11.1 CGL Limits of Insurance and Aggregates

The Six Limits of the ISO CGL

The standard ISO Commercial General Liability Coverage Form (CG 00 01 04 13, the current edition most state exams reference) lists six separate Limits of Insurance in its Declarations. Knowing which claim erodes which limit is one of the most heavily tested points on the national P&C exam, so commit the table below to memory before anything else in this unit.

How the Each-Occurrence Limit Works

The Each Occurrence limit is the most the insurer pays for all bodily injury (BI) and property damage (PD) arising from a single occurrence, regardless of the number of persons injured, the number of claims or suits filed, or the number of insureds involved.

Worked example. A single warehouse fire causes $400,000 of third-party property damage and $850,000 of bodily injury - $1,250,000 total from one occurrence. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000. The remaining $250,000 is the insured's own exposure; the occurrence limit is an absolute cap on that single event.

How the Two Aggregates Differ

The General Aggregate is the most the insurer will pay during the policy period for the sum of all premises-operations BI/PD, all Coverage B personal and advertising injury, and all Coverage C medical payments. Each paid claim erodes it dollar-for-dollar until it is exhausted, after which no further premises-ops claims are paid that period.

The Products-Completed Operations (PCOH) Aggregate is a wholly separate pool. Injuries or damage arising away from the insured's premises from the insured's products or completed work draw only on this aggregate - never on the General Aggregate. Isolating product and completed-operations losses protects the everyday premises limits a business relies on, because recalls and latent defects can be catastrophic.

Which Aggregate Does a Claim Erode?

This crosswalk is the single most useful exam tool in the unit:

Trap: Defense costs are supplementary payments paid in addition to the limits. They do not erode the Each Occurrence limit, the General Aggregate, or the PCOH Aggregate. Once a limit is exhausted by a judgment or settlement, however, the insurer's duty to defend ends.

Worked Aggregate-Erosion Numeric

Assume General Aggregate $2,000,000, PCOH Aggregate $2,000,000, Each Occurrence $1,000,000. During the year the insured has three losses:

• A premises slip-and-fall paid at $600,000 (premises-ops).
• A second premises BI claim paid at $1,000,000 (capped at the occurrence limit).
• A defective-product injury paid at $900,000 (PCOH).

The two premises claims total $1,600,000, drawing the General Aggregate down to $400,000 remaining. The product claim of $900,000 draws only the PCOH Aggregate, leaving $1,100,000 there. The two pools never cross.

Damage to Premises Rented to You

This low sublimit ($100,000 by default) covers fire damage - and, under the 2013 edition, damage from any cause for premises the insured occupies for 7 or fewer consecutive days - to space rented to the named insured. It is carved out of the broad property-damage-to-rented-premises exclusion specifically so a tenant's liability for burning down the landlord's building is covered.

Restoring an Exhausted Aggregate

A standard CGL does not automatically reinstate an aggregate that is used up mid-term; once the General Aggregate is exhausted, premises-ops claims for the rest of the period are unpaid. Insureds with heavy claim activity address this two ways: a higher aggregate at renewal, or a Per-Project / Per-Location Aggregate endorsement (covered in 11.3) that gives each project or location its own separate aggregate so one bad project cannot strip protection from the others.

How the Six Limits Interact - A Recap

Think of the limits as a layered system. The Each Occurrence limit caps any single event; the two aggregates cap the annual total; and the sublimits (Medical Expense, Damage to Premises Rented to You) sit inside those caps for specific exposures. A single claim can simultaneously be subject to the Each Occurrence limit and count against an aggregate - the occurrence limit governs the one event, while the aggregate tracks the running annual total. Exam items often combine both ideas in one fact pattern, so always ask: which single-event cap applies, and which annual pool does the payment drain?