CU 0001-Commercial Excess/Umbrella Liability Coverage Analysis

CU 0001–COMMERCIAL EXCESS/UMBRELLA LIABILITY COVERAGE ANALYSIS

(October 2020)

 

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INTRODUCTION

The previous edition of this policy was the only American Association of Insurance Services (AAIS) excess/umbrella product before it introduced CU 0002–Commercial Umbrella Liability Coverage. CU 0002 is now considered the basic, primary policy. CU 0001 is used when there are excess liability considerations that must be addressed.

Related Article: CU 0002–Commercial Umbrella Liability Coverage Analysis

CU 0001 is the successor to UM 0200 and has a 09 10 edition date. It is primarily an excess liability policy that also has an umbrella component. The excess coverage portion is Coverage E. Coverage U is the umbrella coverage section and is over the self-insured retention.

TABLE OF CONTENTS

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 0001 defines 37 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:

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 the following:

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 two requirements:

7. Coverage territory

This definition has two categories:

8. Covered contract

There are six types of covered contracts:

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

This does not include work done for the municipality.

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

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:

9. Damages

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

10. Data records

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

11. Declarations

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

12. Designated insured

This term has many meanings:

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

13. Employee

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

14. 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 that governs such activities.

15. 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.

16. Indemnitee

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

17. Insured

This term has many meanings.

Under Coverage E–Excess Liability, insured means the named insured and any insured or additional insured person or organization named on the underlying policies. Their insured status under this policy’s terms is limited to the same extent that underlying insurance covers them.

Under Coverage U–Umbrella Liability, insured means the following:

Note: CU 0051–Commercial Excess/Umbrella Liability Declarations does not have a space for or list trusts.

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

Coverage U–Umbrella Liability also includes the following as insureds:

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

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.

18. 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.

19. Limit

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

20. 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.

21. Mobile equipment

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

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

Note: This is because they are considered autos.

22. Occurrence

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

23. Personal and advertising injury

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

24. 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.

25. 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:

The following are not products:

26. 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:

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:

27. 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 that Coverage E provides.

Under Coverage E–Excess Liability, 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.

28. 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.

29. Self-insured retention

This is the dollar amount on the declarations that the insured pays before this insurance pays.

30. 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.

31. Suit

This is any civil legal action in a court of law or 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.

32. 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.

33. Terms

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

34. 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.

35. Underlying insurer

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

36. 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:

Volunteer workers are not temporary workers or leased workers.

37. 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 EXCESS/UMBRELLA LIABILITY COVERAGES

COVERAGE E–EXCESS LIABILITY

1. Insuring Agreement

a.     The insurance company pays amounts on the insured's behalf that it is legally obligated to pay, but only when the amount exceeds the limits the underlying insurance provides. The obligation to pay must be from damages imposed because of bodily injury or property damage that this Insuring Agreement covers.

b.     The company also has the right and duty to defend the insured against suits that seek damages that this Insuring Agreement covers. However, this obligation is only when the underlying limits are used up paying judgments, settlements, or claims. The underlying limits may also be reduced by payment of defense costs, but only when the underlying insurance pays defense costs inside its limits.

c.     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.

d.     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.

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

f.      The company is not required to defend after it has paid amounts that equal the policy limit. The payment can result from written settlements it agrees to or from judgments. It can also result from paying defense costs that reduce the underlying limit of insurance that applies. Except for the provisions under Supplemental Payments, the insurance company is not required to provide support or assistance or pay any other amounts.

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

Coverage applies to only personal and advertising injury that meets all of the following requirements:

Coverage also applies to any other injury or damage due to the following:

Coverage for any other injury or damage is subject to the following:

Note: This item is redundant because the lead in language specifically states that this section applies only if the underlying coverage is on a claims-made basis.

All claims for damages to the same party are treated as though they were made at the same time as the first claim made against any insured, regardless of the number of claims submitted.

Note: There are no provisions for claims-made underlying coverage for bodily injury, property damage, or personal and advertising injury. Only “other injury” underlying coverages can be written on a claims-made basis.

e.     Extended Reporting Periods

Note: This section applies to coverage under "other injury" coverage and not to bodily injury, property damage, or personal and advertising injury.

