CG 00 09–OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE FORM–COVERAGE FOR OPERATIONS OF DESIGNATED CONTRACTOR ANALYSIS

(November 2019)

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INTRODUCTION

The Insurance Services Office (ISO) CG 00 09–Owners and Contractors Protective Liability Coverage Form–Coverage for Operations of Designated Contractor covers the insured for liability that arises out of either of the following:

Operations the contractor performs for the named insured at the location(s) on the declarations
The named insured's own acts or omissions but only those that are connected with its overall supervision of the operations of the contractor at that location

The named insured can be a construction project owner, a property owner, or a general contractor. CG 00 09 covers the named insured's vicarious liability for acts attributed to the listed contractor or its employees. Vicarious liability is where one party is held responsible for the actions or conduct of another party based solely on the relationship between them. As it applies to CG 00 09, it is when the named insured, as a property owner, project owner, general contractor, or other contractor is ultimately held liable for acts of a hired contractor, sub-contractor, or independent contractor that performs work for it or on its behalf.

CG 00 09 is written on a stand-alone, monoline basis. It contains its own set of conditions. It is not written or combined with any other coverage form or policy. Coverage is written on an occurrence basis. A claims-made version is not available.

This analysis is of the 04 13 edition. Changes from the 12 07 edition are in bold print.

COVERAGE FORM ANALYSIS

CG 00 09 opens by stating that certain provisions in it restrict coverage. It encourages that the coverage form be carefully read in order to understand its rights and duties and to determine what is covered and not covered. It also points out that the terms you and your to refer to the named insured and that an insured is any person or entity that qualifies as such under Section II–Who Is an Insured. The terms we, us, and our refer to the insurance company that provides the coverage. It refers to Section V–Definitions because understanding the definitions is critical to understanding CG 00 09.

SECTION I–COVERAGES–BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

The insurance company agrees to pay for damages the insured becomes legally obligated to pay due to covered occurrences of bodily injury and property damage up to the limits stated in Section III–Limits of Insurance. It has the right and the duty to defend any suit that seeks those damages, and it may investigate or settle any claim or suit at any time and at its sole discretion. Its obligation to pay ends when the limits of insurance are used up by paying judgments and settlements.

The insurance company is not required to defend the insured against any suit for bodily injury or property damage that CG 00 09 does not cover.

Example: Amos is a contractor working for Peggy Sue. Amos purchases the CG 00 09 through Good Company that names him as the contractor and Peggy Sue as the named insured. Peggy Sue receives a suit for damages related to the actions of Perry, another contractor working for her. She turns the claim in to Good Company because she forgot to require Perry to purchase an OCP. Good Company does not defend Peggy Sue because Perry is not the insured contractor.

Coverage applies only if the bodily injury or property damage is caused by an occurrence and arises out of either of the following:

Operations the contractor performs for the named insured at the location(s) on the declarations
The named insured's own acts or omissions that are connected with its overall supervision of the contractor’s operations at that location.

Notes:

This is the key to the unusual nature of this coverage form. The contractor purchases the coverage, not the named insured. The named insured is covered for that contractor’s actions as well as for its own acts and omissions but only as they relate to its supervision of that contractor.

There are many reasons a named insured could require a contractor to purchase this coverage such as:

The work being performed is dangerous

The project imposes non-delegable duties on the property or project owner under federal, state, or local laws
They named insured could be held negligent by virtue of hiring incompetent general contractors, sub-contractors, or independent contractors
To guarantee that the full required limits on the declarations are available if a loss occurs and not depleted by claims from other operations
The policy cannot be cancelled without the named insured’s permission

Example: Mineweld Inc. is a general contractor hired to construct a dam. In turn, it hires Super Subs, a sub-contractor, to design and engineer the electrical system. Mineweld is ultimately responsible for Super Subs performance on the dam project. Mineweld must check Super Subs' references, past work record, experience, and training to be certain that Super Subs is qualified for this type of project. Mineweld is held liable for damages when the electrical system fails because it was not installed properly and the entire project is jeopardized.

Similarly, the property or project owner has the same responsibilities when it hires a contractor to perform work on its behalf. As in the example above, the owner must check the contractor’s references, past work record, experience, and training to be certain it is qualified for this type of project.

Example: Harry's Hostels hires Hotels R Us to construct a hotel. Harry solicits Hotels based on its website and does not check out its references or qualifications. Bids are let, Hotels is the lowest bidder, and is awarded the contract. The hotel under construction collapses and several people are injured. Harry is held liable and responsible for Hotels' faulty workmanship and inferior materials.

