Casualty Insurance Basics
Liability foundation
Liability insurance pays on behalf of an insured who is legally obligated because of negligence: a duty owed, a breach, proximate cause, and damages. Damages may be compensatory (special = medical bills and lost wages; general = pain and suffering) or punitive. Liability policies promise to defend and pay; the duty to defend is broader than the duty to indemnify and continues until the limits are exhausted.
Commercial general liability
The CGL is organized by coverage: A, bodily injury and property damage; B, personal and advertising injury (libel, slander, false arrest, invasion of privacy, infringement of copyright in an advertisement); C, medical payments (no-fault, short window); plus supplementary payments. Limits include each occurrence, a general aggregate, a products-completed operations aggregate, and sublimits for damage to rented premises and medical expense. An occurrence form responds to injury during the policy period; a claims-made form responds to a claim first made during the period, limited by a retroactive date and often extended by an extended reporting period (tail).
Auto and workers' compensation
California has no no-fault system; auto liability is tort-based, with financial responsibility limits of 30/60/15 for policies issued or renewed on or after January 1, 2025 (previously 15/30/5). Uninsured/underinsured motorist coverage must be offered. Workers' compensation is compulsory, supplies the exclusive remedy against the employer, and pays medical care, disability, and death benefits.
Worked example: aggregate erosion
$1,000,000 each occurrence, $2,000,000 general aggregate. One claim pays $600,000; a second pays $600,000. Remaining aggregate = $2,000,000 minus $1,200,000 = $800,000, so a third occurrence is capped at $800,000 even though the per-occurrence limit is $1,000,000.
Traps
The CGL excludes injury to the insured's own employees (workers' comp responds), damage to the insured's product or completed work, pollution, and most contractual liability assumed without an insured contract. Personal and advertising injury does not require bodily injury.