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 on CU 0061–Commercial Excess/Umbrella Liability Coverage Supplemental Schedule of Underlying Insurance.

i.      The underlying insurance policies' terms, conditions, and exclusions govern this coverage. The only exceptions are the provisions with respect to the terms of the coverage it/they provide, any agreement to renew, cancellation, or non-renewal, premium, right of recovery, defense, limits, and insurance under more than one policy.

2. Exclusions

a.     Injury or damage that underlying insurance does not cover for any reason, other than its limits being used up

 

Example: Charlie's Clanging Cymbals sustains a pollution liability loss that his underlying commercial liability coverage excludes. CU 0001 also excludes the loss.

 

b.     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 any amendments to the Act and similar regulations.

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

Note: This exclusion’s intent is to eliminate duplicate coverage for injury that should be insured under workers compensation coverage.

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

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

Related Article: Ocean Marine Insurance Overview

e.     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

f.      Bodily injury or property damage that arises from any aspect of pollutants. However, this exclusion does not apply to bodily injury or property damage that underlying insurance covers or would have covered except that its limits were used up. In addition, this coverage is subject to the underlying insurance's provisions, limitations, and exclusions.

g.     Personal and advertising injury that arises from any aspect of pollutants

h.     Any loss, cost, or expense that arises from the following:

This exclusion does not apply to any loss, cost, or expense that underlying insurance covers or would have covered except that its limits were used up. In addition, this coverage is subject to the underlying insurance's provisions, limitations, and exclusions.

i.      Bodily injury or property damage when autos, mobile equipment, watercraft, aircraft, or recreational vehicles are used in organized or pre-arranged racing, speed, pulling, pushing, or stunt activities or contests. There is also no coverage for bodily injury or property that may occur while practicing or preparing for such events.

 

Example: Mike at Mike's Machinery Movers restores muscle cars in his spare time. He runs them on his own quarter-mile drag strip on his large parcel of land in the country. During one test run, the vehicle goes out of control, crashes through the fence, and destroys his neighbor's machine shed. The property damage to the shed is covered because Mike's test was not for a pre-arranged or organized event.

 

j.      Bodily injury, property damage, personal and advertising injury, or any injury underlying insurance covers (including coverage written on a claims-made basis) 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:

k.     Bodily injury or personal and advertising injury to a person due to any of the following:

 

Example: Leo at Leo's Lawnmowers decides to not hire Louie, a mechanic, because he heard a rumor that Louie had a history of faking workers compensation injuries and incurring excessive periods of lost time. Louie gets wind of the reason he was not hired and sues Leo. Leo must defend himself at his own cost because of this exclusion.

                       

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

l.      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.

m.   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.

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.

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

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

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

 

Example: The city of Leesville condemns the derelict apartment building and arranges for its implosion but first uses an asbestos abatement contractor to remove asbestos. Despite performing the abatement operation under the direction of an asbestos abatement expert, one of the abatement firm's employees is exposed to and ingests asbestos fibers. The bodily injury the employee sustained is not covered because of this exclusion.

 

q.     Medical payments or medical expenses provided, regardless of fault. This exclusion applies whether or not underlying insurance covers such payments or expenses.

COVERAGE U–UMBRELLA LIABILITY

1. Insuring Agreement

a.     The insurance company pays amounts on the insured's behalf that exceed the self-insured retention or other insurance that the insured has that provides coverage for injury or damage that this policy’s Insuring Agreement covers. This does not apply to insurance the insured purchased specifically to apply as excess over the insurance this policy provides. Coverage applies to damages the insured is legally obligated to pay as damages due to bodily injury, property damage, or personal and advertising injury that this insurance covers.

The company also has the right and duty to defend the insured against suits that seek damages for bodily injury, property damage, or personal and advertising injury that this Insuring Agreement covers.

The company may not be required to defend but it still has the right to defend or participate with the insured to investigate, defend, and settle suits against the insured for damages that this insurance covers. It is not required to defend the insured against suits asking for damages that this insurance does not cover.

The insurance company has the option to investigate any occurrence or offense 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 policy limit. The payments can be from either written settlements that 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:

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.

Related Court Case: Known Injury or Damage Not Excluded in Continuous or Progressive Damage Loss

On the other hand, bodily injury or property damage may occur during this policy period that is not a continuation or resumption of, or change in, bodily injury or property damage that a designated insured knew about before this policy’s inception date. In that case this coverage includes any continuation or resumption of, or change in, bodily injury or property damage after this policy period ends.