The coverage CG 00 09 provides is different than the coverage CG 00 01–Commercial General Liability Coverage Form provides. The insuring agreement clearly states that coverage is limited to and applies only at the location on the declarations. As opposed to CG 00 01 covering all of the insured's operations, it covers only those related to the named insured, the contractor, and the project/location described on the declarations.

Coverage applies to only bodily injury and property damage events that occur during the policy period. Coverage does not apply if the loss event that results in damages occurred before the inception date, even if the claim for damages was made during the policy period. There is no claims-made version of CG 00 09.

Insurance applies to bodily injury or property damage only if no insured knew that a loss had occurred before the inception date. A covered event that took place before the inception date that an insured knew about that continues into the policy period, changes in scope, or resumes during the policy period is considered known by the insured before the policy period and is excluded.

On the other hand, the opposite is also true. If an insured or an authorized employee did not know about a claim or occurrence prior to the policy period, it is not considered as having been known before the policy period. Bodily injury or property damage is considered known at the earliest date when any insured defined in Section II–Who Is An Insured paragraph 1. or an employee authorized to give or receive notices of claims:

Reports any part of any injury or damage to the current insurance company or any other company
Receives a written or verbal demand or claim for damages
First becomes aware in any other way that bodily injury or property damage either has occurred or has begun to occur

The insurance that applies to bodily injury also applies to damages that any person or organization claims for care, loss of services, or death that results at any time from the bodily injury.

2. Exclusions

The insurance this coverage form provides does not apply to any of the following except as noted:

a. Expected or Intended Injury

Coverage does not apply to bodily injury or property damage that is either expected or intended by the insured. This exclusion has an exception that covers bodily injury that results from the insured using reasonable force to protect persons or property.

Note: The primary reason for this exclusion is to keep the insurance company from becoming involved with non-accidental losses and is in the public interest. It ensures that the insured will not use the insurance coverage for gain, such as theft, to inflict injury on a competitor, as an instrument of revenge, or to cause any other intentional harm. This exclusion's wording continues to be challenged and interpreted by the courts.

b. Contractual Liability

There is no coverage for bodily injury or property damage in cases where the insured must pay damages based on having assumed liability in a written contract or agreement. However, coverage does apply to liability for damages that:

The insured would have without a contract or agreement
The insured assumed in an insured contract or agreement. The bodily injury or property damage must occur after the contract or agreement is executed. Necessary attorney fees and litigation expenses that are incurred by or for a party other than the insured that are determined to be damages because of bodily injury or property damage are covered, but only if both of the following apply:

The insured assumed the cost of that party's defense in the same insured contract
The fees and expenses are for alleged damages that this insurance would cover

The liability assumed and technically eligible under an insured contract also must occur during the policy period. A retroactive agreement is excluded because it unfairly manipulates coverage.

Supplementary Payments may cover defense expenses related to damages assumed under an insured contract or agreement. The Supplementary Payments Section should be reviewed to determine when defense of an indemnitee and payment of an indemnitee’s defense expenses is included outside the limits.

c. Work Completed or Put to Intended Use

Damages for bodily injury or property damage that occur after the designated contractor completes its work on the project are excluded. This exclusion has an exception for any service, maintenance, or repair work the contractor is expected to perform.

Example: Pringle is both the general contractor and the named insured on CG 00 09. Waters is the subcontractor who purchases the policy. Waters’ job is to install the plumbing system for a restaurant Pringle is building. Coverage would normally end once Waters completes the plumbing installation. In this case, coverage continues during the two times in the upcoming months that Waters has, per contract, agreed to perform post-installation check-ups.

Damages for bodily injury or property damage that occur after that portion of the contractor’s work has been put to its intended use are excluded. An important exception to this exclusion is that intended use does not mean continued work by another contractor or sub-contractor on the same project.

Coverage ends when the contractor's work is completed or put to its intended use, whichever occurs first.

Example: A boiler subcontractor at the Pringle construction site uses Waters' plumbing hookup to install the boiler. Coverage remains in force because the boiler subcontractor is not the intended user and is only another part of the continuing construction project. However, coverage ends when the intended tenant uses the plumbing to wash dishes and cookware.

d. Acts or Omissions by You and Your Employees

Coverage does not apply to damages for bodily injury or property damage that result from any act or omission by the named insured or by any of its employees. The one exception is for the general supervision of work the contractor performs for the named insured. This means that coverage does not apply if the named insured or any of its employees performs any activities, work, or operations on the project itself, other than to supervise the designated contractor.

