CU 0002–COMMERCIAL UMBRELLA LIABILITY COVERAGE ANALYSIS

(October 2020)

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INTRODUCTION

The American Association of Insurance Services (AAIS) CU 0002–Commercial Umbrella Liability Coverage provides additional insurance protection to insureds that have significant assets or exposures. It is a stand-alone insurance policy that has its own coverage, exclusions, and conditions. It provides excess limits over General Liability, Automobile Liability, Employers Liability, and other underlying liability coverages. In addition, and because it is a stand-alone policy, it may also include coverage that underlying coverage forms or policies do not include or provide.

This section explains how the policy is organized and how to locate a specific section in it easily. This analysis presents these major sections in policy order.

This section also states that a state-specific endorsement is attached and that any other endorsements or schedules that apply are identified on the declarations. It also states that words or phrases that have special meaning are in the Definitions section and are in quotation marks in the policy.

AGREEMENT

The insurance company agrees to provide the coverages described in the policy, subject to all its terms and conditions. This is in consideration of the named insured paying the required premium.

DEFINITIONS

Defined words are used throughout the policy. Restricting their meaning to the definition in the policy gives all parties a clearer understanding of the coverage intended. CU 0002 defines 39 words and terms.

1. You and your

This is/are the person or persons, entity, or organization on the declarations named as the insured. The cancellation, renewal, nonrenewal, and premium terms apply to only these entities.

You and your also means newly acquired or formed organizations that any of the above own or over which it exercises a majority interest.

You and your do not include any of the following newly acquired or formed organizations or situations:

Newly acquired or formed limited liability companies, joint ventures, or partnerships
That have other similar insurance available to them
More than 90 days immediately after the organization is acquired or formed or after the policy period ends, whichever occurs first
That involve bodily injury or property damage that took place before the organization was acquired or formed
That involve personal injury and advertising injury that arose from an offense committed before the organization was acquired or formed

2. We, us and our

This is the insurance company that provides this coverage.

3. Advertisement

This is an announcement or public notice. Its meaning also extends to (but is not limited to) those on the Internet or in electronic communications that offer the named insured's products, goods, or services for either of the following:

To rent, lease, for sale, or for other uses to prospective customers, clients, purchasers, or patrons
To promote to prospective supporters and for their consideration

The same criteria apply to advertisements on websites. However, this is for only the part of the website that offers the named insured's products, goods, or services.

4. Auto

This is a land motor vehicle, trailer, or semi trailer designed to operate on public roads. It includes machinery and equipment attached to it. It is also any other land vehicle subject to compulsory motor vehicle insurance law(s) or financial responsibility law(s) in the state where it is licensed or primarily garaged. It does not include mobile equipment.

5. Bodily injury

This is bodily harm, sickness, or disease a person sustains, including resulting death. It does not include mental or emotional injury, suffering, or distress that is not related to a physical injury.

Note: Death does not have to occur during the policy period. However, it must result directly from an injury sustained in an occurrence during the policy period.

6. Claims-made

These are liability claim provisions that apply to claims for injury or damage subject to the following requirements:

The claim must be made against an insured during the policy period or an extended reporting period.
The injury or damage must occur on or after the claims-made policy's retroactive date listed on the declarations and before that policy expires.

7. Coverage territory

This is the entire world. However, it does not include any nation, foreign country, or jurisdiction subject to United States of America trade or economic sanctions or embargoes.

8. Covered Auto

This is an auto that underlying insurance covers. It applies to only the liability coverage part of this coverage form.

9. Covered contract

There are six types of covered contracts:

Leases of premises
Easement or license agreements

- Agreements related to construction or demolition operations within 50 feet of a railroad are not included.

Requirements to indemnify a municipality prescribed in ordinances

- This does not include work done for the municipality.

Sidetrack agreements
Elevator maintenance agreements
Any part of any other contract or agreement that relates to the following:

The named insured assuming the tort liability of another party to pay for bodily injury or property damage to a third party. It applies only if the contract has to do with conduct of the named insured’s business and may include contracts that indemnify a municipality for work performed for that municipality.

Tort liability is liability imposed by law with or without a contract or agreement.

The named insured or its employees renting or leasing autos but only when such contracts relate to the named insured’s business.

If a covered contract contains any of the following agreements, these agreements are not considered covered even though the other parts of the contract are still covered:

An agreement that indemnifies a railroad for bodily injury or property damage caused by construction or demolition within 50 feet of any railroad property when it affects a railroad bridge, trestle, track, road-bed, tunnel, underpass, or crossing
An agreement that indemnifies any party for fire damage to premises the named insured rents or borrows

- An agreement that applies to an auto the named insured or any of its employees rent, lease, or borrow. However, this applies only if a driver is furnished with such autos.

An agreement that holds harmless any party hired that is in the business of transporting property by auto. This limitation applies to only contracts the named insured enters into in order to use a covered auto over a route that a public authority authorizes the contracted party to serve.
An agreement that requires that the named insured or its employees pay for property damage to a leased or rented auto
An agreement that indemnifies architects, engineers, or surveyors for injury or damage caused in any way by any of the following:

Maps, drawings, opinions, reports, surveys, change orders, designs, or specifications they prepare or approve (or fail to prepare or approve)
Directions or instructions given (or that should have been given) when the principal cause of the injury or damage is giving or failing to give them

An agreement where the insured assumes liability for injury or damage due to its providing or failing to provide professional services. This includes supervisory, inspection, or engineering services. This limitation applies only if the insured is an architect, engineer, or surveyor.

10. Damages

This is monetary compensation to a party that claims to have been injured.

11. Data records

These are electronic files, documents, and information stored on computers, on networks, or other computer programs used with electronically controlled equipment.

12. Declarations

These are also known as declarations, supplemental declarations, and schedules.

13. Designated insured

This term has many meanings:

If individual is checked on the declarations, the named insured and his or her spouse are designated insureds. However, they are such only when they conduct the named insured’s business that he or she solely owns.

If partnership or joint venture is checked on the declarations, the named insured and its partners or members and their spouses are designated insureds. They are such only when they conduct the named insured’s business.
If limited liability company is checked on the declarations, the named insured and its members are designated insureds. They are such only when they conduct the named insured’s business. The named insured’s managers are also designated insureds but only when they work within the scope of managerial duties.
If trust is checked on the declarations, the named insured and its trustees are designated insureds. The trustees are such only while they perform their duties as trustees.
If the named insured checked on the declarations is an organization other than as listed above, the named insured and its executive officers and directors are designated insureds. The executive officers and directors are such only when they work within the scope of their duties.

- The named insured's stockholders are also designated insureds but limited to their liability as stockholders.

Employees who have the authority to give or receive notices of claims or occurrences

14. Employee

This term includes leased workers. It does not include temporary workers.

15. Executive officer

This is any person who holds an officer position the named insured created in its charter, by-laws, constitution, or any other similar document.

16. Impaired property

This is tangible property made useless or less useful for one of two reasons. It could be because the property contains products or work of the named insured that is dangerous or just deficient. It could also be due to the named insured failing to meet its contractual obligations.

Impaired property does not include the named insured's products or work. Property is considered impaired only if the named insured can restore it to usefulness by taking actions, such as repairing, replacing, or removing the product or work, or by fulfilling its contractual obligations.

17. Indemnitee

This is any party for whom an insured assumed liability for damages for bodily injury or property damage under a covered contract.

18. Insured

This term has many meanings. The following apply except concerning owning, maintaining, or using covered autos.

If individual is checked on the declarations, the named insured and his or her spouse are designated insureds. However, they are such only when they conduct the named insured’s business that he or she solely owns.

If partnership or joint venture is checked on the declarations, the named insured and its partners or members and their spouses are designated insureds. They are such only when they conduct the named insured’s business.
If limited liability company is checked on the declarations, the named insured and its members are designated insureds. They are such only when they conduct the named insured’s business. The named insured’s managers are also designated insureds but only when they work within the scope of their managerial duties.
If trust is checked on the declarations, the named insured and its trustees are designated insureds but only when they work within the scope of their duties.

Note: CU 0052–Commercial Umbrella Liability Declarations does not have a space for or to list trusts.

If the named insured checked on the declarations is an organization other than the ones listed above, the named insured and its executive officers and directors are designated insureds. The executive officers and directors are such only when they work within the scope of their duties.

The named insured's stockholders are also designated insureds. However, this is limited to their liability as stockholders.

The following are also insureds except concerning owning, maintaining, or using covered autos.

