8.6 CGL Limits and Conditions

The Six Limits of the CGL

The CGL Declarations list six distinct limits. Knowing how each interacts with the aggregates is one of the most tested points in the chapter.

How the Each-Occurrence Limit Works

The Each Occurrence limit is the most the insurer pays for all BI and PD arising from a single occurrence, regardless of:

• the number of persons injured,
• the number of claims or suits, or
• the number of insureds involved.

Worked example: A single fire causes $500,000 of third-party property damage and $750,000 of bodily injury — $1,250,000 total from one occurrence. With a $1,000,000 Each Occurrence limit, the insurer pays $1,000,000, and the remaining $250,000 erodes nothing else because the occurrence limit is the cap.

Which Aggregate Does a Claim Erode?

This table is the single most useful exam tool in the section:

Why a separate PCOH aggregate? Product recalls and latent defects can generate catastrophic losses; isolating them protects the premises-operations limits a business relies on for day-to-day claims. Note: defense costs (supplementary payments) do not erode any limit.

Key Policy Conditions

Duties in the Event of Occurrence, Claim, or Suit

The insured must:

• give notice as soon as practicable (time, place, nature, witnesses, injured parties);
• forward every demand, notice, summons, or legal paper immediately;
• cooperate in the investigation, settlement, and defense;
• not, except at its own cost, voluntarily make a payment or assume an obligation without the insurer's consent (first-aid expenses excepted).

Other Insurance

When other valid coverage exists, the CGL responds as:

Two sharing methods: contribution by equal shares (each policy pays equally until the smaller limit is used up, then the larger continues) and contribution by limits (each pays in proportion to its limit).

Legal Action Against the Insurer

No one may sue the insurer until the insured has complied with all policy terms, and the insured's obligation has been finally determined by judgment after trial or by written agreement among insured, claimant, and insurer.

Separation of Insureds

Except for the limits and certain duties, the insurance applies separately to each insured. One insured's conduct that triggers an exclusion does not automatically void coverage for an innocent insured. Example: if Employee A intentionally injures someone, the employer may still be covered even though A's intentional act is excluded as to A.

Transfer of Rights of Recovery (Subrogation)

If the insured has rights to recover from a third party, those rights transfer to the insurer after payment, and the insured must do nothing to impair them.

Premium Audit

The CGL is auditable: the deposit premium is estimated, and the final premium is computed on actual exposures (payroll, gross sales, square footage, units), reconciled at audit.

Common Limit Packages

How the General Aggregate Can Be Exhausted Mid-Term

An often-missed point: the General Aggregate is the total the insurer will pay for all eligible claims during the policy period, and it can be used up before the policy expires. Once exhausted, no further premises-operations, Coverage B, or Coverage C claims are paid until renewal — even though the policy is still technically in force.

Worked example: A business with a $2,000,000 General Aggregate suffers three covered slip-and-fall judgments of $800,000 each in one policy year — $2,400,000 total. The insurer pays only $2,000,000; the final $400,000 is uninsured because the aggregate is exhausted. Meanwhile, the Products-Completed Operations Aggregate is untouched, so a separate product claim that same year could still be paid up to its own $2,000,000 — illustrating exactly why the two pools are kept separate.

Per-Project and Per-Location Aggregate Endorsements

Contractors and multi-site businesses often modify the single shared General Aggregate so one bad project or location cannot drain protection for all the others:

These endorsements multiply the aggregate protection and are a frequent exam topic for contractor and real-estate scenarios.

Why the Conditions Matter for Claims

The duties-after-loss conditions are not boilerplate — breaching them can forfeit coverage. Late notice that prejudices the insurer's investigation, or a voluntary payment made without consent, can give the insurer grounds to deny or reduce a claim. The exam frequently presents an insured who admits fault at the scene or settles privately; the correct response is that the insured violated the no-voluntary-payment condition (first aid excepted) and may lose coverage for the amount paid.