Example: Continuing the Pringle example above, if a Pringle employee helped Waters install the plumbing and caused bodily injury, Pringle's CGL Coverage Form applies to that employee's action, not the CG 00 09.

e. Workers Compensation and Similar Laws

There is no coverage for any requirement or obligation of the insured imposed by any workers compensation, disability benefits, unemployment compensation, or similar law.

Note: The intent of this exclusion and the Employers Liability exclusion is to eliminate the possibility of CG 00 09 indemnifying the insured for an injury that workers compensation or employer’s liability policies cover.

f. Employer’s Liability

Bodily injury to an employee of the insured as a result of his or her employment by the insured or while that employee is performing duties that are in support of the insured’s business is excluded. Bodily injury to the spouse, children, parents, brothers, or sisters of that employee as a consequence of his or her bodily injury is also excluded.

This exclusion applies whether the insured is liable because it is the employer or for any other reason. This exclusion applies whether the insured is liable as an employer or in any other capacity, or whether it must share damages with or repay someone else who must pay damages because of the injury. This exclusion does not apply to liability the insured assumes under an insured contract.

Notes:

This clarification is especially important because of the widespread use of contractors, subcontractors, independent contractors, or leased employees and much of the uncertainty with respect to who is responsible for bodily injury in such cases.

Monopolistic states that provide or require workers compensation coverage often do not provide employer’s liability coverage. This could result in a significant gap in coverage for the insured. Many insurance companies in those states have developed manuscript or company endorsements or utilize ISO endorsements that add employer’s liability coverage to the CGL Coverage Form. However, these endorsements may not be added to CG 00 09.

g. Damage to Property

Coverage does not apply to property damage to any property the named insured owns, rents, or occupies. Costs or expenses the named insured or any other party incurs to repair, replace, improve, or maintain that property for any reason, including preventing injury to persons or damage to property, are also excluded. This exclusion also applies to property loaned to the named insured, personal property in the insured's care, custody, or control, and work the contractor performs for the named insured.

Note: CG 00 09 is intended to protect the insured for the vicarious liability of its contractor or due to its own negligence in supervising that contractor. This is not meant as protection for the named insured’s own property.

h. War

There is no coverage for bodily injury or property damage caused directly or indirectly in any way by war, undeclared war, and civil war. This includes warlike action by a military force. This exclusion also applies to actions a government takes to prevent or defend against an expected or actual attack by any government or other authority that uses military personnel or agents. It also applies to rebellion, revolution, insurrection, or unlawful seizure of power and the action the government takes to prevent or defend against any of these.

i. Mobile Equipment

Bodily injury or property damage caused by or that results from the use of mobile equipment is excluded only when the injury or damage is due to that mobile equipment being part of a racing, speed, demolition, or stunt event or while practicing or preparing for such an activity. This exclusion applies only for prearranged events though.

j. Pollution

Note: It can be very confusing when reading this exclusion because the named insured is often the property owner which means that the exceptions in item (a) would apply. However, the exceptions in item (d) also apply because of the exception for the actions of the contractors working on behalf of the named insured.

(1) Coverage does not apply to bodily injury or property damage that arises from the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants. Pollutants are defined in this coverage form as an irritant or contaminant. It may be solid, liquid, gaseous, or thermal. Smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste are all pollutants but are not the only pollutants. Materials that are to be recycled, reconditioned, or reclaimed are included within the definition of waste.

(a) The exclusion applies at any location any insured now owns or occupies or ever owned or occupied but there are exceptions. It does not apply to bodily injury sustained within such a building that is caused by any of the products of combustion from any equipment used to heat, cool, or dehumidify the building or from equipment that is used to heat water for use by the building’s occupants. This exclusion also does not apply to any bodily injury or property damage that arises from heat, smoke or fumes that emanate from a hostile fire.

Example: The Jones family occupies a unit in Pearson’s apartment building while it is being renovated. The family continues to live there because the renovations are being done on the other side of the building. All members of the family become ill from fumes from a faulty furnace. The illness leads to permanent injuries and the family sues Kelvin, the renovation contractor, and Pearson. Pearson’s CG 00 09, which was purchased by Kelvin, covers the bodily injury the family sustained if Pearson is found liable because of Kelvin’s work on the faulty furnace used to heat the apartment building.

(b) The exclusion also applies at or from any location that the insured or others now or ever used to handle, store, dispose of, process, or treat waste.

