CGL Coverage A: Bodily Injury and Property Damage Liability

CGL Coverage A: Bodily Injury and Property Damage Liability

The Commercial General Liability (CGL) policy is built on the ISO CG 00 01 Coverage Form (the current widely-used edition is CG 00 01 04 13). It protects a business against third-party claims for bodily injury, property damage, and personal/advertising injury arising from the insured's premises, operations, products, and completed work. Most exam questions assume the occurrence form (CG 00 01) rather than the claims-made form (CG 00 02).

Coverage A is the heart of the policy: it pays sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which the insurance applies, and it gives the insurer the right and duty to defend.

Key insuring-agreement definitions

Memorize these defined terms; exam traps live in the wording:

• Bodily injury (BI): bodily injury, sickness, or disease, including death resulting from any of these. Note that the unendorsed CGL does NOT list mental anguish standing alone; many states require physical injury first.
• Property damage (PD): (1) physical injury to tangible property, including loss of use of that property; or (2) loss of use of tangible property that is not physically injured. Electronic data is NOT tangible property under CG 00 01 04 13.
• Occurrence: an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
• Coverage territory: the U.S. (including territories and possessions), Puerto Rico, and Canada, plus worldwide for products made/sold in the territory and for short business trips by the insured's personnel.

Coverage trigger: occurrence vs. claims-made

The occurrence trigger is the single most-tested concept. Coverage attaches when the injury or damage occurs during the policy period, regardless of when the claim is filed. A claims-made form (CG 00 02) instead triggers when the claim is first made during the policy period (or extended reporting period), and uses a retroactive date to cut off old occurrences.

Exception exam point: the basic Extended Reporting Period (ERP) on a claims-made form is automatic (typically 5 years for occurrences reported within 60 days, plus a 60-day mini-tail); the supplemental ERP ('tail') requires a written request within 60 days and an extra premium.

The CGL aggregate limit structure

The CGL declarations show several limits that interact. Candidates must know how a claim erodes each:

• Each Occurrence Limit - the most paid for the combined BI and PD from any one occurrence (e.g., $1,000,000).
• General Aggregate Limit - the most paid for the sum of Coverage A (other than products-completed operations), Coverage B, and Coverage C medical payments during the policy period (e.g., $2,000,000).
• Products-Completed Operations Aggregate - a SEPARATE aggregate (e.g., $2,000,000) for products and completed-work claims; these do NOT erode the general aggregate.
• Damage to Premises Rented to You - a sub-limit (default $100,000) for fire/lightning/explosion damage to rented premises.
• Medical Expense Limit - Coverage C sub-limit (default $5,000 per person).

Worked numeric: aggregate erosion

Assume Each Occurrence $1,000,000 / General Aggregate $2,000,000 / Products-Completed Ops Aggregate $2,000,000.

During the policy year the insured has:

• A premises slip-and-fall (Coverage A, non-products): $700,000
• An advertising-injury suit (Coverage B): $500,000
• A products-liability injury from a sold widget: $1,200,000

General aggregate used = $700,000 + $500,000 = $1,200,000, leaving $800,000. The $1,200,000 products claim is capped at the Each Occurrence $1,000,000 and draws against the separate products-completed ops aggregate ($2,000,000), so the full $1,000,000 is paid and the general aggregate is untouched by it. Total paid: $700,000 + $500,000 + $1,000,000 = $2,200,000 even though the general aggregate is only $2,000,000, because the products claim uses a different aggregate. This separation is a classic exam trap.

Key Coverage A exclusions to recognize

Coverage A is broad, but a dozen exclusions narrow it. The most-tested ones are:

• Expected or intended injury - injury the insured expected or intended (self-defense to protect persons or property is an exception).
• Contractual liability - liability assumed in a contract, except an 'insured contract' (lease, sidetrack agreement, easement, tort liability assumed in a contract).
• Pollution - the absolute/total pollution exclusion removes most pollution cleanup and BI/PD from dispersal of pollutants.
• Aircraft, auto, and watercraft - these need separate liability coverage; the CGL leaves a gap filled by commercial auto and aircraft/marine policies.
• Damage to your product / your work / impaired property - the 'business-risk' exclusions; the CGL is not a warranty on the quality of the insured's own product or workmanship.

These business-risk exclusions explain why faulty work to the insured's OWN project is generally not a covered occurrence.

Premium basis and the experience modification factor

CGL premium for many classes is developed on a rate per $1,000 of gross sales or per 1,000 square feet/payroll, depending on the classification. Larger insureds may be experience rated, where an experience modification factor (mod) adjusts manual premium based on the insured's actual loss history versus expected losses for the class.

Worked numeric: a contractor has a manual premium of $20,000 and an experience mod of 0.85 (better-than-average losses). Modified premium = $20,000 x 0.85 = $17,000, a $3,000 credit. A mod of 1.20 (worse losses) would instead produce $20,000 x 1.20 = $24,000, a debit. A mod of 1.00 is the class average. Mods reward loss control.