10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The Foundation of Business Liability

The Commercial General Liability (CGL) policy is built on the ISO form CG 00 01 (current edition 04 13). Coverage A is the core insuring agreement. The insurer promises to pay "those sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies," and the insurer has the right and duty to defend any suit seeking those damages.

Two definitions drive Coverage A. Bodily injury (BI) means bodily injury, sickness, or disease sustained by a person, including death that results. Property damage (PD) means physical injury to tangible property (including loss of use of that damaged property) or loss of use of tangible property that is not physically injured. Electronic data is not tangible property.

Occurrence and the Coverage Trigger

Coverage A applies only to BI or PD caused by an occurrence, defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The harm must take place in the coverage territory and during the policy period. The CG 00 01 is an occurrence form: it responds to injury that happens during the policy period, regardless of when the claim is later made.

Contrast this with the claims-made version (CG 00 02), which triggers on the date the claim is first made, subject to a retroactive date and an Extended Reporting Period (basic 5-year tail plus an optional supplemental tail). On the exam, remember: occurrence = injury date triggers; claims-made = claim date triggers.

Defense Costs Are Outside the Limit

A heavily tested point: defense costs are paid in addition to the limits of insurance. The insurer's duty to defend ends when it has used up the applicable limit by paying judgments or settlements. So if a $1,000,000 Each Occurrence limit is exhausted by a settlement, defense obligations cease even if other suits remain pending.

Worked Example: Split Limits and the Aggregate

Assume an Each Occurrence limit of $1,000,000 and a General Aggregate of $2,000,000. Three covered claims arise: $700,000, $600,000, and $900,000.

• Each claim is below the $1M per-occurrence cap, so each is paid in full.
• Total paid = $700,000 + $600,000 + $900,000 = $2,200,000.
• But the General Aggregate caps total payments at $2,000,000, so the insurer pays only $2,000,000; the insured absorbs the remaining $200,000.

The General Aggregate restores at each annual renewal; it does not reset mid-term.

Products-Completed Operations and the Second Aggregate

The CGL actually has two aggregates. The General Aggregate caps most Coverage A and Coverage B losses (premises, ongoing operations, P&AI, Med Pay). A separate Products-Completed Operations Aggregate caps liability for injury arising from the insured's products away from the insured's premises and from completed work. A loss that erodes the Products-Completed Operations Aggregate does not reduce the General Aggregate, and vice versa. On the exam, a claim from a product injuring a consumer at the consumer's home draws against the Products-Completed Operations Aggregate, not the General Aggregate.

Coverage Territory

The coverage territory includes the United States, its territories and possessions, Puerto Rico, and Canada; international waters or airspace during transit between those places; and — for the products-completed operations and certain internet/travel exposures — anywhere in the world, provided the suit is brought in the coverage territory.

Common Coverage A Traps

Several exclusions narrow Coverage A. The most tested are listed below; note how each routes a loss to a different policy or removes an uninsurable exposure.

• Expected or intended injury (excludes deliberate harm; bodily injury from reasonable force to protect persons or property is carved back in)
• Contractual liability (excludes assumed liability, except an "insured contract" and liability the insured would have without the contract)
• Workers compensation and Employer's Liability (belongs on the WC policy)
• Auto, aircraft, watercraft (belongs on commercial auto / aviation / marine)
• Pollution (broad absolute pollution exclusion)
• Damage to your product / your work (the "business risk" exclusions — faulty workmanship is a quality issue, not insured liability)
• Damage to property in your care, custody, or control

The "your work" exclusion has an important exception: it does not apply to completed work if the damaged work or the work causing damage was performed by a subcontractor. This subcontractor exception is a frequent exam item.

Damages vs. the Insured's Own Loss

Coverage A pays third-party damages, never the insured's own business losses. If a contractor installs a defective roof, the cost to rebuild the roof itself is an uninsured business risk (the "your work" / "your product" exclusions); but the resulting water damage to the building owner's furniture is third-party property damage potentially covered under Coverage A. Distinguishing the uninsured cost-to-repair-the-work from the covered consequential damage is one of the most common CGL exam fact patterns. Remember the policy is a liability contract, not a performance guarantee or warranty.