10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The CGL Form and Coverage A

The Commercial General Liability (CGL) policy is built on the ISO form CG 00 01, the Commercial General Liability Coverage Form. The current widely tested edition is CG 00 01 04 13 (April 2013). The CGL is the workhorse of business liability insurance, covering a commercial insured against third-party claims for bodily injury, property damage, and personal and advertising injury arising out of premises, operations, products, and completed work.

The CGL is divided into three insuring agreements: Coverage A (Bodily Injury and Property Damage Liability), Coverage B (Personal and Advertising Injury Liability), and Coverage C (Medical Payments). Coverage A is the heart of the form and the most heavily tested.

The Coverage A insuring agreement

Under Coverage A, the insurer agrees to pay sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which the insurance applies. Two threshold conditions must be met before coverage attaches:

• The injury or damage must be caused by an occurrence, and
• The occurrence must take 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 accident requirement is critical: expected or intended injury is excluded. The insurer also has the right and duty to defend the insured against any suit seeking covered damages, and defense costs are paid in addition to the limits of insurance (they do not erode the limit).

Key defined terms

• Bodily injury (BI): bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
• Property damage (PD): physical injury to tangible property, including loss of use of that property; OR loss of use of tangible property that is not physically injured. Loss of use is treated as occurring at the time of the occurrence that caused it.
• Coverage territory: the United States (including territories and possessions), Puerto Rico, and Canada; plus international waters or airspace during travel between these places; and worldwide for products made/sold in the territory and for the activities of a person away on short trips, provided suit is brought in the coverage territory.

A frequent exam trap: tangible property does not include electronic data, so corruption of data is generally not "property damage" under the unendorsed CGL.

Occurrence vs. claims-made triggers

The standard CG 00 01 is an occurrence form: coverage is triggered by injury or damage that occurs during the policy period, regardless of when the claim is reported. ISO also publishes a claims-made version, CG 00 02, which triggers coverage based on when the claim is first made, subject to a retroactive date and an extended reporting period (ERP) option.

Claims-made policies use a retroactive date to exclude occurrences before that date and offer basic (automatic, e.g., 60 days) and supplemental (purchased, often unlimited time) extended reporting periods.

The CGL limits structure

The CGL declarations list six limits that interact in a specific way. Understanding how they stack is essential exam content:

• General Aggregate Limit — the most the insurer pays for the sum of: Coverage A (other than products-completed operations), Coverage B, and Coverage C, during the policy period.
• Products-Completed Operations Aggregate Limit — a separate aggregate for products and completed-work claims under Coverage A.
• Personal and Advertising Injury Limit — most paid for any one person/organization under Coverage B.
• Each Occurrence Limit — most paid for the sum of Coverage A damages and Coverage C medical expenses arising from any one occurrence.
• Damage to Premises Rented to You Limit — default $100,000 any one premises.
• Medical Expense Limit — Coverage C, default $5,000 any one person.

Worked example: how the aggregates cap losses

Assume: General Aggregate $2,000,000; Products-Completed Operations Aggregate $2,000,000; Each Occurrence $1,000,000.

• A customer slip-and-fall (premises) results in a $1,200,000 judgment. The Each Occurrence limit caps the payment at $1,000,000, and that $1,000,000 reduces the General Aggregate to $1,000,000.
• Later, a defective product the insured sold injures a buyer for $1,500,000. This is a products-completed operations claim, so it is paid up to the Each Occurrence limit ($1,000,000) and erodes the Products-Completed Operations Aggregate, NOT the general aggregate.

Trap: products/completed-operations losses never reduce the general aggregate, and premises/operations losses never reduce the products aggregate. They run on separate tracks.

Coverage A exclusions you must know

Coverage A contains a long exclusion list. The most heavily tested exclusions are:

• Expected or intended injury (preserves the accident requirement, except reasonable force to protect persons/property).
• Contractual liability (except liability the insured would have absent the contract, and liability assumed in an insured contract).
• Liquor liability (only for insureds in the business of selling/serving alcohol).
• Workers compensation and employer's liability (overlap with WC and the EL exclusion).
• Pollution, auto/aircraft/watercraft, mobile equipment used in racing, and war.
• The "your work," "your product," and "impaired property" business-risk exclusions (damage to the insured's own work/product is a business risk, not insurable liability).

The insured contract definition is key: it includes leases of premises, sidetrack agreements, easements, obligations to indemnify a municipality, elevator maintenance agreements, and the tort liability of another assumed in a contract.