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Know Your Commercial General Liability Insurance Limits

A commercial general liability policy (CGL) lists six different limits on the policy’s declarations page. While the limits may be listed separately, it’s important to understand that they are all interrelated. That means that payment of damages for one limit will affect another limit.

To illustrate how these limits interact, it is necessary to examine each one in detail:

The General Aggregate Limit  – The maximum amount the insurer will pay during the policy period for all damages including bodily injury, property damage, personal and advertising injury except for any amount paid as damages because of bodily injury or property damage included within the products-completed operations hazard. The definition of the products-completed operations hazard is outlined in the policy and a separate aggregate limit applies to this type of claim. Also included within the general aggregate are damages paid for medical payments.

Products-Completed Operations Aggregate Limit – The maximum amount the insurer will pay for damages because of bodily injury or property damage included within the products-completed operations hazard. The specified hazards are those described within the definition of the products-completed operations hazard and are limited to bodily injury or property damage that:

1.             Occurs away from the insured’s premises.

2.             Caused by the insured’s products that are no longer in the insured’s possession or an insured’s work that has been completed.

Personal and Advertising Injury Limit – The maximum amount the insurer will pay if legally obligated to pay damages due to personal and advertising injury offenses. The personal and advertising injury limit applies separately to each person or organization that sustains damages because of a covered offense. However, regardless of the number of persons or organizations claiming damages, or the number of offenses claimed during the policy period, the insurer is only obligated to pay up to the general aggregate limit.

Each Occurrence Limit – The maximum the insurer will pay for the sum of all damages due to bodily injury, property damage and medical payments. Keep in mind that there is an aggregate limit for bodily injury and property damage claims that arise from the products-completed operations hazard and a separate limit for all other bodily injury and property damages. However, the each occurrence limit does apply to all sums paid for medical payments.

Damage to Premises Rented to You Limit – This coverage is actually an exception to certain exclusions found in the bodily injury and property damage coverage. The first exception provides coverage for property damage to a premises and its contents, rented to the insured for 7 or fewer consecutive days if an insured is legally obligated to pay for such damage due to any cause except fire.

The second exception provides coverage for damage to the premises only if an insured is legally obligated to pay for property damage due to fire. However, if an insured is held liable solely due to an agreement to be responsible for the property or for damage to the property, there is no coverage. Liability has to be imposed on the insured as the result of a lawsuit in order for coverage to apply.

The Damage to Premises Rented to You limit applies to any one premises. Any property damage paid under this limit will reduce the each occurrence limit for that same occurrence and will also reduce the general aggregate limit.

Medical Expense Limit – The medical expenses coverage is a separate insuring agreement that obligates the insurer to pay reasonable medical expenses for bodily injury, caused by an accident, without regard to fault. Medical payments are subject to the medical expense limit. The medical expense limit applies separately to each person. However, medical payments will reduce the each occurrence limit for that same occurrence and will also reduce the general aggregate limit.