The named insured's real estate manager who is not an employee or a volunteer. This manager can be a person or an organization.
A deceased named insured’s legal representative but only for acts within the scope of its duties as such. Any person who has custody of a deceased’s named insured's property is also an insured for liability that arises from maintaining or using that property. However, that status ends when the appropriate legal representative is appointed. The legal representative has all of the named insured's rights and duties under this coverage.
The named insured's employees but limited to actions while in the course of their employment. The named insured’s volunteers are also insured but only while they perform duties related to the way the named insured’s business is conducted. Managers of limited liability companies and executive officers of organizations other than limited liability companies, partnerships, or joint ventures are not insureds under this item. However, they are insureds in the first group of insureds above.

Employees and volunteer workers are not insureds for bodily injury or personal and advertising injury under any of the following circumstances:

The injury is to the named insured, its partners, or members.
The injury is to a fellow employee while that fellow employee works or performs duties for the named insured.
The injury is to a volunteer worker who provides duties related to conduct of the named insured’s business.
The injury is to designated relatives of an injured fellow employees or volunteer workers as described above.
Where an obligation exists to reimburse third parties partially or completely for damages that arise from the injuries described above
Employees and volunteer workers are not insureds for property damage to any property the named insured, its partners, members, employees, or volunteers own, occupy, use, rent, have on loan, or over which they exercise care, custody, or control.

Insured means the following with respect to owning, maintaining, or using covered autos:

The named insured
Insured parties in underlying auto insurance. This is limited to the extent of their coverage under such underlying insurance.
Liability for conduct of any party described in the two points above limited to the extent of that liability

Insured also means any party named as an additional insured in underlying insurance. This is limited to the extent of the coverage the underlying insurance provides.

If a partnership, joint venture or limited liability company (current or past) is not named on the declarations, no party is an insured under this policy as relates to its conduct.

Note: This clarifies that insured status is granted only to parties related to the entities named on the declarations.

19. Leased worker

This is a person the named insured leases from a labor leasing business who is subject to a contract or agreement to perform duties related to conduct of the named insured’s business. A temporary worker is not a leased worker.

Note: This requires an agreement between the named insured and the leasing firm in order for the individual to be considered a leased worker.

20. Limit

This is the dollar amount that applies to the coverages provided.

21. Loading or unloading

This is movement of property. It begins when the property is removed from the point where it is accepted for transit by a vehicle. It continues while the property is in or on the vehicle. It ends when the property is removed from the vehicle at the destination. It also includes moving the property by a hand truck or by any mechanical device attached to the transporting vehicle.

22. Mobile equipment

This is land motor vehicles and their attached machinery and equipment that are or do one or more of the following:

Used exclusively on the named insured's owned or rented premises. This includes adjoining ways.
Designed primarily for use off public roads
Travel on crawler treads
Self-propelled and designed or used to move any of the following equipment that is either a part of it or is permanently attached to it:

Power cranes, shovels, loaders, diggers, and drills
Graders, scrapers, rollers and other road construction or repair equipment

Not described above and not self-propelled. They must be used mainly to provide mobility to any of the following permanently attached equipment:

Air compressors, pumps, generators, spraying, welding, and building cleaning equipment
Equipment used for geophysical exploration or lighting and equipment used to service wells
Equipment that raises or lowers workers, such as cherry pickers

Land vehicles not described in the first four points above subject to the condition that they are not used to transport cargo or people

Mobile equipment does not include self-propelled vehicles with any of the following permanently attached equipment:

Note: This is because they are considered autos.

Snow removal, street cleaning, road maintenance, or resurfacing equipment
Cherry pickers and other equipment mounted on vehicle chassis that raise or lower workers
Air compressors, pumps, generators, spraying, welding, and equipment used to clean buildings
Equipment used for geophysical exploration or lighting and equipment used to service wells

23. Occurrence

This is an accident. It includes repeated exposure to the same or similar conditions.

24. Personal and advertising injury

This is injury caused by, that results or arises from one or more of the following offenses:

Spoken, written, or electronic publication of material that maligns a person or organization, belittles a person's or organization's goods, products, or services, or violates a person's rights of privacy
Falsely taking persons into custody, detaining, or imprisoning them
Willful or wanton prosecution
The named insured misappropriating advertising ideas in its advertisement
The named insured infringing on another's trade-dress, slogan, or copyright in its advertisement
Offenses committed by or on behalf of the owner, landlord, or lessor of a room, dwelling, or premises. These include wrongful entry into, wrongful eviction from, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies.
The definition of personal and advertising injury includes any consequential bodily injury that may result.

25. Pollutant

This is any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant. It includes acids, alkalis, chemicals, fumes, soot, vapor, and waste. Waste includes materials to be disposed of, recycled, reclaimed, or reconditioned. It also includes visible or invisible electromagnetic, magnetic, or electrical fields and particles and sound emissions.

26. Products

These are the named insured's products or goods it manufactures, handles, sells, disposes of, or distributes. Products or goods manufactured, handled, sold, disposed of, or distributed by others that trade under the named insured's name or by a party whose assets the named insured acquired are also considered products.

Products also include the following:

Any representations made at any time or warranties that address the products’ characteristics, such as quality, fitness, durability, use, or performance
Other parts, material, equipment, or containers used in conjunction with such products. A vehicle is not a container.
Either providing or failing to provide instructions and warnings

The following are not products:

Real property
Vending machines or other property the named insured does not sell but that it rents to or places for others to use

27. Products/completed work hazard

The products hazard means bodily injury or property damage that occurs away from locations the named insured owns or rents that arises from products the named insured has physically relinquished or handed over to others.

The completed work hazard means bodily injury or property damage that occurs away from locations the named insured owns or rents that arises from its work. It does not include work that the named insured abandoned or did not finish. This work is considered completed on the earliest of the following dates:

When all work that is the named insured's responsibility under a contract is completed
When all work that is the named insured’s responsibility under a contract at a job site is completed. This applies in cases where the contract calls for work at more than one site.
When parties, other than another contractor or subcontractor that performs work at the same job site, put the named insured's work at that job site to its intended use

However, work that is otherwise complete except that it needs further service, maintenance, correction, repair, or replacement because of a defect or deficiency is considered complete.

Neither the products hazard nor the completed work hazard includes bodily injury or property damage that arises from any of the following:

Property in transit, unless a defect in a non-owned vehicle caused the injury or damage but only if any insured’s loading or unloading created that defect
Tools, uninstalled equipment, or abandoned or unused materials that are present
Any products or work classification that uses the phrase "including products/completed work" on the declarations of the underlying insurance

28. Property damage

This is physical damage to or destruction of tangible property. It includes the loss of use of that property. The loss of use and the physical damage of tangible property that resulted in that loss of use are deemed to occur at the same time.

Loss of use of tangible property that has not been physically damaged or destroyed is also considered property damage. The time of loss of such losses is considered to have occurred at the same time as the occurrence that caused it.

Tangible property does not include data records except with respect to auto coverage.

With respect to owning, maintaining, or using covered autos, property damage also includes any loss, expense, or cost due to any action due to or that involves responding to or assessing the effects of pollutants.

29. Recreational vehicle

This is a land motor vehicle designed for recreational use off public roads. It includes golf carts and snowmobiles but is not limited to just these.

30. Retained limit

This is either the self-insured retention on the declarations or the underlying insurance limits available.

31. Self-insured retention

This is the dollar amount on the declarations that the insured pays before this insurance pays. It applies only in cases where occurrences or offenses take place that underlying insurance does not cover. It does not apply to offenses or occurrences that underlying insurance would have covered except that its limits were used up.

32. Silica

This is also known as silicon dioxide. It includes a number of forms of silica, silica sand, silica mixed with other compounds, and silica dust mixed with other dust particles.

33. Suit

This is any civil legal action in a court of law or an administrative proceeding that seeks damages that this insurance covers. It includes arbitration or alternative dispute proceedings that seek damages that any insured either must submit to or that it agrees to submit to with the insurance company's consent. Either the underlying insurance company or the insurance company that provides this policy’s coverage can grant the consent.

34. Temporary worker

This is a worker furnished to the named insured. He or she may be either a substitute for a full-time employee on leave or may be employed to meet a short-term workload situation.

35. Terms

These are any and all definitions, limitations, conditions, provisions, and exclusions that apply to this coverage.

36. Underlying insurance

This is the liability insurance coverage for the specified limits and policy period provided by the policies on the schedule of underlying insurance on the declarations. It includes policies issued to replace those policies during this insurance's policy period. The replacement policies must provide the same or higher limits and insure against the same hazards, except where modified by standard revisions or as this policy’s insurance company agrees to in writing.

37. Underlying insurer

This is any insurance company that issues an underlying insurance policy.

