Commercial General Liability (CGL) for the Texas P&C Exam: Complete Guide

Auto insurance and Workers' Compensation are the two biggest pieces of the casualty section on the Texas P&C exam. The third heavyweight is Commercial General Liability (CGL), which shows up in roughly 5–10 questions. Combined with Auto and WC, the casualty section is concentrated in these three topics.

CGL is the broad business liability policy. Almost every business in Texas — from a corner restaurant to a Fortune 500 company — carries some version of a CGL policy. As an agent, you'll write or service CGL more often than any other commercial line.

The exam tests whether you understand the three coverage sections (A, B, C), the difference between occurrence and claims-made forms, what exclusions exist (and why), how additional insureds work, and how the limits stack. This guide covers all of those at exam-question depth.

A standard CGL policy contains three separate coverage parts:

• Coverage A — Bodily Injury (BI) and Property Damage (PD) Liability: Pays damages the insured becomes legally obligated to pay because of BI or PD caused by an "occurrence" during the policy period. This is the biggest piece of CGL — most claims fall here.
• Coverage B — Personal and Advertising Injury Liability: Covers specific intentional torts: false arrest, malicious prosecution, wrongful eviction, libel, slander, copyright infringement in advertising, oral/written publication that violates privacy. Note: this is one of the few coverages that pays for some intentional conduct.
• Coverage C — Medical Payments: Pays small medical bills for non-employees injured on the insured's premises, regardless of fault. Typical limit: $5,000 per person. Designed to be a goodwill payment that prevents lawsuits from minor incidents.

Common exam pattern: "A customer slips on a freshly mopped floor in a retail store and suffers a minor bruise. The customer accepts $500 in medical expenses without filing a lawsuit. Which CGL coverage pays?"

→ Coverage C (Medical Payments). It's no-fault and doesn't require proving negligence — designed exactly for these "smooth it over" scenarios.

CGL policies come in two trigger forms, and the exam tests this distinction in multiple ways:

Occurrence form:

• Covers BI/PD that occurs during the policy period, regardless of when the claim is filed
• If a roof installed in 2024 collapses and injures someone in 2030, the 2024 occurrence-form policy responds — even though the policy expired years ago
• Standard for most small businesses

Claims-made form:

• Covers BI/PD that occurs AND is claimed during the policy period (or extended reporting period)
• Has a retroactive date — the earliest occurrence date the policy will cover
• Has an extended reporting period (ERP) or "tail coverage" — extends the time to report claims after the policy expires
• Common for professional liability, doctors, contractors with long-tail risks

Common exam scenarios:

"A contractor's claims-made CGL policy has a retroactive date of January 1, 2020 and a policy period of 2024-2025. A claim is filed in 2025 for an occurrence in 2018. Is it covered?"

→ No. The occurrence (2018) predates the retroactive date (2020). Claims-made coverage requires the occurrence to be on or after the retro date.

"A doctor switches from claims-made to occurrence coverage. What protects her against claims for prior occurrences that haven't yet been filed?"

→ Tail coverage / extended reporting period (ERP) on the old claims-made policy.

CGL has many exclusions — they're testable not just for what they exclude, but for the rationale behind each. Key ones:

• Expected or intended injury: CGL doesn't cover damage the insured intended to cause. Self-defense is an exception.
• Contractual liability: CGL excludes liability assumed by contract, except "insured contracts" (leases of premises, sidetrack agreements, easement agreements, indemnification of municipality, elevator maintenance, and liability assumed under contract that would attach in the absence of contract).
• Liquor liability: Excluded for businesses in the alcohol trade. Solution: a separate Liquor Liability policy.
• Workers' Compensation: Employee injuries are WC's territory. Stop-gap coverage handles monopolistic state gaps.
• Employer's liability: Closely tied to WC exclusion. Coverage B on a WC policy or stop-gap on CGL fills this.
• Pollution: Generally excluded due to massive cleanup costs. Specialized environmental policies exist.
• Aircraft, auto, watercraft: Excluded because separate policies cover these (commercial auto, aircraft liability, marine).
• Damage to your work / your product: CGL doesn't pay for the insured to redo their own bad work. Damage caused BY the bad work to other property may be covered.
• Damage to property in your care, custody, or control: Excluded. Covered separately by bailee insurance or specific endorsements.
• Recall of products: Excluded. Recall is a business decision, not a covered loss.
• War and nuclear hazards: Standard catastrophic exclusions.

The trick: most exclusions exist either because (a) another policy handles that risk, or (b) the loss is uninsurable due to its nature (intentional acts, recall, war).

This trio confuses many candidates. The distinction is heavily tested:

• Additional insured: A third party added to the CGL policy by endorsement. Receives liability coverage for claims arising out of the named insured's operations. Example: a property owner is added as an additional insured on a contractor's CGL — if a third party sues the property owner for the contractor's negligence, the contractor's CGL defends and indemnifies the property owner.
• Loss payee: A party with a financial interest in property (typically a lender). Receives property insurance claim payments to protect their financial interest. Loss payee status is on property policies, not CGL.
• Certificate holder: A party that has been issued a Certificate of Insurance (COI) confirming coverage exists. The certificate holder has no coverage rights from the document itself — the COI is informational only.

Common exam pattern: "A property owner requires her contractor to provide proof of CGL coverage. The contractor's insurer issues a Certificate of Insurance listing the property owner. Does the property owner have coverage under the contractor's CGL?"

→ No. The COI is informational only. The property owner needs to be added as an Additional Insured by endorsement to actually have coverage rights.

This is one of those exam questions designed to catch candidates who skim the difference. Know that COI = paper, AI = endorsement = coverage.

