11.1 CGL Limits of Insurance and Aggregates

The Six Limits on the CGL Declarations

The Commercial General Liability (CGL) policy, Insurance Services Office (ISO) form CG 00 01, lists six distinct limits of insurance on the Declarations page. Memorizing how each limit interacts with the two annual aggregates is one of the most heavily tested points on the casualty portion of the exam.

The two aggregate limits are annual ceilings: they reset at each policy renewal and represent the most the insurer pays over the entire policy term for that category of loss.

How the Each Occurrence Limit Works

The Each Occurrence limit is the most the insurer will pay for all bodily injury (BI) and property damage (PD) arising from a single occurrence, regardless of:

• the number of persons injured,
• the number of claims or suits brought, or
• the number of insureds protected by the policy.

Worked example: A single explosion injures three people and damages a neighbor's building. Damages total $400,000 BI plus $750,000 PD = $1,150,000 from one occurrence. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000; the insured absorbs the remaining $150,000. The number of claimants is irrelevant — the occurrence limit is the single cap.

Which Aggregate Does the Claim Erode?

This distinction is the single most useful exam tool in the section. Premises-operations losses (slips, falls, ongoing work) plus all Coverage B and C losses erode the General Aggregate. Products and completed-operations losses erode the separate PCO Aggregate.

Why a separate PCO Aggregate? Product recalls and latent defects can generate catastrophic, clustered losses. Isolating them in their own pool protects the General Aggregate that a business relies on for everyday premises claims.

Exam trap: When the General Aggregate is exhausted, the policy stops paying premises-operations claims even though the Each Occurrence limit is technically still available. The aggregate is the true ceiling.

Defense Costs and Supplementary Payments

Under the CGL, defense costs are paid in addition to the limits as part of the Supplementary Payments provision. They do not erode the Each Occurrence limit or either aggregate. This contrasts with many professional liability and claims-made forms, where defense is inside the limits ("defense within limits" or "eroding" / "wasting" limits).

Supplementary payments also include:

• all costs taxed against the insured in a defended suit,
• pre-judgment and post-judgment interest,
• the cost of bail bonds (up to a stated amount) and appeal bonds, and
• reasonable expenses the insured incurs assisting the defense (with a daily loss-of-earnings allowance).

Exam trap: A question may show $1,000,000 in damages plus $120,000 in defense costs. On the CGL the insurer pays both — the limit is not reduced by defense. Do not subtract defense from the occurrence limit.

Damage to Premises Rented to You and Medical Expense

Two of the six limits are narrow but frequently tested. The Damage to Premises Rented to You limit (often $300,000, sometimes shown as $100,000 on older forms) covers fire damage to premises the insured rents, and damage from any cause to a premises rented for seven or fewer consecutive days. It is a carve-back to the property and contractual liability exclusions.

The Medical Expense limit (Coverage C), typically $5,000 per person, pays reasonable medical costs regardless of fault when someone is injured on the insured's premises or by its operations. Because it is no-fault, it is a goodwill payment that can head off a larger liability claim. It does not apply to the insured, employees, or tenants.

Exam trap: A Medical Expense payment still erodes the General Aggregate, even though it requires no proof of negligence.

Stacking Limits and the Annual Reset

Candidates often miss that the Each Occurrence limit and the aggregates work together, not as alternatives. Within a single occurrence, the occurrence limit caps the payout. Across the policy year, the relevant aggregate caps the total.

Consider a manufacturer with a $1,000,000 occurrence limit, a $2,000,000 General Aggregate, and a $2,000,000 PCO Aggregate:

• Two large premises claims of $1,000,000 each exhaust the General Aggregate for the year; a third premises claim is unpaid.
• A separate $1,500,000 product-liability claim still has the full PCO Aggregate available, because product claims draw from a different pool.

This separation is precisely why the CGL splits products and completed operations into their own aggregate. At renewal, both aggregates reset to their full amounts. Knowing which pool a loss draws from, and that the pools refill annually, lets you answer most multi-claim limit questions correctly.