Example: Mike’s Painting does all of the painting for Gold’s Apartments. Mike’s CG 00 09 displays Mike as the contractor and Gold's Apartments as the named insured. Mike usually disposes of his old paint by dumping it next to the holding pond on the premises of Gold’s Apartments. The pond overflows and carries pollutants to neighboring areas. This incident is not covered.

(c) Coverage does not apply to bodily injury or property damage that arises from any pollutants that any insured or any party the named insured is legally responsible or liable for now or ever transported, handled, stored, treated, disposed of, or processed as waste.

Example: Continuing with Mike’s Painting, Mike occasionally has too much paint left over to dump on the Gold's Apartments premises. In those cases, he dumps the paint at isolated spots throughout the county. The county sheriff discovers the activity one night and tracks the activity to several other sites. The county sues both Mike’s Painting and Gold’s Apartments to clean up the sites, but this exclusion applies, so there is no coverage.

(d) Coverage does not apply to bodily injury or property damage at or from any premises, site, or location where the insured is working or where any contractor or subcontractor working directly or indirectly on the insured's behalf is performing operations. This applies only if the insured or contractor brings the pollutants to that premises, site, or location. However, this exclusion does not apply when the pollutants are fuels, lubricants, or other operating fluids that are needed to perform the normal functions or operation of mobile equipment or its parts escape from the part of the equipment where they are used by the equipment causes the bodily injury or property damage. This exception does not apply if the discharge, dispersal, escape, or release is intentional or is a part of the operation being performed.

Another exception to this exclusion is when the bodily injury or property damage occurs within a building because of materials the contractor brought into it. The material must be part of an operation the contractor performs for an insured.

One final exception is injury or damage caused by products of combustion from a hostile fire.

Examples:

Mike’s Painting has a cherry picker it uses to paint the outside of buildings. The unit suddenly shifts and overturns during a job. The damage the escaping spilled fuel causes is covered. The damage caused by the paint contaminating the water in an adjacent pond is not.
Pearson’s Apartments is sued when a tenant becomes ill from the fumes inside the building as a result of Kelvin’s painting an interior hallway. Coverage applies because the event occurred inside the building. Coverage would not apply to anyone similarly injured who was outside the building.

(e) There is no coverage for bodily injury or property damage at any location where the insured, or any contractor working directly or indirectly for or on its behalf, is working or performing operations when the operations are to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of pollutants.

Example: Gold’s Apartments warns Mike’s Painting that it must change its ways or lose the contract. Mike’s Painting hires Curt’s Salvage to pick up the old paint cans and haul them away. Any bodily injury or property damage that arises from any pollution event as a result of Curt's operations is excluded.

(2) Coverage does not apply to any loss, cost, or expense due to any of the following:

Request, demand, order, or requirement that either an insured or another party respond in any way to the effects of pollutants
Claim or suit by or on behalf of any government entity for damages because of any activity that involves the effects of pollutants. For example, this exclusion eliminates coverage for any such action the Environmental Protection Act requires or brought on behalf of the Environmental Protection Agency (EPA) or any other government authority.

This exclusion does not apply to liability for property damage the insured has without a request, demand, order, requirement, claim, or suit.

Note: A separate pollution liability policy should be considered if additional pollution liability coverage is needed.

k. Damage to Impaired Property or Property Not Physically Injured

The insurance company does not cover property damage to impaired property or to property that is not physically injured when the property damage is caused by a defect, inadequacy, or dangerous condition in either the named insured’s product or its work. Coverage also does not apply if the damage is caused by a delay or failure by the named insured or others who act on its behalf to meet contract terms and conditions.

There is an exception. This exclusion does not apply to any loss of use of other property that arises because of a sudden and accidental physical injury to the named insured’s product or work after it has been put to its intended purpose.

Note: The definition of property damage is physical damage to tangible property and also the loss of use of tangible property. There is no requirement that the loss of use and the physical damage to tangible property be related. Note: There is no standard ISO endorsement available to buy back this coverage or delete the project delay exclusion.

Examples:

Craftworks General Contractors hires Excavations Dun Rite. Craftworks is the named insured on
CG 00 09 and Excavations is the contractor. As a result of Excavation not properly grading and backfilling the site, water does not drain correctly, the ground moves and begins to apply pressure to the building's foundation, and the project is impaired. There is no coverage because there was no physical property damage.
Excavations was scheduled to finish its part of the project by the end of May but did not do so until July 1. Coverage does not apply for costs resulting from the delay of the project. However, coverage could apply if the delay was due to a fire that Excavations caused.

l. Electronic Data (04 13 change)

Coverage does not apply to damages to electronic data. This includes loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data. This exclusion does not apply to the named insured’s liability for damages due to bodily injury. (04 13 addition)

Electronic data is defined as information, facts, or programs used with computer software or any other media used with electronically controlled equipment.

