CG 00 42-Underground Storage Tank Policy-Designated Tanks Analysis

CG 00 42–UNDERGROUND STORAGE TANK POLICY–DESIGNATED TANKS ANALYSIS

(November 2019)

 

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INTRODUCTION

Insurance Services Office (ISO) CG 00 42–Underground Storage Tank Policy–Designated Tanks is monoline liability coverage written on a claims-made basis. Coverage applies to petroleum storage tanks the named insured either owns or operates listed and described on the declarations or elsewhere in the policy. A retroactive date is required because coverage is on a claims-made basis.

This policy has two coverage parts.

·         Coverage A provides bodily injury and property damage liability coverage for third party claims that an underground storage tank incident causes.

·         Coverage B covers costs of corrective actions needed for off-site cleanup in addition to cleanup on the insured's premises on an incident-reported basis.

This analysis is of the 04 13 edition. The single change from the 12 04 edition is in bold print.

CG 00 42–UNDERGROUND STORAGE TANK POLICY–DESIGNATED TANKS ANALYSIS

The policy directs the reader to two very important items of information. The first explains that bodily injury and property damage coverage is written on a claims-made basis and that the corrective action costs coverage is written on an incident-reported basis. The second is that defense expenses are limited. Instead of the unlimited defense outside of policy limits that are in most liability coverage forms and policies, defense payments are limited to the amount stated on the declarations and that the paragraph under Defense Expense Payments explains.

The policy then opens by stating that certain provisions restrict coverage and encourages the insured to carefully read the entire policy to determine its rights and duties and to determine what is covered and not covered. It also points out that the insurance company uses the terms you and your to refer to the named insured and that an insured is any person or entity that qualifies as such under Section II–Who Is An Insured. The term "first named Insured" is the first person or entity listed as a named insured on the declarations. The terms we, us, and our refer to the insurance company that provides the coverage. It also refers the insured to Section VI–Definitions because understanding the definitions is critical to understanding the policy.

SECTION I–UNDERGROUND STORAGE TANK COVERAGE

1. Insuring Agreement

a. Coverage A–Bodily Injury and Property Damage

The insurance company pays amounts the insured is legally required to pay as compensatory damages but only when caused by or that result from bodily injury or property damage that this insurance covers. Coverage applies to bodily injury or property damage under only certain circumstances:

 

Example: Ollie's oil storage tank develops a leak and oil seeps into the local water supply. Phil lives in the same area and develops serious physical problems as a result of drinking the contaminated water. Phil files a claim against Ollie when he learns of the source of the contamination. A few weeks later, Phil's condition worsens to the point that he is unable to work. Because of this, Phil's wife places him in a nursing facility that provides round-the-clock care and she files a claim against Ollie for the cost of the facility. Still later, Phil's employer files a claim for the loss of Phil's services as a skilled technician. Each of these claims is treated as having been made at the same time that Phil filed the first claim.

 

 

Example: Continuing the example above, all of Phil's trees, shrubs, and flowers die as a result of the leaking oil. Phil submits a property damage claim for payment to replace them. The replacements also die and it is determined that the soil must be reclaimed or decontaminated before anything can be planted. Phil submits a second claim for damages against Ollie. Each claim is treated as having been made at the same time that the first claim was filed.

 

Note: This concept is important, considering the fact that this policy is written on a claims-made basis and subsequent claims that occur after the end of the reporting period are not covered without this provision.

The amount the insurance company pays for damages due to bodily injury, property damage, or corrective action costs is limited as described in Section III–Limits of Insurance.

b. Coverage B–Corrective Action Costs

The insurance company pays amounts the insured is legally required to pay for corrective action costs that result from an underground storage tank incident that this insurance covers.

Coverage applies only if both of the following apply:

Underground storage tank incidents are considered reported at the earliest of the following times:

The amount the insurance company pays for damages due to bodily injury, property damage, or corrective action costs is limited as described in Section III–Limits of Insurance.

2. Exclusions

This insurance coverage does not apply to any of the following, except as noted:

a. Expected or Intended Injury

Coverage does not apply to bodily injury or property damage that the insured expects or intends.

