Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client's business has a Commercial General Liability (CGL) policy with a General Aggregate Limit of $2,000,000 and a Products-Completed Operations Aggregate Limit of $1,000,000. The 'per occurrence' limit is $500,000. If the business incurs $700,000 in covered damages from a single products liability claim, how much will the CGL policy pay for this claim?
- A$700,000
- B$1,000,000
- C$500,000
- D$2,000,000
Show answer & explanationAnswer & explanation
Correct answer: C. $500,000
Even though the total damages are $700,000, the 'per occurrence' limit specifies the maximum amount the policy will pay for any single occurrence. In this case, the per occurrence limit is $500,000, so the policy will pay no more than that.
Why the other options are wrong
- A. Incorrect; this is the actual damage, but it exceeds the per occurrence limit.
- B. Incorrect; this is the Products-Completed Operations Aggregate Limit, which is a total for all such claims over the policy period, not for a single occurrence.
- D. Incorrect; this is the General Aggregate Limit, which is a total for all covered claims over the policy period, not for a single occurrence.
CGL Per Occurrence Limit
The maximum amount a Commercial General Liability (CGL) policy will pay for all damages arising out of a single incident or occurrence, regardless of the number of claimants or the total extent of damages.
- Applies to each distinct event causing injury or damage.
- Cannot be exceeded for one occurrence.
- Separate from aggregate limits, which cap total payouts over a policy period.
Memory trick: CGL limits are like a budget: each event has its 'per occurrence' spending cap, and overall there's an 'aggregate' total.