CGL Limits of Insurance and Aggregates

How the ISO CGL Stacks Its Six Limits

The ISO Commercial General Liability Coverage Form (CG 00 01, current 04 13 edition) does not use one flat limit. Its Section III - Limits Of Insurance creates a tiered structure of six interlocking limits. Exam questions almost always test whether you can identify which limit caps a given loss and how the two aggregates erode the per-occurrence limits.

The six limits, in the order they appear on the form, are:

1. General Aggregate Limit - the most the insurer pays for the sum of: medical payments, damages under Coverage A (bodily injury/property damage), and damages under Coverage B (personal and advertising injury), EXCEPT damages from the products-completed operations hazard.
2. Products-Completed Operations Aggregate Limit - a separate aggregate for products and completed-operations claims; it is NOT reduced by, and does not reduce, the general aggregate.
3. Personal and Advertising Injury Limit - the most paid under Coverage B for any one person or organization.
4. Each Occurrence Limit - the most paid for the sum of Coverage A damages and Coverage C medical payments arising from any one occurrence.
5. Damage To Premises Rented To You Limit - default $100,000 any one premises (fire, and since the 04 13 edition, other perils for premises rented 7 days or fewer).
6. Medical Expense Limit - default $5,000 any one person under Coverage C.

The Two Aggregates Are the Tested Trap

The single most tested CGL concept is that there are two separate aggregates. Claims arising from the insured's products or completed work draw down the products-completed operations aggregate. Everything else (premises/operations, Coverage B, medical payments) draws down the general aggregate. A contractor who exhausts the general aggregate on slip-and-fall claims still has the full products-completed operations aggregate available for a defective-work claim, and vice versa.

A classic exam declarations page reads like this:

The Six Limits in Practice and How Aggregates Erode

The CGL stacks six limits, and the tested interactions are between the occurrence limit and the two aggregates.

Exam trap: Products-completed-operations claims erode their own aggregate, not the General Aggregate. A series of product claims can exhaust the products aggregate while the General Aggregate is untouched - and vice versa.

Worked Erosion Example

A contractor has a $1M each-occurrence / $2M general / $2M products CGL. Three premises occurrences cost $700K, $800K, and $900K. The first two pay in full ($1.5M), but the General Aggregate has only $500K left, so the third $900K claim pays just $500K - the each-occurrence limit no longer matters once the aggregate is nearly gone. Defense costs are paid in addition and do not erode these limits.

Worked Numeric: Eroding the Each Occurrence Limit

The Each Occurrence limit caps the sum of Coverage A damages and Coverage C medical payments for one occurrence. Suppose a single occurrence produces $40,000 in bodily-injury damages (Coverage A) and $5,000 in medical payments (Coverage C) on a $1,000,000 Each Occurrence limit.

• Total drawn this occurrence: $40,000 + $5,000 = $45,000
• Remaining Each Occurrence capacity that occurrence: $1,000,000 - $45,000 = $955,000
• General aggregate also reduced by $45,000.

The medical payments here come out of the Each Occurrence limit, not on top of it. Candidates lose points assuming Med Pay is additional. The $5,000 Medical Expense limit is a per-person sublimit within the Each Occurrence cap.

Defense Costs Are Outside the Limits

Under the ISO CGL, supplementary payments - including defense costs, the cost of bonds to release attachments (up to a stated amount), and prejudgment interest - are paid in addition to the limits of insurance. This is the opposite of a typical claims-made professional-liability form, where defense usually erodes (a "defense within limits" or "wasting" policy). The CGL's duty to defend ends when the applicable limit is exhausted by paying judgments or settlements - but defense costs themselves do not reduce that limit.

How a Per-Project Aggregate Endorsement Changes the Math

A general aggregate shared across every job can be exhausted by one bad project, leaving nothing for others. The Designated Construction Project(s) General Aggregate Limit endorsement (CG 25 03) gives each listed project its own separate general aggregate. The Amendment of Limits of Insurance (Designated Project or Premises) endorsement (CG 25 04) does the same per project or premises. Contractors frequently require these by contract so one large claim cannot consume the shared aggregate that other owners are relying on.