Note: This exclusion does not have the exception that covers such bodily injury when it results from the insured using reasonable force to protect persons or property that is standard in other liability coverage forms and policies.

b. Contractual Liability

There is no coverage for bodily injury or property damage in cases where the insured must pay damages based on having assumed liability in a written contract or agreement. However, coverage does apply to liability for damages the insured has without a contract or agreement.

c. Workers Compensation and Similar Laws

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

Note: The intent of this exclusion and the Employers Liability exclusion is to eliminate the possibility of CG 00 42 indemnifying the insured for an injury that workers compensation or employer’s liability policies cover.

d. Employer’s Liability

Bodily injury to an employee of the insured as a result of employment or performance of duties in conjunction with conduct of the insured’s business is excluded. Bodily injury to the employee’s spouse, children, parents, brothers, or sisters as a consequence of that employee’s bodily injury is also excluded. 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.

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

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

Related Article: Workers Compensation Monopolistic State Funds

e. Damage to Property

Coverage does not apply to property damage to any property the named insured owns, rents, or occupies. Costs or expenses the named insured or any other party incurs to repair, replace, improve, or maintain that property for any reason, including preventing injury to persons or damage to property are also excluded. This exclusion also applies to property damage that arises from premises the named insured sells, gives away, or abandons, to property loaned to the insured, and to personal property in its care, custody, or control.

Note: CG 00 42 is intended to protect the insured for its negligence and tort liability to others, not to damages or injuries it sustains. This exclusion reinforces the need for the insured to maintain its premises and property in good condition and at its own expense.

f. Failure to Comply With Environmental Laws

There is no coverage for bodily injury, property damage, or corrective action costs that arise out of an underground storage tank incident that result from or are directly or indirectly related to failing to comply with any environmental law by any governmental entity. This exclusion applies only if the failure to comply is a willful or deliberate act or omission by the insured or by the named insured or any of its members, managers, partners, or executive officers.

g. Corrective Actions

The Corrective Action Costs coverage this policy provides does not apply to the following costs or other expenses:

 

Example: Fred's Finer Fuels accidentally mixes gasoline with kerosene by pumping it into the wrong tank. Fred dumps the now useless mixture in an empty field nearby just to get rid of it. This exclusion eliminates coverage for corrective action costs if the fuel mixture spreads and contaminates a neighboring location.

 

 

Example: Farah Farmsalot paid $2,100 for tests to check for seepage because her previous inventory indicated a shortage in her gas tanks. The cost of these tests is not covered.

 

h. War

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

i. Electronic Data (04 13 change)

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

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

3. Our Right and Duty to Defend

The insurance company has the right and duty to defend the insured against any of the following suits:

The company is not obligated to defend or pay for suits for costs or damages that this insurance does not cover. It has the option to investigate any incident or settle any suit for injury, damage, or costs that may result.

The duty to defend and pay or reimburse is limited as the policy states. It ends at the earliest of the following times. It applies to both claims or suits pending at the time as well as those filed afterwards:

4. Defense Expense Payments

Any payments or reimbursements are limited to the Defense Expense Amount on the declarations. They apply even if the insured assumes control of defense of a suit before that amount or the Limit of Insurance is used up. The insured may take control by mutual agreement with the insurance company or through a court order. The change in control can occur before or after the limits of insurance and/or the defense expense limit are used up.

The Defense Expense Amount is the same as the Aggregate Limit on the declarations if there is not a limit for it entered on the declarations. The insured may assume control of the defense before the Defense Expense Amount is used up. In that case, the insurance company reimburses it for not more than the Defense Expense Amount that remains.

5. Supplementary Payments

Payments made under this section do not reduce the Limits of Insurance or the Defense Expense Amount.

The insurance company pays the following with respect to claims paid or suits defended that this insurance covers that has a limit of insurance for corrective action costs or damages:

Note: The insurance company pays interest on the entire amount of the judgment, even the part outside its limits.

6. No Other Obligation or Liability

The insurance company does not have any other obligation or liability to make payments or perform acts or services unless specifically provided for elsewhere in the policy.

Note: The intent of this section is to clarify that coverage applies to only what is expressly stated and nothing more.

SECTION II–WHO IS AN INSURED

1. The named insured's form of business determines who is an insured. If the form of business is:

a. Individual. The individual and the individual's spouse are insureds but only for conduct of the business the individual solely owns.