38. Volunteer worker

This is not an employee. This is a person who donates time or services and who is or does both of the following:

Acts within the scope of the duties the named insured determines and directs
Is not remunerated in any way except for being reimbursed for certain out-of-pocket expenses

Volunteer workers are not temporary workers or leased workers.

39. Your work

This is work or operations the named insured performs or that others perform on its behalf. It includes any equipment, material, equipment, or parts supplied specifically for the work.

It also includes written warranties or representations with respect to the work or operation’s quality, fitness, durability, or performance. It also includes providing warnings or instructions or failing to provide them.

COMMERCIAL UMBRELLA LIABILITY COVERAGES

COVERAGE L–BODILY INJURY LIABILITY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. The insurance company pays amounts on the insured's behalf in excess of the policy’s retained limits. The insured must be legally obligated to pay these amounts due to damages imposed on it because of bodily injury or property damage that this Insuring Agreement covers.

The company also has the right and duty to defend the insured against suits that seek damages for bodily injury or property damage that this Insuring Agreement covers but only when either of the following applies:

The underlying coverage does not apply.
The underlying limits are used up paying judgments, settlements, or claims.

The company may not be required to defend but it still has the right to defend or participate with any underlying carrier or the insured to defend suits against the insured for damages that this insurance covers. It is not required to defend the insured against suits for damages that this Insuring Agreement does not cover.

The insurance company has the option to investigate any occurrence that this insurance covers and settle claims or suits that it has the duty to defend.

b. How Much We Pay describes amounts the insurance company pays as damages.

c. The company is not required to defend after it has paid amounts that equal the limit that applies that result from written settlements it agrees to or from judgments. Except for the provisions under Supplemental Payments, it is not required to provide support or assistance or pay any other amounts.

d. Coverage applies to only bodily injury or property damage that meets all of the following requirements:

Occurs during this insurance’s policy period
Results from an occurrence that takes place in the coverage territory
Does not continue, resume, or change covered bodily injury or property damage that a designated insured knew about before this insurance’s inception date

The Knowledge of Bodily Injury or Property Damage Condition addresses this issue. If a designated insured knew about bodily injury or property damage that occurred before this insurance’s inception date, all continuations, resumptions, and changes in the injury or damage are considered part of the initial occurrence even after the policy expired.

Example: An awning attached to Tiebel's Jewelry Store collapsed and struck Jonathon on his head on 01/10/20. He fell and was life-lined to the hospital. He never regained consciousness and died on 04/02/21. His family filed a wrongful death claim against Tiebel's. The policy in effect on 01/10/20 responded, not the one in effect on 04/02/21.

e. Bodily injury or property damage that occurs during this insurance’s policy period includes any continuation, resumption, or change in such injury or damage after this insurance expires.

f. Damages that arise from bodily injury include those that any party claims at any time for care, loss of services, or death that results from such bodily injury.

g. A contract or agreement may require providing coverage to an insured that is an additional insured under underlying insurance coverage. In that case, the most the insurance company pays on the additional insured's behalf is the limit that the contract or agreement requires. Any amounts that the underlying insurance pays may reduce that limit.

h. Injury or damage that arises from an exposure that underlying insurance covers may be subject to a separate limit based on its terms. In that case, this insurance applies to injury or damage that arises from that exposure only if there is a separate limit is on CU 0052–Commercial Umbrella Liability Declarations Schedule of Underlying Insurance.

2. Exclusions

a. Bodily injury or property damage expected, intended, or directed by the insured or that results from its intentional and malicious acts. However, bodily injury that arises from using reasonable force to protect people or property is covered.

Note: The primary reason for this exclusion is to keep the insurance company from becoming involved with non-accidental losses. In addition, it 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, especially in cases where the action was intentional but the type and extent of injury or damage that resulted was not.

Related Court Cases:

Intentional Damage Exclusion Barred Claims against Liability Insurer of Store Owner

"Expected or Intended Injury" Exclusion Did Not Apply to Bar Patron's Injuries

b. Bodily injury or property damage the insured assumes under a contract or agreement. However, this exclusion has the following exceptions:

Liability for damages the insured has without a contract or agreement
Liability for damages that arise from bodily injury or property damage the insured assumes in a covered contract. However, the bodily injury or property damage must take place after the insured executes the contract.

Damages that arise from such contractually obligated bodily injury and property damage include reasonable attorney fees and necessary litigation costs incurred by or for an indemnitee. This coverage applies subject to both of the following:

The covered contact assumes liability for that indemnitee’s defense or for the costs of defense.
Such attorney fees and litigation expenses are to defend that indemnitee against a suit or legal action that alleges damages that this insurance covers.

Costs of defense is part of Supplementary Payments if all of the conditions under Supplementary Payments 4.b. are met. If not, the reasonable attorney fees and necessary costs of litigation incurred by or for an indemnitee are considered part of damages.

Note: Defense costs that are part of damages are included within the limit of insurance instead of outside the limits. As a result, all defense costs reduce the amount available to pay for any settlement or judgment.

c. Claims based on violations of requirements the Employment Retirement Income Security Act (ERISA) of 1974 imposes on fiduciaries. This exclusion also applies to violations of amendments to the Act and similar regulations.

d. Bodily injury in cases where the insured is required to provide benefits under workers compensation, disability benefits, occupational disease, unemployment compensation, or similar laws

e. Note: This exclusion’s intent is to eliminate duplicate coverage for injury that workers compensation insurance should cover.

f. Liability for bodily injury an employee of the insured sustains while employed as a master or crewmember of any vessel

g. Note: Ocean Marine coverage forms and policies cover this exposure.

h. Related Article: Ocean Marine Insurance Overview

i. f. Bodily injury or property damage that arises from owning, using, or maintaining autos that are not covered autos.

h. g. Liability imposed by automobile no-fault or similar laws, uninsured or underinsured motorists laws, personal injury protection, medical payments, or first party physical damage coverage. Bodily injury or property damage that arises from any actual, alleged, or threatened release, escape, seepage, or migration of pollutants under the following circumstances:

1) That occurs when:

The pollutants are being transported or towed by either the insured or someone acting on an insured’s behalf by a covered auto.
A covered auto is loaded or unloaded.
The pollutants are handled in or on a covered auto.

The pollutants may be (but are not required to be) contained in covered property.

This exclusion has an important exception. Damage from lubricants, fuel, or any operating fluids needed for a covered auto to function properly is covered but only if these fluids escape from the part of the covered auto designed to contain them. As a result, intentional discharge is excluded. This exception is subject to the underlying insurance providing such coverage except that its limits are used up. This coverage follows the underlying insurance coverage's limitations, exclusions, and terms.

2) That takes place at or from any location or site any insured ever owned, occupied, rented, or had loaned to it, except for the following:

Bodily injury or property damage that arises from a fire's heat, fumes, or smoke when the fire goes out of control and escapes from its intended place or receptacle

Bodily injury sustained inside a building that arises from smoke, vapor, fumes, or soot generated by heating, cooling, or dehumidification equipment. This exception also applies to equipment used to heat water for the building's occupants or their guests' personal use. The bodily injury must be sustained inside the building.

Example: The Adaams family continues to occupy a unit in an apartment building undergoing renovations on the other side of the building. Everyone becomes ill from the fumes released from a faulty furnace. The illness leads to permanent injuries and the family sues its landlord. The landlord’s Commercial Umbrella Liability Coverage insures the bodily injury sustained because it resulted from a faulty heating unit.

Bodily injury or property damage for which the named insured may be liable as a contractor. This is only if the owner or lessee of the location, site, or premises was added to this policy (or the underlying coverage form or policy) as an additional insured for the named insured's ongoing operations at that specific location, site, or premises. This exception is subject to the location, site or premises having never been owned, occupied by, rented to, or loaned to any insured except the designated additional insured.

3) That takes place at or from any location or site any insured or others ever used to handle, store, dispose of, process, or treat waste

4) The pollutants were transported, handled, stored, treated, disposed of, or processed as waste by any insured or another for whom the named insured is legally responsible.

5) That takes place at or from any location or site where any insured, its contractors, or subcontractors performed operations but only if the pollutants were brought to the location or site in conjunction with such operations. There are three exceptions:

Bodily injury or property damage that arises from a fire's heat, fumes, or smoke when the fire goes out of control and escapes from its intended place or receptacle

Bodily injury or property damage as a result of fuels, lubricants, or other operating fluids needed to perform mobile equipment's normal functions escaping from the reservoir designed to contain them. This exception does not apply if the injury or damage results from such fluids being intentionally released. It also does not apply if the fluids brought to the location or site are intended to be released as part of the operations that any insured, contractor, or subcontractor performs.

