11.1 CGL Limits of Insurance and Aggregates

How the CGL Limits Section Works

The ISO Commercial General Liability Coverage Form (CG 00 01, current 04 13 edition) is the backbone of the national exam's liability section. Unlike a homeowners or auto policy that lists a single liability number, the CGL stacks six separate limits in its Section III - Limits of Insurance. Memorizing how these limits relate to each other - and how they refill (or do not refill) - is the single most tested concept in this chapter.

The declarations page shows six dollar amounts. Each Loss applies against one or more of them. The structure is deliberately layered so that a single catastrophic claim cannot exhaust protection for unrelated future claims within the policy term.

The Six CGL Limits

The limits cascade from the broadest container (General Aggregate) down to the per-claim caps. Learn this table cold - the exam tests the relationships, not just the definitions.

Key trap: Personal & Advertising Injury and the Each Occurrence limit both erode the General Aggregate, but Products-Completed Operations losses erode a completely separate aggregate. A new candidate who lumps them together gets the worked problems wrong.

Two Aggregates, Not One

The General Aggregate caps the total the insurer pays for: premises/operations bodily injury and property damage, personal and advertising injury, and medical payments combined. It does not cap products and completed-operations claims - those run against the Products-Completed Operations Aggregate, which is a stand-alone bucket of money.

This is why a manufacturer can blow through its entire products aggregate on a defective-widget recall and still have a full General Aggregate available for a slip-and-fall in its showroom. The exam loves to give you a fact pattern that mixes a premises injury with a product injury and asks which aggregate each erodes.

Worked Example - Aggregate Erosion

Assume a contractor's CG 00 01 declarations show:

• General Aggregate: $2,000,000
• Products-Completed Operations Aggregate: $2,000,000
• Each Occurrence: $1,000,000
• Damage to Premises Rented to You: $300,000

During the year these losses occur:

1. A visitor trips at the job-site office: $400,000 BI (premises/operations).
2. A second visitor is injured the same week, separate event: $700,000 BI.
3. A completed deck collapses a month after the job ends: $900,000 (completed operations).

Each Occurrence test: Each of the three is its own occurrence, and none exceeds the $1,000,000 per-occurrence cap, so each is paid in full subject to aggregates.

General Aggregate erosion: Losses 1 and 2 are premises/operations. $400,000 + $700,000 = $1,100,000 charged against the $2,000,000 General Aggregate, leaving $900,000.

Products-Completed Operations Aggregate erosion: Loss 3 ($900,000) hits the separate completed-operations aggregate, leaving $1,100,000 there. It does not touch the General Aggregate. A candidate who subtracts all three from one $2,000,000 bucket would wrongly report $0 remaining.

The Damage to Premises Rented Limit and the Sublimit Trap

The Damage to Premises Rented to You limit (formerly "Fire Legal Liability") provides a sublimit - $300,000 by default - for damage to a premises the named insured rents, but only for fire and a short list of perils when the insured occupies the space short-term. It is not additional money on top of the Each Occurrence limit; it is the most the insurer pays for that exposure, and it still erodes the General Aggregate.

Medical Payments works the same way: the $5,000-per-person default pays small, no-fault medical bills to keep minor injuries from becoming liability suits, and those payments also reduce the General Aggregate.

How the Limits Interact in a Single Claim

When one occurrence triggers several coverages at once, apply the caps in order. First test the loss against the Each Occurrence limit - that is the ceiling for the combined bodily injury and property damage from that single event. Then test the running total against the applicable aggregate. A loss can be reduced by the per-occurrence cap, by the aggregate, or by both, whichever bites first.

The exam often phrases this as a two-step subtraction. If a single occurrence produces $1,300,000 in covered BI but the Each Occurrence limit is $1,000,000, the insurer pays $1,000,000 and that $1,000,000 - not the full $1,300,000 - is what erodes the General Aggregate.

Defense Costs Are Outside the Limits

A defining feature tested heavily on the national exam: under the CGL, the insurer's duty to defend and the supplementary payments (defense costs, court costs, post-judgment interest, bail bonds up to $250, and reasonable expenses) are paid in addition to the limits of insurance - they do not erode the Each Occurrence or aggregate limits.

This contrasts sharply with many professional liability and claims-made forms, where defense costs are inside the limit (a "defense-within-limits" or "eroding" structure). On the exam, if a question asks whether legal defense reduces the policy limit under a standard occurrence CGL, the answer is no - defense is supplementary.