10.1 CGL Coverage A: Bodily Injury and Property Damage Liability
Key Takeaways
- The CGL is written on ISO form CG 00 01 (occurrence) or CG 00 02 (claims-made); Coverage A insures bodily injury and property damage the insured is legally obligated to pay.
- Coverage A requires an occurrence (accident), within the coverage territory, during the policy period; expected or intended injury is excluded.
- Occurrence forms trigger on when injury happens; claims-made forms trigger on when the claim is first made and use a retroactive date.
- Defense costs are paid in addition to the limits, but the duty to defend ends when the applicable limit is exhausted.
- Coverage A losses erode the General Aggregate (or the Products-Completed Operations Aggregate), not just the Each Occurrence limit.
The CGL Coverage Form
The Commercial General Liability policy is built on ISO Coverage Form CG 00 01 (the occurrence form) or CG 00 02 (the claims-made form). Most exam questions assume CG 00 01. The form is assembled with the Common Policy Declarations, the Common Policy Conditions (IL 00 17), the CGL Coverage Form, and any endorsements. The current edition seen on most exams is the 04 13 edition, though insurers may use later editions.
The coverage form opens with three insuring agreements:
- Coverage A - Bodily Injury and Property Damage Liability
- Coverage B - Personal and Advertising Injury Liability
- Coverage C - Medical Payments
Coverage A is the financial heart of the policy. The insurer agrees to pay "those sums the insured becomes legally obligated to pay as damages" because of bodily injury or property damage to which the insurance applies, and it assumes the duty to defend any suit seeking those damages.
The Three-Part Coverage A Trigger
Coverage A responds only when all of the following are satisfied:
- The bodily injury or property damage is caused by an occurrence - defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
- The injury or damage occurs in the coverage territory - the U.S. (including territories and possessions), Puerto Rico, and Canada, with limited worldwide extensions for products and the insured's traveling employees.
- The injury or damage occurs during the policy period.
Trap: "Occurrence" requires an accident. Intentional acts that are expected or intended from the insured's standpoint are excluded - except reasonable force used to protect persons or property. Memorize that distinction; exams test the "expected or intended" exclusion repeatedly.
Occurrence vs. Claims-Made Triggers
| Feature | Occurrence (CG 00 01) | Claims-Made (CG 00 02) |
|---|---|---|
| Trigger | Injury happens during policy period | Claim is first made during policy period |
| Retroactive date | None | Yes - bars injury before that date |
| Long-tail exposures | Covered even if claim filed years later | Needs extended reporting period (tail) |
| Premium | Higher initially | Lower initially |
Worked example - occurrence trigger: A contractor builds a deck in 2024 under an occurrence policy that expires 12/31/2024. The deck collapses and injures a guest in 2026. Because the injury (occurrence) controls under an occurrence form, the 2026 policy in force when the injury happens responds - not the 2024 policy. Reverse this for claims-made: the policy in force when the claim is made responds, provided the injury occurred on or after the retroactive date.
A roofing contractor completes a job in November 2024 under an occurrence-based CGL that expires December 31, 2024. The roof leaks during a 2026 storm, causing $40,000 of interior water damage. Which policy responds?
What Counts as Bodily Injury and Property Damage
Bodily injury (BI) means bodily injury, sickness, or disease sustained by a person, including death that results. Purely emotional distress without physical manifestation is generally not BI under standard ISO wording.
Property damage (PD) has two prongs:
- Physical injury to tangible property, including resulting loss of use; and
- Loss of use of tangible property that is not physically injured.
Electronic data is expressly not tangible property under the CGL, which is why cyber exposures need separate coverage. The exam loves the "loss of use" prong: if a contractor's mistake forces a store to close for a week with no physical damage, the lost-use claim can still be PD.
Defense Costs and the Limits Structure
The CGL is a defense-outside-the-limits policy. Defense costs - attorney fees, court costs, investigation - are paid in addition to the applicable limit of insurance and do not erode it. The insurer's duty to defend ends once the applicable limit is exhausted by payment of judgments or settlements.
Coverage A and Coverage B claims erode aggregates differently:
- A typical CGL has a $1,000,000 Each Occurrence Limit and a $2,000,000 General Aggregate.
- Coverage A bodily-injury/property-damage claims (other than products-completed operations) erode the General Aggregate.
- Products and completed-operations losses erode the separate Products-Completed Operations Aggregate.
Worked numeric: With a $1M Each Occurrence limit and $2M General Aggregate, two unrelated premises accidents settle for $700,000 and $900,000. Each is within the per-occurrence cap, and together they consume $1.6M of the $2M aggregate, leaving $400,000 for the rest of the policy year.
A CGL has a $1,000,000 Each Occurrence Limit and a $2,000,000 General Aggregate. The insurer has already paid $1,500,000 in Coverage A losses this term. A new covered occurrence produces an $800,000 judgment. How much will the insurer pay on the new judgment?
Damages, Settlement, and the "Legally Obligated" Standard
Coverage A only pays sums the insured is legally obligated to pay as damages. This means the insured must have legal liability - typically through negligence, but also strict liability or liability assumed under an insured contract. A voluntary payment the insured makes without the insurer's consent is generally not recoverable; the policy's conditions bar the insured from making payments, assuming obligations, or incurring expenses without consent, except first aid.
The insurer also reserves the right and duty to defend and the right to settle any claim or suit it considers appropriate. Unlike some professional liability policies, the standard CGL contains no consent-to-settle clause for the insured - the insurer may settle without the insured's permission. Once the insurer pays the applicable limit in judgments or settlements, it has no further duty to defend or to pay, which is why exhaustion of limits is so consequential on long-tail claims.