                       

Example: Jack's Janitorial Services' Commercial Excess/Umbrella Liability Coverage with Macho Mutual expires and the renewal coverage is placed with Super Stock Insurance Company. Jack struck and injured one of its customer's employees while cleaning its office a month before the Macho policy expired. The injured person developed complications that led to additional charges being incurred for well over a year after the incident occurred. Even though most of the charges arose after the Macho policy expired, Macho was responsible for paying them.

                       

e.     Coverage also applies to personal and advertising injury that arises from offenses committed while conducting the named insured's business. The offenses must be committed during this insurance's policy period and within the coverage territory.

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.     Coverage U does not apply to claims that Coverage E covers or that Coverage E would have covered except that the underlying insurance limits were used up.

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.

 

Example: Harvey is fed up with the neighborhood teenagers making fun of him and keeping him up until all hours by making loud noises, opening and slamming his front screen door, and threatening him. He decides to retaliate by rigging the door so that a shotgun will discharge off to the side in the hopes of scaring them away once and for all. However, the plan goes tragically wrong when the shotgun is dislodged from its perch, discharges, and injures two of the perpetrators. While Harvey did not plan to hurt anyone, the injuries that his intentional act caused were excluded.

 

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 Article:

Expected or Intended Injury Exclusion

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:

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:

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 litigation costs 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.

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

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

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

Related Article: Ocean Marine Insurance Overview

f.      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.

g.     Bodily injury, property damage, or personal and advertising injury that arises from any aspect of pollutants

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

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

i.      Bodily injury, property damage, or 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.

j.      Bodily injury or property damage that arises from owning, maintaining, using, occupying, renting, operating, loaning, entrusting, supervising, loading, or unloading autos, mobile equipment, recreational vehicles, watercraft, or aircraft

 

Example: Serendipity Seeds and Grain owns a large yacht that it rents out to others to use. However, Serendipity neglects to maintain it properly and the person who rented the yacht is injured while attempting to maneuver it into its mooring. Coverage does not apply to the injuries the person sustains.

 

k.     The insurance company does not pay for bodily injury or property damage that any insured may be liable for because of:

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

 

Examples:

  • Francine's Finery holds a company Christmas party and serves alcoholic beverages without making a charge.
  • Sam at Sam's Steel Salvage takes Salvatore to lunch and pays for a bottle of wine to go with the meal.

Both of these examples are covered if bodily injury or property damage occurs as a result of consuming alcoholic beverages because neither is in the liquor business.

 

On the other hand, consider the following:

 

Example: Bubba's Beer Distributors sponsors a fundraiser for a local semi-professional football team by holding a beer-tasting event. It serves beer to everyone who contributed to the team. An attendee who was served a number of beers is injured on the trip home from the event. There is no coverage if Bubba is sued for contributing to the attendee's intoxication because Bubba’s business is distributing beer, an alcoholic beverage.

 

Related Court Cases:

Liquor Liability Exclusion Held Applicable to Nonprofit VFW

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

CGL Policy's Liquor Exclusion Inapplicable to Sales During Festival

l.      Bodily injury to the following:

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 liability the insured assumes under a covered contract.

m.   Bodily injury, property damage, or personal and advertising injury due to providing or failing to provide any professional service

n.     Bodily injury or personal and advertising injury to a person due to any of the following:

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.

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.

o.     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 are also excluded even when the reason for such activity is to prevent injury to persons or damage to property of others.

 

Example: Bob's Bobcats Sales and Service experiences a business boom and has to rent additional warehouse space in the building next door. One of Bob's employees strikes one of the warehouse's load-bearing columns with a bobcat, causing a portion of the building to collapse shortly afterwards. The building must be closed down for three weeks until the structural damage is repaired. The building damage is excluded because the warehouse was controlled by and rented to Bob's Bobcats.

 

p.     Property damage to products that arise from the product or its parts

 

Example: Household Appliances manufactures a line of kitchen appliances, including a deep-fat fryer. Henrietta purchases one and is pleased with the performance until the day the thermostat apparently malfunctions, the unit overheats, the fat ignites, and causes a fire that destroys her kitchen and slightly injures her. The fire also destroys the deep-fat fryer. While Household Appliances' Excess/Umbrella Liability Coverage applies to the damage to the kitchen and Henrietta's injuries, the destroyed deep fryer is not covered.