 

Example: Mary Jones is the named insured. She is the sole owner of a small gas station. Both Mary and her husband Jerry are insureds with respect to the gas station operations. However, neither the custom car painting operation that Mary and her sister are partners in nor the contracting business that Jerry and his brother are partners in are covered.

 

b. Partnership or joint venture. The partnership or joint venture is an insured. The insured’s members and partners and their spouses are also insureds but only with respect to conduct of the named insured’s business.

 

Example: Mary and her sister Sandy are partners in the Girly Shop, a custom car painting operation that has
CG 00 42. Mary is also the sole owner of a small gas station. The gas station operation is not covered.

 

c. Limited liability company. The limited liability company is an insured. The named insured’s members are also insureds but only with respect to conduct of the named insured’s business. The named insured's managers are also insureds but only with respect to their duties as managers.

d. Any other organization. That organization is an insured. Executive officers and directors are insureds but only with respect to their duties as such. Stockholders are also insureds but only with respect to their liability as stockholders.

 

Example: Mary and Sandy's painting operation is so successful that they decide to incorporate. Mary and Sandy are the executive officers and Jerry buys his way in as a stockholder. All three are covered for incidents that involve the custom car painting operation. However, Mary's liability for the small gas station she owns and Jerry’s liability for his contracting business are not covered.

 

2. The following are also insureds:

a. The named insured's employees but only for acts within the scope of their duties as they relate to conduct of the named insured’s business.

(1) No employee is an insured for bodily injury:

·         To the named insured, the named insured's partners or members, or to a co-employee when that co-employee is in the course of his or her employment or performs duties related to conduct of the named insured's business.

 

Example: Shari and Emma work for Hyprice Truck Rentals. They are assigned to work on a valve connected to an underground storage tank. Shari tries to loosen a rusty connection on the valve but only succeeds in creating enough vibration to rupture an adjacent gas pipe. The gas spray from the broken pipe drenches Emma and she suffers a severe allergic reaction. There is no coverage under CG 00 42 for Shari when Emma sues her for the drenching.

 

Note: This limitation keeps this type of injury within the confines of Workers Compensation, Employers Liability, or a similar or related coverage as the exclusive remedy.

·         To a designated relative of that co-employee as a consequence of the paragraph above

 

Example: Continuing the example above, Emma's unfortunate injury results in her death. Her family files a claim against Shari for their emotional distress that the loss caused. CG 00 42 does not provide coverage for Shari in this situation.

 

·         Where an obligation exists to share damages with or to repay another party that must pay damages because of the injury described in the two paragraphs above

(2) No employee is an insured for property damage to property owned, occupied, used by, rented to, in the care, custody, or control of, or physically controlled for any reason by the named insured, its employees, partners, or members.

 

Example: An employee of Car Care Clinic prepares to do some repairs on a customer's vehicle parked next to an underground storage tank on its premises. A pipe connected to the tank bursts and gas sprays the outside and inside of the vehicle whose windows were left open. CG 00 42 does not cover this loss because the vehicle was in Car Care Clinic's care, custody, or control for repairs.

 

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

 

Example: The wife of a long-term customer asks Willie's Auction House to clean and maintain her deceased husband's car rental business before she puts it up for sale. Willie is covered for liability while maintaining and repairing the property.

 

c. A properly appointed legal representative has all the insured's rights and duties if the named insured dies but only to the extent of its duties as such.

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

SECTION III–LIMITS OF INSURANCE AND DEFENSE EXPENSE AMOUNT

1. Limits of Insurance

This section discusses the form’s coverage limits.

a. The most the insurance company pays are the Limits of Insurance on the declarations, subject to the following rules. This is regardless of the number of insureds, claims made, suits brought, number of parties that make claims, bring suits, or make requests or demands that seek corrective action costs or that require the named insured's action.

b. The most the insurance company pays for the total of damages for all bodily injury, property damage, and corrective action costs is the Aggregate Limit on the declarations.

c. The insurance company pays only damages and corrective action costs that exceed any deductible on the declarations. Subject to the Aggregate Limit, the most the insurance company pays for all damages because of bodily injury, property damage, and corrective action costs in any one underground storage tank is the Underground Storage Tank Incident Limit or the total of the damages and corrective action costs, whichever is less.

If the total of the damages and corrective action costs is less than the Underground Storage Tank Incident Limit, the insurance company pays all of any deductible amount. The named insured then promptly reimburses the insurance company for that amount.

