The Commercial General Liability (CGL) policy is the backbone of business liability protection. It covers a business when it is legally responsible for bodily injury, property damage, or certain personal injuries it causes to others. This guide breaks down how the CGL is triggered, the three coverages it provides, the difference between premises and products claims, how limits work, and the exclusions that trip up new agents on the exam.

What the CGL does

A business faces lawsuits from customers who slip and fall, neighbors damaged by its operations, and people harmed by its products. The CGL responds to these third-party claims by paying damages the insured is legally obligated to pay and by providing a legal defense. A crucial exam point: defense costs are usually paid in addition to the policy limits and the insurer's duty to defend ends once the limits are exhausted by payment of judgments or settlements.

Occurrence vs. claims-made: how coverage is triggered

The single most tested CGL concept is when a policy responds. There are two trigger types.

Occurrence form

An occurrence policy covers injury or damage that takes place during the policy period, no matter when the claim is actually filed. If a covered event happens this year, the policy in force this year responds—even if the lawsuit arrives five years later. This is the more common and more generous form.

Claims-made form

A claims-made policy covers claims that are first made against the insured during the policy period (and after the retroactive date). Timing of the claim, not just the event, matters. Two special features control claims-made coverage:

• Retroactive (retro) date – The earliest date an injury can occur and still be covered. Anything happening before the retro date is excluded, no matter when the claim is made.
• Tail / Extended Reporting Period (ERP) – Because a claims-made policy stops responding once it lapses, an ERP ("tail") extends the time during which claims arising from earlier covered events can still be reported.

Exam tip: Occurrence = "when did it happen?" Claims-made = "when was the claim made?" Watch the retro date—incidents before it are never covered.

The three coverages of the CGL

The CGL bundles three insuring agreements, labeled A, B, and C.

Coverage A – Bodily Injury and Property Damage Liability

Coverage A pays damages the insured becomes legally obligated to pay because of bodily injury (BI) or property damage (PD) caused by an occurrence. An occurrence is defined as an accident, including continuous or repeated exposure to harmful conditions. This is the core coverage—slip-and-falls, damage to a customer's property, and similar accidents.

Coverage B – Personal and Advertising Injury Liability

Coverage B responds to specific offenses rather than accidents. Personal and advertising injury includes things like:

• False arrest, detention, or imprisonment
• Malicious prosecution
• Wrongful eviction or invasion of privacy (of a room or premises)
• Libel, slander, or other defamation
• Copyright/slogan/title infringement in the insured's advertisement

Note that Coverage B is triggered by the listed offenses, not by "occurrences," so it does not require an accident.

Coverage C – Medical Payments

Coverage C pays medical expenses for bodily injury to others regardless of fault, up to a small sublimit, if the injury happens on the insured's premises or arises from its operations. Because it's paid without proving liability, it acts as a goodwill, "no-fault" coverage that can head off larger lawsuits. It typically does not apply to the insured's own employees (workers compensation handles those).

Premises-operations vs. products-completed operations

The CGL groups exposures into two big buckets, and each has its own aggregate limit.

• Premises and operations – Liability arising from the insured's premises (the physical location) and ongoing operations (work being performed). Example: a customer trips over a contractor's tools on a job site.
• Products and completed operations – Liability arising after a product has left the insured's control or after work has been finished. Example: a defective product injures a user at home, or a deck collapses months after a contractor completed it.

The products-completed operations hazard covers harm occurring away from the insured's premises and after operations are complete—an important distinction because the two have separate limits.

How CGL limits work

The CGL contains several limits stacked together. Understanding the interaction is heavily tested.

• A per-occurrence limit caps a single event.
• An aggregate limit caps the total the insurer will pay during the whole policy period, no matter how many occurrences.
• Once an aggregate is used up, coverage stops for that category even if the policy period isn't over.

Exam tip: The general aggregate and the products-completed operations aggregate are separate buckets. Exhausting one does not exhaust the other.

Key exclusions

The CGL is broad, but exclusions define its edges. Commonly tested exclusions under Coverage A include:

• Expected or intended injury – Intentional harm by the insured (self-defense to protect people/property is an exception).
• Contractual liability – Liability assumed under contract, with an important exception for "insured contracts."
• Workers compensation / employer's liability – Injuries to employees belong to WC policies, not the CGL.
• Pollution – Most pollution-related BI/PD is excluded.
• Auto, aircraft, and watercraft – Liability from owned/operated autos and aircraft is excluded (covered by commercial auto/aviation policies).
• Damage to the insured's own product or work – The CGL is not a warranty; it won't pay to repair the insured's faulty product or workmanship (the "business risk" exclusions).
• Damage to property in the insured's care, custody, or control.
• Liquor liability – Excluded for businesses in the business of serving alcohol (covered by separate liquor liability).
• Recall of products ("sistership" exclusion).

Key terms at a glance

• Occurrence – An accident, including continuous/repeated harmful exposure.
• Retroactive date – Earliest date a covered injury can occur on a claims-made form.
• ERP / tail – Extended period to report claims after a claims-made policy ends.
• Aggregate limit – Maximum the insurer pays for the whole policy period.
• Products-completed operations – Harm after a product/work leaves the insured's control.
• Duty to defend – Insurer's obligation to provide legal defense, usually in addition to limits.

Common exam traps

• Occurrence vs. claims-made. Occurrence responds to when the event happened; claims-made responds to when the claim was made.
• The retro date excludes earlier events even if reported during the policy period.
• Defense costs are typically outside the limits, and the duty to defend ends when limits are exhausted.
• Coverage C (medical payments) ignores fault and is a small sublimit—don't confuse it with liability damages under Coverage A.
• General aggregate and products-completed operations aggregate are separate.
• Coverage B is triggered by listed offenses, not by an accident/occurrence.
• The CGL excludes the insured's own faulty product/work, employee injuries, autos, and pollution.

Quick recap

• The CGL protects businesses against third-party BI, PD, and personal/advertising injury claims and provides legal defense.
• It is written on an occurrence (event-based) or claims-made (claim-based, with retro date and ERP) trigger.
• Coverage A = BI/PD from occurrences; Coverage B = personal & advertising injury offenses; Coverage C = no-fault medical payments.
• Exposures split into premises-operations and products-completed operations, each with its own aggregate.
• Per-occurrence limits cap single events; aggregate limits cap the whole policy period.
• Key exclusions include employee injuries, autos, pollution, intentional acts, and the insured's own faulty product/work.