Study guide
8.1 CGL Policy Overview
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
8.1 CGL Policy Overview
Key Takeaways Explain This Topic AI
The Commercial General Liability (CGL) policy is the foundation of business liability protection, covering third-party bodily injury, property damage, and personal and advertising injury under ISO form CG 00 01.
The CGL is written on either an occurrence basis (CG 00 01) or a claims-made basis (CG 00 02); occurrence is far more common and includes built-in tail coverage.
On a claims-made policy the retroactive date and the Extended Reporting Period (ERP) determine how far back and how far forward coverage reaches.
The duty to defend is broader than the duty to indemnify: if any allegation could be covered, the insurer must defend even a groundless, false, or fraudulent suit.
Supplementary payments such as defense costs, a $250 bail bond, and up to $250/day lost earnings are paid in addition to the policy limits and do not erode them.
Last updated: October 2026
What Commercial General Liability Covers
Commercial General Liability (CGL) insurance protects a business against third-party claims for bodily injury (BI) , property damage (PD) , and personal and advertising injury (P&AI) . It pays sums the insured becomes legally obligated to pay as damages, and it defends suits seeking those damages. The standard contract is Insurance Services Office (ISO) form CG 00 01 (occurrence) or CG 00 02 (claims-made); the current edition tested is CG 00 01 04 13 .
CGL covers liability to others — not damage to the insured's own property, which belongs on a commercial property policy. A frequent exam trap: the CGL is third-party coverage, so the injured claimant is always someone other than the named insured.
The Six Insuring Agreements / Sections
- Section Content
- Coverage A Bodily Injury and Property Damage Liability
- Coverage B Personal and Advertising Injury Liability
- Coverage C Medical Payments (no-fault, ~$5,000/person)
- Supplementary Payments Defense costs, bail/appeal bonds, interest
- Who Is An Insured Persons/organizations the policy protects
- Limits of Insurance Six-limit structure (see Section 8.6)
- Occurrence vs. Claims-Made Trigger
The single most-tested distinction in this chapter is the coverage trigger .
- Factor Occurrence (CG 00 01) Claims-Made (CG 00 02)
- Trigger Injury/damage occurs during policy period Claim is made during policy period
- When claim filed Irrelevant — may be years later Must be reported in-period or ERP
- Retroactive date None Limits how far back coverage reaches
- Tail coverage Built in, no extra cost Must buy an Extended Reporting Period
- Premium pattern Stable Starts low, "steps up" annually
Occurrence example: A 2024 policy. A customer slips in December 2024 but sues in 2026 — the 2024 occurrence policy responds because the injury occurred in 2024.
Claims-made example: A 2024 policy with a retroactive date of 2020 . A claim filed in 2024 for a 2021 injury is covered; a claim for a 2019 injury (before the retro date) is not .
Extended Reporting Periods (Claims-Made Only)
Basic ERP : automatic and free, with two parts that run together. The 60-day mini-tail lets the insured report any claim, even for an occurrence not reported before; the 5-year midi-tail covers claims arising from occurrences reported to the insurer no later than 60 days after the policy ends.
Supplemental ERP ("full tail"): purchased by endorsement, unlimited reporting time; must be requested within 60 days of cancellation/non-renewal.
Who Is An Insured
The named insured in the Declarations and certain automatic insureds are covered:
Individual — and the spouse, for business conduct.
Partnership/Joint Venture — partners, members, and their spouses (business only).
LLC — members (ownership role) and managers (management role).
Corporation — officers, directors, and stockholders (in their capacity), plus employees and volunteer workers acting within scope.
Newly acquired/formed organizations — covered automatically for 90 days (or to policy end if sooner).
Real estate managers and a legal representative if the named insured dies.
Not automatic insureds: independent contractors, subcontractors, and additional insureds — each requires an endorsement (e.g., CG 20 10).
The Two Insurer Duties
Duty to defend — the insurer provides and pays for legal defense, even if the suit is groundless, false, or fraudulent . Defense costs are supplementary (outside the limits) and the duty ends when the applicable limit is exhausted by payment of judgments or settlements.
Duty to indemnify — pay damages the insured is legally liable for, within the limits.
Trap: the duty to defend is broader — triggered if any allegation in the complaint could be covered, even if most are not.
Supplementary Payments (Paid In Addition To Limits)
- Payment Detail
- All defense costs Attorney fees, court costs, expert witnesses
- Bail bonds Up to $250 (does not require the insurer to furnish the bond)
- Appeal/release-of-attachment bonds Cost of the bond within the limit
- Loss of earnings Up to $250/day for the insured's time assisting defense
- Pre- and post-judgment interest Interest accruing on the judgment
- Reasonable expenses Insured's costs incurred at insurer's request
- Common Exam Confusions to Avoid
First-party vs. third-party. The CGL never pays the named insured for damage to its own property or its own injuries — those need property and health/workers-comp coverage. If an exam scenario describes the insured repairing its own equipment, the CGL does not respond.
"Legally obligated" is the dividing line for Coverage A. Coverage A pays only when the insured is legally liable . Coverage C, by contrast, ignores liability. A favorite test question pairs a no-fault payment of a customer's small medical bill (Coverage C) against a negligence judgment (Coverage A) to see whether you can separate them.
Defense ends at exhaustion. Once the applicable limit is used up by paying judgments or settlements, the insurer's duty to defend ceases. Memorize that defense is unlimited in dollars while the limit lasts but stops the moment the limit is exhausted .
How Occurrence and Claims-Made Premiums Differ
On a claims-made policy, the first-year premium is low because few prior years are exposed; each renewal "steps up" toward a mature premium (often year five) as more prior years are covered. An occurrence premium is comparatively level because each policy stands alone for the injuries that happened that year.
- Year Claims-made premium pattern
- 1 (first) Lowest — only current-year exposure
- 2–4 Step factors increase
- 5+ "Mature" — full prior-acts exposure priced
Why occurrence is generally better for the insured: built-in tail means no gap when switching carriers, and a single occurrence policy can pay claims decades later as long as the injury occurred in its period. Claims-made is used where the cost of long-tail exposure must be controlled (professional and products lines), but it demands careful management of retroactive dates and ERPs to avoid coverage gaps.