A client's Commercial General Liability (CGL) policy has a per-occurrence limit of $1,000,000 and a General Aggregate Limit of $2,000,000. The policy also has a Products-Completed Operations Aggregate Limit of $1,500,000. If the client incurs $800,000 in damages from a slip-and-fall (not products-related) and later $1,200,000 in damages from a product defect, what is the maximum total the policy will pay for these two claims?
- A$1,800,000
- B$2,200,000
- C$2,500,000
- D$2,000,000
Show answer & explanationAnswer & explanation
Correct answer: A. $1,800,000
First, apply the per-occurrence limit to each claim. The slip-and-fall is $800,000, which is less than the $1,000,000 per-occurrence limit, so it pays $800,000. The product defect is $1,200,000, but it is capped by the $1,000,000 per-occurrence limit, so it pays $1,000,000. The total initial payout is $800,000 + $1,000,000 = $1,800,000. Next, check the aggregate limits: The slip-and-fall (not products-related) reduces the General Aggregate Limit. The product defect claim reduces both the Products-Completed Operations Aggregate Limit and the General Aggregate Limit. The $1,800,000 total is less than the General Aggregate Limit of $2,000,000 and also less than the Products-Completed Operations Aggregate Limit of $1,500,000 (for the product claim portion). Since the total payout for the product claim ($1,000,000) is within its specific aggregate and the overall total ($1,800,000) is within the General Aggregate, the policy will pay the full $1,800,000.
Why the other options are wrong
- B. This overpays the product defect claim, ignoring the per-occurrence limit.
- C. This sums the full damages without applying any limits.
- D. This would be the General Aggregate Limit, but the per-occurrence limit on the product claim reduces the total.
CGL Multiple Aggregate Limits
Commercial General Liability (CGL) policies can have multiple aggregate limits, such as a General Aggregate and a separate Products-Completed Operations Aggregate, which both cap the total payout for specific types of claims within a policy period.
- Per-occurrence limits apply to each incident.
- Specific aggregate limits (e.g., Products-Completed Operations) apply to certain claim types.
- The General Aggregate is an overarching limit for most other claims.
- Payouts reduce both the specific aggregate (if applicable) and the General Aggregate.
Memory trick: Each claim has a cap; then the 'product' bucket and 'general' bucket each have their own bigger caps.