Each Occurrence vs General Aggregate Limit For Sports / Recreation Organizations

Source: sadlersports.com - Each Occurrence vs General Aggregate Limit For Sports / Recreation Organizations
Author: John Sadler

The difference between the Each Occurrence vs 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 such limit is 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 for the insured.

The Each Occurrence limit caps the payout of losses arising 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 limit caps the payout of losses that arise throughout the policy year from multiple occurrences. It is the insurance industry standard that the General Aggregate limit should be twice the Each Occurrence limit.

To follow is an example to illustrate how these limits work:

Assume that the Each Occurrence limit is $1,000,000, the General Aggregate limit is $2,000,000, and three claims occur sequentially in the policy year with total liabilities owed of $1,200,000, $600,000, and $800,000 respectively. As regards the $1,200,000 claim, the carrier would only pay $1,000,000 of this claim due to the $1,000,000 Each Occurrence limit and the sports organization (and possibly its administrators and staff) would be “out of pocket” for the balance of $200,000. As regards the $600,000 claim, it would be paid in full as it is under the Each Occurrence limit and has not tripped the General Aggregate limit. As regards the $800,000 claim, the carrier would only be responsible for paying $400,000 of this claim since any amounts in excess of $400,000 would trip the General Aggregate limit of $2,000,000 for all claims during the policy period.

Sports organizations with large number of participants or teams would be better served by not having a General Aggregate on their policy (designated by a showing of “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.

Here is a prior blog post on Each Occurrence vs. General Aggregate that describes this issue in a little different terms.

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