Property & Casualty Insurance Exam (National Portion)Casualty InsuranceEasy
A business owner has a Commercial General Liability (CGL) policy with a per-occurrence limit of $500,000 and a General Aggregate Limit of $1,500,000. In the first quarter, a single accident results in $600,000 in bodily injury claims. How much will the CGL policy pay for this single accident?
- A$600,000
- B$500,000
- C$0
- D$1,500,000
Show answer & explanationAnswer & explanation
Correct answer: B. $500,000
The per-occurrence limit is the maximum amount the policy will pay for any single accident, regardless of the total damages. Since the per-occurrence limit is $500,000, the policy will pay $500,000, even though the damages are $600,000.
Why the other options are wrong
- A. This amount exceeds the per-occurrence limit.
- C. The policy covers such accidents.
- D. This is the General Aggregate Limit, which applies to all claims over the policy period, but individual occurrences are capped by the per-occurrence limit.
CGL Per-Occurrence Limit
The maximum amount a Commercial General Liability (CGL) policy will pay for all damages arising from a single 'occurrence' (accident), regardless of the number of claimants or the total cost of damages from that event.
- Applies to each individual accident.
- Cannot be exceeded for a single event.
- Payments reduce the General Aggregate Limit.
Memory trick: The Per-Occurrence Limit is the 'single event' maximum – one accident, one big cap.