10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

CGL Coverage A: Bodily Injury and Property Damage Liability

The Commercial General Liability (CGL) policy is the workhorse of business liability insurance and a heavily tested topic on the national P&C exam. The current standard is the ISO CG 00 01 Commercial General Liability Coverage Form. The most widely used edition is CG 00 01 04 13 (April 2013), though newer editions exist; exam questions reference the structure rather than minor edition tweaks. The form is packaged inside a Commercial General Liability Coverage Part, which combines with the Common Policy Declarations, Common Policy Conditions, and the CGL Declarations to create a complete contract.

Coverage A is the heart of the CGL. It promises 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. It also includes the duty to defend the insured against any suit seeking those damages, even if the allegations are groundless, false, or fraudulent.

Defined Terms and the Insuring Agreement

The exam tests precise CGL definitions:

• Bodily injury — bodily injury, sickness, or disease sustained by a person, including death resulting at any time from that injury.
• 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.
• Suit — a civil proceeding; also includes arbitration and other alternative dispute resolution the insured submits to with the insurer's consent.

The insurer's duty to defend ends when the applicable limit of insurance is exhausted by the payment of judgments or settlements. This is a classic trap: defense is not unlimited once limits are paid out.

Occurrence vs. Claims-Made Triggers

The CG 00 01 is the occurrence form: coverage triggers when BI or PD occurs during the policy period, regardless of when the claim is reported. ISO also publishes the claims-made form CG 00 02, which triggers when the claim is first made during the policy period (or extended reporting period), subject to a retroactive date.

Trap: A claims-made policy with a retroactive date of 1/1/2024 will NOT respond to an injury that occurred 12/15/2023, even if the claim is filed during the policy period.

The Limits of Insurance

The CGL Declarations show six limits. Coverage A losses erode the Each Occurrence Limit and the General Aggregate Limit. The aggregate is the most the insurer pays in the policy period for all covered losses, with two exceptions noted below.

• General Aggregate Limit — caps total payments (other than products-completed operations).
• Products-Completed Operations Aggregate Limit — a separate aggregate for that exposure.
• Each Occurrence Limit — most paid for any one occurrence (combines BI and PD).
• Damage to Premises Rented to You Limit — typically $100,000 per premises; a carve-back to the fire damage exclusion.
• Medical Expense Limit — Coverage C, per person.
• Personal & Advertising Injury Limit — Coverage B, per person/organization.

Worked Example: Aggregate Erosion

A contractor has a CGL with a $1,000,000 Each Occurrence Limit and a $2,000,000 General Aggregate. During the policy period three covered Coverage A occurrences are paid: $600,000, $900,000, and $800,000.

• Occurrence 1: $600,000 (within the $1M occurrence cap). Aggregate remaining: $2,000,000 - $600,000 = $1,400,000.
• Occurrence 2: $900,000 paid. Aggregate remaining: $1,400,000 - $900,000 = $500,000.
• Occurrence 3: $800,000 incurred, but only $500,000 of aggregate remains, so the insurer pays $500,000 and the insured absorbs the $300,000 shortfall.

Each individual loss was under the $1M occurrence limit, yet the aggregate is what stopped full payment on the third claim. The aggregate restores at renewal, not mid-term.

Key Coverage A Exclusions That Define the Grant

CGL Coverage A grants broad BI/PD coverage, then narrows it with critical exclusions the exam tests by name:

The "your work" / "your product" business-risk exclusions are heavily tested: the CGL is not a performance bond and will not pay to repair the insured's own faulty work, though resulting damage to other property may be covered.

Trap: the CGL excludes the insured's own product/work but covers damage that faulty work causes to third-party property or persons.