Examples:

Franklin is a contractor working on the MegaDome building site. He overdrives his forklift, turns too quickly, and overturns. Oil seeps out of the engine and hydraulic fluid also leaks. The damage to the site that these pollutants caused is covered.
Changing the example, Franklin changes the forklift's oil while it is on the site. He lets the oil spill out on the ground, replaces the oil in the forklift, and drives off. This pollution damage is not covered.

Bodily injury or property damage sustained inside a building caused by release of gases, fumes, or vapors from materials brought into the building. The materials must be used in the operations that any insured, contractor, or subcontractor performs. The injury or damage must be sustained inside the building.

Examples:

The named insured hires Prime Time Painters to paint an office building's hallway. On the third day of work, an employee of one of the building's tenants is rushed to the hospital after being overcome by paint fumes inside the building. This insurance applies to the costs related to that employee’s illness.
The named insured hires Prime Time Painters to paint an office building. It uses an ammonia-based paint on the metal fence that surrounds the property. An employee of one of the building's tenants returns from lunch, faints from the fumes, strikes her head on the sidewalk, and is rushed to the hospital for treatment. There is no coverage because the incident occurred outside the building.

6) That takes place at or from any location or site where any insured performs operations that involve testing for, monitoring, abating, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way. This exclusion also applies if contractors or subcontractors that work on an insured's behalf perform these operations.

i. Any loss, cost, or expense that arises from any of the following:

Requests, demands, orders, or statutory or regulatory requirements for any insured or others to test for, monitor, clean up, abate, remove, contain, treat, detoxify, neutralize, respond to, or assess the effects of pollutants in any way
Claims or suits by a governmental authority (or on its behalf) for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way

This exclusion does not apply to any of the following:

Liability for property damage the insured has without such request, demand, order, or statutory or regulatory requirement, or claim or suit brought by or on behalf of a governmental authority
Any cost or expense that underlying auto insurance covers or would have covered except its limits were used up. This coverage follows the underlying auto insurance's terms, exclusions, and limitations.

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

Related Court Cases:

Contaminant Clarified With Respect to Application of Pollution Exclusion

Environmental Cleanup Costs Held Not Covered by CGL Insurance

Pollution Claim by Insured for Damage to His Property by Former Tenant Held Not Covered

Pollution Cleanup Costs Incurred During Policy Period by Subsidiary Acquired Thereafter Held Not Covered

Pollution Exclusion Applied Although Toxic Waste Was Turned Over to Transporter for Disposal

Pollution Exclusion Held Applicable to Cigarette Smoke

j. Bodily injury or property damage caused directly or indirectly by any act of 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, usurped power, or acts a government authority takes to hinder or defend against any of these.

k. Bodily injury or property damage that arises out of any of the following:

Owning, maintaining, using, occupying, renting, operating, loaning, entrusting, supervising, loading, or unloading any aircraft owned or operated by, or rented or loaned to, any insured
The insured’s negligence or wrongdoing on its part in supervising, hiring, or training others if the bodily injury or property damage arises from any of the activities above

Example: An aircraft the insured owns and rents to its employees to use is not properly maintained and an employee is injured when it must make an emergency landing. Coverage does not apply to the injury.

This exclusion does not apply to the following:

Liability assumed under any insured contract that applies to owning, maintaining, or using aircraft
Aircraft that any insured does not own. However, such aircraft must have a paid crew and be loaned to or chartered/hired by the named insured.
If underlying aircraft liability insurance covers or would have covered these exposures except that its limits were used up. This coverage follows the underlying aircraft insurance's terms, exclusions, and limitations unless stated otherwise.

Related Article: Aircraft Insurance Coverage Analysis

l. Bodily injury or property damage that arises from the following:

Owning, maintaining, using, occupying, renting, operating, loaning, entrusting, supervising, loading, or unloading any watercraft owned or operated by, or rented or loaned to, any insured
The insured’s negligence or wrongdoing on its part in supervising, hiring, or training others if the bodily injury or property damage arises from any of the activities above

Example: A watercraft the insured owns and rents to its employees for pleasure use is not properly maintained and an employee is injured when the watercraft sinks. Coverage does not apply to the injury.

This exclusion does not apply to the following:

Liability assumed under any insured contract that applies to owning, maintaining, or using watercraft
Watercraft ashore at the named insured's owned, rented, or controlled locations
Watercraft that the named insured does not own that is/are less than 50 feet long and is/are not used to transport people or property for a fee

Example: Bobby and Bubba of B & B's Barbecue rent a large pontoon boat for an afternoon sales presentation and prepare a bodacious barbecue on a large charcoal grill. The grill causes a fire. The guests scatter, the shift causes the boat to tip, and several guests fall overboard. A few are injured. Coverage applies because the boat was not owned, it was less than 50 feet long, and there was no charge made to transport the people.

If underlying watercraft liability insurance covers or would have covered these exposures except that its limits were used up. This coverage follows the underlying watercraft insurance's terms, exclusions, and limitations unless stated otherwise.

m. Bodily injury or property damage that any insured may be liable for because of any of the following:

Causing or contributing to any person becoming intoxicated
Furnishing alcoholic beverages to a person who is either under the legal drinking age or is already intoxicated
Any law that relates to selling, giving, distributing, or using alcoholic beverages

This exclusion does not apply if the named insured is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

Example: Denny's Dental Distributors holds a formal company Christmas party and serves alcoholic beverages without requesting payment. Coverage applies if bodily injury or property damage occurs as a result of Denny’s guests consuming alcoholic beverages.

On the other hand, consider the following:

Example: Ace Liquor and Wine Distributors sponsors a fundraiser for a local art museum by holding a wine tasting event. Ace serves food and wine to everyone who contributed to the museum. An attendee who was served several alcoholic beverages is injured on the trip home from the event. There is no coverage if Ace is sued for contributing to the attendee's intoxication because Ace is in the business of distributing alcoholic beverages.

This exclusion does not apply if underlying liquor liability insurance covers or would have covered these exposures except that its limits were used up. This coverage follows the underlying liquor liability insurance's terms, exclusions, and limitations unless stated otherwise.

Related Court Cases:

270_C045, Liquor Liability Exclusion Held Applicable to Nonprofit VFW

270_C046, Liquor Liability Suit Based on Failure to Restrain Patron Did Not Circumvent Exclusion

CGL Policy's Liquor Exclusion Inapplicable to Sales during Festival

n. Bodily injury to any of the following:

An employee of the insured when that bodily injury is the result of his or her employment by the insured or is due to that employee performing duties in conjunction with conducting the insured’s business
The spouse, children, parents, brothers, or sisters of an employee injured as described above whose bodily injury is a consequence of that employee's bodily injury

This exclusion applies whether the insured is liable as an employer or in any other capacity. It also applies if the insured must share damages with or repay someone else who must pay damages because of the injury.

Note: This clarification is especially important because of increasing use of contractors, subcontractors, independent contractors, or leased employees and the uncertainty about who is responsible for injuries to them.

This exclusion does not apply to the following:

If underlying employers liability insurance covers or would have covered these exposures except that its limits were used up. This coverage follows the underlying employers liability insurance's terms, exclusions, and limitations unless stated otherwise.
Bodily injury a domestic employee sustains but only if it arises from a covered auto. This applies only in cases where the domestic employee cannot claim workers compensation benefits. Domestic employees are defined as persons an insured employs to perform domestic or household duties related to use or care of residence premises.
Liability the insured assumes under a covered contract

Note: Monopolistic states that provide or require workers compensation coverage do not provide employer’s liability coverage. This could result in a significant gap in coverage.

Workers Compensation Monopolistic State Funds

Stop Gap–Employer’s Liability Coverage

o. Bodily injury and property damage due to providing or failing to provide any professional service

p. Bodily injury due to any of the following:

Refusing to employ a person or terminating that employee's employment. It also does not apply to on-the-job practices, acts, policies, or omissions related to employment directed towards the person such as, but not limited to, sexual misconduct, coercion, discipline, defamation, malicious prosecution, demotion, humiliation, reassignment, evaluation, harassment, and discrimination.

Note: Malicious prosecution is included because the court in Peterborough Oil Company, Inc. v. Great American Insurance refused to exclude malicious prosecution as an employment-related practice. The court reasoned that if the insurance company did not intend to cover malicious prosecution, it should have listed it. The court determined that this exclusion must be read narrowly, so even with the term “such as” preceding the list, only the items actually listed could be excluded.

Bodily injury to the person's family member as a consequence of the bodily injury to the person due to actions described above.

This exclusion applies even if the injury occurred before the person became an employee or after the person was terminated.

