Which limits apply per occurrence and in aggregate in a CGL policy, and how may defense costs affect them?

• A. Defense costs are not counted against any limit.
• B. Per-occurrence limit applies to each claim; Aggregate limit applies to all covered claims in the policy period; defense costs may reduce limits over time.
• C. There is a single limit that applies to both per-claim and aggregate totals.
• D. Each claim has its own separate limit with no aggregate cap.

Answer: (B)

In a CGL policy, two main limits govern liability: the per-occurrence limit and the general aggregate limit. The per-occurrence limit applies to damages for each individual claim arising from a single event—the insurer will pay up to that amount for that one incident. The general aggregate limit caps the total payments for all covered claims in the policy period, with separate sublimits (like products-completed operations) that may apply in their own ways.

Defense costs matter because, in many standard CGL forms, they count against those limits. As defense costs accumulate for ongoing claims, they reduce the amount left available under the per-occurrence or aggregate limits. That means defense expenses can deplete the policy’s capacity to pay damages on ongoing or future claims within the same policy period.

So the correct view is: each claim is limited by a per-occurrence limit, all claims in the policy period are capped by a general aggregate limit, and defense costs may erode those limits over time.