SUPPLEMENTARY PAYMENTS

Payments made under this section do not reduce the limits of insurance.

1. The insurance company has the right and duty to investigate and settle claims and also to defend lawsuits. When it does any of these, it also pays the following:

All expenses it incurs to do so
The cost of bail bonds that are required because of traffic law violations or accidents as a result of using any motor vehicle this insurance covers. The cost is limited to $250. The insurance company is not required to furnish these bonds.
The cost to purchase bonds that are required to release attachments. Payment is limited to the cost of bond amounts that are within the limit of insurance that applies. The insurance company is not required to furnish these bonds.
Reasonable expenses the insured incurs because the insurance company requests assistance as it investigates or defends a claim or suit. When the insured must be away from work, a maximum of $250 per day is paid for loss of earnings.
A suit's court costs that are the insured's responsibility. These court costs do not include attorney fees or expenses that are taxed by the court against the insured.

Note: This restriction can be very costly to the insured, especially when a court assesses all of the proceeding’s costs and expenses against the negligent party.

If the insurance company pays a judgment, it also pays the prejudgment interest charged against the insured for the amount of the judgment it pays. It does not pay any prejudgment interest that accrues on the part of the judgment for which the insurance company is not responsible. In addition, once the insurance company offers the full limits to settle, it will not pay any prejudgment interest that accrues after that offer.
Interest that accrues on the full amount (not just the amount within the available limits) of any judgment after it is entered. Once the insurance company pays, offers to pay, or deposits with the court the part of the judgment for which it is responsible, no additional interest is paid.
Expenses for first aid administered to others at the time of an accident. However, this is for only bodily injury that this insurance covers.

2. Under the Contractual Liability exclusion, the cost of the defense of the indemnitee is part of the damages paid for when coverage for an insured contract applies. This means that defense costs reduce the amount of limits available to pay for the loss. However, if the insured and the indemnitee are sued in the same suit and the insurance company defends the insured in that suit, it will also defend the indemnitee and pay under Supplementary Payments but only if all of the following apply:

The damages the suit seeks must be for liability assumed in the insured contract between the insured and the indemnitee.
The insurance this coverage form provides must be for the liability described in the first bullet point above.
The insured contract described in the first bullet point above must include a provision that requires that the insured assume defense costs or be obligated to defend damages for liability assumed in the insured contract.
The interests of the insured and the interests of the indemnitees must not conflict with respect to the suit brought. This lack of conflict is based on both the suit’s allegations and the information the insurance company obtains with respect to the suit.
Both the insured and the indemnitee must ask the insurance company to handle the indemnitee's defense in the suit and agree to the same legal counsel handling the interests of both parties.
The indemnitee must agree in writing to actions the insured agrees to do in Section IV–Conditions. This is required because the indemnitee is not a party to the contract and is not subject to those conditions or to even know about them. This means that all of the following apply regarding defense of the indemnitee.

o The indemnitee must cooperate with the insurance company in investigating, defending, or settling the suit. It must promptly send copies of any demands, notices, summonses, or legal documents it receives related to the suit to the insurance company. The indemnitee must also agree to notify any other insurance company with available coverage and assist all of the insurance carriers to work together so that all coverage is coordinated.

o The indemnitee must give the insurance company written authorization to obtain records and other information related to the suit. It must also provide written authorization for this insurance company to conduct and control the indemnitee's defense in the suit.

o Attorney fees and all litigation expenses are paid without reducing the limits of insurance when all of the above requirements are met.

o There is no obligation for the insurance company to defend after the limit of insurance that applies is used up paying judgments or settlements.

o In addition, if the indemnitee fails to meet the conditions above, the insurance company is not obligated to pay the indemnitee’s attorney’s fees and other costs of litigation as part of Supplementary Payments.

SECTION II–WHO IS AN INSURED

1. The declarations lists different types of entities. Who is an insured is based on the type(s) of entities selected:

a. If the named insured is an individual, then the individual and the individual's spouse are insureds.

Note: There is no reference to business operations. This means the individuals named do not necessarily have to be in business.

