Pre- and post-judgment interest.
• Up to $250 per day for the insured's lost earnings to attend trials/hearings.

The duty to defend ends once the insurer has paid out the applicable limit of insurance through judgments or settlements.

Who Is an Insured and Premium Auditing

Under Section II of the CGL, the named insured's status depends on its form of business: for a corporation, executive officers, directors, and stockholders are insureds for their corporate duties; partners and members are insureds in partnerships and LLCs. Employees are insureds for acts within the scope of employment (with key exceptions, such as injury to a co-worker). The CGL is typically an auditable policy: the premium is based on an exposure base such as gross sales or payroll, charged at a deposit premium and then adjusted by audit at the end of the policy period to reflect the insured's actual exposure.

This is why a growing business often owes additional premium at audit, while a contracting one may receive a return premium — a practical point candidates are expected to apply.