11.1 CGL Limits of Insurance and Aggregates

How the CGL stacks six limits

The ISO Commercial General Liability Coverage Form (CG 00 01, the current edition widely used on exams is the 04 13 revision) does not carry a single number. The Declarations show a Limits of Insurance schedule with six separate figures, and Section III of the policy explains how they interact. On the exam you will be asked which limit a given loss erodes, so memorize the structure before you memorize the dollar amounts.

The six limits and what each one caps

How the limits nest

Think of the structure as a funnel. The Each Occurrence limit pays first and is the per-event ceiling. Both the Damage to Premises Rented to You sub-limit and the Medical Payments sub-limit sit inside the Each Occurrence limit, not on top of it. The Each Occurrence payments then accumulate toward the General Aggregate, which is the annual ceiling for the policy period. Once the General Aggregate is exhausted, no further BI/PD is paid even if the Each Occurrence limit remains numerically larger.

Worked split-limit example

A contractor carries: Each Occurrence $1,000,000; General Aggregate $2,000,000; Products-Completed Operations Aggregate $2,000,000; Damage to Premises Rented to You $100,000; Medical Payments $5,000.

• A trip-and-fall claim settles for $1,300,000. The Each Occurrence cap pays $1,000,000; the insured owes the remaining $300,000.
• Three separate occurrences during the year each pay $800,000 = $2,400,000 demanded. The General Aggregate stops payment at $2,000,000; the insured is uninsured for the last $400,000.
• A completed-operations defect pays $900,000. That loss erodes the separate $2,000,000 Products-Completed Operations Aggregate, leaving the General Aggregate untouched.

Defense costs and supplementary payments

A recurring exam trap: under the CGL, defense costs are paid in addition to the limits of insurance and do NOT erode them. The duty to defend ends only when the applicable limit is exhausted by payment of judgments or settlements. Supplementary payments (Section I, Coverage A) such as up to $250 for bail bonds, the cost of bonds to release attachments, post-judgment interest, and loss of earnings up to $250/day are also paid on top of the limit. Contrast this with most professional-liability and D&O forms where defense costs are inside the limit (a 'wasting' or 'eroding' limit).

Per-location and per-project aggregates

By default the General Aggregate is a single annual pool shared across all of the insured's operations. Two endorsements multiply that pool:

• CG 25 04 Designated Construction Project(s) General Aggregate Limit - a fresh General Aggregate applies separately to each scheduled construction project.
• CG 25 03 Amendment of Limits of Insurance (Per Project) and the per-location endorsement (CG 25 05) - a separate General Aggregate for each location.

Contractors and developers buy these so one bad project cannot consume the aggregate protecting every other job.

Reinstatement, restoration, and exhaustion

Unlike property forms, the standard CGL does not automatically restore an aggregate after a loss. Once the General Aggregate is paid out, the policy is exhausted for the remainder of the period and the insured must purchase a new aggregate (or rely on excess/umbrella coverage) to be protected for further losses. This is why an insured with a deteriorating loss history may find its aggregate effectively 'burned' months before renewal, leaving a dangerous gap that only an umbrella sitting above a fresh underlying aggregate can fill.

Single occurrence vs. multiple occurrences

Whether a loss event counts as one occurrence or several drives which limit applies. The CGL defines occurrence as 'an accident, including continuous or repeated exposure to substantially the same general harmful conditions.' Courts use a 'cause' test: if one proximate cause produces many injuries (a single explosion injuring twenty people), it is ONE occurrence subject to a single Each Occurrence limit. If multiple independent causes produce harm, each is a separate occurrence. The exam favors the cause approach, so count causes, not victims.

Why limits selection matters at the exam and in practice

Producers must counsel insureds that a high Each Occurrence limit is meaningless if the General Aggregate is small. A $1,000,000 occurrence limit paired with only a $1,000,000 aggregate gives essentially one full loss per year. The conventional pairing is a 2:1 aggregate-to-occurrence ratio ($1M/$2M), and high-frequency operations buy per-project or per-location endorsements plus an umbrella to stretch the protection across many simultaneous exposures.