CGL Limits of Insurance and Aggregates

CGL Limits of Insurance and Aggregates

The Insurance Services Office (ISO) Commercial General Liability Coverage Form CG 00 01 is the backbone of business liability insurance, and the licensing exam tests the structure of its limits heavily. Unlike a personal auto split limit, the CGL uses a six-part Limits of Insurance structure that interacts in a specific hierarchy. Memorizing that hierarchy is the single highest-yield exam task for this topic.

The Limits of Insurance section (Section III of CG 00 01) lists six limits: the General Aggregate Limit, the Products-Completed Operations Aggregate Limit, the Personal and Advertising Injury Limit, the Each Occurrence Limit, the Damage to Premises Rented to You Limit, and the Medical Expense Limit. Every payment the insurer makes erodes one or more of these limits.

The Six Limits and How They Cap Each Other

The Each Occurrence Limit is the most a policy pays for the combined sum of bodily injury and property damage arising out of any one occurrence. It is the working limit for most claims. The Personal and Advertising Injury Limit caps all such injury sustained by any one person or organization, regardless of how many offenses.

Two aggregates sit on top:

The General Aggregate is the overall ceiling. No matter how many separate Each Occurrence limits are triggered, total non-products payments cannot exceed the General Aggregate.

Worked Numeric: How Aggregates Erode

Assume a contractor carries: Each Occurrence $1,000,000; General Aggregate $2,000,000; Products-Completed Operations Aggregate $2,000,000; Personal & Advertising Injury $1,000,000; Damage to Premises Rented $300,000; Medical Expense $10,000.

• A slip-and-fall on the insured's premises injures three customers in one event totaling $1,400,000 in damages. This is one occurrence, so the insurer pays only $1,000,000 (the Each Occurrence cap). The $400,000 excess is the insured's exposure. The General Aggregate drops to $1,000,000.
• A second, unrelated premises occurrence later costs $1,300,000. The Each Occurrence cap is $1,000,000, but only $1,000,000 of General Aggregate remains — so the insurer pays $1,000,000 and the General Aggregate is now exhausted.
• A third premises occurrence pays $0 from premises/operations coverage because the General Aggregate is gone — even though the Each Occurrence limit was never individually breached.

Key trap: products-completed operations losses draw from the separate Products-Completed Aggregate, so they would still be available even though the General Aggregate is exhausted.

Defense Costs Are Outside the Limits

A crucial CGL feature tested repeatedly: under the standard CG 00 01, defense costs (Supplementary Payments) are paid in addition to the Limits of Insurance. Attorney fees, court costs, and post-judgment interest do not erode the Each Occurrence or aggregate limits. The duty to defend ends only when the insurer has used up the applicable limit in the payment of judgments or settlements.

Contrast this with many claims-made professional liability and some umbrella forms, where defense costs are inside the limits (called "defense within limits" or "eroding limits"). If the exam describes a policy where "defense reduces the limit," it is NOT a standard occurrence CGL.

The Six CGL Limits and How They Interact

The CGL declarations show six limits that cap payments in a layered way. The General Aggregate caps total payments (except products-completed operations) during the policy period. The Products-Completed Operations Aggregate is a separate cap for that exposure. The Each Occurrence limit caps any single occurrence and feeds both aggregates. Within each occurrence sit the Personal & Advertising Injury limit (per person/organization), the Damage to Premises Rented to You (fire damage) limit, and the Medical Expense limit (per person). Knowing which limit a given claim erodes is essential.

How Aggregates Erode and Reinstate

Each payment for bodily injury or property damage reduces the Each Occurrence limit for that occurrence and erodes the General Aggregate for the policy period; once the aggregate is exhausted, no further claims are paid even if the per-occurrence limit remains. Aggregates do not automatically reinstate mid-term, which is why a business with frequent claims can exhaust coverage before the policy expires. The separate products-completed operations aggregate protects that high-severity exposure from being depleted by ordinary premises claims.

Sublimits: Fire Damage and Medical Expense

The Damage to Premises Rented to You limit (commonly $100,000) covers fire, and on a short-term basis other perils, to premises the insured rents, a buy-back of the otherwise-excluded "property in your care" liability. The Medical Expense limit (commonly $5,000 per person) pays small third-party medical bills without regard to fault as a goodwill, claims-reducing feature, and it is excess of and coordinated with any liability payment. These sublimits sit inside the each-occurrence limit and are common targets for detail questions.

Damage to Premises Rented to You

This limit (default often $100,000 or $300,000) replaced the old "Fire Legal Liability" coverage. It pays for damage to premises rented to the insured — or temporarily occupied with the owner's permission — caused by fire, and for premises rented for 7 or fewer consecutive days for any covered cause. It is exempt from the standard exclusion that bars coverage for property in the insured's care, custody, or control. Watch for exam questions that try to apply the general aggregate to this limit: each premises has its own sub-limit.