11.1 CGL Limits of Insurance and Aggregates

CGL Limits of Insurance and Aggregates

The Commercial General Liability (CGL) policy is built on the ISO CG 00 01 Commercial General Liability Coverage Form (the occurrence version) and CG 00 02 (the claims-made version). The Limits of Insurance section is one of the most heavily tested topics on the national portion of the Property & Casualty exam, because each limit caps a different kind of loss and several limits interact. Memorizing the structure of the six limits, not just the dollar amounts, is what separates a pass from a fail.

The Six CGL Limits

The declarations of a CGL policy show six distinct limits. They are arranged as a hierarchy: the General Aggregate is the master cap, and most other limits draw down from it.

How the Aggregates Cap Everything

The General Aggregate is the most the insurer pays during the policy period for the sum of all Each Occurrence payments (other than products-completed operations), plus Medical Payments and Personal & Advertising Injury. Once paid out, it is gone for the rest of the policy term unless the policy is endorsed to reinstate it.

The Products-Completed Operations Aggregate stands apart. Losses arising after a product leaves your control or after operations are finished erode only this separate aggregate, not the General Aggregate. This is why a contractor's completed-operations claims do not consume the limits available for premises and ongoing-operations claims.

Worked Numeric: Aggregate Drawdown

Assume limits of $1,000,000 Each Occurrence / $2,000,000 General Aggregate / $2,000,000 Products-Completed Operations Aggregate.

• Slip-and-fall in the store: insurer pays $1,000,000 (Each Occurrence cap). General Aggregate now has $1,000,000 left.
• A second premises occurrence costs $1,300,000. The Each Occurrence limit caps it at $1,000,000, but only $1,000,000 of General Aggregate remains, so the insured absorbs the $300,000 gap plus the General Aggregate is now exhausted.
• A defective-product claim arrives for $1,500,000. Because it draws on the separate $2,000,000 Products-Completed Ops Aggregate, the insurer still pays the full $1,000,000 (Each Occurrence) - the exhausted General Aggregate does not affect products claims.

Damage to Premises Rented to You and Medical Payments

Two sublimits sit inside the Each Occurrence limit. Damage to Premises Rented to You (default $100,000) covers fire damage to a building you rent - and for a stay of seven days or fewer, certain other perils. It is a sublimit: a $250,000 fire loss to a rented building pays only $100,000.

Medical Payments (default $5,000 per person) is paid without regard to fault for injuries on premises or arising from operations, provided the expense is incurred and reported within one year. Med Pay reduces the Each Occurrence limit available for the matching liability claim - it is not extra money on top.

Common Limits Traps

• The General Aggregate does NOT apply to products-completed operations - that hazard has its own aggregate. Reversing this is the #1 wrong answer.
• Med Pay and Damage to Premises are sublimits within Each Occurrence, not separate buckets that increase total recovery.
• The Personal & Advertising Injury limit is per person/organization, while it still erodes the General Aggregate.
• Defense costs are paid in addition to the limits in the standard CG 00 01 - they do not erode the aggregate (unlike a defense-within-limits or 'eroding' form).

Per-Project and Per-Location Aggregates

A single shared general aggregate is dangerous for a contractor with many jobs: one project's losses can exhaust the limit available to all others. Two endorsements solve this. CG 25 03 (Designated Construction Project(s) General Aggregate) gives each project its own separate general aggregate, and CG 25 04 (Designated Location(s) General Aggregate) does the same per location.

Trap: Without CG 25 03/04, the single general aggregate is shared across all projects; a string of claims at one site can leave nothing for another. Owners often require the per-project endorsement in the contract.

How Defense Costs and Sublimits Interact With the Limits

On the standard CG 00 01, defense costs are supplementary payments paid outside the limits, so they never erode the aggregate - a major advantage over eroding professional-liability forms. Medical Payments ($5,000 default) and Damage to Premises Rented to You ($100,000 default) are sublimits within the Each Occurrence limit, not separate buckets.

Trap: The General Aggregate does not cap products-completed operations - that hazard has its own aggregate. Treating one shared aggregate as covering everything (including products) is the number-one CGL-limits error.