11.1 CGL Limits of Insurance and Aggregates

The Six Limits of the CGL

The standard ISO Commercial General Liability form, CG 00 01 04 13, lists six separate limits in its Declarations. Confusing these limits, or misjudging which one a given loss erodes, is one of the most heavily tested areas on the national P&C exam. The six limits are not interchangeable buckets of money; each has its own job, and several feed two different annual caps called aggregates.

The most common package an agent quotes is the $1M/$2M/$2M structure: a $1,000,000 Each Occurrence limit sitting under a $2,000,000 General Aggregate and a separate $2,000,000 Products-Completed Operations Aggregate.

How the Each-Occurrence Limit Works

The Each Occurrence limit is the most the insurer pays for all bodily injury and property damage arising out of a single occurrence, no matter how many people are hurt, how many claims or lawsuits are filed, or how many insureds are involved.

Worked example. A single warehouse fire produces $500,000 of third-party property damage and $750,000 of bodily injury, totaling $1,250,000 from one occurrence. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000; the remaining $250,000 is uninsured. The injured parties cannot stack the limit by filing separate suits, because the cap is per occurrence, not per claimant.

Each occurrence vs. the General Aggregate

Every Coverage A payment does double duty: it counts against the Each Occurrence limit for that loss and draws down the General Aggregate for the year. Picture the General Aggregate as the gas tank and Each Occurrence as the maximum size of a single fill-up.

Which Aggregate Does a Claim Erode?

This is the single most useful table in the section. Premises and operations losses, Coverage B, and Coverage C all chip away at the General Aggregate. Product defects and completed-work injuries draw down the separate Products-Completed Operations (PCOH) Aggregate.

Why two aggregates? Product recalls and latent defects can generate catastrophic, delayed losses. Isolating them in their own $2,000,000 pool protects the premises-operations limit a business relies on for everyday slip-and-fall claims. Trap to remember: defense costs are supplementary payments and do not erode any limit or aggregate.

How an Aggregate Gets Exhausted Mid-Term

The General Aggregate is the total the insurer pays for eligible claims during the policy period, and it can run out before the policy expires.

Worked example. A retailer with a $2,000,000 General Aggregate suffers three covered slip-and-fall judgments of $800,000 each in one year, totaling $2,400,000. The insurer pays only $2,000,000; the final $400,000 is uninsured because the aggregate is exhausted. Meanwhile the PCOH Aggregate is untouched, so a separate product-injury claim that same year could still be paid up to its own $2,000,000 limit. That is precisely why the two pools are kept apart.

Per-project and per-location aggregate endorsements

Contractors and multi-site firms often split the single shared General Aggregate so one bad project cannot drain protection for all the rest:

These endorsements multiply aggregate protection and appear often in contractor and real-estate scenarios.

Common Limit Packages

Notice the pattern: the General Aggregate and PCOH Aggregate are usually set at twice the Each Occurrence limit. Memorizing the standard $1M/$2M/$2M figures lets you answer most limit-erosion questions on sight.

Quick numeric drill. A business pays out a $400,000 libel judgment (Coverage B), then a $300,000 slip-and-fall. Both erode the General Aggregate, leaving $2,000,000 − $700,000 = $1,300,000 of General Aggregate for the rest of the year. A later $900,000 product-injury claim is paid from the separate, full $2,000,000 PCOH Aggregate, unaffected by the $700,000 already spent.