3.3 General Liability Insurance
Key Takeaways
- The ISO Commercial General Liability (CGL) policy has Coverage A (BI/PD), Coverage B (personal and advertising injury), and Coverage C (medical payments)
- Occurrence forms cover incidents that happen during the policy period; claims-made forms cover claims first made during the period after the retroactive date
- Claims-made policies use a retroactive date and offer extended reporting periods (basic and supplemental tail) to cover late-reported claims
- Products-completed operations coverage has its own separate aggregate and applies after goods leave the premises or work is finished and accepted
- The CGL carries multiple limits: general aggregate, products-completed ops aggregate, per occurrence, personal/advertising injury, damage to premises rented, and medical payments
CGL Coverage Sections
The Commercial General Liability (CGL) policy is the foundation of a business's liability program. The standard ISO form provides three insuring agreements.
Coverage A - Bodily Injury and Property Damage Liability
Pays sums the insured is legally obligated to pay as damages for bodily injury (BI) or property damage (PD) caused by an occurrence - defined as an accident, including continuous or repeated exposure to substantially the same harmful conditions. It also provides defense, with defense costs paid outside the limits.
Coverage B - Personal and Advertising Injury Liability
Covers a defined list of offenses (not "accidents"):
| Offense | Example |
|---|---|
| False arrest, detention, imprisonment | Wrongful shoplifting detention |
| Malicious prosecution | Baseless criminal complaint |
| Wrongful eviction / entry / invasion of privacy | Improper lockout of a tenant |
| Oral or written publication that libels/slanders | Defamatory ad copy |
| Use of another's advertising idea | Copying a competitor's slogan |
| Copyright/trade dress infringement in the advertisement | Lifting protected ad artwork |
Coverage C - Medical Payments
Pays reasonable medical expenses for bodily injury to a third party, regardless of fault, on the insured's premises or from operations, usually if expenses are incurred within a set period. It is goodwill coverage that can settle small injuries before they become liability suits.
Occurrence vs. Claims-Made
The single most tested CGL concept is the coverage trigger.
| Feature | Occurrence form | Claims-made form |
|---|---|---|
| Trigger | BI/PD occurs during the policy period | Claim is first made during the policy period |
| Retroactive date | None | Yes - bars claims for events before it |
| Tail / ERP | Not needed | Basic + supplemental extended reporting periods |
| Long-tail claims (e.g., latent injury) | Covered if the occurrence fell in the period | Covered only if the claim is reported in-period or under an ERP |
Exam tip: An occurrence policy responds based on when the injury happened, even if the claim arrives years later. A claims-made policy responds based on when the claim is reported, provided the event happened on or after the retroactive date.
Worked scenario. A product injures a customer in 2024 but the lawsuit is filed in 2027. Under an occurrence policy active in 2024, the 2024 policy responds. Under a claims-made policy, only the 2027 policy (or an ERP) responds, and only if the retroactive date predates 2024.
Extended Reporting Periods (Tail Coverage)
Because claims-made forms can leave a gap when a policy ends, ISO provides Extended Reporting Periods (ERPs):
- Basic ERP - automatic, short window (commonly 60 days for any claim, plus up to 5 years to report claims from occurrences already reported during the policy). No extra charge.
- Supplemental ERP - purchased by written request within 60 days of termination; provides an unlimited reporting tail for events before the policy ended. It is endorsed and separately rated.
The retroactive date is the linchpin: claims-made coverage applies only to occurrences on or after that date. Advancing ("laser-ing") or dropping the retroactive date can wipe out years of prior-acts protection - a key broker due-diligence point.
Products-Completed Operations
This built-in CGL coverage has its own separate aggregate limit.
| Hazard | When it applies | Example |
|---|---|---|
| Products | After the product leaves the insured's possession | A defective space heater catches fire in a buyer's home |
| Completed operations | After work is finished and accepted | A contractor's faulty roof leaks months after sign-off |
Work still in progress is not completed operations - it falls under ordinary Coverage A premises/operations.
Major CGL Exclusions
- Expected or intended injury (except reasonable-force self-defense)
- Contractual liability, except liability assumed in an "insured contract"
- Liquor liability for those in the business of selling/serving alcohol
- Workers' compensation and employer's liability (covered by the WC policy)
- Pollution (standard absolute pollution exclusion)
- Auto, aircraft, watercraft liability (covered elsewhere)
- Professional services / errors and omissions (needs separate E&O)
- Damage to the insured's own product/work (business-risk exclusions)
CGL Limit Structure
The CGL stacks several distinct limits - know which limit a given loss erodes.
| Limit | What it caps | Sample value |
|---|---|---|
| General Aggregate | Total Coverage A/B/C (except products-completed ops) for the term | $2,000,000 |
| Products-Completed Ops Aggregate | Separate cap for products/completed-ops losses | $2,000,000 |
| Each Occurrence | Most paid per occurrence (BI/PD) | $1,000,000 |
| Personal & Advertising Injury | Per person/organization | $1,000,000 |
| Damage to Premises Rented to You | Fire (and short-term) damage to rented space | $100,000 |
| Medical Payments | Per person, Coverage C | $5,000 |
Aggregate erosion example. A business with a $2,000,000 general aggregate pays $1,000,000 on one occurrence and $1,000,000 on another mid-year; the general aggregate is exhausted, and a third covered claim that term gets nothing under that aggregate - though a separate products-completed ops claim could still draw on its own untouched $2,000,000 aggregate.
A customer is injured by a product in 2024, but does not sue until 2027. The business holds an occurrence-based CGL. Which policy responds?
Which CGL coverage section would respond to a claim that the insured's advertisement infringed a competitor's copyrighted slogan?
Why does a claims-made policy use a retroactive date?
A business with a $2,000,000 general aggregate has already paid $2,000,000 in Coverage A losses this term. A new covered products-completed operations claim arises. What happens?