11.4 Commercial General Liability: Architecture, Coverage A and Coverage Triggers
Key Takeaways
- The Commercial General Liability form provides Coverage A for bodily injury and property damage, Coverage B for personal and advertising injury and Coverage C for medical payments, with defense paid in addition to the limits.
- Coverage A responds to bodily injury or property damage caused by an occurrence in the coverage territory during the policy period, and Florida holds the duty to defend broader than the duty to indemnify.
- The principal Coverage A exclusions are expected or intended injury, contractual liability outside an insured contract, liquor liability for those in the beverage business, workers’ compensation and employer’s liability, pollution, aircraft, auto and watercraft, and the business risk exclusions for the insured’s own product and work.
- An occurrence policy is triggered by injury occurring during the policy period, while a claims-made policy requires the injury to occur on or after the retroactive date and the claim to be first made and reported during the policy period or an extended reporting period.
- A basic extended reporting period is automatic and limited, while a supplemental extended reporting period must be requested in writing within 60 days of expiration and reinstates the aggregate limits for an additional premium.
Quick Answer: The standard Commercial General Liability (CGL) policy (ISO CG 00 01) provides three core coverages: Coverage A (Bodily Injury & Property Damage Liability), Coverage B (Personal & Advertising Injury Liability), and Coverage C (Medical Payments to others on a no-fault basis within 1 year). Under an Occurrence trigger, coverage is activated if the bodily injury or property damage occurs during the policy period; under a Claims-Made trigger, the loss must occur on or after the retroactive date and the claim must be first made and reported during the policy term or extended reporting period. Unlike insurance contracts that transfer risk between two parties, surety bonds are three-party guarantee agreements (Principal, Obligee, Surety) where the surety retains an absolute right of indemnification against the principal.
1. Commercial General Liability (CGL) Policy Architecture
The standard Commercial General Liability policy, developed by the Insurance Services Office (ISO), is the primary casualty coverage instrument protecting commercial businesses from third-party liability claims. The policy comprises three distinct coverage sections, supported by supplementary payments and policy limits.
CGL Coverage Architecture (ISO CG 00 01)
├── Coverage A: Bodily Injury & Property Damage (Occurrence or Claims-Made)
├── Coverage B: Personal & Advertising Injury (Defined intentional tort offenses)
├── Coverage C: Medical Payments (No-fault goodwill, incurred & reported within 1 yr)
└── Supplementary Payments (Defense costs paid outside policy limits)
Coverage A: Bodily Injury and Property Damage Liability
Under Coverage A, the insurer promises to pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" caused by an occurrence within the defined "coverage territory" during the policy period.
- Duty to Defend vs. Duty to Indemnify: The insurer has a legal duty to defend the insured against any civil suit seeking covered damages. Under Florida law, the duty to defend is broader than the duty to indemnify; defense is triggered if the factual allegations of the complaint arguably fall within coverage, even if groundless, false, or fraudulent.
- Defense Outside Limits: Defense costs and legal expenses are paid under Supplementary Payments in addition to (outside) the policy limits of liability, meaning legal defense fees do not erode the applicable aggregate or occurrence limits.
Essential Exclusions Under Coverage A
- Expected or Intended Injury: Intentional acts committed by the insured are excluded, unless reasonable force was used to protect persons or property.
- Contractual Liability: Liability assumed under contract is excluded, unless the agreement qualifies as an "insured contract" (e.g., lease of premises, sidetrack agreement, easement, elevator maintenance agreement, or an indemnity clause in a construction subcontract).
- Liquor Liability: Excludes liability arising out of causing or contributing to the intoxication of any person, but only if the insured is in the business of manufacturing, distributing, selling, or serving alcoholic beverages. Standard host liquor liability (such as an office holiday party) remains covered.
- Workers' Compensation & Employer's Liability: Any obligation under workers' comp, disability benefits, or unemployment compensation laws is excluded, as is employer liability for injury to an employee arising out of employment.
