Commercial General Liability: Coverage Mechanics, Exclusions and Premium Development
This domain tests how the standard commercial general liability (CGL) coverage form is triggered, structured and priced, and how the exposure figures behind CGL premium are classified and verified at audit. Questions typically turn on the occurrence trigger, the three insuring agreements, the limits architecture, the business-risk exclusions, and the exposure bases that generate audited premium.
Coverage trigger and the insuring agreements
- The standard CGL is written on an occurrence basis: bodily injury or property damage must occur during the policy period, regardless of when the claim is reported. Claims-made versions instead require the claim to be made during the policy period and add a retroactive date and extended reporting periods.
- Coverage A - bodily injury and property damage.
- Coverage B - personal and advertising injury: libel, slander, wrongful eviction or entry, violation of privacy, use of another's advertising idea, and copyright infringement in your advertisement.
- Coverage C - medical payments: no-fault, for injury on the insured's premises or arising from its operations, with expense incurred within one year.
Limits architecture
Each occurrence, general aggregate (per policy period), products-completed operations aggregate, personal and advertising injury limit, damage to premises rented to you, and medical expense limit. Coverage C and the damage-to-premises limit sit outside the general aggregate; products-completed operations losses respond to their own aggregate.
Exclusions that decide claims
Expected or intended injury; contractual liability; liquor liability; employer's liability and workers compensation; pollution; auto, aircraft and watercraft. The business-risk exclusions - your product, your work, impaired property, recall - bar the cost of repairing or replacing the insured's own faulty goods or workmanship. Professional services and damage to your own property are separately excluded.
Worked example
A subcontractor retained by a general contractor installs a roof that leaks, staining interior drywall and ruining the roof deck. The cost to redo the defective roofing falls within the damage-to-your-work exclusion, but that exclusion carries a subcontractor exception, so it does not apply to work performed on the insured's behalf by a subcontractor - the damaged roofing itself may therefore be covered. The drywall is other property harmed by the faulty work, not the work itself, so the exclusion does not reach it. Because both losses occurred after the work was completed and away from the insured's premises, they fall in the products-completed operations hazard and erode that aggregate, not the general aggregate.
Premium development and audit
Premises and operations exposure is rated on the classification basis that fits the risk - gross sales, payroll, area or admissions. Products and completed operations exposure is rated on gross sales, per $1,000 of exposure. The auditor must confirm the correct classification, verify reported sales and payroll against the insured's records, and capture exposures for classes written on an "if any" basis.
Traps that cost marks
Assuming the CGL is claims-made; forgetting that Coverage C and damage-to-premises limits are outside the general aggregate; confusing your product (goods sold) with your work (construction or services); treating the subcontractor exception as deleting the exclusion rather than restoring only the specific damaged work; overlooking that work still in the insured's possession is not in the products-completed operations hazard.