CGL Limits of Insurance and Aggregates

How the CGL Limits Section Works

The ISO Commercial General Liability Coverage Form (CG 00 01, the standard occurrence form; the current widely tested edition is CG 00 01 04 13) sets out six distinct limits in its Section III - Limits of Insurance. Exam questions almost always test how these six limits interact, which coverages they cap, and how a single occurrence or a series of claims erodes them during the policy period.

The six limits are arranged as a structured hierarchy. Two annual aggregate limits sit at the top and act as the ceiling for everything below them. Beneath those sit the per-occurrence and per-person/per-offense limits that cap any single loss.

The Six Limits of Insurance

The Each Occurrence limit is the most a policy pays for the combined bodily injury and property damage arising out of one occurrence, no matter how many claimants or claims are involved.

How the Two Aggregates Cap Everything

The General Aggregate is the maximum the insurer will pay during the policy period for the total of: bodily injury and property damage (other than products-completed operations), personal and advertising injury, medical payments, and damage-to-premises claims. Once exhausted, no more is paid in those categories even if the Each Occurrence limit has not been reached on a later claim.

The Products-Completed Operations Aggregate is a wholly separate bucket. Bodily injury and property damage arising out of the insured's products or completed work draw down only this aggregate - they never erode the general aggregate. This separation is a classic exam trap: a products claim does not reduce the money available for premises/operations claims, and vice versa.

Worked Numeric Example - Aggregate Erosion

A contractor's CGL carries: General Aggregate $2,000,000; Products-Completed Aggregate $2,000,000; Each Occurrence $1,000,000.

• A slip-and-fall at the job site (premises/operations) is settled for $800,000 -> drawn from the general aggregate, leaving $1,200,000 general remaining.
• A second premises occurrence settles for $1,000,000 -> capped at the Each Occurrence limit; general aggregate now $200,000 remaining.
• A defective-product claim settles for $900,000 -> drawn from the products-completed aggregate (still $2,000,000 full), leaving $1,100,000 there; the depleted general aggregate is untouched.

Key takeaway: the products claim was paid in full even though the general aggregate was nearly gone, because the two buckets are independent.

Damage to Premises Rented to You and Medical Payments

The Damage to Premises Rented to You limit is a carve-back inside the fire-damage area of the policy: it covers property damage to premises (including contents during the lease) rented to or temporarily occupied by the insured, with a default of $300,000 per premises in CG 00 01 04 13. It applies only to the named insured's negligence as a tenant, not to the building owner's own losses.

Medical Payments (Coverage C) pays reasonable medical expenses, regardless of the insured's fault, for bodily injury caused by an accident on premises the insured owns or rents or because of the insured's operations - with a default of $5,000 per person. It is a goodwill, no-fault coverage that is subject to the General Aggregate. If a Med Pay claim later becomes a liability suit, amounts paid under Coverage C are credited against any Coverage A settlement so the insured is not paid twice.

Supplementary Payments and the "Outside the Limits" Rule

Costs the insurer pays under Section I - Supplementary Payments (defense costs, the cost of bonds, post-judgment interest, up to $250/day for the insured's lost earnings, all taxed court costs) are paid in addition to the limits of insurance. They do not erode the Each Occurrence or aggregate limits.

This "defense outside the limits" feature is standard in the occurrence CGL. Contrast it with many claims-made professional liability forms, where defense costs are inside (and therefore erode) the limit - a frequent comparison item on the exam.

The Duty to Defend Ends When Limits Are Exhausted

The insurer's duty to defend continues only until the applicable limit of insurance has been used up by the payment of judgments or settlements. Once the Each Occurrence limit or an aggregate is exhausted by paying damages, the insurer may withdraw and the insured bears defense going forward. Watch for exam items pairing a near-exhausted aggregate with ongoing litigation: defense stops when the limit is gone, even mid-case.