CGL Coverage A: Bodily Injury and Property Damage Liability

The ISO Commercial General Liability Policy

The Commercial General Liability (CGL) policy is built from standardized ISO forms. The core insuring document is the Commercial General Liability Coverage Form CG 00 01; the most heavily tested current edition on licensing exams is CG 00 01 04 13 (April 2013), which remains the working edition for many programs. The CGL is assembled into a complete policy with the Common Policy Declarations (IL 00 17 / CG declarations), the Common Policy Conditions (IL 00 17), and applicable endorsements.

The CGL form provides three coverages plus supplementary payments:

• Coverage A - Bodily Injury and Property Damage Liability
• Coverage B - Personal and Advertising Injury Liability
• Coverage C - Medical Payments

Coverage A is the heart of the policy. It responds to third-party claims for bodily injury (BI) and property damage (PD) that the insured becomes legally obligated to pay as damages, and it includes the insurer's separate duty to defend the insured.

CG 00 01 vs. CG 00 02: Occurrence vs. Claims-Made

Exams test two coverage triggers heavily:

• Occurrence form (CG 00 01): Covers BI/PD that occurs during the policy period, regardless of when the claim is filed. The date of injury controls. This is the default and most common CGL.
• Claims-made form (CG 00 02): Covers claims first made against the insured during the policy period (or extended reporting period), provided the injury happened after the retroactive date.

Trap: On a claims-made policy, an injury that occurred before the retroactive date is excluded even if the claim is made during the policy period.

Coverage A Insuring Agreement and Triggers

Coverage A pays "those sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage" to which the insurance applies. The BI/PD must be:

1. Caused by an occurrence (an accident, including continuous or repeated exposure to substantially the same harmful conditions); and
2. Occur within the coverage territory (the U.S., its territories, Canada, and worldwide for products/operations under defined conditions); and
3. Take place during the policy period.

Bodily injury means bodily injury, sickness, or disease, including death resulting from any of these. Property damage means physical injury to tangible property (including resulting loss of use) or loss of use of tangible property that is not physically injured. Note: electronic data is not tangible property in the standard form.

The Duty to Defend (Outside the Limits)

The insurer has the right and duty to defend the insured against any suit seeking covered damages. The duty to defend is broader than the duty to indemnify - if any allegation in the suit could be covered, the insurer must defend.

Critical exam point: Defense costs are paid in addition to the limits of insurance (they do not erode the Each Occurrence limit). However, the insurer's duty to defend ends when the applicable limit of insurance is exhausted by payment of judgments or settlements.

CGL Limits Structure and the Aggregate (Worked Example)

The CGL declarations show several limits that exams require you to apply:

• Each Occurrence Limit - max for all BI/PD from one occurrence
• General Aggregate Limit - annual cap for most claims (excludes products-completed operations)
• Products-Completed Operations Aggregate Limit - separate annual cap for that hazard
• Personal & Advertising Injury Limit - per person/organization (Coverage B)
• Damage to Premises Rented to You - sublimit ($300,000 default in CG 00 01 04 13)
• Medical Expense Limit - per person (Coverage C)

Worked example. Limits: $1,000,000 Each Occurrence / $2,000,000 General Aggregate. Three separate covered occurrences during the year produce judgments of $700,000, $800,000, and $900,000.

• Each individual claim is under the $1M occurrence limit, so each is paid in full at $700K, $800K, $900K = $2,400,000 demanded.
• But the General Aggregate is $2,000,000. The insurer pays only $2,000,000 total; the insured absorbs the remaining $400,000.

Trap: The Each Occurrence limit being adequate does NOT protect against multiple losses exhausting the aggregate.

Key Coverage A Exclusions

Coverage A contains numerous exclusions that exams test:

• Expected or intended injury (a. - except reasonable force to protect persons/property)
• Contractual liability (b. - except an "insured contract")
• Liquor liability (c. - applies only to those in the business of serving alcohol)
• Workers compensation / employer's liability (d. and e.)
• Pollution (f.)
• Aircraft, auto, watercraft (g. - autos covered under a separate auto policy)
• Damage to your product / your work (k. and l. - the "business risk" exclusions)
• Damage to impaired property (m.)
• Recall of products / sistership (n.)

The "your work" and "your product" exclusions reflect the principle that the CGL is not a performance warranty - the insured's own faulty workmanship is a business risk, not an insurable accident. A useful memory device: the CGL covers damage your work or product causes to other property or people, but not the cost to repair or replace the defective work or product itself.

Damage to Premises Rented to You is an important exception carved out of the auto/care-custody-control exclusions: it restores coverage for fire (and, in current editions, certain other perils) damage to premises rented to the insured, subject to the $300,000 default sublimit shown in the declarations of CG 00 01 04 13.