Per-Project Aggregate: How One Bad Job Can Consume a Full Year of Limits

Look at your general liability declarations page and you will see something like $1,000,000 per occurrence and $2,000,000 general aggregate. Most contractors read that as two million dollars of protection.

It is more complicated than that, and the gap between what those numbers appear to mean and what they actually mean is the entire reason per-project aggregate exists.

What each number means

Per occurrence is the most the policy pays for any single claim. One incident, one occurrence, one limit.

General aggregate is the most the policy will pay in total for all claims during the policy year, other than products and completed operations claims. Once it is gone it is gone, and there is no more coverage until the policy renews.

Products and completed operations aggregate is a separate pool, usually the same amount, for claims arising out of work you have already finished. This one matters enormously in construction, since most construction claims are completed operations claims. Worth knowing that it is a separate bucket, and that per-project endorsements usually do not touch it.

The math

Run a contractor with a $1 million per occurrence and $2 million general aggregate policy through a bad year.

Project A, February. A water intrusion claim during construction settles at $700,000 including defense costs.

Project B, June. A third party injury settles at $900,000.

Both are covered. Both are comfortably under the per occurrence limit. Together they have consumed $1.6 million of the $2 million general aggregate.

Project C, October. A claim arrives at $600,000. There is $400,000 of aggregate remaining. The other $200,000 is the contractor’s problem, and so is anything else that happens between October and renewal.

Nothing went wrong with the policy. It performed exactly as written. The contractor had three claims in a year and the third one found an empty tank.

What a per-project aggregate does

A per-project aggregate endorsement gives each project its own general aggregate limit. Run the same year again with one in place and Project C arrives with a full $2 million available rather than $400,000, because Projects A and B drew down their own aggregates instead of a shared one.

This is why general contractors and homebuilders require it. They are not being pedantic. They are making sure a claim on somebody else’s job cannot exhaust the limit protecting theirs.

The catch, and it is a real one

Two things to check before assuming the endorsement solves the problem.

First, what counts as a project. The endorsement defines it and the definitions vary. A single site with multiple buildings might be one project or several. A subdivision might be one project or one per home. Multiple phases under separate contracts for the same owner might or might not be separate. Read the definition, because it determines how many aggregates you actually get.

Second, the products and completed operations aggregate. Most per-project endorsements apply to the general aggregate only and leave the completed operations aggregate as a single shared pool. Since most construction defect claims are completed operations claims, that is a meaningful limitation on how much protection the endorsement really adds. It is not a reason to skip it. It is a reason to know what you bought.

What it costs

Usually not much. On many contractor policies it is already included or available for a modest charge. Relative to the exposure it addresses, it is one of the least expensive meaningful improvements available on a contractor’s program.

Contractors who run one job at a time genuinely do not need it. Everyone else usually should have it, and most contract requirement schedules in commercial and residential construction now demand it regardless.

How to check whether you have it

Look at the endorsement schedule on your policy. You are looking for a designated construction project general aggregate limit endorsement, or wording to that effect. If you cannot find it, you probably do not have it, and the declarations page will not tell you either way.

If it is there, read the project definition. That is the part that determines what you actually bought.

The short version

A general aggregate is one pool for the whole year across every job. A per-project aggregate gives each project its own. Without it, a bad job in February can leave you underinsured in October with nothing having gone wrong except arithmetic. It is inexpensive, it is increasingly required by contract, and the two things to verify are how the endorsement defines a project and whether it reaches your completed operations aggregate.