CGL has multiple limits that stack and erode in specific ways. Memorize the structure:

• Per-Occurrence Limit: The maximum the policy will pay for any single occurrence (BI + PD combined).
• Personal & Advertising Injury Limit: The per-person/per-occurrence limit for Coverage B claims.
• Medical Expense Limit: Per-person limit on Coverage C med-pay.
• General Aggregate Limit: The maximum the policy pays during the entire policy period for Coverage A (BI/PD), Coverage B, and Coverage C combined — EXCEPT for Products-Completed Operations.
• Products-Completed Operations Aggregate Limit: A separate aggregate limit specifically for damages arising from the insured's products or completed work. This exists separately because products/completed-ops claims tend to be slow-developing and high-severity.
• Damage to Premises Rented to You Limit: A specific lower limit for fire damage to premises rented to the insured (typically $100,000-$300,000).

The structure means a single occurrence might exhaust the per-occurrence limit but only erode part of the aggregate. Multiple smaller occurrences could exhaust the aggregate without hitting any single per-occurrence limit.

Example exam pattern: "A CGL policy has a $1M per-occurrence limit and a $2M general aggregate. The insured has three claims during the year: $800K, $600K, and $700K. How much does the policy pay total?"

→ $2M. The per-occurrence limit isn't hit on any single claim. The general aggregate caps the total at $2M, so the third claim is reduced from $700K to $600K (the remaining aggregate after the first two claims = $2M - $800K - $600K = $600K).

Most CGL provisions are standardized via ISO forms, but Texas has specific considerations:

• Anti-stacking provisions: Texas courts generally enforce anti-stacking language in CGL policies — multiple policies can't be combined to exceed each individual policy's limits unless the policies explicitly allow stacking.
• Duty to defend: In Texas, the duty to defend is broader than the duty to indemnify. Even if a claim is ultimately uncovered, the insurer may have a duty to defend if the allegations potentially fall within coverage. The "eight corners" rule (look only within the four corners of the policy and four corners of the petition) generally applies.
• Texas Property Code Section 27 (residential construction): Specific notice and right-to-cure requirements for residential construction defect claims affect how CGL responds.
• Anti-indemnity statutes (Texas Insurance Code Chapter 151): Limits the enforceability of certain indemnification clauses in construction contracts. Affects the "insured contracts" exception to the contractual liability exclusion.

The anti-indemnity statute is increasingly tested. The general rule: contracts that require one party to indemnify another for the indemnified party's own sole or concurrent negligence are limited or unenforceable in Texas construction contracts.

The exam tests whether you can route a claim to the right policy:

• CGL vs Personal Liability (Section II of homeowners): CGL is for businesses; Section II of an HO policy is for personal/non-business liability of homeowners. A business activity at home can fall outside HO Section II and require separate business coverage.
• CGL vs Business Owners Policy (BOP): A BOP packages CGL + commercial property + business income for small/medium businesses. The CGL piece of a BOP is largely the same as a stand-alone CGL but may have restrictions.
• CGL vs Umbrella: An umbrella sits on top of underlying CGL (and auto) coverage. Once underlying limits are exhausted, the umbrella picks up. Most umbrellas require specific minimum underlying limits (e.g., $1M CGL).
• CGL vs Professional Liability (E&O): CGL excludes professional services rendered by the insured. A CPA's malpractice is excluded from CGL — they need a separate E&O policy.
• CGL vs Directors and Officers (D&O): CGL covers BI/PD claims; D&O covers wrongful-act claims against directors/officers (mismanagement, breach of fiduciary duty). Separate policies because the risks are different.

Pattern 1: Coverage routing

"A restaurant patron suffers food poisoning and incurs $50K in medical bills plus $10K in lost wages. She also experiences pain and suffering. Which CGL coverage applies?"

→ Coverage A (Bodily Injury) on the CGL pays the BI damages, including pain and suffering. Coverage C (Medical Payments) might also pay her medical bills up to the per-person limit, regardless of negligence.

Pattern 2: COI vs Additional Insured

"A property owner hires a painting contractor and requires proof of liability insurance. The contractor's insurer issues a COI confirming $1M CGL coverage. Does the property owner have any coverage rights from this document alone?"

→ No. A COI is informational only. The property owner must be added as an Additional Insured by endorsement to have actual coverage.

Pattern 3: Occurrence vs Claims-made

"A consultant's claims-made E&O policy has a retroactive date of 2020 and is in force from 2024-2025. A 2018 occurrence is reported as a claim in 2025. Covered?"

→ No. The 2018 occurrence predates the 2020 retroactive date.

Pattern 4: Aggregate exhaustion

"A CGL has $1M per-occurrence and $2M general aggregate. The insured has two claims for $1M each, then a third claim for $500K. What does the third claim collect?"

→ Nothing. The general aggregate ($2M) is exhausted by the first two claims. No coverage left for the third.

Pattern 5: Excluded scenarios

"A contractor's poorly installed roof leaks and damages the homeowner's furniture and the roof itself. Is the damage to the furniture covered? Is damage to the roof covered?"

→ Furniture damage: covered (damage caused by faulty work to other property). Damage to the roof itself: excluded ("damage to your work" exclusion).

CGL is heavy on distinctions and routing — which coverage handles which scenario, what's excluded vs covered, AI vs COI vs loss payee. The exam tests whether you can spot the right answer fast.

The pattern that works: listen to the audio explanation once for understanding, then drill quiz questions until the routing becomes automatic. Most exam questions on CGL are scenario-based with one clearly-correct answer if you know the framework.

LanePrep's Chapter 4 covers CGL in audio format alongside Auto and WC. Together, the casualty deep-dive in that chapter accounts for ~30 of the 150 exam questions. 25 free practice questions include CGL scenarios. Try Chapter 1 free first to see whether the audio format works for you, then expand to the full course if it does.