11.1 CGL Limits of Insurance and Aggregates

The Six-Limit Structure of the CGL

The Commercial General Liability (CGL) Declarations on ISO form CG 00 01 04 13 list six distinct Limits of Insurance. Knowing which claims erode which limit is the single most-tested numeric concept in commercial liability, so memorize this table cold.

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 involved.

Worked example

A warehouse fire injures three customers and damages a neighbor's adjoining building:

• BI claims: $400,000 + $350,000 + $200,000 = $950,000
• Neighbor PD: $300,000
• Total loss from one occurrence: $1,250,000

With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000 total. The extra $250,000 is the insured's exposure. Splitting one event into multiple claimants does not unlock more money - the occurrence is the cap.

Two Aggregates - Which Limit Does a Claim Erode?

The General Aggregate is the most the insurer pays in the policy year for premises-operations, Coverage B, and Coverage C combined. The Products-Completed Operations Aggregate is a separate pool for injuries from the insured's products or completed work. A product claim does not touch the General Aggregate and vice versa.

Why a separate PCOH aggregate? A product recall or a latent construction defect can generate catastrophic, clustered losses. Isolating those claims protects the General Aggregate the business needs for routine day-to-day premises claims.

Aggregate Erosion - A Full-Year Walk-Through

Assume standard limits ($1M occurrence / $2M General Aggregate / $2M PCOH). Track a manufacturer through one policy year:

1. Jan: Slip-and-fall pays $600,000 - General Aggregate remaining = $1,400,000.
2. Apr: Advertising-injury (Cov B) pays $500,000 - General Aggregate remaining = $900,000.
3. Aug: Defective-product injury pays $1,000,000 - hits the PCOH aggregate (remaining PCOH = $1,000,000); General Aggregate unchanged at $900,000.
4. Nov: Second slip-and-fall is $1,000,000, but only $900,000 of General Aggregate is left, so the insurer pays $900,000 and the General Aggregate is exhausted.

Key trap: once an aggregate is exhausted, the insurer pays nothing more in that category that year - even though each loss was within the per-occurrence limit. The aggregates reset at renewal.

Defense costs do NOT erode any limit. They are paid as Supplementary Payments outside the limits, so a $1M judgment plus $200K in attorney fees costs the insurer $1.2M against a $1M occurrence limit.

The Six CGL Limits

Memorize the CGL limit structure, which appears as a recall item. The General Aggregate caps total payments for most BI/PD plus personal & advertising injury in the policy year. The Products-Completed Operations Aggregate is a separate aggregate for products/completed-ops claims. Within those sit: the Each Occurrence limit (BI and PD per occurrence), the Personal & Advertising Injury limit (per person/organization), the Damage to Premises Rented to You (fire legal liability, commonly $100,000), and Medical Payments (commonly $5,000 per person).

How Aggregates Erode: Worked Example

A contractor has a $1,000,000 each-occurrence limit and a $2,000,000 general aggregate. Three unrelated covered claims settle at $800,000, $700,000, and $600,000 = $2,100,000. The policy pays the first two in full ($1,500,000) and only $500,000 of the third, because the general aggregate is exhausted at $2,000,000. The remaining $100,000 falls on the insured (or an umbrella). Products-completed-ops losses would draw on their own aggregate, not this one.

Damage to Premises Rented and Med Pay Nuances

Two sublimits round out the structure. Damage to Premises Rented to You (fire legal liability) covers the insured's liability for fire damage to rented premises (and short-term rentals up to 7 days for any covered cause), commonly $100,000 — a buy-back of the otherwise-excluded care/custody/control of rented space. Medical Payments (Coverage C), commonly $5,000 per person, pays without regard to fault for injuries to non-employees on the premises, functioning as goodwill coverage that can head off larger liability claims.