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.
General Liability in the Tennessee Tort System
Tennessee businesses carry Commercial General Liability (CGL) to cover bodily injury, property damage, and personal and advertising injury for which they are legally liable. Because Tennessee follows modified comparative fault (the 50% bar adopted in McIntyre v. Balentine), a claimant whose fault is 50% or more recovers nothing, and a claimant less than 50% at fault has the award reduced by their percentage. This rule directly shapes liability claim outcomes and the value of the CGL's duty to defend and indemnify Tennessee insureds.
Tennessee Damage Caps and Statutes of Limitation
Tennessee law caps non-economic damages (pain and suffering) in most personal-injury cases at a statutory limit, with higher caps or exceptions for catastrophic injury and no cap where the defendant acted intentionally or was intoxicated. Punitive damages are also statutorily capped and require clear and convincing proof. The general personal-injury statute of limitations is one year in Tennessee, shorter than many states, which makes prompt claim reporting under the CGL's duties-after-loss conditions especially important for insureds and producers to emphasize.
Coverage Coordination and Required Liability Lines
A Tennessee business typically layers liability coverage: the CGL for premises, operations, products, and completed operations; commercial auto liability for vehicles; professional liability/E&O for service errors; and an umbrella for catastrophic exposure above the underlying limits. Certain Tennessee occupations and license categories must show proof of liability coverage to the relevant board.
Producers must coordinate these forms so that an exposure excluded by one (for example, auto liability excluded by the CGL) is picked up by the proper companion policy, avoiding the gaps Tennessee claimants would otherwise exploit.
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?