10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The CGL Form and Coverage A

The Commercial General Liability (CGL) policy is the workhorse of business liability insurance, and the exam tests the standard Insurance Services Office (ISO) form CG 00 01 (the current widely used edition is the 04 13 version). Coverage A responds to a business's legal liability for bodily injury (BI) and property damage (PD) caused to third parties. It is by far the most heavily tested grouping in the casualty portion.

The Insuring Agreement

Coverage A's insuring agreement says the insurer will pay sums the insured becomes legally obligated to pay as damages for BI or PD, and it has the right and duty to defend any suit seeking those damages. Two ideas anchor the exam here:

• The insurer pays only when the insured is legally liable — usually through negligence. A moral obligation is not enough.
• The duty to defend is broader than the duty to indemnify: the insurer must defend even groundless, false, or fraudulent suits.

Bodily Injury vs. Property Damage Defined

Bodily injury means physical injury, sickness, or disease sustained by a person, including death resulting from any of these. Property damage means physical injury to tangible property (including loss of use of that property) or loss of use of tangible property that is not physically injured.

A classic trap: purely economic loss or damage to electronic data is generally not tangible property damage under the unendorsed form. Memorize that data is excluded as tangible property.

The Coverage Trigger: Occurrence

The standard CG 00 01 is an occurrence form. An occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Two trigger conditions must both be met:

1. The BI or PD must be caused by an occurrence in the coverage territory.
2. The BI or PD must occur during the policy period.

Compare this with a claims-made form (the alternative ISO CGL, CG 00 02), where the trigger is when the claim is made, not when the injury occurs. Occurrence forms can produce long-tail claims reported years after the policy expires.

Coverage Territory

Coverage A applies only to BI or PD occurring in the coverage territory. The standard territory includes the United States (and its territories and possessions), Puerto Rico, and Canada, plus international waters or airspace between those places.

It also extends worldwide in limited situations — for example, injury arising out of goods made or sold in the standard territory, or the activities of a person whose home is in the territory but who is away on business briefly. Suits, however, must generally be brought in the standard territory. This worldwide-products carve-out is a common exam wrinkle.

Coverage A Limits and the Aggregate Math

The CGL declarations show several limits that interact. The two that govern Coverage A are the Each Occurrence Limit and the General Aggregate Limit.

The General Aggregate is the policy-period ceiling; once eroded, no more is paid for covered occurrences even if the Each Occurrence limit is untouched. The Products-Completed Operations Aggregate is a separate bucket — claims for the insured's finished products or completed work draw from it rather than the General Aggregate.

This split matters because a manufacturer can exhaust products-completed coverage without touching its premises/operations protection, and vice versa. Always read the declarations to see which aggregate a given loss erodes before answering a limits question.

Worked Example: Eroding the Aggregate

A contractor carries $1,000,000 Each Occurrence and a $2,000,000 General Aggregate. During the year three covered premises/operations losses settle: $700,000, $800,000, and $600,000.

• First two losses pay in full: $700,000 + $800,000 = $1,500,000.
• The third loss is valued at $600,000, but only $500,000 of the General Aggregate remains ($2,000,000 − $1,500,000).
• The insurer pays $500,000; the insured absorbs the remaining $100,000.

Note each individual loss stayed under the $1,000,000 Each Occurrence limit, yet the aggregate still capped recovery. That is the tested point.

Defense Costs Are Outside the Limits

Under the CGL, defense costs are paid in addition to the limits of insurance (they are supplementary payments, covered in 10.3). This is the opposite of many defense-within-limits professional liability or eroding/wasting policies, where legal fees deplete the limit. Exam writers love this contrast: standard CGL defense does not reduce the limit.

Key Coverage A Exclusions to Recognize

• Expected or intended injury (no coverage for deliberate harm, except reasonable force to protect persons/property).
• Contractual liability (with a carve-back for insured contracts).
• Workers' compensation and employer's liability (employee injuries belong on WC, not CGL).
• Pollution (the broad absolute pollution exclusion).
• Auto, aircraft, watercraft (covered elsewhere).
• Damage to your product / your work / impaired property — the business risk or "your work" exclusions push faulty-workmanship costs back on the insured.

Defining an Occurrence and the Coverage Territory

Coverage A of the standard CG 00 01 insures sums the insured becomes legally obligated to pay as damages for bodily injury or property damage caused by an occurrence. An occurrence is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." This wording brings gradual exposures (a slow chemical leak harming a neighbor) within coverage as long as the result was not expected or intended.

Coverage applies only within the coverage territory - the U.S., its territories, Canada, and international waters/airspace between them, plus a limited extension for products made or sold in the territory and for the worldwide activities of executives traveling abroad. The trigger is injury during the policy period, which on an occurrence form can produce a claim reported years later.