Note: This last paragraph is in response to Owners Insurance Company v. Clayton South Carolina Supreme Court where the insurance company was required to pay for damages to a terminated employee who was slandered after the employer terminated her employment.

This entire exclusion applies whether the insured is liable as an employer or in any other capacity or if it must share damages with or repay someone else who must pay damages because of the injury.

q. An employee's liability for bodily injury due to the following:

A fellow employee when caused by an auto. This applies only if the injury arises from and is in the course of that fellow employee's employment or when the fellow employee performs duties related to the named insured's business.

Example: Mindy and Paul are employees at Cini's Pizza and Pasta. Cini's has dine-in service as well as delivery.

Scenario one: While returning from a delivery, Mindy hits Paul, a fellow worker who is walking across the parking lot in order to dump trash into the receptacle. There is no coverage.
Scenario two: While returning from a delivery, Mindy hits Paul who just dropped by Cini's to pick up a pizza for his family. There is coverage because Paul is not in the course of his employment at the time of the accident.

Bodily injury to the fellow employee's family member as a consequence of the bodily injury to the fellow employee

r. Bodily injury or property damage due to using autos, mobile equipment, or recreational vehicles in, or to practice or prepare for, organized or pre-arranged racing, speed, pulling, pushing, or stunt activities or contests

s. Property damage to property the named insured owns, rents, or occupies. Any costs or expenses it or any other party incurs to repair, replace, retrofit, or maintain such property and costs to prevent injury to persons or damage to property of others are also excluded.

Example: Calculatin' Computerz experiences a sudden surge in its business and rents warehouse space from a neighboring business. Shortly afterwards, a new Calculatin' employee strikes one of the warehouse's load-bearing columns with a forklift, causing the building to collapse. City authorities close the facility for three weeks until the structural damage is repaired. The damage to the building is excluded because the warehouse was controlled by and rented to Calculatin' Computerz.

t. Property damage to property the insured transports or owns that arises out of owning, using, or maintaining covered autos. This exclusion does not affect liability assumed under a sidetrack agreement.

u. Property damage to premises the named insured sold, gave away, or abandoned if the property damage arises out of any part of those premises. This exclusion does not apply to premises that are the named insured's work and that it never occupied, rented, or held for rental.

v. Property damage to property loaned to the named insured. This exclusion does not affect liability assumed under a written trailer interchange or sidetrack agreement.

w. Property damage to personal property in the insured's care, custody, or control. This exclusion does not affect liability assumed under a written trailer interchange or sidetrack agreement.

x. Property damage to the specific part of real property that the named insured performs work on if the property damage arises from the work. This exclusion also applies if a contractor or subcontractor working on behalf of the named insured performs the work. This exclusion does not affect liability assumed under a sidetrack agreement.

y. Property damage to the specific part of any property that must be restored, repaired, or replaced because of faults in the named insured's work. This exclusion does not affect property damage that the products/completed work hazard covers or liability assumed under a sidetrack agreement.

z. Property damage to products that arises from the product or its parts

Example: Grillz-r-us manufactures gas grills and their fuel tanks. Hector purchases a Grillz-r-us grill and uses it regularly over the course of the summer. During one use, the grill malfunctions due to a defective temperature control, melts down, and starts a fire. The grill's fuel tank explodes and damages part of the deck and a wall of the house in addition to seriously injuring Hector who was standing nearby. While Grillz-r-us' umbrella liability coverage applies to the bodily injury and property damage, there is no coverage for the destruction of the grill itself.

Note: Grillz-r-us may have a course of action against the supplier of the temperature control unit if it is determined that it contributed to the malfunction in any way.

aa. Property damage to the named insured's work that arises from that work and that is considered part of the products/completed work hazard. Such damage that arises from work that a subcontractor does on the named insured's behalf is an exception to this exclusion.

bb. Property damage to property not physically injured or destroyed, or to impaired property, if the named insured or another party that acts on its behalf fails to perform a contract or delays performing it. It is also excluded if the cause is defects, deficiencies, inadequacies, or unsafe conditions in the named insured's work or products.

Note: Property damage includes loss of use even when property is not physically injured. As a result, this exclusion means that the loss of use caused when the insured’s work prevents an item from being utilized is not paid.

This exclusion does not apply to loss of use of other property that results from sudden and accidental physical injury or destruction of the named insured's work or products after they are put to their intended use.

Example: Select Switches manufactures a switch it sells to another company that uses it as a component in its product. The switch turns out to be defective, causing the product to not work. In this case, the product is impaired but not damaged and the down time sustained when the product does not work is excluded.

cc. Any loss, expense, or cost the named insured or others incur due to loss of use, disposing of, withdrawing, recalling, inspecting, repairing, replacing, adjusting, or removing the named insured's work, products, or impaired property. Expenses related to withdrawals or recalls are also excluded. This exclusion applies if the named insured's work, products, or impaired property is withdrawn or recalled from the market or from use because of known or suspected defects, deficiencies, or unsafe conditions.

Example: Titanic Tires manufactures automobile tires. The tires develop problems that require immediate recall and replacement. None of the recall expenses are covered.

dd. Any bodily injury that arises from personal and advertising injury

Note: Bodily injury that arises from personal and advertising injury is covered under Coverage P–Personal and Advertising Injury Liability.

ee. Any damages, expenses, costs, or losses that arise from loss of, loss of use of, damage to, corruption of, inability to access, change, or manipulate electronic data records

If underlying insurance covers or would have covered these exposures except that its limits were used up, this coverage follows the underlying insurance's terms, exclusions, and limitations unless stated otherwise.

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

ff. Bodily injury or property damage due either directly or indirectly from any type of actual or alleged violations of any of the following and similar state or local laws or regulations:

The Telephone Consumer Protection Act (TCPA), including its amendments or additions
The CAN-SPAM Act of 2003, including its amendments or additions
The Fair Credit Reporting Act (FCRA), the Fair and Accurate Credit Transaction Act (FACTA), and any of their amendments or additions
Any other local, state, or federal statute, ordinance, or regulation that in any way pertains to sending, collecting, disposing of, recording, printing, sending, transmitting, communicating, or distributing material or information

gg. Bodily injury or property damage related in any way to any aspect of lead

hh. Bodily injury or property damage related in any way to any aspect of silica

ii. Bodily injury or property damage related in any way to any aspect of asbestos

Note: The lead, silica, and asbestos exclusions apply even if the underlying coverage form or policy provides coverage.

COVERAGE P–PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring Agreement

a. The insurance company pays amounts on the insured's behalf in excess of the policy’s retained limits. The insured must be legally obligated to pay these amounts due to damages imposed on it because of personal and advertising injury that this Insuring Agreement covers.

The company also has the right and duty to defend the insured against claims or suits that seek damages for personal and advertising injury that this Insuring Agreement covers under the following circumstances:

The underlying coverage does not apply.
The underlying limits are used up paying judgments, settlements, or claims.

The insurance company has the option to investigate any occurrence that this insurance covers and settle claims or suits that it has the duty to defend.

b. How Much We Pay describes amounts the company pays as damages.

c. The company is not required to defend after it has paid amounts that equal the limit that applies that result from written settlements it agrees to or judgments. Except for the provisions under Supplemental Payments, it is not required to provide support or assistance or pay any other amounts.

d. Coverage applies to only personal and advertising injury if the offense:

Was committed during this insurance’s policy period
Took place in the coverage territory

2. Exclusions

a. Personal and advertising injury that arises at any time from the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants

b. Any loss, cost, or expense that arises from either of the following:

Any request, demand, order, or statutory or regulatory requirement that any insured or others test for, clean up, treat, respond to, or assess the effects of pollutants in any way
Any claim or suit by or on behalf of a governmental authority because of testing for, cleaning up, treating, responding to, or assessing the effects of pollutants in any way

Note: Personal injury liability coverage language in earlier editions led to numerous attempts to cover various types of pollution losses. These attempts were disguised as trespass, wrongful entry, or invasion of the right of private occupancy. Personal and advertising injury liability coverage was never intended to pay for any pollution damages or cleanup costs. This exclusion clarifies that there is no coverage for any pollution exposure that may arise out of the personal and advertising injury wording in this policy.

c. Personal and advertising injury caused directly or indirectly by any act of 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, usurped power, or acts a government authority takes to hinder or defend against any of these.

d. Personal and advertising injury that arises from providing or failing to provide professional services

e. Personal and advertising injury due to either of the following:

Refusing to employ a person or terminating that employee's employment. It also does not apply to on-the-job practices, acts, policies, or omissions related to employment such as sexual misconduct, coercion, discipline, defamation, malicious prosecution, demotion, reassignment, humiliation, evaluation, discrimination, and harassment.
Consequential damage to a person's family member(s) due to the injuries described above.

