10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The CGL Form and Coverage A

The standard commercial general liability policy is built on the ISO CG 00 01 Commercial General Liability Coverage Form (current edition CG 00 01 04 13). It comes in two coverage triggers: the occurrence form (CG 00 01) and the claims-made form (CG 00 02). Unless an exam question says otherwise, assume the occurrence form, which is by far the most common.

Coverage A is the core liability grant. 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 this insurance applies," and it has the right and duty to defend any suit seeking those damages.

The Insuring Agreement Conditions (All Must Be Met)

Coverage A applies only when every one of these is true:

• The BI or PD is caused by an occurrence.
• The occurrence takes place in the coverage territory (US, its territories, Canada, and international waters/airspace in transit between them).
• The BI or PD occurs during the policy period.
• Before the policy period, no insured listed in the declarations and no employee authorized to give notice knew the BI/PD had occurred (the known-loss / known-injury provision).

Key Definitions (Memorize Exactly)

Bodily injury (BI): physical harm, sickness, or disease sustained by a person, including death resulting from any of these. Mental anguish is covered only when it flows from a physical injury; purely emotional distress with no physical component is generally not BI.

Property damage (PD) has two prongs:

Trap: Electronic data is not tangible property, so corrupting a customer's data is not PD under the unendorsed CGL. Loss of use of physically injured property is deemed to occur at the time of the physical injury; loss of use of property not physically injured is deemed to occur at the time of the occurrence.

Occurrence: "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Expected or intended injury is not an accident.

Coverage territory is broader than many candidates expect. It includes the United States (including its territories and possessions), Puerto Rico, and Canada; international waters or airspace during transit between those places; and, importantly, anywhere in the world for products made or sold in the territory and for the injury arising from the activities of a person whose home is in the territory who is away on business - provided the suit is brought in the coverage territory.

Two Hazard Groups Within Coverage A

Coverage A bundles two distinct exposures, and each is controlled by a separate aggregate limit (see numerics below).

1. Premises-Operations

BI/PD arising from the ownership, maintenance, or use of premises and from ongoing operations.

2. Products-Completed Operations

BI/PD arising away from premises the insured owns or rents, caused by the insured's product after it leaves the insured's possession, or by completed work. Work is "complete" at the earliest of: put to its intended use, the work called for in the contract is done, or the insured leaves the job (except service/maintenance return visits). This hazard is capped by its own separate aggregate.

The Six Standard Limits

The CGL declarations show six limits, and the exam expects you to know which loss each one caps and how they relate to one another. Two of them - the General Aggregate and the Products-Completed Operations Aggregate - are annual caps that reset only at renewal, while the Each Occurrence limit caps any single loss event no matter how many claimants are involved. The Medical Expense limit is a per-person figure, and the Personal & Advertising Injury limit is per person or organization.

The Damage to Premises Rented to You limit is a narrow grant that gives back a sliver of the otherwise-excluded care-custody-control exposure for premises the insured rents (and for fire damage, even short-term rentals like a hotel room). Understanding which bucket a loss falls into is the single most common CGL numeric tested on the state exam.

Worked Numerics: How the Limits Stack

Assume a CGL with these standard six declarations limits:

Example: A single fire injures two customers, $700,000 and $600,000. The total $1,300,000 exceeds the $1,000,000 Each Occurrence limit, so the insurer pays only $1,000,000 for that occurrence. If three separate, unrelated premises-ops occurrences during the year cost $900,000 each ($2,700,000 total), the $2,000,000 General Aggregate caps the year's payout at $2,000,000 - the third claim is reduced to $200,000. Products-completed ops losses do NOT erode the General Aggregate; they draw on their own $2,000,000.