Each Occurrence vs General Aggregate Limit
The difference between the Each Occurrence and General Aggregate limits is often a point of confusion for sports/recreation sanctioning governing associations and their members. If the General Aggregate limit is larger, it is tempting to think that’s the actual amount of coverage for any one lawsuit. However, that is not the case. Also, some carriers may quote a policy showing “none” under the General Aggregate limit. In this case, none is actually a good thing.
The Each Occurrence limit caps the payout of losses from any one occurrence or accident. A single occurrence could involve injuries to a single claimant or to multiple claimants (ex: lightning strike, bleacher collapse). The General Aggregate caps the payout of losses that arise throughout the policy year from multiple occurrences. The General Aggregate limit should be twice the Each Occurrence limit, per insurance industry standards.
How these limits work:
Assume that the Each Occurrence limit is $1 million, the General Aggregate limit is $2 million, and three claims occur sequentially in the policy year with total liabilities of $1.2 million, $600,000, and $800,000 respectively. The carrier would only pay $1 million for the $1.2 million claim because of the Each Occurrence limit. The sports organization would pay out of pocket the balance of $200,000. The $600,000 claim would be paid falling under the Each Occurrence limit and not having tripped the General Aggregate limit. The carrier would only be responsible for paying $400,000 of the $800,000 claim, since any amounts in excess of $400,000 would trip the General Aggregate limit of $2 million for all claims during the policy period.
Putting this into practice
Sports organizations with large numbers of participants or teams would be better served by not having a General Aggregate on their policy (designated by “NONE” on the policy) or by having a special endorsement that reinstates the General Aggregate per team, league, or event.
It is also common to see a single master General Liability policy covering an entire sports association or sanctioning body and its member teams/leagues under a single General Aggregate limit. This is dangerous since those filing claims later in the policy year may find that they have no General Aggregate limits left to pay their claims.
It is critical to understand the difference between the Each Occurrence vs General Aggregate limits when designing a protection program. We encourage you to read General Aggregate Limit for General Liability for more information.