10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

CGL Coverage A: Bodily Injury and Property Damage Liability

The Commercial General Liability (CGL) policy is the cornerstone of commercial liability protection. Most insurers write it on ISO standard forms. The two key coverage forms are the Occurrence form (CG 00 01) and the Claims-Made form (CG 00 02). The Occurrence form responds to injury or damage that takes place during the policy period, regardless of when the claim is filed. The Claims-Made form responds to claims first made during the policy period (or extended reporting period). For exam purposes, when no form is named, assume the Occurrence form CG 00 01.

The CGL provides three insuring agreements: Coverage A (Bodily Injury and Property Damage Liability), Coverage B (Personal and Advertising Injury Liability), and Coverage C (Medical Payments). Coverage A is the heart of the policy.

What Coverage A Insures

Coverage A pays sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD) to which the insurance applies. The insurer also has the right and duty to defend any suit seeking those damages, and may investigate and settle claims at its discretion.

Key definitions tested heavily:

• Bodily injury = bodily injury, sickness, or disease sustained by a person, including death resulting at any time.
• Property damage = (1) physical injury to tangible property, including resulting loss of use; or (2) loss of use of tangible property that is not physically injured. Electronic data is not tangible property.
• Occurrence = an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

The BI or PD must be caused by an occurrence that takes place in the coverage territory (generally the US, its territories, Puerto Rico, and Canada, with some worldwide extensions for products and certain travel).

Coverage Trigger and the Defense Obligation

Under the Occurrence form, the trigger is the occurrence happening during the policy period. The defense obligation is critical: the duty to defend is broader than the duty to pay. The insurer must defend even groundless, false, or fraudulent suits. However, defense costs are paid in addition to the limits of insurance and do not reduce them. The insurer's duty to defend ends when it has used up the applicable limit paying judgments or settlements.

Coverage A Limits Structure

The CGL is subject to several limits that interact:

• Each Occurrence Limit — the most paid for all BI and PD from any one occurrence.
• General Aggregate Limit — the most paid in the policy period for the sum of Coverage A (except products-completed operations), Coverage B, and Coverage C medical payments.
• Products-Completed Operations Aggregate Limit — a separate aggregate for products and completed-operations claims.
• Damage to Premises Rented to You Limit — a sublimit (commonly $100,000) for fire (and certain other perils) damage to premises rented to or occupied by the insured.

Worked example: A contractor has a $1,000,000 Each Occurrence Limit and a $2,000,000 General Aggregate. Three separate occurrences during the year produce covered judgments of $800,000, $700,000, and $900,000. The first two ($1,500,000) are paid in full. The third would be $900,000, but only $500,000 of General Aggregate remains ($2,000,000 - $1,500,000), so the insurer pays $500,000 and the insured absorbs $400,000.

Key Coverage A Exclusions (Common Exam Traps)

Coverage A contains numerous exclusions. The most tested:

• Expected or intended injury — BI/PD expected or intended from the insured's standpoint (reasonable-force exception for protection of persons/property).
• Contractual liability — liability assumed in a contract, except for an insured contract (e.g., a lease, easement, or the tort liability of another assumed in a business contract).
• Liquor liability — applies only if the insured is in the business of manufacturing, selling, or serving alcohol; a host who only occasionally serves is not excluded.
• Pollution — broad exclusion for actual/alleged pollutant release.
• Auto, aircraft, and watercraft — owned/operated autos are excluded (covered under the BAP instead).
• Damage to your product / your work — the policy is not a performance warranty; faulty workmanship to the insured's own product or work is excluded (the 'business risk' exclusions).
• Damage to property in your care, custody, or control.

Trap: The 'damage to your work' exclusion has an exception when the work was performed by a subcontractor, preserving coverage for completed-operations claims involving sub work.

Key Takeaways

• Coverage A pays damages for BI and PD caused by an occurrence in the coverage territory, on ISO form CG 00 01 (occurrence) or CG 00 02 (claims-made).
• Defense is provided in addition to limits and the duty to defend is broader than the duty to indemnify.
• Limits stack: Each Occurrence, General Aggregate, Products-Completed Operations Aggregate, and the Damage to Premises Rented sublimit (~$100,000).
• Major exclusions include expected/intended injury, contractual (except insured contracts), liquor (business only), pollution, auto/aircraft/watercraft, and the business-risk 'your work/your product' exclusions.
• The 'your work' exclusion has a subcontractor exception preserving completed-operations coverage.