10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The Core Promise of Coverage A

Coverage A of the Commercial General Liability (CGL) policy is the insuring agreement most heavily tested on the national exam. It promises to pay sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD) to which the insurance applies, and it gives the insurer the right and duty to defend any suit seeking those damages.

The standard form is ISO CG 00 01 (occurrence trigger); the edition tested is CG 00 01 04 13. The claims-made counterpart is CG 00 02. Coverage A is third-party coverage: the claimant is always someone other than the named insured. Damage to the insured's own property belongs on a commercial property policy, never the CGL.

Bodily Injury vs. Property Damage Defined

The form defines each insured peril precisely, and the exam tests the wording:

• Bodily injury means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time. Note it does NOT, in the unendorsed form, include mental anguish standing alone — that lives in Coverage B.
• Property damage means (1) physical injury to tangible property, including resulting loss of use, OR (2) loss of use of tangible property that is not physically injured.

A classic trap: electronic data is not tangible property, so corrupting a customer's data is not PD under Coverage A. Another trap: impaired property (property that can be restored by repair, replacement, or removal of the insured's faulty work or product) is generally excluded under the business-risk exclusions.

The Occurrence Trigger and "Occurrence" Definition

Coverage A on CG 00 01 responds when BI or PD is caused by an occurrence that takes 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 single most-tested distinction in this section is the coverage trigger:

Because "accident" is required, expected or intended injury is excluded — a key business-risk exclusion under Coverage A.

Key Coverage A Exclusions (the "Business Risk" Group)

The exam expects you to recognize the standard exclusions, which shift uninsurable business risk back to the insured:

1. Expected or intended injury (except reasonable force to protect persons/property).
2. Contractual liability — except liability the insured would have without the contract, or liability assumed in an insured contract.
3. Liquor liability — applies to those in the business of serving alcohol (host liquor is covered).
4. Workers compensation / employer's liability — employee injury belongs on WC.
5. Pollution — the broad absolute pollution exclusion.
6. Auto/aircraft/watercraft — owned/operated; belongs on commercial auto.
7. Damage to your product / your work / impaired property — the product itself is a business risk.
8. Recall of products ("sistership") — cost of withdrawal is excluded.

Mnemonic for the product/work exclusions: a CGL pays when your faulty work injures someone else or damages their property, but not to fix your own defective product or work.

Worked Example: Aggregate Erosion

Assume a CGL with a $1,000,000 Each Occurrence limit and a $2,000,000 General Aggregate. Three separate Coverage A occurrences during the year settle for $700,000, $900,000, and $600,000.

• Occurrence 1 pays $700,000 (within the per-occurrence cap). Aggregate remaining: $1,300,000.
• Occurrence 2 would be $900,000 (within the per-occurrence cap). Aggregate remaining: $400,000.
• Occurrence 3 claims $600,000 but only $400,000 of aggregate remains, so the insurer pays $400,000 and the insured absorbs $200,000.

Total paid by insurer: $2,000,000 — the general aggregate is the absolute ceiling for Coverage A and B losses (other than products-completed operations, which has its own aggregate). The per-occurrence limit caps any single loss; the aggregate caps the policy term.

The Insuring Agreement and the Business-Risk Exclusions

Coverage A's insuring agreement promises to pay sums the insured becomes legally obligated to pay as damages for bodily injury or property damage caused by an occurrence that takes place in the coverage territory during the policy period, and to defend the insured. The occurrence requirement is why deliberately caused harm is excluded: an occurrence is an accident, including continuous or repeated exposure to substantially the same harmful conditions, not an intentional act.

The most heavily tested exclusions are the business-risk group, which removes liability for the quality of the insured's own work or product because that is a business cost, not an insurable accident.

The "your product" exclusion bars coverage for property damage to the insured's own product, the "your work" exclusion bars damage to the insured's completed work, and the "impaired property" and "recall (sistership)" exclusions bar the cost to repair, replace, or recall a defective product. The principle: the CGL covers damage the product or work causes to other property or persons, not the cost to fix the faulty product or work itself.

Exceptions narrow these exclusions. Damage to the insured's work arising out of a subcontractor's work is covered (the subcontractor exception), which is vital for general contractors. Fire damage to premises rented to the insured is restored by the Damage to Premises Rented to You carve-back up to its sublimit. Knowing where an exclusion stops and an exception begins is the recurring Coverage A skill.

Worked scenario: a contractor installs a defective water heater that leaks and ruins a customer's hardwood floor. The floor damage is covered property damage caused by the insured's work, but the cost to replace the defective heater itself is barred by the "your product/your work" exclusion. If a subcontractor had installed the heater, the resulting damage to the contractor's broader work would fall under the subcontractor exception. Separating covered third-party damage from the excluded cost to fix the insured's own work is the core business-risk question.

Key Takeaways

Coverage A pays sums the insured is legally obligated to pay as damages for bodily injury or property damage from an occurrence (an accident) in the coverage territory, and provides defense. The business-risk exclusions (your product, your work, impaired property, recall) bar the cost to fix the insured's own defective product or work, though damage that work causes to other property is covered and a subcontractor exception applies. The per-occurrence limit caps a single loss and the general aggregate caps the term.