CGL Coverage A: Bodily Injury and Property Damage Liability
Key Takeaways
- Coverage A pays sums the insured becomes legally obligated to pay as damages for bodily injury or property damage caused by an occurrence in the coverage territory during the policy period.
- The standard ISO form is the Commercial General Liability Coverage Form CG 00 01, and the occurrence version is triggered by injury that happens during the policy period, not by when the claim is reported.
- The Each Occurrence Limit caps any single loss; the General Aggregate and Products-Completed Operations Aggregate cap total payouts for the policy term.
- Defense costs are paid in addition to the limits but defense ends once the applicable limit is exhausted by judgments or settlements.
- Key exclusions include expected or intended injury, contractual liability, pollution, and damage to the insured's own work or product.
Coverage A: The Insuring Agreement
The Commercial General Liability (CGL) policy is the backbone of business liability insurance. Coverage A pays "those sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD)" caused by an occurrence and taking place in the coverage territory.
The standard form is the Insurance Services Office (ISO) Commercial General Liability Coverage Form, numbered CG 00 01. Two trigger versions exist: the occurrence form and the claims-made form (CG 00 02).
Bodily Injury and Property Damage Defined
Bodily injury means physical injury, sickness, or disease sustained by a person, including resulting death. It is the harm to people.
Property damage means physical injury to tangible property, including resulting loss of use, OR loss of use of tangible property that is not physically injured. A retailer's parking lot blocked by your overturned truck is loss of use even if nothing is dented.
Note the exam trap: tangible property only. Pure economic loss and electronic data are generally excluded from the definition of tangible property.
The Occurrence Trigger
An occurrence is "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The key feature of the occurrence form is the trigger: coverage applies if the BI or PD happens during the policy period, regardless of when the claim is filed.
Contrast this with the claims-made form, which is triggered by the claim being first made during the policy period (subject to a retroactive date and tail/extended reporting provisions). Most CGL exam questions assume the occurrence form unless stated otherwise.
Limits of Insurance
The CGL stacks several limits. Understanding their interplay is heavily tested.
| Limit | What it caps |
|---|---|
| Each Occurrence Limit | The most paid for any single occurrence (Coverage A + C combined) |
| General Aggregate Limit | Total for all Coverage A (non-products), B, and C during the term |
| Products-Completed Operations Aggregate | Total for products and completed-work claims, separate from General Aggregate |
| Damage to Premises Rented to You | Sublimit, commonly $100,000, for fire/property damage to rented premises |
Aggregates restore at each renewal. Once exhausted, the insurer pays no more even if the occurrence limit has room.
Worked Limit Example
A contractor carries: Each Occurrence $1,000,000; General Aggregate $2,000,000; Products-Completed Operations Aggregate $2,000,000.
During the year three premises-operations claims settle for $800,000, $700,000, and $600,000 = $2,100,000 demanded. The first two ($1,500,000) erode the General Aggregate, leaving $500,000. The third claim, though under the $1,000,000 occurrence limit, is paid only up to the remaining $500,000 aggregate. The insured absorbs the $100,000 gap.
Major Exclusions Under Coverage A
The insuring grant is wide, so exclusions narrow it:
- Expected or intended injury by the insured (intentional acts are not accidents).
- Contractual liability, except liability assumed in an insured contract.
- Liquor liability for those in the business of serving alcohol.
- Pollution (the absolute pollution exclusion).
- Workers compensation and employer's liability obligations.
- Damage to your product, your work, and impaired property (the business-risk exclusions, often called the "k through n" exclusions).
The business-risk exclusions reflect a core principle: the CGL is liability insurance, not a performance warranty on the insured's own faulty work.
Coverage Territory and Policy Period
Coverage A applies only to BI or PD that takes place in the coverage territory during the policy period. The standard territory includes the United States (and its territories and possessions), Puerto Rico, and Canada. It also extends to international waters or airspace during transit, and to certain products made or sold in the territory but causing injury elsewhere.
This matters for the exam: an injury in the United States from a product sold there is covered, but a permanent foreign operation usually needs broadened coverage or a separate foreign liability policy.
Premises-Operations vs Products-Completed Operations
Coverage A really splits into two exposure groups, each tracked by a different aggregate.
- Premises and operations liability covers injury or damage arising while work is ongoing or on the insured's premises. Example: a customer slips in your store, or a worker drops a tool on a passerby mid-job. These erode the General Aggregate.
- Products and completed operations liability covers injury after a product leaves the insured's control or after work is finished. Example: a deck collapses six months after a contractor completes it. These erode the separate Products-Completed Operations Aggregate.
Keeping these two buckets distinct is essential, because exhausting one does not affect the other.
Occurrence vs Claims-Made: A Closer Look
The occurrence form (CG 00 01) responds to injury that happens during the policy period even if the claim surfaces years later, which suits long-tail exposures. The claims-made form (CG 00 02) responds only to claims first made during the period, and it uses a retroactive date to exclude prior injury.
Claims-made policies offer two tail options: a Basic Extended Reporting Period (ERP) of 60 days (plus a five-year mini-tail for occurrences reported within those 60 days) provided automatically, and a Supplemental ERP purchased by endorsement for unlimited reporting time. When switching carriers, mismatched retroactive dates can create dangerous gaps.
Common Coverage A Exam Traps
Watch for these distractors on the exam:
- A claim for the insured's faulty workmanship itself is excluded; only resulting damage to other property is covered.
- Punitive damages may be uninsurable depending on state law even when compensatory damages are paid.
- The Damage to Premises Rented to You sublimit applies to fire (and short-term rentals), not to ordinary tenant negligence beyond that limit.
- An employee injured on the job is a workers compensation matter, not Coverage A.
A manufacturer's CGL has a $1,000,000 Each Occurrence limit and a $2,000,000 Products-Completed Operations Aggregate. Three separate product-injury claims settle at $900,000 each. How much does the insurer pay in total?
Under CGL Coverage A occurrence form, which event determines whether coverage applies?