10.1 CGL Coverage A: Bodily Injury and Property Damage Liability
Key Takeaways
- Coverage A pays sums the insured becomes legally obligated to pay as damages for bodily injury or property damage caused by an occurrence, plus the duty to defend.
- An occurrence is an accident, including continuous or repeated exposure to substantially the same harmful conditions.
- The occurrence form covers injury during the policy period; the claims-made form covers claims first made during the period, subject to a retroactive date.
- The Each Occurrence Limit caps any single loss; the General Aggregate Limit caps total Coverage A and B payments for the policy term.
- Common exclusions include expected/intended injury, contractual liability, workers compensation, pollution, and the insured's own work or product.
What Coverage A Promises
The Commercial General Liability (CGL) policy is written on standardized Insurance Services Office (ISO) forms, most commonly the CG 00 01 occurrence form and the CG 00 02 claims-made form. The current widely used edition is CG 00 01 04 13. Coverage A is the heart of the policy.
Under Coverage A, the insurer pays sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD). The insurer also has the duty to defend any suit seeking those damages, even a groundless one.
Defining BI, PD, and Occurrence
Bodily injury means physical injury, sickness, or disease, including resulting death. Property damage means physical injury to tangible property (including loss of use) or loss of use of property not physically injured.
The trigger is an occurrence, defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The injury or damage must take place in the coverage territory and must not be expected or intended by the insured.
Occurrence Form vs. Claims-Made Form
The distinction is a heavily tested exam trap.
| Feature | Occurrence form (CG 00 01) | Claims-made form (CG 00 02) |
|---|---|---|
| Trigger | Injury happens during policy period | Claim first made during policy period |
| Retroactive date | Not used | Yes; bars injury before that date |
| Late-reported claims | Covered if injury was in-period | Need ERP/tail or extended reporting |
The retroactive date on a claims-made form excludes any injury occurring before it. A claims-made and reported approach also requires the claim to be reported during the period or an extension.
Extended Reporting Periods
When a claims-made policy ends, gaps can occur. The Basic Extended Reporting Period (ERP) is automatic and free, giving a short window (commonly 60 days to report, and a 5-year tail for occurrences already reported). The Supplemental ERP is purchased by endorsement for an unlimited reporting tail. Buying tail coverage prevents a coverage gap when switching carriers or retiring the policy.
The Limits Structure
The CGL uses stacked limits that exam questions probe with arithmetic:
- Each Occurrence Limit - most paid for BI and PD from any one occurrence (combined with medical payments).
- General Aggregate Limit - most paid for all Coverage A, Coverage B, and medical payments combined, except products-completed operations.
- Products-Completed Operations Aggregate - a separate aggregate for that hazard.
When an aggregate is exhausted, the policy stops paying even if the occurrence limit would otherwise allow more.
Worked Limit Example
Assume limits of $1,000,000 each occurrence and a $2,000,000 general aggregate. Three separate covered occurrences produce judgments of $700,000, $900,000, and $800,000 = $2,400,000 total.
- Occurrence 1 pays $700,000 (under the $1M cap).
- Occurrence 2 pays $900,000 (under the cap); running total $1,600,000.
- Occurrence 3 is capped by the remaining aggregate: only $400,000 is left ($2M - $1.6M), so it pays $400,000 of the $800,000 claim. The insured absorbs $400,000.
Key Exclusions in Coverage A
Candidates must recognize that exclusions narrow the broad grant:
- Expected or intended injury (except reasonable force to protect persons/property).
- Contractual liability, except liability assumed in an insured contract.
- Workers compensation and employer's liability obligations.
- Pollution (with limited exceptions).
- Damage to your product, your work, or impaired property - the policy is liability insurance, not a performance warranty.
- Damage to property in the insured's care, custody, or control.
The business-risk exclusions explained
The "your product / your work / impaired property" exclusions are collectively the business-risk or faulty-workmanship exclusions, and they embody a core CGL principle: the policy covers damage your faulty work causes to other property or persons, not the cost to redo your own defective work. If a roofer installs a roof badly and it leaks, repairing the roof itself is the roofer's business risk (excluded), but the resulting water damage to the owner's furniture is covered third-party property damage.
The products-completed operations hazard and its separate aggregate exist precisely to handle injury and damage that surface after the work is finished and away from the insured's premises.
Coverage territory and the duty-to-defend distinction
The CGL coverage territory includes the U.S., its territories, Puerto Rico, and Canada, plus international coverage for products made or sold in the territory, the activities of a person away on business, and internet-based offenses - provided suit is brought within the territory. A key exam contrast: the insurer's duty to defend is broader than its duty to indemnify. The insurer must defend any suit that potentially falls within coverage, even a groundless, false, or fraudulent one, but it only pays (indemnifies) sums the insured is legally liable for that are actually covered.
A producer who can articulate "defend the potentially-covered suit, indemnify only the actually-covered loss" has a reliable answer to many CGL questions.
| Concept | Standard |
|---|---|
| Duty to defend | Triggered by any potentially covered allegation |
| Duty to indemnify | Only actually covered damages the insured is liable for |
| Defense cost treatment | Paid in addition to the limit (supplementary) |
| End of defense | When the applicable limit is exhausted |
A CGL has a $1,000,000 each-occurrence limit and a $2,000,000 general aggregate. The insured has already had Coverage A losses paid totaling $1,800,000 this term. A new covered occurrence results in a $600,000 judgment. How much does the insurer pay on this occurrence?
Which statement best distinguishes a claims-made CGL from an occurrence CGL?