10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The Insuring Agreement of Coverage A

The Commercial General Liability Coverage Form (ISO CG 00 01) is the foundation of nearly every business liability program. The current edition examiners reference is CG 00 01 04 13 (April 2013), though older 12 07 and 10 01 editions still appear on legacy policies. Coverage A is the heart of the form. The insurer promises to pay "those sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies."

Three elements must all be present before Coverage A responds. First, there must be bodily injury (BI) or property damage (PD) as those terms are defined. Second, the injury or damage must be caused by an occurrence. Third, the occurrence must take place in the coverage territory during the policy period. Miss any one element and the duty to pay never attaches.

Defined Terms That Drive Coverage

The defined words are tested heavily because juries and adjusters live and die by them:

• Bodily injury = bodily injury, sickness, or disease sustained by a person, including death that results. It does not include standalone emotional injury unless it flows from a physical injury (a trap).
• Property damage = (1) physical injury to tangible property, including resulting loss of use, or (2) loss of use of tangible property that is not physically injured. Electronic data is not tangible property.
• Occurrence = an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The key word is accident - it filters out intended or expected harm.

Because loss of use is split into two prongs, an exam item may give a scenario where a contractor blocks a client's driveway without touching anything - that is the second prong, loss of use of property not physically injured, and it triggers a PD claim.

Occurrence vs. Claims-Made Triggers

Coverage A is written on an occurrence trigger in the standard CG 00 01: the policy in force when the BI or PD takes place responds, even if the claim is filed years later. ISO also offers a claims-made form (CG 00 02), which responds only to claims first made during the policy period (subject to a retroactive date and an extended reporting period, or "tail"). Knowing which trigger applies is a classic distractor.

Expect a question contrasting the two: an occurrence policy can produce stacking of multiple policy-year limits for a single long-developing injury, while claims-made avoids that by anchoring on the report date.

A Worked Limit Example

Assume a CGL with these declarations: Each Occurrence Limit $1,000,000, General Aggregate $2,000,000, Products-Completed Operations Aggregate $2,000,000. A slip-and-fall in the insured's store produces a $1,400,000 judgment.

The insurer pays the Each Occurrence Limit of $1,000,000 only - the per-occurrence cap controls a single event, leaving the insured to fund the $400,000 excess. That $1,000,000 also erodes the General Aggregate, dropping it to $1,000,000 for the rest of the term.

A separate later premises claim of $1,200,000 would again be capped at $1,000,000, and that payment exhausts the General Aggregate. A third premises claim that year would have no remaining premises limit, even though the per-occurrence limit by itself is untouched. Candidates routinely miss that the aggregate, not the occurrence limit, is the true ceiling for the year.

The Insuring Agreement's Two Promises

Coverage A makes two distinct promises: to pay damages the insured becomes legally obligated to pay for covered bodily injury or property damage, and to defend any suit seeking such damages — even if groundless, false, or fraudulent. The duty to defend is broader than the duty to indemnify; the insurer must defend whenever the allegations potentially fall within coverage, and that duty ends when the applicable limit is exhausted by payment of judgments or settlements.

Products-Completed Operations Hazard

Coverage A separates ongoing-operations injury from the products-completed operations hazard (PCOH) — injury away from the insured's premises arising out of the insured's product or completed work. PCOH losses are subject to the separate products-completed operations aggregate, not the general aggregate. A defective product that injures a customer at home is a PCOH claim; an injury at the job site during work is an ongoing-operations claim.

Worked Trigger and Limit Recap

If injury is expected or intended from the insured's standpoint, there is no "occurrence" and no Coverage A — the single biggest conceptual gate to coverage.