10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The CGL Form and Coverage A

The Commercial General Liability (CGL) policy is the cornerstone of most business liability programs. The standard form is the ISO CG 00 01 Commercial General Liability Coverage Form (current widely tested edition CG 00 01 04 13). It is written on the occurrence trigger by default; a separate form, CG 00 02, supplies the claims-made trigger. The form is organized into five Sections: Section I (Coverages A, B, and C), Section II (Who Is an Insured), Section III (Limits of Insurance), Section IV (Conditions), and Section V (Definitions).

Coverage A pays sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD) to which the insurance applies. The insurer also has the right and duty to defend any suit seeking those damages, even if the suit is groundless, false, or fraudulent. The duty to defend is broader than the duty to indemnify, and defense costs are paid in addition to the limits of insurance (they do not erode the policy limit), but the duty to defend ends when the applicable limit has been exhausted by payment of judgments or settlements.

The Coverage Trigger

Coverage A applies only if the BI or PD is caused by an occurrence that takes place in the coverage territory, and the BI or PD occurs during the policy period. An occurrence is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." This definition is critical: it means liability arising from a true accident is covered, but expected or intended injury (from the standpoint of the insured) is excluded under Exclusion a.

Coverage A Definitions That Drive Exam Questions

• Bodily injury - bodily injury, sickness, or disease sustained by a person, including death resulting at any time.
• Property damage - physical injury to tangible property (including resulting loss of use) OR loss of use of tangible property that is not physically injured. Electronic data is not tangible property.
• Coverage territory - the U.S., its territories, Puerto Rico, and Canada; plus international waters/airspace during travel between those places; plus worldwide for products made or sold in the U.S. and for the activities of a person away from home for a short time on the insured's business.

Key Coverage A Exclusions

The following exclusions appear repeatedly on exams. Memorize the concept, not just the letter.

Worked Example - Defense Outside Limits

A contractor carries a CGL with a $1,000,000 Each Occurrence Limit. A bodily injury suit is settled for $700,000, and the insurer spends $250,000 on defense (attorney fees, expert witnesses, court costs). Because defense is paid in addition to the limit, the insurer pays the full $700,000 indemnity plus $250,000 defense = $950,000 total, and the Each Occurrence Limit is reduced to $300,000 remaining (only the $700,000 indemnity erodes it). Contrast this with auto policies, where defense is also typically outside limits, but professional liability often pays defense within limits.

Coverage A's Insuring Agreement and "Occurrence"

CGL Coverage A pays sums the insured becomes legally obligated to pay as damages for bodily injury or property damage caused by an "occurrence" (an accident, including continuous or repeated exposure to substantially the same harmful conditions) that takes place in the coverage territory during the policy period. The insurer also has the duty to defend any suit seeking those damages, even if groundless, false, or fraudulent — a duty broader than the duty to indemnify and one that ends only when the limit is exhausted by payment of judgments or settlements.

The Business-Risk Exclusions Behind Coverage A

Coverage A is not a performance guarantee.

The business-risk exclusions remove claims that are really the cost of doing business: expected/intended injury, contractual liability (except insured contracts), liquor liability (for those in the business), workers' compensation/employer's liability, pollution, aircraft/auto/watercraft, damage to your own product/your work/impaired property, and recall ("sistership").

The exam favorite: damage to your work by a subcontractor can be covered back in (the products-completed operations subcontractor exception), but damage to your product itself remains excluded. Defense costs are paid in addition to the limit; indemnity erodes the aggregate.

Trap: Occurrence vs. Claims-Made

Do not confuse the trigger types. The occurrence form (CG 00 01) responds to injury that happens during the policy period, no matter when the claim is reported - even years later. The claims-made form (CG 00 02) responds to claims first made during the policy period (subject to the retroactive date and any extended reporting period / tail). A common exam trap pairs a late-reported but in-period injury with the occurrence form: it IS covered, because the trigger is when the harm occurred, not when reported.