This exclusion applies even if the injury occurred before the person became an employee or after the person was terminated.

This exclusion applies whether the injury that results from the above occurs before, during, or after that person's employment. It also applies whether the insured is liable as an employer or in any other capacity, or whether it must share damages with or repay another party that must pay damages because of the injury.

f. Personal and advertising injury that results when the insured causes or directs an act that it knows will result in personal and advertising injury.

Example: Questioning Quinn follows movie stars for Movie Monthly. Even though Suzie Starlett obtains a restraining order against it, Movie forces Quinn to get the story, regardless of the consequences. Movie is not covered if Suzie decides to sue it for violating the restraining order.

g. Personal and advertising injury that arises out of a criminal act that the insured commits or directs

Example: Bob Breakingnews fails to obtain details of an incident for a story. The Nose For News Gazette tells Bob to break into a building and copy the confidential files that contain the information needed. There is no coverage if the break-in is discovered and the Gazette is sued. However, if Bob broke in without the Gazette's knowledge, coverage would apply to the Gazette but not to Bob.

h. Personal and advertising injury due to either of the following:

When personal and advertising injury arises from material published by or at the insured's direction that the insured knew was false

Example: An article in the Tumbleweeds Truth discloses that a famous politician's son was arrested for driving under the influence. At the time the article was published, the Truth knew it was only a traffic stop that did not even result in a ticket or citation. Coverage does not apply if the politician’s son decides to sue the newspaper.

When personal and advertising injury arises from oral or written publication of material that first began before the coverage inception date

Example: This coverage is effective 01/01/21. The official date of a publication is 01/02/21 but an advance copy was released on 12/28/20. Because the first publication took place before the 01/01/21 effective date, there is no coverage if a suit is filed that seeks damages for personal and advertising injury.

In both circumstances above, the publication can be either oral or written.

i. Personal and advertising injury that arises out of breach of contract. However, this exclusion does not apply to an implied contract to use the advertising idea of another party in the named insured's advertisement.

Example: Johnny On The Spot Printing contracted to design, print, and mail a promotional brochure for Brad's Bowling Bonanza. The project was date sensitive. Johnny dropped the ball (pun intended) and missed the mailing date by several days. Brad sued for breach of contract. There is no coverage.

j. Personal and advertising injury that arises from the named insured's goods, products, or services failing to conform to statements of quality or performance stated in its advertisement

Example: Ollie Overweight sues FatOut because its weight loss product guaranteed weight loss but Ollie gained weight instead. Coverage does not apply in this case.

k. Personal and advertising injury committed by an insured in the advertising, broadcasting, publishing, or telecasting business. There is also no coverage if the insured’s business designs or determines website content for others, or provides Internet search, access, content, or service.

There is an exception. This exclusion does not apply to the parts of the definition of personal and advertising injury that address false arrest, detention or imprisonment, or malicious prosecution. It also does not apply to activities related to landlords, such as wrongful eviction, entry, or invasion of private occupancy. The insured that places only advertising that could include frames, borders, or links on the Internet is not considered being in the business of advertising, broadcasting, publishing, or telecasting.

l. Personal and advertising injury that arises from incorrect descriptions of goods, products, or services as stated in the named insured's advertisement.

Example: Beulah's Bundled Ads sues Cain't Get It Right News for lost revenue because the paper incorrectly placed the decimal point in the sale price of a product in an advertisement. This loss is excluded.

m. Personal and advertising injury liability the insured assumes in an agreement or contract. However, there is coverage for liability that he insured has without a contract or agreement.

n. Personal and advertising injury that arises out of any infringement of copyright, patent, trademark, trade secret, or any other intellectual property rights

Note: There is no requirement that the named insured, an insured, or even someone who acts on behalf of either does the infringing. All infringement is excluded.

There are two exceptions. This exclusion does not apply to the following:

When the named insured's advertisement infringes on copyright, trade dress, or slogan
When use of another party’s advertising idea in the named insured’s advertisement is considered infringement of intellectual property rights

o. Personal and advertising injury that arises out of an electronic chatroom, bulletin board, blogs, or social networking sites but only ones the insured owns, hosts, or controls

p. Personal and advertising injury that arises when the named insured tries to mislead another’s customers or potential customers on the Internet. This exclusion applies when the misleading is caused by unauthorized use of another party’s name or product in the named insured's email address, domain, or metatag.

q. Personal and advertising injury due either directly or indirectly from any type of actual or alleged violations of any of the following and similar state or local laws or regulations:

The Telephone Consumer Protection Act (TCPA), including its amendments or additions
The CAN-SPAM Act of 2003, including its amendments or additions
The Fair Credit Reporting Act (FCRA), the Fair and Accurate Credit Transaction Act (FACTA), and any of their amendments or additions
Any other local, state, or federal statute, ordinance, or regulation that pertains in any way to sending, collecting, disposing of, recording, printing, sending, transmitting, communicating, or distributing material or information

r. Personal and advertising injury related in any way to any aspect of lead

s. Personal and advertising injury related in any way to any aspect of silica

t. Personal and advertising injury related in any way to any aspect of asbestos

SUPPLEMENTAL PAYMENTS

1. Payments

When the insurance company has the duty to defend, it pays all of the following when it investigates or settles claims or defends suits:

Court costs of a suit that the court rules are the insured's responsibility. This item does not include attorney fees or expenses.
All expenses the insurance company incurs
Reasonable expenses the insured incurs at the insurance company's request to help it investigate or defend a claim or suit. This includes up to $250 per day in lost earnings if the insured must be away from work.

Note: These can be very costly to the insured, especially when a court assesses the proceeding's costs and expenses against the negligent party.

Prejudgment interest the court awards but only on that part of the judgment the insurance company pays. However, the insurance company does not pay prejudgment interest that accumulates after it offers its full limits.
Interest that accrues on the full amount of any judgment after it is entered but before the insurance company pays, offers to pay, or deposits its part of the judgment within the limits of insurance with the court
Cost of appeal bonds or bonds to release attachments. This is limited to the cost of bond amounts within the limit of insurance that applies. The insurance company is not required to apply for or furnish the bonds.

Note: The cost of the excess amount of the bond is the insured’s expense.

Cost of bail bonds required but only if they result from an occurrence that this policy covers. The cost is limited to $2,000. The insurance company is not required to apply for or furnish the bonds.

2. Additional Limits

Payments made under this section are in addition to the policy’s limits of insurance.

Note: This provision is important because these expenses can be substantial and could reduce the available limits if they were included in the limits of insurance that apply.

3. Expenses

There are cases when the insurance company has the right to defend the insured and also to choose to participate in the defense but does not have a duty to do so. If it exercises this right, it pays its own expenses but does not contribute to the insured's or the underlying carrier's expenses.

4. Indemnitees

The insurance company may be called on to defend the insured against a suit where the insured's indemnitee is also named in the suit. In that case, the company does the following:

Defends that indemnitee
Pays attorney fees it incurs to defend that indemnitee
Pays necessary litigation expenses it incurs
Pays necessary litigation expenses the indemnitee incurs at its request

However, the actions and payments above are subject to all of the following conditions:

The suit against the indemnitee must seek damages for which the insured assumed the indemnitee's liability in an insured contract or agreement.
This policy’s insurance must apply to the liability the insured assumed.
The insured must have assumed the obligation to defend or to pay the cost of defense in the same insured contract or agreement.
Based on what the insurance company knows about the occurrence and the allegations contained in the suit, there must be no apparent conflict between the insured’s and the indemnitee’s respective interests.
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 representative handling the interests of both parties.
The indemnitee must agree to do all of the following:

Cooperate with the insurance company during the time it investigates, defends, or settles the suit.
Promptly send the company copies of any demands, notices, summonses, or legal documents it receives related to the suit.
Notify any other insurance company that has coverage that may be available to the indemnitee.
Cooperate with the insurance company to coordinate such other insurance.
Provide the insurance company with written authorization to obtain records related to the suit.
Give the insurance company other information related to the suit.
Give the insurance company written authorization to conduct and control the indemnitee's defense in the suit.

These payments are not considered damages for bodily injury and property damage if the insured meets these conditions. As a result, they do not reduce the limits available to pay losses. This voids the provisions of Coverage L's exclusion 2. b. 2). that agrees to pay such expenses but only as damages.

The insurance company's obligation to defend the indemnitee ends when it uses up the limit of insurance that applies by paying judgments or settlements or when these conditions and agreements are not met.