Example: Mr. and Mrs. Henry Jones are both insureds individually when the CG 00 09 they require from the general contractor that is building their home names Henry Jones as the named insured and the general contractor as the contractor.

b. If the named insured is a partnership or joint venture, then the partnership or joint venture is an insured. The named insured’s members and partners and their spouses are also insureds but only with respect to their duties as partners or members of the joint venture.

Example: Mr. John Insured and Mr. Joe Insured are partners in a business, and they and their spouses are insureds with respect to the partnership's operations. However, there is no coverage for their sole proprietorships or any other partnerships.

c. If the named insured is a limited liability company, then the limited liability company is an insured. Members of the company are insureds but only when conducting the named insured's business. The named insured's managers are also insureds but only when performing specific duties as managers.

d. If the named insured is any other organization, then that organization is an insured. The executive officers and directors are insureds while performing their duties as such. Stockholders are insureds but only in their very limited capacity as stockholders.

2. The following are also insureds:

a. Any party that acts as the named insured's real estate manager

b. Any party that has proper temporary legal custody of a deceased named insured's property. However, this is limited to liability that arises out of or is caused by maintaining or using that property and only until a proper legal representative is appointed.

c. A properly appointed legal representative has all the named insured's rights and duties if the named insured dies. However, this is limited to its duties as a properly appointed legal representative.

No party is an insured with respect to conduct of any current or previous partnership, joint venture, or limited liability company that is not listed as an insured on the declarations.

Notes:

CG 00 09 does not include employees and volunteers as insureds. Who Is an Insured in CG 00 09 is a more restricted version of the same section in the ISO Commercial General Liability Coverage Form.

In addition to the definitions of Insured above, additional insureds can be added using either of two different endorsements. One is CG 20 31–Additional Insured–Engineers, Architects, or Surveyors. The other is CG 29 35–Additional Insured–State or Governmental Agency or Subdivision or Political Subdivision–Permits or Authorizations.

SECTION III–LIMITS OF INSURANCE

1. The most the insurance company pays are the limits of insurance on the declarations. This is subject to the rules outlined below. This is regardless of the number of insureds, claims made, suits brought, or number of parties that make claims or bring suits.

Example: Mary Jones is the named insured. Because she is an individual, her husband Todd is also an insured. A loss occurs, and both Mary and Todd are sued. CG 00 09 responds and defends each as if he or she is the only insured. However, this is subject to the requirement that the limit applies to each occurrence, not to each individual.

2. The most the insurance company pays for the total of damages for all bodily injury and property damage is the Aggregate Limit on the declarations.

Note: Coverage ends when claim payments made during the policy period use up this limit.

Example: The Aggregate Limit is $2,000,000. Three covered losses occur during the policy period. Each loss is for $1,000,000, for a total of $3,000,000. The most paid is the $2,000,000 Aggregate Limit for all covered losses that occur during the policy period.

3. The most the insurance company pays for all bodily injury and property damage from any one covered occurrence is the Each Occurrence Limit on the declarations. This is subject to the Aggregate Limit.

Example: The Each Occurrence Limit is $1,000,000. The insured is a property owner, and the contractor it hires to do some work causes an explosion at the construction site. The explosion occurs while visitors are on the premises, and 13 persons injured by the blast present claims for a total of $2,500,000 in damages. CG 00 09 pays the $1,000,000 Each Occurrence Limit, and the insured is responsible for the remaining $1,500,000 in claims from other insurance or its own financial resources.

If there is more than one project designated on the declarations, the Aggregate Limit applies separately to each designated project.

This section also clarifies how the limits of insurance apply. They apply separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

Example: Jacklyn’s new house was scheduled to be completed in nine months. Denny’s Homes purchased a CG 00 09 for her effective 4/1/2018. On 3/1/2019 it became apparent that at least three months more work was needed. Jacklyn’s CG 00 09 is about to expire. She can:

1) Believe that the house will be completed in three months and request that the existing policy be extended for three months. If she does this, the same limits applying to the 4/1/2018-4/1/19 will apply until 7/1/2016.

2) Be cautious and request a six-month renewal policy from 4/1/2019-10/1/2019. In this case, a new set of limits is available losses that may occur from 4/1/2019 – 10/1/2019.

3) Be very cautious and request a full annual renewal from 4/1/2019-4/1/2019. In this case, a new set of limits is available for losses that may occur from 4/1/2019 – 4/1/2019.

Note: In all cases, Denny’s Homes will be responsible for the premium and will receive any return premium if the house is completed ahead of time.

SECTION IV–CONDITIONS

1. Bankruptcy

The insurance company is not relieved of its obligations if the insured or its estate becomes bankrupt or insolvent.

