10.1 CGL Coverage A: Bodily Injury and Property Damage Liability
Key Takeaways
- ISO CGL uses occurrence form CG 00 01 (most common) and claims-made form CG 00 02; the trigger differs - injury timing vs. claim-made timing.
- Claims-made forms require a retroactive date and an Extended Reporting Period (tail) to avoid coverage gaps.
- Coverage A pays sums the insured is legally obligated to pay for BI/PD plus the broad duty to defend, even groundless suits.
- The general aggregate is the hard annual ceiling; once eroded, even within-per-occurrence claims are paid only up to the aggregate balance.
- Electronic data is not tangible property, so corrupted data alone is not covered 'property damage' under the standard form.
The Standard Form and Coverage Triggers
The Commercial General Liability (CGL) policy is built on Insurance Services Office (ISO) standardized forms. The most-tested editions are the occurrence form CG 00 01 and the claims-made form CG 00 02. Most businesses buy the occurrence form. The CGL provides three insuring agreements: Coverage A (Bodily Injury and Property Damage), Coverage B (Personal and Advertising Injury), and Coverage C (Medical Payments).
Under Coverage A, the insurer agrees 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, and to defend any suit seeking those damages. The defense duty is broad and exists even if the suit is groundless, false, or fraudulent.
Occurrence vs. Claims-Made Trigger
The coverage trigger is the single most-tested CGL concept. The two forms respond differently to when a loss is covered.
| Form | Number | Trigger | Key Feature |
|---|---|---|---|
| Occurrence (CG 00 01) | Standard | BI/PD must occur during the policy period | Claim can be filed years later; policy in force at time of injury responds |
| Claims-Made (CG 00 02) | Optional | Claim must be first made during the policy period (or extended reporting) | Requires retroactive date; needs ERP/tail at expiration |
Trap: On the occurrence form, what matters is when the injury happened, not when the claim is filed. A 2026 lawsuit for a 2020 injury is covered by the 2020 policy. On the claims-made form, the retroactive date caps how far back covered injuries can reach; injury before the retro date is excluded even if the claim arrives during the policy term.
Key Definitions to Memorize
- Bodily injury: physical harm, sickness, or disease sustained by a person, including death resulting at any time.
- Property damage: 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: an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
- Electronic data is NOT tangible property under the standard form - a frequently tested exclusion point.
A contractor's faulty wiring installed in 2021 causes a building fire in 2026. The contractor had an ISO occurrence CGL (CG 00 01) in force in 2021 but switched insurers in 2023. Which policy responds?
Trigger Mechanics and the Duty to Defend
The duty to defend is broader than the duty to indemnify. The insurer must defend any suit alleging covered BI or PD even if some allegations fall outside coverage, and even if the suit ultimately fails. Defense ends only when the applicable limit is exhausted by payment of judgments or settlements. Because defense is a Supplementary Payment (covered in 10.3), the cost of defense does not by itself reduce the limit available for damages.
A second tested nuance is the 'known loss' or loss-in-progress doctrine: an occurrence the insured knew about before the policy began is not covered. On the occurrence form, coverage attaches to BI/PD that takes place during the policy term, even if the resulting claim is reported decades later - which is why long-tail exposures like construction defects and pollution are managed on occurrence forms with care.
How Coverage A Limits Work
The CGL uses a layered limit structure. Candidates must know how the per-occurrence limit interacts with the aggregate. A typical limit schedule reads like this:
- Each Occurrence Limit: $1,000,000 - most the insurer pays for BI and PD arising from any one occurrence.
- General Aggregate Limit: $2,000,000 - most the insurer pays in total during the policy period for all BI/PD (Coverage A), P&AI (Coverage B), and Medical Payments (Coverage C), except products-completed operations.
- Products-Completed Operations Aggregate: $2,000,000 - a separate annual cap for product and completed-work liability.
- Damage to Premises Rented to You: $300,000 (fire legal liability).
- Medical Expense Limit: $10,000 per person.
Worked Numeric: Aggregate Erosion
Assume Each Occurrence = $1,000,000 and General Aggregate = $2,000,000. Three covered occurrences during the year produce settlements of $800,000, $700,000, and $900,000.
- Occurrence 1: $800,000 paid (under the $1M per-occurrence cap). General aggregate remaining: $2,000,000 - $800,000 = $1,200,000.
- Occurrence 2: $700,000 paid. Remaining: $1,200,000 - $700,000 = $500,000.
- Occurrence 3: $900,000 loss, but only $500,000 remains in the aggregate. Insured absorbs the uncovered $400,000.
Key trap: The per-occurrence limit is not a fresh bucket each time - the general aggregate is the hard ceiling. Once eroded, even a within-per-occurrence claim is only paid up to the aggregate balance.
Products-Completed Operations Hazard
The CGL splits aggregate exposure into two pools. The general aggregate caps premises-and-operations, Coverage B, and Med Pay losses. A separate products-completed operations aggregate caps liability for products sold and work completed and abandoned.
Why does this matter on the exam? A manufacturer can exhaust its general aggregate on premises claims yet still have its full products-completed operations aggregate available for a defective-product recall lawsuit, because the two pools are independent. The 'your product' and 'your work' exclusions then determine whether repairing the product itself is covered - it generally is not, because that is a business risk, not third-party liability.
Coverage A: The Insuring Agreement and the Duty to Defend
CGL Coverage A pays sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which the insurance applies, when caused by an occurrence in the coverage territory during the policy period. An 'occurrence' is an accident, including continuous or repeated exposure to substantially the same harmful conditions, so the insured-expected/intended result is not an occurrence. Bodily injury includes the sickness or disease and any resulting death; property damage includes both physical injury to tangible property and loss of use of property that was not physically injured.
The duty to defend is broader than the duty to indemnify and is its own exam topic. The insurer must defend any suit seeking covered damages even if the allegations are groundless, false, or fraudulent, and defense costs are paid in addition to the limits — they do not erode the per-occurrence or aggregate limit. The duty to defend ends only when the applicable limit is exhausted by payment of judgments or settlements. A stem that asks whether a frivolous suit must be defended, or whether legal fees reduce the limit, is testing exactly this distinction.
A CGL has a $1,000,000 each-occurrence limit and a $2,000,000 general aggregate. The insured has already had $1,600,000 in covered Coverage A losses paid this policy year. A new covered occurrence results in a $900,000 judgment. How much does the insurer pay on the new occurrence?