Each payment the insurance company makes for damages and corrective action costs reduces both the Underground Storage Tank Incident Limit and the Aggregate Limit.

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

2. Defense Expense Amount

a. The most the insurance company pays for defense expense is the Defense Expense Amount on the declarations. This is regardless of the number of insureds, claims made, suits brought, or number of parties that make claims, bring suits, make requests or demands, or underground storage tank incidents.

b. Defense expense payments and reimbursements reduce the Defense Expense Amount. They do not reduce the Limits of Insurance.

c. The Defense Expense Amount is not subject to any deductible.

d. The Defense Expense Amount applies separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the Defense Expense Amount.

 

Example: Acme Trucking decides to change insurance companies. Because it has to establish common policy periods for all its policies, the company that writes CG 00 42 agrees to extend its term by four months. Acme was involved with two expensive lawsuits during the regular policy term that completely depleted the Defense Expense Amount. The company informs Acme that the remaining limits of insurance are still available for the additional four months but the defense expense amount is not because it has been used up.

SECTION IV–CONDITIONS

1. Bankruptcy

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

2. Duties in the Event of an Underground Storage Tank Incident

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

a. The named insured must inform the insurance company of an underground storage tank incident that may result in a claim, request, demand, or proceeding to impose an obligation on the insured for bodily injury, property damage, or corrective action costs as soon as possible after the incident occurs. As a minimum, the notice should include information about how, when, and where the incident took place and the names and addresses of all injured parties and any witnesses. It should also state the nature and location of any injury, damage, or release as a result of the incident.

Notice of such an incident is not notice of a claim under Coverage A. It is also not a report of an incident under Coverage B unless the notice meets Coverage B's reporting requirements.

b. The named insured must provide the insurance company with prompt written notice of claims made, suits brought against any insured, or requests or demands received that require the named insured's action because of an underground tank incident.

c. Every insured involved in or with an underground tank incident must:

·         Immediately send the insurance company copies of requests, demands, notices, summonses, and legal documents it receives in conjunction with the claim or suit.

·         Authorize and grant approval for the insurance company to obtain records and other needed information.

·         Cooperate with the insurance company as it investigates or settles the claim or defends against the suit, request, or demand.

·         When the insurance company requests, help it enforce any right against any person or organization that may be liable to the insured for a covered injury or damage.

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

Related Court Case: Ten Year Delay of Claim Relieved Insurer of Defense and Indemnification of Housing Authority

3. Legal Action Against Us

No party has the right to join the insurance company in any way, bring the company into a suit that claims damages from an insured, or sue the company unless all its terms and conditions have been met.

The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, it is not liable for damages not subject to payment under CG 00 42’s terms or that are more than the limit of insurance that applies.

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

4. Other Insurance

The insurance company's obligations to pay are limited if there is other valid and collectible insurance that applies to the loss, as follows:

a. Primary Insurance

This insurance is primary except when Excess Insurance applies. If this insurance is primary, the insurance company's obligations are not affected unless any other insurance that applies to the loss is also primary. In that case, this insurance shares with that insurance as outlined under Method of Sharing.

b. Excess Insurance

c. Method of Sharing

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

If the other insurance does not include contribution by equal shares, contribution is by proportional limits. With this approach, each company's share is the ratio of its applicable limit of insurance to the total applicable limits of insurance by all insurance companies. Ratios are determined based on each company's limit as a percentage of the total applicable limits and the loss is then apportioned between the various policies.

5. Premium Audit

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

b. The advance premium is only a deposit premium. At the end of each audit period, the insurance company determines the actual earned premium for the period and notifies the first named insured. The due date for the company to receive the premium billed is 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 first named insured.

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

6. Representations

When the named insured accepts this policy as issued, it agrees that the statements on the declarations are complete and accurate, are based on representations it made to the insurance company, and that the policy is issued based on those representations.

7. Separation of Insureds

Other than the Limits of Insurance, the Defense Expense Amount, and any rights and duties that apply specifically to the first named insured, this insurance applies to each named insured as if it was the only named insured and separately to each insured against whom claim is made or suit is brought.