2. Cancellation

a. The first named insured on the declarations can cancel at any time by giving the insurance company advance written notice of its desire to cancel.

b. The insurance company can cancel at any time by providing both the first named insured and the contractor with written notice of cancellation. Cancellation for non-payment requires at least 10 days advance notice. Any other reason requires at least 30 days advance notice.

c. The insurance company must mail or deliver its notices to the mailing addresses of both the first named insured and the contractor. This is why it is very important to keep the addresses on the declarations current.

d. The notice of cancellation states the cancellation date. This is the date that both the policy period and coverage ends.

e. In case of cancellation, the insurance company sends the contractor any return premium due. If the company cancels, the refund is calculated on a pro rata basis. If the named insured cancels, the refund may be calculated on a different basis. In any case, the cancellation is effective even if a refund has not been offered or made.

f. If the notice of cancellation is mailed and not delivered, proof of mailing is sufficient proof of notice.

3. Changes

CG 00 09 includes all agreements with respect to the insurance coverage provided between the named insured, the contractor, and the insurance company. The company must agree before any changes requested by either the first named insured or the contractor go into effect. Policy terms can be changed only by endorsements that the insurance company issues.

Note: Both the first named insured and the contractor receive copies of endorsements issued. While either can request changes, the insurance company is not required to notify either party of the other's request before it issues the endorsement.

4. Duties in the Event of Occurrence, Offense, Claim, or Suit

The named insured has a number of duties to perform if a claim or demand for coverage occurs:

a. The named insured must inform the insurance company of any occurrence that may result in a claim as soon as possible. As a minimum, the notice should include information with respect to how, when, and where the event took place and the names and addresses of all injured parties and any witnesses. It should also indicate the nature and location of any injury or damage as a result of the occurrence.

b. With respect to claims made or suits brought, the named insured or any insured must immediately record its details, the date it was received, and notify the insurance company as soon as possible. This is in addition to providing the company with timely written notice of the claim or suit.

c. Every insured involved in or with the claim and the named insured is required to:

Immediately send the insurance company copies of demands, notices, summonses, and legal documents it receives in conjunction with the claim or suit
Authorize and give the insurance company permission to obtain records and other needed information
Cooperate with the insurance company as it investigates or settles the claim or defends against the suit
When the insurance company requests, help it enforce any right against any person or organization that may be liable to the insured for injury or damage that this insurance covers.

d. No insured may voluntarily make any payments, assume any obligations, or incur any expenses other than first aid without the insurance company's consent. If it does, it does so at its own cost or expense.

5. Examination of Your Books and Records

The insurance company may examine and audit any books and records of either the named insured or the contractor at any time during the policy period and for up to three years afterward. However, the only books or records it can examine and audit are the ones that relate to the coverage provided by this coverage form.

6. Inspections and Surveys

a. The insurance company has the right to make inspections and surveys at any time, report its findings to the named insured, and recommend changes it feels should be made.

b. The inspections and surveys may or may not be conducted. If it does inspect or survey, anything it does in this regard relates only to its findings of the risk's insurability and the premiums to charge. The inspection is not considered a safety inspection or an attempt to perform duties of parties that provide for the health or safety of workers or the public. The insurance company is not warranting that conditions are safe or healthful or comply with any law, regulation, code, or standard.

c. This condition applies to the insurance company as well as to any rating, advisory, rate service, or other organization that also makes insurance inspections, surveys, reports, or recommendations for insurance purposes.

d. There is an exception to paragraph b. Any inspections or recommendations that are made to certify boilers, pressure vessels, or elevators under any state or municipal statute, ordinance, or regulation is not subject to paragraph b.

7. Legal Action Against Us

No party has the right to join the insurance company in any way, bring it into a suit that claims damages from an insured, or to sue the insurance company unless all of the coverage form’s terms and conditions are completely met and complied with.

The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, its liability does not go beyond what is available in this coverage form's terms. That liability is also limited to this coverage form’s limit of insurance.

An agreed settlement is a settlement and release of liability that the insured, the insurance company, and the claimant or its legal representative signs.

8. Other Insurance

CG 00 09 provides primary coverage. The insurance company does not look for contribution from any other insurance available to the named insured unless a different contractor other than the one on the declarations, provides insurance for the same operation and job location. It then shares with the other insurance on the basis of one of two options.

If the other insurance permits contribution by equal shares, then this insurance also does. Each insurance company contributes equal amounts until it uses up its limit of insurance or the loss is paid, whichever occurs first.

