3.2 Texas General Liability Insurance

Fault Allocation: Proportionate Responsibility and Joint Liability

Liability insurance pays a third party when the insured is legally responsible for bodily injury or property damage. To know who pays what, Texas applies proportionate responsibility - a modified comparative negligence rule with a 51% bar. A claimant's recovery is reduced by their own percentage of fault, and a claimant who is 51% or more at fault recovers nothing.

The second layer is joint and several liability, which Texas modified to soften the old rule that any defendant could be forced to pay the whole judgment:

• A defendant found more than 50% responsible can be held jointly and severally liable - potentially for the entire award.
• A defendant found 50% or less responsible owes only their several (proportional) share.

This 50% threshold is the trigger to memorize - it differs from the 51% bar that governs the claimant's right to recover at all.

Putting the rules together

Worked example: A plaintiff is injured at a job site and sues two contractors. The jury assigns the plaintiff 20% fault, Contractor X 60%, and Contractor Y 20%, with $500,000 in damages. First, the plaintiff's award is reduced by 20% to $400,000 (and the plaintiff is under the 51% bar, so recovery is allowed). Contractor X, at 60% (more than 50%), can be made to pay the entire $400,000 under joint and several liability and then seek contribution from Y. Contractor Y, at 20% (50% or less), owes only its several share of $80,000.

Exam questions often hinge on whether a defendant crosses the 50% line (joint liability) and whether the claimant crosses the 51% line (loses all recovery). Keep the two thresholds straight.

The Commercial General Liability (CGL) Policy

The Commercial General Liability (CGL) policy is the workhorse business-liability form, covering premises and operations, products and completed operations, personal and advertising injury, and providing a duty to defend. Its limits are layered: a per-occurrence limit, a products-completed operations aggregate, and a general aggregate that caps total payouts in the policy period.

The single most tested CGL distinction is the coverage trigger:

• Occurrence form - responds to bodily injury or property damage that occurs during the policy period, no matter when the claim is later filed. This protects against long-tail losses (the harm and the lawsuit can be years apart).
• Claims-made form - responds only to claims first made during the policy period (on or after the retroactive date). It pairs with Extended Reporting Periods (ERPs, or "tail" coverage) to cover claims reported after the policy ends.

Because claims-made coverage can leave gaps when policies are switched, agents must explain the retroactive date and tail options. A common exam trap presents harm that happened years ago but is sued today, then asks which form responds - the answer turns on which trigger applies.

What the CGL covers - and what it excludes

Candidates should be able to list the CGL's grant of coverage and its built-in exclusions. The form is organized into three coverage parts:

• Coverage A - Bodily Injury and Property Damage Liability (premises, operations, and the products-completed operations hazard).
• Coverage B - Personal and Advertising Injury (offenses such as libel, slander, false arrest, and copyright infringement in advertising).
• Coverage C - Medical Payments (small no-fault medical amounts paid without a finding of liability, as a goodwill coverage).

Key exclusions drive separate insurance needs: the CGL excludes expected or intended injury, auto/aircraft/watercraft liability (covered by commercial auto/aviation forms), workers' compensation and employer's liability for the insured's own employees, professional services errors (covered by E&O), and pollution (subject to narrow exceptions). Knowing what the CGL leaves out is just as testable as knowing what it includes.

Rate Regulation, Professional Liability, and Punitive Damages

Texas regulates most P&C liability rates under a file-and-use system: insurers file rates with the Texas Department of Insurance (TDI) and may use them, subject to TDI's authority to review and disapprove rates that are inadequate, excessive, or unfairly discriminatory. Rates must rest on sound actuarial support; territorial rating is allowed but regulated, while discrimination on prohibited bases is not.

Umbrella and excess liability policies sit above the CGL: an excess policy simply adds limits over the underlying form, while an umbrella also broadens coverage and can drop down over a self-insured retention for claims the primary policy does not cover. Both require the insured to keep the scheduled underlying limits in force.

Professional liability (errors and omissions, E&O) covers losses from a professional's mistakes in rendering services - distinct from CGL, which excludes professional-service errors. Some Texas professions face disclosure or coverage expectations; for example, attorneys must disclose to clients if they lack malpractice coverage. Agents should pair a CGL with E&O for service businesses because the two forms cover different exposures.

Insurability of punitive damages

Texas is comparatively permissive about insuring punitive (exemplary) damages, where many states bar it on public-policy grounds. Still, coverage depends on policy language, and standard forms typically exclude intentional or expected harm. So while a gross-negligence punitive award might be insurable, deliberate wrongdoing usually is not.