Commercial General Liability (CGL)
Key Takeaways
- The CGL has three insuring agreements: Coverage A (bodily injury and property damage), Coverage B (personal and advertising injury), and Coverage C (medical payments).
- The CGL can be written on an occurrence or claims-made basis; the occurrence form is the standard and is generally more favorable to the insured.
- The CGL carries six limits, including the Each Occurrence limit, the General Aggregate, and a separate Products-Completed Operations Aggregate.
- The Products-Completed Operations Aggregate is independent of the General Aggregate — payments under one do not erode the other.
- Professional liability (errors and omissions, malpractice) is excluded by the CGL and must be insured separately, usually on a claims-made basis.
The Three CGL Coverages
The Commercial General Liability (CGL) policy insures a business against most liability exposures arising from its premises, operations, products, and completed operations. The standard ISO CGL contains three separate insuring agreements:
| Coverage | Insuring agreement | What it pays |
|---|---|---|
| Coverage A | Bodily Injury & Property Damage Liability | Damages the insured is legally obligated to pay for BI or PD caused by an occurrence; includes defense |
| Coverage B | Personal & Advertising Injury Liability | Offenses such as libel, slander, false arrest, malicious prosecution, wrongful eviction, copyright/slogan infringement in advertising |
| Coverage C | Medical Payments | Reasonable medical expenses for injury on the insured's premises or from operations, regardless of fault |
Coverage A is the heart of the policy, responding to premises-and-operations and products-and-completed-operations claims. Coverage C is a goodwill coverage paid without regard to liability, which can head off larger lawsuits. As with the auto and most liability policies, defense costs are paid in addition to the limits under Coverages A and B.
Occurrence vs. Claims-Made CGL
The CGL is available on two trigger bases:
- Occurrence form — covers BI or PD that occurs during the policy period, regardless of when the claim is reported. This is the standard and preferred form because there is no reporting gap.
- Claims-made form — covers claims first made during the policy period, subject to a retroactive date. It includes a basic and supplemental extended reporting period (tail) to cover claims reported after expiration that arise from covered events.
An occurrence is defined as an accident, including continuous or repeated exposure to substantially the same harmful conditions. This broad definition lets the occurrence form pick up gradual injury (such as slow leakage) as a single occurrence. Because the occurrence form responds to the date of injury rather than the date of claim, it avoids the coverage gaps that can arise when an insured switches insurers under claims-made coverage.
The Six CGL Limits
The CGL applies six limits of insurance, and the interplay among them is heavily tested:
| Limit | Applies to |
|---|---|
| Each Occurrence | Most the insurer pays for the sum of Coverage A damages and Coverage C medical payments arising from any one occurrence |
| General Aggregate | Most paid in the policy year for the sum of Coverage A (except products-completed operations), Coverage B, and Coverage C |
| Products-Completed Operations Aggregate | Most paid in the policy year for BI/PD in the products-completed operations hazard |
| Personal & Advertising Injury | Most paid for all such injury sustained by any one person or organization |
| Damage to Premises Rented to You | Fire (and limited other) damage to premises the insured rents, per premises |
| Medical Expense | Most paid under Coverage C for any one person |
The General Aggregate caps Coverage A premises-and-operations, Coverage B, and Coverage C combined for the year. The Products-Completed Operations Aggregate is a separate, independent annual cap for product and completed-work claims — losses charged against it do not reduce the General Aggregate, and vice versa. An Each Occurrence limit applies per event but is also subject to the relevant aggregate. Worked example: with a $1M Each Occurrence and $2M General Aggregate, three unrelated $1M premises losses in one year would be capped at the $2M aggregate, leaving the third loss only partly paid.
Commercial Auto and Beyond
The CGL specifically excludes liability arising from the ownership, operation, or use of autos — that exposure is insured under a separate Commercial Auto policy (the Business Auto Coverage Form). Commercial auto uses symbols (numbers 1–9) on the declarations to designate which autos are covered: Symbol 1 means any auto, Symbol 7 means specifically described autos, Symbol 8 hired autos, and Symbol 9 non-owned autos. Commercial auto provides both liability and physical-damage coverage for business vehicles, paralleling the PAP for commercial use.
Other exposures excluded from the CGL and insured separately include: workers compensation and employers liability (covered in the next section), liquor liability for businesses in the business of serving alcohol, pollution, and professional services.
Professional Liability (E&O and Malpractice)
The CGL covers bodily injury and property damage but not financial harm from a professional's negligent advice or services — a critical exclusion. That gap is filled by professional liability insurance:
- Errors and Omissions (E&O) — covers professionals such as insurance agents, accountants, architects, consultants, and real-estate brokers against claims of negligent acts, errors, or omissions in rendering professional services. E&O typically responds to economic loss, not bodily injury.
- Malpractice — the term used for E&O covering medical and similar professionals (physicians, dentists, attorneys), responding to bodily injury arising from negligent care.
- Directors and officers (D&O) — protects corporate leadership against claims arising from management decisions.
Professional liability is almost always written on a claims-made basis with a retroactive date, because professional claims often surface years after the service was performed. Unlike the CGL, many professional policies require the insured's consent to settle and may have defense costs erode the limit rather than being paid in addition.
Which CGL coverage responds to a claim that the insured's advertisement infringed another company's slogan?
How does the Products-Completed Operations Aggregate relate to the General Aggregate in a CGL policy?
An insurance agent is sued for failing to procure the coverage a client requested, causing the client a financial loss. What policy is designed to respond?