If the other insurance does not include contribution by equal shares, contribution is by limits. With this approach, each company's share is the ratio of its limit of insurance that applies to the total limits of insurance that apply by all companies.

Example: Maxi's House of Beauty has three separate policies. Each applies to the same construction project and has the same named insured but a different contractor. Each policy responds when a loss occurs where Maxi is liable for damages. The Each Occurrence Limit for Policy A is $50,000, $100,000 for Policy B, and $1,000,000 for Policy C. The damages assessed against Maxi total $500,000.

Under Contribution by Equal Shares, each policy contributes $50,000. This amounts to $150,000 of the $500,000 in damages. Policy A's limits are now used up. Policy B and Policy C then each contribute an additional $50,000, for a total contribution of $250,000. Policy B's limits are used up. Policy C contributes the remaining $250,000 to reach the $500,000 amount of total damages.

Under contribution by limits, contribution is proportionally by limits. Ratios are determined based on each insurance company's limit as a percentage of the total limits that apply. The loss is then apportioned between the various policies.

Example: Continuing the example above, Policy A's Each Occurrence Limit is $50,000, Policy B's is $100,000, and Policy C's is $1,000,000, for a $1,150,000 total limit available to pay claims. Policy A's limit is approximately 4.3% of the total, Policy B's is about 8.7%, and Policy C has the remaining 87%. If the total amount of the insured’s liability is $500,000, Policy A pays approximately $21,500, Policy B pays about $43,500, and Policy C pays the remaining $435,000.

9. Premiums

The contractor pays the premium. It also receives any return premiums the insurance company pays.

10. Premium Audit

a. The insurance company calculates all premiums according to its rules and rates.

b. The advance premium on the declarations is only a deposit premium. At the end of each audit period, the insurance company determines the actual earned premium for the period and notifies the contractor. The date on the billing notice is the date the company expects to receive the premium billed. However, if the advance and audit premiums are more than the earned premium, the insurance company refunds the excess to the contractor.

c. The contractor is required to keep the records and information the insurance company needs to do the premium calculations and must send copies of them to the company when it requests.

Note: Audit period is not clearly defined or explained. It can be monthly, quarterly, annually, or any reasonable period the contractor and the insurance company agree to.

11. Separation of Insureds

Other than the limits of insurance and any rights and duties that apply specifically to the first named insured, the insurance provided applies to each named insured as if it was the only named insured. It also applies separately to each insured against whom a claim is made or a suit is brought.

12. Transfer of Rights of Recovery Against Others to Us

Any rights the insured has against others to recover all or part of any payment the insurance company made transfer to the company. The insured must preserve those rights and not do anything after the loss occurs to impair them. The company can request that the insured bring suit or transfer those rights to it and help it enforce them.

13. When We Do Not Renew

If the insurance company decides to not renew, it must mail or deliver written notice stating so to the first named insured on the declarations at least 30 days before the expiration date. If the notice is mailed, proof of mailing is sufficient proof of notice.

Notes:

There is no requirement to notify the contractor of the non-renewal, even though it pays for the coverage.

This paragraph is modified by specific endorsements in many states as to the number of days of advance notice of non-renewal required, what is considered acceptable as proof of mailing, and valid reasons to terminate or not renew coverage. Each state’s requirements must be evaluated carefully when considering any changes or modifications of this condition.

SECTION V–DEFINITIONS

Defined words are used throughout the coverage form. Restricting the meanings to such definitions provides a way for everyone to have a clearer understanding of the coverage intended. There are 16 defined terms.

1. Auto (04 13 change)

This is a land motor vehicle, trailer, or semi-trailer designed for travel on public roads. It includes any attached machinery or equipment. It is also any other land vehicle subject to compulsory or financial responsibility laws or motor vehicle laws where it is licensed or principally garaged. This definition does not include mobile equipment. The 04 13 edition removes the words “in the state” after “motor vehicle laws” in the prior edition with respect to auto licensing or garaging locations.

2. Bodily injury

This is bodily injury, disability, sickness, or disease a person sustains. Death that occurs as a result of bodily injury, sickness, or disease is also considered bodily injury regardless of when the death occurs.

3. Contractor

This is the contractor on the declarations.

4. Employee

The term employee is broadened to include leased workers. It does not include temporary workers.

5. Executive officer

This is any person who occupies any officer position that the named insured's charter, constitution, by-laws, or similar governing documents creates.

6. Hostile fire

This is a fire that becomes uncontrollable or that burns beyond where it is intended to be.