10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

CGL Coverage A: Bodily Injury and Property Damage Liability

The Commercial General Liability policy is built on the ISO CGL Coverage Form CG 00 01 (the most-tested edition on the exam is CG 00 01 04 13, the April 2013 occurrence form; the claims-made twin is CG 00 02). Coverage A is the heart of the policy: it promises to pay 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 any suit seeking those damages.

Two defined terms drive the exam. Bodily injury (BI) means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these. Property damage (PD) means (1) physical injury to tangible property, including resulting loss of use, or (2) loss of use of tangible property that is not physically injured. Electronic data is expressly not tangible property under the form.

The Insuring Trigger

Coverage A applies only if the BI or PD is caused by an occurrence and takes place in the coverage territory during the policy period. An occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The word "accident" is critical: intended or expected injury is excluded, which is why intentional acts and faulty-workmanship-only claims often fall outside Coverage A.

The form's most-tested time mechanism is the occurrence vs. claims-made distinction:

An occurrence policy follows the year of injury forever; a claims-made policy needs a Basic and/or Supplemental ERP when canceled to cover late-reported claims.

Limits of Insurance (Worked Example)

Coverage A losses erode two limits. The Each Occurrence Limit is the most paid for all BI and PD from any one occurrence. The General Aggregate Limit is the most paid for the sum of Coverage A (other than products-completed operations), Coverage B, and Coverage C medical payments during the policy year. A separate Products-Completed Operations Aggregate applies to that hazard.

Worked numeric: Limits are $1,000,000 each occurrence / $2,000,000 general aggregate. Three separate, unrelated occurrences in one year produce verdicts of $700,000, $900,000, and $800,000.

• Occurrence 1: $700,000 (under the $1M each-occurrence cap) - paid in full.
• Occurrence 2: $900,000 - paid in full. Running total $1,600,000.
• Occurrence 3: $800,000, but only $400,000 of the $2,000,000 general aggregate remains, so the insurer pays $400,000.

The aggregate is exhausted; the insured absorbs the remaining $400,000 even though no single occurrence exceeded the $1M limit. Trap: the each-occurrence limit and the aggregate are separate ceilings - a claim must clear both.

Products-Completed Operations and the Coverage Territory

Coverage A actually splits into two exposures that share the each-occurrence limit but draw on different aggregates. Premises and operations liability covers ongoing work and the insured's premises and erodes the General Aggregate. The products-completed operations hazard covers BI/PD arising away from premises after the insured's product has been sold or work is complete; these losses erode the separate Products-Completed Operations Aggregate, not the general aggregate.

The coverage territory is broad: the US, its territories, Canada, and international waters/airspace in transit between those places, plus worldwide coverage for products made/sold in the US and for the activities of a person away from home on business - provided the suit is brought in the coverage territory.

Coverage A Exclusions to Memorize

The exam loves the Coverage A exclusion list (a through q). The highest-yield exclusions to commit to memory are the intentional-act, contractual, employee-injury, pollution, and business-risk exclusions. Each one exists to push a predictable or non-fortuitous loss off the CGL and onto another policy or onto the insured.

The most-tested Coverage A exclusions:

• Expected or intended injury (a) - reaffirms the "accident" requirement; preserves coverage for reasonable use of force to protect persons or property.
• Contractual liability (b) - bars liability assumed in a contract, except an insured contract, which restores coverage for tort liability assumed in qualifying agreements (leases, sidetrack agreements, easements).
• Workers compensation (d) and Employer's liability (e) - injuries to employees in the course of employment belong on the WC/EL policy.
• Pollution (f) - the absolute pollution exclusion is a frequent trap.
• Damage to your product (k) / your work (l) - faulty workmanship to the insured's own product or completed work is a business risk, not an insurable fortuity.

The subcontractor exception to (l) - which restores coverage when the defective work was performed by a subcontractor - is heavily tested.

• Damage to impaired property (m) and recall of products (n) - the "sistership" exclusion bars the cost of withdrawing a defective product.

The Six-Limit Structure of the CGL

A heavily tested CGL feature is its stacked limit structure. The declarations show six figures: the General Aggregate, the Products-Completed Operations Aggregate (a separate aggregate so product claims do not erode premises/operations coverage), the Each Occurrence limit, the Personal and Advertising Injury limit (per person/organization, capped by the general aggregate), the Damage to Premises Rented to You limit (fire legal liability, often $300,000), and the Medical Payments limit (often $5,000 to $10,000 per person).

The Each Occurrence limit caps all bodily injury and property damage from one occurrence; payments erode the applicable aggregate. Once the general aggregate is exhausted by premises/operations claims, no further premises/operations coverage exists for the term, but the products-completed operations aggregate remains available because it is tracked separately. Understanding which claims erode which aggregate — and that defense costs are paid in addition to the limits — lets candidates work the multi-claim scenarios the exam favors.