11.1 CGL Limits of Insurance and Aggregates
Key Takeaways
- The Commercial General Liability (CGL) Declarations show six limits: General Aggregate, Products-Completed Operations Aggregate, Personal and Advertising Injury, Each Occurrence, Damage to Premises Rented to You, and Medical Expense.
- The Each Occurrence limit caps all bodily injury and property damage from one occurrence regardless of the number of claimants, claims, suits, or insureds.
- Premises-operations and Coverage B/C losses erode the General Aggregate, while products and completed-operations losses erode the separate Products-Completed Operations Aggregate.
- Supplementary payments such as defense costs are paid in addition to the limits and do not reduce any aggregate.
- Per-Project (CG 25 03) and Per-Location (CG 25 04) endorsements multiply aggregate protection so one project or site cannot drain coverage for all the others.
The Six Limits of the CGL
The Commercial General Liability (CGL) Declarations, written on Insurance Services Office (ISO) form CG 00 01, list six distinct limits of insurance. Understanding how each interacts with the two aggregates is one of the most frequently tested points in the commercial section.
| Limit | Typical amount | What it caps |
|---|---|---|
| General Aggregate | $2,000,000 | Total for premises-operations (Coverage A), B, and C |
| Products-Completed Operations Aggregate | $2,000,000 | Total for products and completed-operations losses |
| Personal and Advertising Injury | $1,000,000 | Per person or organization (Coverage B) |
| Each Occurrence | $1,000,000 | All BI and PD from one occurrence (Coverage A) |
| Damage to Premises Rented to You | $100,000 | Fire or short-term-rental damage to rented space |
| Medical Expense | $5,000 | Per person (Coverage C) |
How the Each Occurrence Limit Works
The Each Occurrence limit is the most the insurer pays for all bodily injury (BI) and property damage (PD) from a single occurrence, regardless of the number of persons injured, the number of claims or suits, or the number of insureds.
Worked example: One kitchen explosion causes $400,000 of customer bodily injury and $700,000 of damage to a neighboring tenant's property, totaling $1,100,000 from one occurrence. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000; the remaining $100,000 is the insured's uninsured exposure because the occurrence limit is the firm cap for that event.
Which Aggregate Does a Claim Erode?
This allocation table is the single most useful exam tool in the section.
| Claim type | Each Occurrence? | General Aggregate? | Products-Completed Operations? |
|---|---|---|---|
| Slip-and-fall on premises | Yes | Yes | No |
| Defective-product injury | Yes | No | Yes |
| Completed-operations injury | Yes | No | Yes |
| Libel or slander (Coverage B) | P&AI limit | Yes | No |
| Medical payments (Coverage C) | $5,000/person | Yes | No |
| Fire to rented premises | Separate $100K | No | No |
Why two pools? Product recalls and latent defects can generate catastrophic, delayed losses. Isolating them in a separate Products-Completed Operations Hazard (PCOH) aggregate protects the premises-operations limits a business needs for everyday claims.
Aggregates Can Exhaust Mid-Term
The General Aggregate is the total the insurer pays for all eligible claims during the policy period, and it can be used up before the policy expires. Once exhausted, no further premises-operations, Coverage B, or Coverage C claims are paid until renewal, even though the policy remains in force.
Worked example: A retailer with a $2,000,000 General Aggregate suffers three covered slip-and-fall judgments of $800,000 each in one year, totaling $2,400,000. The insurer pays only $2,000,000; the final $400,000 is uninsured. Meanwhile the PCOH aggregate is untouched, so a separate product claim that year could still be paid up to its own $2,000,000.
Supplementary Payments and Aggregate Endorsements
Supplementary payments such as defense costs, a bail bond up to $250, prejudgment interest, and up to $250/day of the insured's lost earnings are paid in addition to the limits and do not erode any aggregate. This is a frequent exam trap: candidates wrongly assume legal defense costs reduce the Each Occurrence limit.
Contractors and multi-site firms often modify the single shared aggregate:
- CG 25 03 - Per Project Aggregate: a separate General Aggregate applies to each construction project.
- CG 25 04 - Per Location Aggregate: a separate General Aggregate applies to each described premises.
These endorsements multiply aggregate protection so one bad project or location cannot drain coverage for the rest.
A business has a $1,000,000 Each Occurrence limit and a $2,000,000 General Aggregate. A single warehouse fire produces $1,300,000 of third-party bodily injury and property damage. How much will the CGL pay for this loss?
Which CGL claim would erode the Products-Completed Operations Aggregate rather than the General Aggregate?
Reading the Declarations and Common Limit Packages
On the exam you will be expected to read a Declarations page and identify which limit applies to a given loss. Insurers sell the six limits in standard packages, and the relationship between the Each Occurrence limit and the General Aggregate is usually a fixed ratio.
| Package | Each Occurrence | General Aggregate | PCOH Aggregate |
|---|---|---|---|
| Minimum | $300,000 | $600,000 | $600,000 |
| Standard | $1,000,000 | $2,000,000 | $2,000,000 |
| Enhanced | $2,000,000 | $4,000,000 | $4,000,000 |
| High | $5,000,000 | $10,000,000 | $10,000,000 |
Notice that the General Aggregate is typically double the Each Occurrence limit. A candidate who sees a $1,000,000 occurrence limit should expect a $2,000,000 aggregate unless the Declarations state otherwise.
How Premium Audit Affects Limits and Exposure
The CGL is an auditable policy. At inception the insurer charges a deposit premium based on estimated exposures such as gross sales, payroll, square footage, or admissions. After the policy period the insurer performs a premium audit on the insured's actual records and computes the final premium.
Worked example: A contractor estimated $500,000 of annual payroll and paid a deposit premium accordingly. At audit, actual payroll was $650,000. Because the rate is, say, $4 per $100 of payroll, the final earned premium is $650,000 / 100 x $4 = $26,000 versus a $20,000 deposit, so the insured owes an additional $6,000. If audited payroll had come in lower, the insured would receive a return premium. The limits of insurance are unchanged by audit; only the premium adjusts to match the true exposure.
The Damage to Premises Rented to You Limit
The Damage to Premises Rented to You limit (default $100,000) is a narrow grant that fills a gap created by the property-damage exclusions. It covers damage by fire to premises the insured rents, plus damage to a space the insured occupies for seven days or fewer caused by any covered peril. Without this limit, a tenant whose negligence caused a fire to the rented space would have no CGL coverage because the care-custody-control exclusion would apply.
Worked example: A tenant's faulty wiring sparks a fire that causes $140,000 of damage to the leased storefront. With a $100,000 Damage to Premises Rented to You limit, the CGL pays $100,000; the remaining $40,000 is uninsured under the CGL. A higher rented-premises limit can be scheduled when leases demand it.