10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

Coverage A: Bodily Injury and Property Damage Liability

Commercial General Liability (CGL) is the workhorse of business liability insurance. The standard market uses the ISO Commercial General Liability Coverage Form CG 00 01 (occurrence version) and CG 00 02 (claims-made version). Most candidates should assume the occurrence form unless the question states claims-made. The current widely tested edition is the 04 13 edition, though newer editions exist; exam writers rarely hinge on a specific edition date for Coverage A.

The insuring agreement 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. Coverage attaches only when the BI or PD is caused by an occurrence that takes place in the coverage territory and occurs during the policy period.

Defined terms that drive Coverage A

• Bodily injury means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
• Property damage means physical injury to tangible property (including loss of use of that property) or loss of use of tangible property that is not physically injured.
• Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
• Coverage territory includes the U.S., its territories, Puerto Rico, and Canada, plus international coverage for products made or sold in the territory and for the activities of a person away from home for a short time on the insured's business.

The occurrence trigger vs. the claims-made trigger

The trigger is the single most tested Coverage A concept. On the occurrence form (CG 00 01), coverage responds based on when the injury or damage takes place, regardless of when the claim is reported. A policy in force in 2024 covers a 2024 injury even if the lawsuit arrives in 2029. This is why occurrence policies create a long "tail" of exposure.

The claims-made form (CG 00 02) responds based on when the claim is first made against the insured, subject to a retroactive date (injury must occur on or after that date) and, after the policy ends, an Extended Reporting Period (ERP). The basic (automatic) ERP is short (often 60 days for reporting, 5 years for claims arising from reported circumstances), while a supplemental ERP ('tail') must be purchased.

The limits of insurance structure

Coverage A is capped by a layered set of limits shown on the declarations. Memorize how they interact:

• Each Occurrence Limit - the most paid for the sum of damages under Coverage A and medical payments under Coverage C arising from any one occurrence.
• General Aggregate Limit - the most paid for the sum of Coverage A (other than products-completed operations), Coverage B, and Coverage C during the policy period.
• Products-Completed Operations Aggregate - a separate annual cap for BI/PD arising out of products and completed work; it does NOT erode the General Aggregate.
• Damage to Premises Rented to You - a sub-limit (commonly $100,000) for fire (and certain short-term rental) damage to premises rented to or temporarily occupied by the insured.

Worked example: A contractor carries Each Occurrence $1,000,000 / General Aggregate $2,000,000 / Products-Completed Aggregate $2,000,000. Three separate Coverage A losses occur in one year for $800,000, $700,000, and $900,000 (ongoing operations, not products). Each is under the $1M occurrence cap, so each is paid in full, but the total $2,400,000 exceeds the $2,000,000 General Aggregate, so only $2,000,000 is available and the third loss is reduced to $500,000. A separate products loss would still have its own untouched $2,000,000.

Defense costs and key exclusions

Under the standard CGL, the insurer has the right and duty to defend any suit seeking covered damages, and defense costs are paid in addition to the limits - they do not reduce the Each Occurrence or aggregate amounts. However, the duty to defend ends when the applicable limit has been exhausted by payment of judgments or settlements. This 'outside the limits' defense distinguishes the CGL from many professional liability forms where defense erodes the limit.

Frequently tested Coverage A exclusions include:

• Expected or intended injury (the occurrence must be an accident from the insured's standpoint; reasonable-force defense of persons/property is an exception).
• Contractual liability (excluded, but an exception restores coverage for an 'insured contract' and for liability the insured would have absent the contract).
• Workers' compensation / employer's liability (handled by the WC policy, not the CGL).
• Pollution, auto/aircraft/watercraft, damage to your product / your work, and the 'damage to property' (care, custody, or control) exclusions.

Trap: candidates often think defense costs erode the limit. On the standard CGL they do not - they are supplementary payments paid in addition until the limit is exhausted.

One more Coverage A nuance worth memorizing is the 'your work' versus 'your product' damage exclusions, which prevent the CGL from acting as a performance warranty. The CGL is not designed to pay to repair or replace the insured's own faulty product or defective workmanship - that is a business risk, not a liability covered by third-party insurance. It does, however, cover resulting bodily injury or damage to other property caused by that faulty product or work. Distinguishing 'damage to the work itself' (excluded) from 'damage the work causes to other property' (covered) is a recurring exam theme.