11.1 CGL Limits of Insurance and Aggregates

The Six Limits of the CGL

The Commercial General Liability (CGL) Coverage Form is built on the ISO CG 00 01 occurrence form (the current edition in most states is CG 00 01 04 13). Its Section III - Limits of Insurance lists six distinct dollar limits. Understanding how each limit interacts - and which ones are eroded by the two aggregates - is among the most heavily tested topics on the national P&C exam.

The six limits are: General Aggregate, Products-Completed Operations Aggregate, Personal & Advertising Injury Limit, Each Occurrence Limit, Damage to Premises Rented to You Limit, and the Medical Expense Limit.

How the Aggregates Cap Everything

The Each Occurrence Limit is the most a policy pays for the sum of all bodily injury (BI) and property damage (PD) plus medical payments arising out of one occurrence. But every occurrence payment also draws down an annual aggregate - the ceiling for the entire policy period regardless of how many claims arise.

The critical exam point: there are two separate aggregates. The General Aggregate funds premises-operations BI/PD (Coverage A), all of Coverage B, and all of Coverage C. The Products-Completed Operations Aggregate is a completely independent pool funding only products and completed-operations claims. Exhausting one does not exhaust the other.

Worked Example - Multiple Occurrences vs. the Aggregate

A restaurant carries a CGL with a $1,000,000 Each Occurrence limit and a $2,000,000 General Aggregate. Three unrelated slip-and-fall incidents occur during the policy year:

• Occurrence 1: jury awards $900,000
• Occurrence 2: jury awards $800,000
• Occurrence 3: jury awards $600,000

Each award is below the $1M per-occurrence cap, so each would be fully payable in isolation. But the running total against the General Aggregate is what matters:

• After Occ. 1: $900,000 paid; $1,100,000 aggregate remaining
• After Occ. 2: $800,000 paid; $300,000 aggregate remaining
• Occurrence 3: demands $600,000 but only $300,000 of aggregate is left

The insurer pays $300,000 on the third claim. Total paid = $2,000,000. The insured personally absorbs the remaining $300,000. This is why insureds buy a commercial umbrella to sit above an exhausted CGL aggregate.

The Single-Occurrence Trap

A frequent trap reverses the math: many injuries from one event. A single warehouse explosion injures four customers, generating four suits totaling $1.4 million. Because all four injuries arise from one occurrence, the $1,000,000 Each Occurrence Limit caps the payout at $1,000,000 - not $1.4M, and the number of claimants is irrelevant. The insurer pays $1M and the aggregate is reduced by $1M.

Memory hook: "Per occurrence" counts EVENTS, not VICTIMS. "Aggregate" counts DOLLARS for the YEAR.

Damage to Premises Rented to You

This sub-limit (default $100,000) is a carve-back from the property-in-your-care exclusion. It covers damage by fire to premises the insured rents, and damage to a premises occupied for 7 days or fewer for any covered cause. It applies per premises and is paid from - and counts against - the Each Occurrence Limit and the General Aggregate.

Defense Costs and Supplementary Payments

A defining feature of liability forms tested heavily on the exam: the CGL pays defense costs in addition to the limits of insurance. Legal defense, investigation, and the supplementary payments listed in the form do not erode the Each Occurrence limit or the aggregates - they are paid on top. The duty to defend continues until the applicable limit is exhausted by payment of judgments or settlements; once the insurer has paid out the full limit, its duty to defend ends.

Supplementary payments paid on top of the limits include: all expenses the insurer incurs; up to $250 for bail bonds; the cost of bonds to release attachments; reasonable expenses incurred by the insured at the insurer's request (up to $250 per day for lost earnings); court costs taxed against the insured; and pre-judgment and post-judgment interest. Because defense is outside the limits, a small per-occurrence limit can still come with significant defense value - a key selling point versus a defense-within-limits form.

Reinstatement and Selecting Limits

Unlike property policies, the CGL aggregate does not automatically reinstate after a loss during the policy term. The producer must counsel clients on adequate aggregate selection up front. A business with high claim frequency (a restaurant, a retailer) needs a larger General Aggregate, while a manufacturer with severe but infrequent product exposures needs a robust Products-Completed Operations Aggregate and an umbrella above both.