- Pollution: Broad exclusion barring coverage for the actual, alleged, or threatened discharge, dispersal, seepage, or escape of pollutants at or from the insured's premises or job sites.
- Aircraft, Auto, or Watercraft: Excludes ownership, maintenance, use, or entrustment of autos, aircraft, or watercraft (requiring commercial auto, aviation, or marine policies).
- Damage to Property (Business Risk Exclusions): Excludes damage to property owned, rented, or occupied by the insured, damage to "your product" arising out of the product itself, and damage to "your work" arising out of the completed operations, except if performed by a subcontractor on the insured's behalf.
2. Occurrence vs. Claims-Made Coverage Triggers
The fundamental operational distinction in commercial casualty insurance is the mechanism that activates coverage: the Occurrence Form (CG 00 01) versus the Claims-Made Form (CG 00 02).
| Feature | Occurrence Trigger (CG 00 01) | Claims-Made Trigger (CG 00 02) |
|---|---|---|
| Triggering Event | The date the bodily injury or property damage occurs | The date the claim is first made against the insured |
| Incident Timing | Must occur during the policy period | Must occur on or after the Retroactive Date |
| Reporting Timing | Can be reported months or years later ("long tail") | Must be reported during policy term or ERP |
| Retroactive Date | Not applicable | Critical declaration date that locks out past losses |
| Extended Reporting | Unnecessary (injury during term is permanently covered) | Essential (BERP or SERP needed when canceled) |
| Primary Use Cases | Standard premises, retail, manufacturing, general contracting | Environmental liability, medical malpractice, D&O, E&O |
Mechanics of the Claims-Made Form
To eliminate the financial risk of "long-tail" claims (claims filed years after an incident occurs, such as latent asbestos exposure or environmental contamination), the Claims-Made form enforces two simultaneous requirements:
- The injury or damage must occur on or after the Retroactive Date stated in the Declarations; and
- The claim must be first made against any insured and formally reported to the insurer during the active policy period or an applicable Extended Reporting Period.
The Retroactive Date
The Retroactive Date represents the earliest point in time from which an occurrence can trigger coverage. Any bodily injury or property damage that occurred prior to 12:01 AM on the retroactive date is strictly barred from coverage, even if the claim is served during the active policy period. Under insurance underwriting rules, advancing or eliminating a retroactive date requires written insured consent because it creates an uninsurable coverage gap.
Extended Reporting Periods (ERPs or "Tail Coverage")
When a claims-made policy is canceled, non-renewed, or replaced with an advanced retroactive date, an Extended Reporting Period (ERP) provides additional time to report claims resulting from occurrences that took place between the retroactive date and policy expiration:
- Basic Extended Reporting Period (BERP): Provided automatically at no additional premium. Includes a 60-day mini-tail for claims reported from unknown occurrences, and a 5-year midi-tail for claims resulting from occurrences that were formally reported to the insurer within 60 days of policy expiration.
- Supplemental Extended Reporting Period (SERP): An optional endorsement providing an unlimited reporting window ("maxi-tail"). The insured must request the SERP in writing within 60 days of policy expiration. The insurer may charge a one-time additional premium of up to 200% of the annual premium, but the SERP reinstates 100% of the policy's aggregate limits.
A commercial general contractor carries a Claims-Made Commercial General Liability policy with an effective policy term of January 1, 2025 to January 1, 2026, and a Retroactive Date of January 1, 2022. An accident causing severe property damage occurred on October 15, 2021. The damaged building owner formally files a lawsuit against the contractor on June 1, 2025. How will the insurer respond to this claim?
A restaurant's Commercial General Liability policy has a $1,000,000 each-occurrence limit. A guest sues for $400,000 after a slip and fall, and the insurer spends $250,000 defending the case before settling for $400,000. How much of the limit remains available for other occurrences in the policy period?