Note: Household may have a cause of action against the thermostat supplier if it is clearly established that the thermostat malfunction was the cause of the injury or damage.

 

q.     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.

r.     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 covered under the products/completed work hazard or liability assumed under a sidetrack agreement.

s.     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.

t.      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.

 

Example: Iggy's Injectors manufactures a fuel injection and ignition system. One of his customers is Morrie's Mowers. Morrie uses the system as a component in a line of its lawn mowers. The system turns out to be defective and the mowers do not work. In this case, the system is impaired but not damaged and the down time sustained when it does not work is excluded.

 

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.

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

v.     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.

w.    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: Continuing the example of Iggy's Injectors above, Iggy immediately recalls all of these fuel injection and ignition systems. None of the recall expenses are covered.

 

x.     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

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

y.     Property damage to the named insured's work that arises from that work and that the products/completed work hazard includes. Damage to the work (or the part of the work that the damage arises from) that a subcontractor does on the named insured's behalf is an exception to this exclusion.

z.     Bodily injury, property damage, or 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:

aa. 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: Hollywood Celebrities Weekly hires Bob to get stories for its publication. Bob gets especially aggressive in pursuing one movie star and is slapped with a restraining order. Hollywood insists that Bob continue his efforts to get the story, regardless of the consequences. Hollywood is not covered if the movie star sues it for forcing Bob to violate the restraining order.

 

bb. Personal and advertising injury that arises from a criminal act that the insured commits or directs

 

Example: Continuing the Hollywood Celebrities Weekly example above, Bob does not get details of an incident for a story. Hollywood tells him 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 Hollywood is sued. However, if Bob broke in without the Hollywood's knowledge, Hollywood would be covered, but Bob would not.

 

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

 

Example: An article in the All The Trash Fit To Print Gazette reports that the son of a prominent businessman was arrested for drunk driving. However, the Gazette knew that it was only a traffic stop that did not even result in a ticket or citation. There is no coverage if the businessman’s son decides to sue the Gazette.

                       

 

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

dd. Personal and advertising injury that arises from 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: Pronto Printing contracted to design, print, and mail a promotional brochure for Hugh's Hardware Heaven. The project was date sensitive. Pronto was not pronto at all and missed the mailing date by several days. Hugh sued for breach of contract. There is no coverage.

 

ee. 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: Two-ton Tommy sues WeightBeGone because its weight loss product guaranteed weight loss but he gained weight instead. There is no coverage in this case.

 

ff.   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.

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

 

Example: Ace Advertising sues the Crosstown Truth for its lost revenue because the paper incorrectly placed the decimal point in the sale price of a product in an advertisement. This loss is excluded.

 

hh. Personal and advertising injury liability the insured assumes in an agreement or contract, other than the liability it has without an agreement or contract

ii.    Personal and advertising injury that arises from 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:

Related Court Case: Insurer is Obligated to Defend Copyright Infringement Claim

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

kk. Personal and advertising injury that arises when the named insured uses the Internet to try to mislead another’s customers or potential customers. 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.

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

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

nn.   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:

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

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

2. Additional Limits

This part of this provision applies to only Coverage E–Excess Liability. The limits of any underlying insurance may be reduced by paying defense costs. In that case, this policy’s related Supplemental Payments also reduce this policy’s applicable limits to the extent of such payments. Apart from this provision, 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:

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

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 U'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

This part of this provision applies to only Coverage E–Excess Liability. The named insured must cooperate with underlying insurance carriers and comply with all underlying policies' terms and conditions.

Otherwise, 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 or any other insured have 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 assist the insurance company to do all of the following:

HOW MUCH WE PAY

COVERAGE E–EXCESS LIABILITY AND COVERAGE U–UMBRELLA LIABILITY

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, vehicles or watercraft involved in an accident, or coverages that this policy provides.

2. General Aggregate Limit

The General Aggregate Limit is the most paid for the total of all damages under Coverages E and U and/or defense costs the company pays under Coverage E when paying defense costs reduces the underlying insurance limits that apply.

However, it does not apply to the following damages for bodily injury or property damage:

3. Products/Completed Work Hazard Aggregate Limit

The Products/Completed Work Hazard Aggregate Limit is the most paid for damages that arise from bodily injury or property damage that the products/completed work hazard includes.