WHAT MUST BE DONE IN CASE OF LOSS

1. Cooperation

The named insured must cooperate with underlying insurance companies and comply with all underlying policies' terms and conditions. All insureds involved in a loss must cooperate with the insurance company as it investigates and settles claims or defends suits.

2. Notice

The named insured must notify its insurance company as soon as practicable if there is an occurrence or offense that might be covered. The same requirement applies if an insured becomes aware of anything that might become a claim under this coverage. The notice must include certain information, such as the name of the insured and the policy number as well as the time, place, and circumstances of the occurrence or offense. In addition, the named insured must also provide the names and addresses of all known and potential claimants and witnesses.

3. Voluntary Payments

Volunteer payments cannot be made, or obligations or costs assumed by any insured except at its own expense.

4. Other Duties

The named insured has other duties if there is an occurrence or offense that might lead to a claim. It must send the insurance company copies of all legal papers, demands, and notices on a timely basis. When requested, it must also cooperate with and help the insurance company do all of the following:

Enforce the insurance company's rights of recovery against all parties that may be liable to an insured for the injury or damage.
Obtain and give evidence.
Make arrangements for all witnesses to attend.

HOW MUCH WE PAY

1. Limits

The most paid for all damages are the limits on the declarations. This is regardless of the number of insureds, persons, or organizations that sustain injury or damage, claims made or suits brought, or vehicles or watercraft involved in an accident.

Example: Ashland Jewelers is a partnership. A customer sues Ashland Jewelers when she discovers that the diamond in her engagement ring is an imitation. The angered bride-to-be also files separate actions against the partners individually. Each partner sends his copy of the notice of the suit to the insurance company. The claims adjuster informs them that the limit of insurance available to respond to the lawsuit is the each occurrence limit.

2. Aggregate Limit

The Aggregate Limit is the most paid for the total of all damages under Coverages L and P. The exception is that it does not apply to damages for bodily injury or property damage that arise out of owning, maintaining, using, loading, or unloading covered autos.

3. Each Occurrence Limit

The Each Occurrence Limit is subject to the Aggregate Limit. It is the most paid for the total of all damages under Coverage L due to bodily injury or property damage that arises from any one occurrence.

4. Personal and Advertising Injury Limit

The Personal and Advertising Injury Limit is subject to the Aggregate Limit. It is the most paid for the total of all damages under Coverage P due to personal and advertising injury that any one person or organization sustains.

5. Non-concurrent Underlying Insurance

Underlying insurance may not be concurrent with this policy’s policy period. In that case, only claims for occurrences or offenses that underlying insurance covers that take place during this insurance's policy period are considered to determine the extent that any aggregate limit in underlying insurance is reduced or used up.

The available limits of underlying insurance written on a claims-made basis are reduced or used up by only claims made during the policy period or any applicable extended reporting period.

6. Application of Aggregate Limit

The Aggregate Limit applies separately to each 12 consecutive month period. This begins with the inception date on the declarations. It also applies separately to any remaining policy period of less than 12 months. If the policy is extended after it is written, the additional period is treated as part of the most recent preceding period when determining limits.

CONDITIONS

1. Appeals

The insurance company may appeal a judgment that exceeds the underlying limit if the underlying carrier does not appeal. If it does, it is liable for the expenses it incurs in conjunction with the appeal. This is in addition to its limit.

Note: This condition allows the umbrella carrier to protect its interest. There are situations when an underlying insurance company or a self-insured decides to not appeal a judgment. If the judgment exceeds the umbrella’s retained limit, the umbrella carrier can make the appeal at its own expense. This is very important in cases where the underlying carrier believes that the verdict will exceed its limits and decides not to spend additional time and money on a lost cause.

2. Assignment

Assigning the policy requires the insurance company's approval and written consent.

3. Bankruptcy of an Insured

The insurance company is still obligated and is not relieved of any of its obligations if an insured declares bankruptcy or becomes insolvent.

Note: This means the umbrella continues as though the insured is still solvent.

4. Bankruptcy of Underlying Insurer

Umbrella coverage does not replace the underlying insurance if the underlying carrier is bankrupt or insolvent. It continues to apply as if the underlying insurance is still in effect.

5. Cancellation and Nonrenewal

This condition refers to the state-specific endorsement listed on the declarations.

6. Change, Modification, or Waiver of Policy Terms

Waivers or changes to the policy's terms are valid only when the insurance company agrees in writing to do them.

7. Conformity with Statute

Any terms in the policy that conflict with laws in the state where the policy is issued are changed to conform to those laws.

8. Examination of Books and Records

The insurance company is allowed to examine any part of the named insured's books and records that pertain to the coverage this policy provides during the policy period and up to three years after coverage ends.

9. Inspections

The insurance company or others that act on its behalf may inspect the named insured's property and operations at any time. However, it is not obligated to do so. Such inspections and any recommendations that result from the report are for only the company's benefit. They do not warrant that the named insured's property or operations are safe, healthful, or comply with any laws, rules, or regulations.

10. Knowledge of Bodily Injury or Property Damage

This is determined to have occurred at the earliest of the following when any designated insured:

Receives a suit, claim, or demand for damages that alleges bodily injury or property damage
Reports the bodily injury or property damage to the insurance company or any other carrier
Becomes aware of anything that suggests that bodily injury or property damage has occurred or is occurring

Note: This condition is very important because it determines the insurance policy that must respond. The Insuring Agreement for Coverage L covers only bodily injury and property damage that was first known to a designated insured after the policy inception date.

11. Legal Action against Us

The insurance company cannot be sued unless all policy terms are met and the amount of an insured's liability determined by a final judgment in a trial or by a written agreement between the insured, the party that brings the claim for damages, and the insurance company.

There is no coverage for any injury or damage that this policy excludes or that exceeds the limit that applies.

No party has the right to join or implead the insurance company in any action brought to determine an insured's liability.

Notes:

The insurance company may be sued to recover an agreed settlement or final judgment against an insured. However, it is not liable for damages that the policy does not insure or that exceed the limit of insurance that applies.

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

12. Maintenance of Underlying Insurance

The named insured must maintain and keep all underlying insurance in effect during this policy's term. Cancellation, non-renewal, or material changes in coverage or limits must be reported to the insurance company immediately. If underlying insurance is not properly maintained for any reason, this policy responds as if the required underlying insurance is still in force.

Payments for judgments, settlements, or expenses for occurrences or offenses during the policy period that reduce or deplete any aggregate limit in the underlying coverage are not the same as failing to maintain in effect such underlying insurance. In addition, any statement in this condition does not limit the insurance company's right to cancel or non-renew.

13. Misrepresentation, Concealment or Fraud

This insurance is void with respect to the named insured or any insured did any of the following at any time:

Intentionally concealed or misrepresented a material fact or situation that relates to this insurance, to the subject of this insurance, or the insured's interest in it
Engaged in fraud or false swearing concerning any matter that relates to this insurance or its subject matter

Note: This condition clarifies that the named insured agrees that the information on the declarations is both accurate and complete when it accepts the coverage issued. It also affirms that the information is based on representations it made to the insurance company in the application and that the company relied on that information when it issued the policy.

14. Subrogation

If the insurance company pays under this policy, it may require assignment of an insured’s rights of recovery against third parties that may have caused the loss to the company. The company is not obligated to make any payments if any insured impairs or otherwise affects those rights. However, an insured may waive its rights of recovery against a third party in writing before a loss event takes place.

Note: Once the insurance company pays under this insurance, any rights an insured has to recover any payments from others responsible for causing the loss transfer to the company. An insured must not jeopardize those rights. In addition, and if the insurance company requests, the named insured may be required to assist in bringing a suit, transferring those rights, or helping to enforce them.

Example: The massive chandelier in the atrium of the Felix Office building crashed to the floor. Thankfully, nobody was killed but 30 people sustained significant injuries. Felix’s primary and umbrella carriers responded to the claims and lawsuits. Their investigation included trying to find out why the chandelier fell. They determined that Mayberry Enterprises, the prior owner, withheld critical information regarding the chandelier’s stability and its attachments and provided false information on its disclosure notice. Felix has rights of recovery against Mayberry but the carriers that paid the losses assume those rights and sue Mayberry Enterprises instead of Felix.

15. Transfer of Defense

The underlying carrier's duty to defend transfers to the umbrella carrier after the underlying carrier pays its limits in judgments or settlements.
The umbrella carrier agrees to cooperate in the transfer of control of any unresolved claims or suits.

16. Separate Insureds

Other than the limits under How Much We Pay, the insurance provided applies to each insured that is sued or against whom a claim is made.

