11.1 CGL Limits of Insurance and Aggregates

CGL Limits of Insurance and Aggregates

The ISO Commercial General Liability Coverage Form (CG 00 01) is the backbone of business liability insurance, and exam questions hammer on how its six interlocking limits respond. The current edition most candidates will see referenced is CG 00 01 04 13, though the 12 04 and 12 07 editions still appear. The limits are not stacked freely; they sit in a hierarchy where smaller per-occurrence and per-person caps feed into larger annual aggregates.

The Six Limits in the Declarations

The CGL Declarations list six dollar limits. Memorize their relationships because exam math depends on it:

How the General Aggregate Limits Coverage

The Each Occurrence Limit is the maximum for any single occurrence, but the General Aggregate is the annual ceiling that the sum of all occurrences (plus Coverage B and Med Pay) cannot exceed. Once the General Aggregate is exhausted, the insurer pays nothing more for the remainder of the policy period, even if the per-occurrence limit on a new claim is technically available. This is the single most tested CGL concept.

The Products-Completed Operations Aggregate is separate from the General Aggregate. Erosion of one does not erode the other, so a business can exhaust its products aggregate yet still have premises-and-operations coverage available under the General Aggregate.

Worked Numeric: Aggregate Erosion

Assume limits of $1,000,000 Each Occurrence / $2,000,000 General Aggregate. During the year:

• Slip-and-fall claim #1 (premises): pays $800,000
• Slip-and-fall claim #2 (premises): pays $1,000,000 (capped at Each Occurrence)
• Defective-product injury claim: pays $700,000

The two premises claims total $1,800,000 and erode the General Aggregate, leaving $200,000 of General Aggregate. The product claim, however, draws on the separate $2,000,000 Products-Completed Operations Aggregate, so it is paid in full at $700,000. A third premises claim that year could collect only the remaining $200,000 of General Aggregate.

The CGL Limit Structure

The CGL uses a layered limit structure that the exam tests with calculations:

The Each Occurrence limit is subject to the aggregates. Once the General Aggregate is exhausted, no further premises/operations claims are paid even if the per-occurrence limit remains.

Exam trap: Products and completed operations claims erode their OWN separate aggregate, not the general aggregate - so a manufacturer can exhaust the products aggregate while the general aggregate is intact, and vice versa. The Damage to Premises Rented to You limit replaced the old "fire legal liability" and defaults to $300,000; medical payments default to $5,000 per person. Aggregates reset each policy period and can be reinstated only by endorsement.

Supplementary Payments Are Outside the Limits

A critical trap: Supplementary Payments (defense costs, court costs taxed against the insured, prejudgment interest, up to $250 for bail bonds, the cost of bonds to release attachments) are paid in addition to the limits of insurance. Defense costs do not erode the Each Occurrence Limit or the aggregates in the standard CGL. This contrasts with many professional liability and D&O forms, which use 'defense within limits' (eroding/wasting) limits where defense spending reduces the amount left for indemnity.

Damage to Premises Rented and Med Pay Sublimits

The Damage to Premises Rented to You limit is a sublimit within the Each Occurrence Limit, applying to fire (and, in newer editions, certain other perils) damage to premises the insured rents or occupies briefly. It does not add coverage above the Each Occurrence amount; it caps the rented-premises portion at the lower stated figure (commonly $100,000 or $300,000).

Medical Expense (Med Pay) under Coverage C pays small medical bills on a no-fault basis (no liability finding required) for injuries on the insured's premises or arising from operations, with a per-person sublimit (commonly $5,000). Med Pay payments erode the General Aggregate.