Commercial general liability insurance operates through a carefully constructed framework of numerical limitations that define the boundaries of coverage. Understanding how these limits function, how aggregates accumulate, and how defense costs interact with policy limits represents essential knowledge for any professional working with commercial insurance in Canada. The architecture of policy limits determines not merely the maximum amount an insurer will pay but also shapes how claims are handled, how multiple incidents across a policy period affect available coverage, and ultimately whether a policyholder faces personal or corporate exposure beyond their insurance protection. This lesson examines the mechanical operation of these numerical constructs, the legal principles governing their application, and the practical realities that emerge when limits are tested by actual claims.
The foundation of limit structures in commercial general liability policies rests on principles developed over decades of insurance practice and refined through both contractual evolution and judicial interpretation. Canadian courts have consistently held that policy limits represent the maximum contractual obligation of the insurer, not a guaranteed payment to any particular claimant. The Insurance Act in each province establishes the regulatory framework within which these limits operate, though the specific numerical values and structural arrangements remain matters of contract between insurer and insured. In Ontario, the Insurance Act governs the relationship between insurers and insureds, while British Columbia operates under its Insurance Act with parallel provisions, and Alberta follows similar common law principles under the Alberta Insurance Act. Quebec presents a distinct framework under the Civil Code of Quebec, where insurance contracts are governed by articles 2389 through 2628, though the fundamental economic operation of limits functions similarly despite the different legal foundation. As of the date of authorship, these provincial frameworks share the common characteristic of enforcing policy limits as stated in the contract while imposing certain minimum requirements for specific coverages, particularly in automobile liability contexts.