8. Transfer of Rights of Recovery Against Others to Us

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

9. Policy Issued to Comply With Law or Regulation

The insurance company agrees to furnish the director of an implementing agency a signed duplicate copy of the policy and all endorsements that apply when requested to do so.

10. Cancellation

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

b. The insurance company can cancel at any time by sending written notice of cancellation by certified mail to the first named insured's last known mailing address. Cancellation for nonpayment of premium or misrepresentation is effective 10 days after the notice is received. Cancellation is effective 60 days after the notice is received if it is for any other reason. Longer notice periods may be substituted in place of these periods.

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

11. Nonrenewal

If the insurance company decides to not renew, it sends written notice to the first named insured on the declarations at least 60 days before the expiration date. The notice is either delivered or sent by certified mail to the first named insured's last known mailing address.

Note: Paragraphs 10 and 11 above may be modified by specific endorsements in many states with respect to the number of days of advance notice of cancellation or non-renewal required, what is considered acceptable as proof of mailing, and valid reasons to terminate coverage or not renew. Each state’s requirements must be examined carefully when considering changing or modifying any of these conditions.

12. Financial Responsibility and Reimbursement

CG 00 42 is issued to certify that the named insured complies with the federal Environmental Protection Agency financial responsibility requirements. These are imposed because the named insured owns or operates underground storage tanks. The insurance company agrees to comply with such financial responsibility requirements when it issues the policy. The named insured agrees to reimburse the company if it makes payments that this policy does not cover but that this condition requires.

13. Examination of Your Books and Records

The insurance company may examine and audit any of the named insured's books and records during the policy period and up to three years afterwards. However, the only books and records it may examine are those that related to the coverage CG 00 42 provides.

14. Inspections and Surveys

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

b. The company is not obligated to do so. Anything it does in this regard relates to only its findings of the risk's insurability and the premiums to charge. It does not make safety inspections or attempt to perform duties of parties that provide for the health or safety of workers or the public. It does not warrant that conditions are safe or healthful or comply with any law, regulation, code, or standard.

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

15. Premiums

The first named insured on the declarations pays all premiums and receives any return premiums that the insurance company issues.

16. If You Are Permitted to Retain Defense Counsel

These provisions apply if the Limit of Insurance and the Defense Expense Amount have not been used up and the insured receives the right to retain defense counsel by either mutual agreement or court order:

a. The insurance company retains the right to settle, approve, or disapprove the settlement of any claim or suit and appeal any judgment, award, or ruling at its own expense and at its discretion.

b. The named insured and any other involved insured must do both of the following:

17. Transfer of Duties When a Limit of Insurance or the Defense Expense Amount Is Used Up

This condition provides detailed instructions about the procedures to follow when transferring the duties of defense from the insurance company to the named insured. These instructions are needed when the Limit of Insurance or the Defense Expense Amount is used up defending and/or paying claims.

a. The insurance company must give written notification to the named insured as soon as it realizes that the Limit of Insurance will probably be used up by paying reported covered incidents, claims, or suits. Similarly, it must give written notification to the named insured when it realizes that the Defense Expense Amount will probably be used up by payments or reimbursements.

b. The insurance company must do certain things when the limit of insurance is used up by paying judgments or settlements for damages or for corrective action costs or if the Defense Expense Amount is used up by paying reimbursement of defense expenses.

The insurance company must give written notice to the first named insured at the earliest possible date in the event of either of the following:

The insurance company must also initiate and cooperate in transferring to any appropriate insured control of all claims and suits where its duty to defend has ended for any reason listed above. It must also take all appropriate steps to avoid a default. This means it may actually continue to defend any existing suits until the transfer is complete. This is subject to the appropriate insured cooperating with the company to complete the transfer.

c. If the Limit of Insurance or the Defense Expense Amount is used up, the first named insured and any other insured involved in a suit that seeks damages subject to that limit must cooperate with the insurance company in transferring control of the claims or suits. They must also arrange to defend the suit in the period of time the insured and the insurance company agree to. If there is no such agreement, arrangements must be made as soon as practicable.

d. The insurance company does not defend any claim or suit reported to it after the Limit of Insurance that applies is used up. This applies even if the Defense Expense Amount is not yet used up. Similarly, the insurance company does not provide a defense when the Defense Expense Amount is used up, even though the Limit of Insurance is not used up. If either of these events occurs, the first named insured and any other insured involved with the claim or suit must arrange to defend such claim or suit.

