10.1 CGL Coverage A: Bodily Injury and Property Damage Liability

The Heart of the CGL

The Commercial General Liability (CGL) policy is built on the ISO Commercial General Liability Coverage Form CG 00 01. The current widely tested edition is CG 00 01 04 13 (April 2013). Coverage A is the most heavily examined grant: it covers liability for bodily injury (BI) and property damage (PD) that the insured becomes legally obligated to pay.

The core insuring agreement reads: the insurer will 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 conditions must all be met for coverage to attach.

• The BI or PD must be caused by an occurrence — an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
• The occurrence must take place in the coverage territory (US, its territories, Canada, plus limited worldwide for products and internet activities).
• The BI or PD must happen during the policy period (for the standard occurrence trigger).

Occurrence vs. Claims-Made Trigger

The unendorsed CG 00 01 is an occurrence form: it responds to injury or damage that takes place during the policy period, no matter when the claim is reported. A separate ISO form, CG 00 02, is the claims-made version, which responds only to claims first made during the policy period (subject to a retroactive date and an optional Extended Reporting Period, or "tail").

Definitions That Drive Coverage

• Bodily injury — bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time. Pure emotional distress without physical injury is often disputed.
• 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 — note that intentional acts are generally excluded; the harm must be neither expected nor intended from the insured's standpoint.

Exam trap: Loss of use of undamaged property (e.g., a building tenant cannot access the premises because of the insured's negligence) still qualifies as property damage even though nothing was physically broken.

The Six CGL Limits and How Coverage A Erodes

The CGL Declarations list six limits. Coverage A claims erode the General Aggregate (unless products-completed-operations applies). Memorize this structure.

Worked Numeric: Aggregate Erosion

A contractor carries a CGL with a $1,000,000 Each Occurrence limit and a $2,000,000 General Aggregate. During the policy year three separate premises-operations occurrences are settled for $600,000, $800,000, and $900,000.

• Occurrence 1: $600,000 paid (within the $1M each-occurrence cap). Aggregate remaining: $2,000,000 − $600,000 = $1,400,000.
• Occurrence 2: $800,000 paid. Aggregate remaining: $1,400,000 − $800,000 = $600,000.
• Occurrence 3: claim is $900,000, but only $600,000 of aggregate remains, so the insurer pays $600,000. The insured absorbs the remaining $300,000 out of pocket.

This illustrates why the aggregate, not the per-occurrence limit, is the binding constraint after multiple losses in one year. On the exam, watch for the products-completed-operations twist: those losses erode the separate Products-Completed Operations Aggregate, not the General Aggregate, so they do not consume the $2,000,000 in this example.

Defense Inside the Insuring Agreement

A defining CGL feature is the insurer's duty to defend. The insurer has the right and duty to defend the insured against any "suit" seeking damages to which the insurance applies, even if the allegations are groundless, false, or fraudulent. The duty to defend is broader than the duty to indemnify — if any part of a complaint potentially falls within coverage, the insurer must defend the entire suit.

Crucially, defense costs in the CGL are paid as Supplementary Payments in addition to the limits (covered in Section 10.3). This contrasts with many professional-liability and D&O policies where defense costs erode the limit ("defense within limits" or "wasting" limits).

• The duty to defend ends once the insurer has used up the applicable limit by paying judgments or settlements.
• The insurer is not obligated to defend suits seeking relief other than money damages (e.g., injunctions), though it may choose to.

Coverage A Exclusions That Define the Product

CGL Coverage A promises to pay sums the insured becomes legally obligated to pay as damages for bodily injury and property damage caused by an occurrence (an accident, including continuous exposure to harmful conditions). What is not covered is just as important and heavily tested.

The business-risk exclusions (your-product, your-work, impaired property) are the recurring trap: the CGL covers damage your faulty work does to other property or persons, but not the cost to redo the defective work itself — that is the contractor's own business risk.