4. Each Occurrence Limit

The Each Occurrence Limit is subject to the General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit. It is the most paid for the total of all damages under Coverages E and U and/or defense costs the company pays under Coverage E when paying defense costs reduces the underlying insurance limits that apply.

The damages must be due to the following:

5. Coverage E–Excess Liability–Using Up Underlying Insurance Limits

Damages, claims payments, and/or defense costs may use up the limits of any underlying insurance. In that case, this policy provides coverage as underlying insurance.

6. Coverage E–Excess Liability–Reducing Underlying Insurance Limits

Damages, claims payments, and/or defense costs may reduce the limits of any underlying insurance. In that case, this policy applies as excess of that underlying insurance whose limits were reduced.

7. Coverage E–Excess Liability–Non-concurrent Underlying Insurance

Underlying insurance may not be concurrent with this policy’s term. In that case, only claims for occurrences, offenses, and other negligent errors, omissions, acts, incidents, events, and injuries that underlying insurance covers that take place during this policy’s term are considered to determine the extent that any aggregate limit in underlying insurance is reduced or used up.

This part of the provision applies to underlying insurance written on a claims-made basis. In that case, only the following reduce or use up the limits of such underlying insurance:

8. Application of General Aggregate Limit and Products/Completed Work Hazard Aggregate Limit

The General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit apply separately to each 12 consecutive month period. This begins with the inception date on the declarations. They also apply 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 as it applies to Coverage E or that exceeds the self-insured retention as it applies to Coverage U if the underlying carrier does not do so. 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 excess/umbrella liability carrier to protect its interest. There are situations when an underlying carrier or a self-insured decides not to appeal a judgment. For example, 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 excess/umbrella continues as though the insured is still solvent.

4. Bankruptcy of Underlying Insurer

This condition applies to Coverage E–Excess Liability. This 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 identified 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 provision applies to Coverage U–Umbrella Liability. This is determined to have occurred at the earliest of the following when any designated insured:

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 was 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 signs.

12. Maintenance of Underlying Insurance

This condition applies to Coverage E. The named insured must maintain and keep all underlying insurance in effect during this coverage form's term. Cancellation, non-renewal, or material changes in coverage or limits must be reported to the insurance company immediately. If the underlying is not properly maintained for any reason, this policy responds as if the 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 such underlying insurance in effect. In addition, any statement in this condition does not limit the insurance company's right to cancel or non-renew.

Related Article: Maintaining Underlying Limits

Related Court Case: Agency's Inaction Results In Gap Between Primary And Umbrella

13. Misrepresentation, Concealment or Fraud

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

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 that an insured assign its 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: Jerry is an employee of Restless Foods. He was driving a company van car when its engine suddenly stopped. The major collision that followed involved seven different cars and injured 14 people. Restless Foods’ primary and umbrella policies compensated the victims up to their policy limits. Jerry swore that he did not do anything wrong and that the van’s engine simply stopped running.

Restless Foods’ carriers assumed Restless Foods’ recovery rights and proceeded to file suit against the van manufacturer after they obtained information about a faulty switch that caused the engine to  stop suddenly.

15. Transfer of Defense

This condition applies to Coverage E–Excess Liability.

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 requests.

18. Insurance under More than One Policy

 

Example: GasGrillzRUs manufactures outdoor gas grills. It has the following insurance:

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

Company B: Umbrella Coverage Form with a $1,000,000 Aggregate Limit

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

A GasGrillzRUs sales rep is demonstrating its new line of gas grills at the Indiana State Fair when its propane tank explodes. The claims for damages and injuries total $3,250,000. In this case, Company A first pays its $1,000,000 aggregate limit. Company B is an umbrella purchased to be excess of Company A and it pays its $1,000,000 aggregate limit. Company C provides a layer purchased as excess over Company C. It does not pay until both Company A and Company B use up their limits. It then pays only $1,250,000.

                       

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, its underlying carrier, or any other insurance pays the applicable underlying insurance limit, the self-insured retention, or the limits of any other insurance that covers the injury or damage. 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

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 failures 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:

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:

2. Definitions

These definitions specifically apply to the Nuclear Energy Liability Exclusion:

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

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

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

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

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.

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.

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.

This includes all forms of radioactive contamination of property.

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.