17. Premium

All premiums are calculated according to the insurance company's rules and rates.

The advance premium on the declarations may be a deposit premium. In that case, the insurance company determines the actual earned premium for each audit period and bills the named insured for any additional amounts due. The premium billed is due on the due date on the billing notice. However, if the advance and audit premiums are more than the earned premium, the insurance company refunds the excess to the named insured.

The named insured must keep records and information the insurance company needs to calculate the premium. It must send the company copies of such records and information when the company asks for them.

18. Insurance under More than One Policy

This insurance is excess over any other insurance of any kind. It does not contribute with it, except for insurance specifically written as excess over this insurance.

Example: Pilgrim's Pressure Cookers manufactures pressure cookers. It has the following insurance:

Company A: Commercial Liability Coverage Form with a $1,000,000 Aggregate Limit

Company B: Umbrella Liability Policy with a $1,000,000 Aggregate Limit

Company C: Excess Layer with a $2,000,000 Aggregate Limit

A Pilgrim's sales rep is demonstrating its new line of pressure cookers at a consumer fair when a one of them explodes. The claims for damages and injuries total $4,000,000. In this case, Company B does not respond to the loss until Company A pays its obligations. Company B responds before Company C because Company C's coverage is a second layer of excess insurance protection.

The umbrella carrier is not obligated to defend against a suit if another carrier has that obligation. However, it will defend if no other carrier does. It then becomes entitled to the insured's rights against those carriers.

This insurance pays only its share of the ultimate net loss. That is the amount that exceeds amounts any other primary sources of coverage owe, including any deductibles and/or self-insured retentions.

19. Loss Payable

The insurance company does not pay until and unless the insured or its underlying carrier pays the retained limit. The insured's obligation to pay part of the final loss must have been determined by a final settlement or judgment after litigation, or by a written agreement between the company, the claimant, and the insured.

20. Extended Coverage Territory

A suit may be brought in a country where the insurance company is not allowed to defend the insured. In that case, it reimburses the insured for any defense costs and other necessary expenses incurred that would have been its responsibility if it could have defended. These payments are made as Supplementary Payments to the extent that this policy applies and are not part of the limit.
If a claimant is awarded damages covered by this insurance at a location outside the coverage territory, the company reimburses the insured for amounts it paid.
Payments or reimbursements are in United States currency. The rate of exchange for damages paid is based on the exchange rate at the time the insured became obligated to pay the damages. The exchange rate for all such expenses under Supplementary Payments expenses is based on the date the insured incurs the expenses.
Disputes between the named insured and the insurance company about the coverage provided must be filed in courts in the United States, its territories and possessions, Canada, or Puerto Rico.
The named insured must carry and maintain any coverage any governmental authority requires throughout the policy period. Not doing so does not invalidate this insurance but it applies as though the required coverage was in place.

This requirement does not apply to any reduction in limits that may take place due to payments of settlements, judgments, or expenses that arise from covered occurrences or offenses. These are not failure to maintain the required coverage.

NUCLEAR ENERGY LIABILITY EXCLUSION

1. Exclusion

This insurance does not apply to bodily injury or property damage under any liability coverage as follows:

Where an insured under this policy is also an insured (or would be an insured under any such policy except that it ended because its limit was used up) under a Nuclear Energy Liability policy issued by any of the following:

Nuclear Energy Liability Insurance Association
Mutual Insurance Association
Mutual Atomic Energy Liability Underwriters
Nuclear Insurance Association of Canada
Any of their successors

That results from the hazardous properties of nuclear material and in cases where any person or organization must maintain financial protection in accordance with the Atomic Energy Act of 1954 or any amendatory law. This also includes cases where the insured is entitled to indemnity from the United States of America or any of its agencies under any agreement it enters into with any person or organization. This exclusion applies even if this entitlement was nullified in some way with this policy being issued.

This insurance also does not apply under any liability coverage to bodily injury or property damage that results from the hazardous properties of nuclear material based on the following:

The nuclear material is at (or has been discharged or dispersed from) any nuclear facility owned or operated by or on behalf of an insured.
The nuclear material is contained in spent fuel or waste that an insured or others that act on its behalf ever possessed, handled, used, stored, processed, disposed of, or transported.
The bodily injury or property damage arises out of an insured furnishing services, materials, parts, or equipment in connection with planning, constructing, maintaining, operating, or using any nuclear facility. However, for such facilities in the United States of America, its territories or possessions, or Canada, this exclusion applies only to property damage to that nuclear facility and any property at that facility.

2. Definitions

These definitions apply specifically to the Nuclear Energy Liability Exclusion:

Hazardous Properties

These are properties that have radioactive, toxic, or explosive characteristics.

Nuclear Material

This is source material, special nuclear material, or by-product material.

Source Material, Special Nuclear Material, and Byproduct Material

Each of these terms has the meaning given it in the Atomic Energy Act of 1954 or subsequent or amendatory laws.

Spent Fuel

This is any solid or liquid fuel element or fuel component used in or exposed to radiation in a nuclear reactor.

Waste

This means any waste material that contains byproduct material. It does not mean tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content. It also means waste that results from the operation of nuclear reactors or equipment designed or used to separate uranium or plutonium isotopes, process or utilize spent fuel, or handle, process, or package waste.

Nuclear Facility

This is any nuclear reactor. It is also equipment designed or used to separate uranium or plutonium isotopes, to process or utilize spent fuel, or to handle, process, or package waste. It also means any equipment or device used to process, fabricate, or alloy special nuclear material. The total amount of such material at such facilities consists of or contains more than 25 grams of plutonium or uranium-233 (or any combination thereof) or more than 250 grams of uranium-235. It also means any structure, basin, excavation, location, or place prepared or used to store or dispose of waste.

Nuclear Reactor

This is any apparatus designed or actually used to sustain nuclear fission in a self-supporting chain reaction or that contains a critical mass of fissionable material.

Property Damage

This includes all forms of radioactive contamination of property.

Notes:

There is a small amount of coverage granted under Nuclear Material for byproduct material. There is bodily injury coverage in a very limited circumstance. This should concern any insurance company that insures contractors or others that provide services to nuclear facilities.

The Nuclear Energy Liability Exclusion is an extensive exclusion of incidents and materials related to nuclear energy of every kind and description. It includes its own set of definitions. The intent is to exclude any bodily injury or property damage covered by any nuclear liability insurance policy and to exclude coverage for companies required to maintain financial protection by any federal laws and acts related to nuclear energy. It excludes all medical payments of any kind and excludes nuclear discharge, leaks, waste, or work performed at any nuclear facility.

CU 0002–COMMERCIAL UMBRELLA LIABILITY COVERAGE ANALYSIS

INTRODUCTION

TABLE OF CONTENTS

AGREEMENT

DEFINITIONS

1. You and your

2. We, us and our

3. Advertisement

4. Auto

5. Bodily injury

6. Claims-made

7. Coverage territory

8. Covered Auto

9. Covered contract

10. Damages

11. Data records

12. Declarations

13. Designated insured

14. Employee

15. Executive officer

16. Impaired property

17. Indemnitee

18. Insured

19. Leased worker

20. Limit

21. Loading or unloading

22. Mobile equipment

23. Occurrence

24. Personal and advertising injury

25. Pollutant

26. Products

27. Products/completed work hazard

28. Property damage

29. Recreational vehicle

30. Retained limit

31. Self-insured retention

32. Silica

33. Suit

34. Temporary worker

35. Terms

36. Underlying insurance

37. Underlying insurer

38. Volunteer worker

39. Your work

COMMERCIAL UMBRELLA LIABILITY COVERAGES

COVERAGE L–BODILY INJURY LIABILITY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

2. Exclusions

COVERAGE P–PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring Agreement

2. Exclusions

SUPPLEMENTAL PAYMENTS

1. Payments

2. Additional Limits

3. Expenses

4. Indemnitees

WHAT MUST BE DONE IN CASE OF LOSS

1. Cooperation

2. Notice

3. Voluntary Payments

4. Other Duties

HOW MUCH WE PAY

1. Limits

2. Aggregate Limit

3. Each Occurrence Limit

4. Personal and Advertising Injury Limit

5. Non-concurrent Underlying Insurance

6. Application of Aggregate Limit

CONDITIONS

1. Appeals

2. Assignment

3. Bankruptcy of an Insured

4. Bankruptcy of Underlying Insurer

5. Cancellation and Nonrenewal

6. Change, Modification, or Waiver of Policy Terms

7. Conformity with Statute

8. Examination of Books and Records

9. Inspections

10. Knowledge of Bodily Injury or Property Damage

11. Legal Action against Us