11.1 CGL Limits of Insurance and Aggregates

How the Six CGL Limits Fit Together

The Insurance Services Office (ISO) Commercial General Liability form CG 00 01 structures its Limits of Insurance section around six separate dollar amounts. Each controls a different slice of coverage, and they interact through two aggregate "buckets" that can be exhausted during the policy period.

The declarations page lists each limit. On the exam, candidates must know which limit a given loss draws against and how the aggregates cap total recovery.

The Limit Hierarchy

Which Aggregate Does a Loss Erode?

A claim arising from a slip-and-fall on your premises or from ongoing operations erodes the General Aggregate. A claim arising after your product leaves your control, or after your work is finished, erodes the separate Products-Completed Operations Aggregate (PCOA).

This separation matters: a manufacturer can exhaust its PCOA on a defective-product recall season and still have a full General Aggregate for premises liability.

Worked Example: Aggregate Erosion

Assume declarations show General Aggregate $2,000,000, PCOA $2,000,000, Each Occurrence $1,000,000.

A customer is injured by a defective product (a completed-operations loss) for $700,000. Then two premises slip-and-fall claims hit at $600,000 and $650,000.

• Product claim: $700,000 erodes PCOA, leaving $1,300,000 PCOA. Each Occurrence ($1M) is not breached.
• Premises claims: $600,000 + $650,000 = $1,250,000 erodes the General Aggregate, leaving $750,000.

Each loss stayed under the $1M Each Occurrence cap, so the occurrence limit never reduced any payment here.

Defense Costs Sit Outside the Limits

A frequently tested trap: under the CGL, Supplementary Payments (defense attorney fees, court costs, bail bond premiums up to stated amounts, post-judgment interest) are paid in addition to the Limits of Insurance.

They do not erode the Each Occurrence limit or the aggregates. This is the opposite of many professional liability and claims-made forms, where defense costs are "inside the limits" and reduce the amount available to pay damages.

The Sublimited Coverages

Three of the six limits act as sublimits within or alongside the main aggregates.

• Damage to Premises Rented to You is a fire-legal-liability sublimit (default $100,000) covering damage to a premises the insured rents, including short-term occupancy. It draws within the General Aggregate.
• Medical Payments (default $5,000 per person) pays reasonable medical costs without regard to fault, also within the General Aggregate.
• Personal and Advertising Injury has its own per-person/organization cap and erodes the General Aggregate.

Per-Location and Per-Project Aggregates

Because one shared General Aggregate can be exhausted by a single bad location, two endorsements split it.

A contractor running ten projects can buy a per-project aggregate so a loss at one site cannot consume the limits protecting the other nine. Exam questions reward recognizing when a single aggregate is inadequate.

Second Worked Example: Occurrence Limit Caps a Payment

Declarations: Each Occurrence $1,000,000, General Aggregate $2,000,000.

A single explosion injures several people and damages neighboring property, totaling $1,400,000 in covered bodily injury and property damage from one occurrence.

• The Each Occurrence limit caps the payment at $1,000,000, even though the General Aggregate still has $2,000,000 available.
• That $1,000,000 then reduces the General Aggregate to $1,000,000 for the rest of the term.

The occurrence limit governs a single event; the aggregate governs the cumulative season.

Restoring Limits and How Aggregates Reset

CGL aggregates apply per policy period, normally 12 months. Once a new policy period begins, the aggregates reset to their full amounts; they do not roll over unused or carry forward exhausted balances.

A policy period longer than 12 months (an extended or multi-year term) generally treats each 12-month segment as a separate annual period for aggregate purposes unless endorsed otherwise. The remaining portion is treated as part of the last full period. This stops a three-year policy from sharing a single, easily exhausted aggregate across the entire term.

Putting the Limits in Order on a Claim

When analyzing any CGL loss on the exam, work through the limits in this sequence:

1. Identify the category (premises/operations vs. products-completed operations vs. personal/advertising vs. medical).
2. Apply the Each Occurrence limit (or the per-person sublimit) to cap the single payment.
3. Subtract that payment from the correct aggregate.
4. Add Supplementary Payments on top without touching any limit.

Following this order prevents the classic error of mixing the products and general aggregates.