e. The first named insured is responsible for reimbursing the insurance company for any expenses it incurs when it takes the appropriate steps to avoid a default or to continue to defend any existing suits until the transfer is complete. The duty to reimburse begins on the date the limit of insurance that applies is used up, if the insurance company sent notice as required, or the date it actually did send the required notice.

f. The following provisions apply if the Limit of Insurance is available to pay damages or corrective action costs but the insurance company's duty to defend has ended because the Defense Expense Amount is used up and it transferred control of defending the suits to the insured:

g. Using up the Limit of Insurance by paying judgments or settlements for damages, or corrective action costs that caused the insurance company to no longer have a duty to defend is not affected by the insurance company not complying with any other aspect of this condition. Similarly, that lack of compliance does not affect when the Defense Expense Amount is used up by paying or reimbursing defense expenses and the insurance company no longer has a duty to defend.

SECTION V–EXTENDED REPORTING PERIODS

Extended Reporting Periods are in only insurance policies or coverage forms written on a claims-made basis.

Editor’s note: The following titles are not part of CG 00 42. They are provided to aid in understanding this section.

1. When Extended Reporting Periods are available

The insurance company provides one basic and one optional supplemental reporting period option in cases where this policy is cancelled or not renewed. They are also available if this policy is renewed or replaced with insurance that has a retroactive date later than the one on the declarations or that does not apply to bodily injury or property damage on a claims-made basis or corrective action costs on an incident-reported basis.

2. Extended Reporting Periods Conditions

These Extended Reporting Period options do not extend the policy period or change the coverage provided. They apply to only bodily injury, property damage, and corrective action costs due to an underground storage tank incident that started before the expiration date but not before the retroactive date. Extended Reporting Periods may not be cancelled once they are put into effect.

3. Basic Extended Reporting Period

This policy automatically provides the Basic Extended Reporting Period at no additional charge. It begins on the expiration date and lasts six months. The six months does not apply to claims that any subsequent insurance coverage insures. It also does not apply even if they are not covered but would have been covered if the limits of insurance or defense expense amount had not been used up. The basic reporting period does not reinstate or increase the Limits of Insurance or the Defense Expense Amount or extend the policy period.

4. Optional Supplemental Extended Reporting Period Endorsement

a. A two-year Supplemental Extended Reporting Period is available by endorsement as an option. It is subject to an additional premium charge. It begins on the expiration date and replaces the Basic Extended Reporting Period. It is not in addition to the Basic Extended Reporting Period.

b. The named insured must notify the insurance company of its intent to purchase this option before the expiration or cancellation date. If the named insured initiates the cancellation or non-renewal, the request for the extended reporting period must accompany the request for cancellation or non-renewal. If the insurance company cancels or non-renews, the notification time varies based on the amount of time provided. The Supplemental Extended Reporting Period is not effective unless the named insured pays the additional premium when it is due.

c. The insurance this option provides is excess over any other insurance that begins or continues after this endorsement becomes effective. The other insurance must be valid and collectible.

d. If the Supplemental Extended Reporting Period applies, the insurance company provides a Supplemental Aggregate Limit of Insurance and a Supplemental Defense Expense Amount. However, this is for only claims first received and recorded during the Supplemental Extended Reporting Period. The Supplemental Aggregate Limit of Insurance equals the Aggregate Limit amount on the declarations at expiration. The Supplemental Defense Expense Amount equals the Defense Expense Amount on the declarations at expiration. Section III–Limits of Insurance is amended to reflect application of this option.

SECTION VI–DEFINITIONS

Defined words are used throughout the policy. Restricting the meaning to such definitions provides a way for everyone to have a clearer understanding of the coverage intended. There are 14 defined terms.

1. Bodily injury

This is bodily injury, sickness, or disease a person sustains. It includes death.

2. Corrective action costs

These are the reasonable and necessary expenses the named insured incurs to respond to a confirmed underground storage tank incident for corrective action the federal Environmental Protection Agency requires.

3. Coverage territory

This is the United States of America, its territories and possessions, Puerto Rico, and Canada.

4. Defense expense

These are amounts paid for and allocated to a specific claim or suit the insurance company investigates, settles, or defends. It does not include salaries and expenses of employees of either the insurance company or the insured, except as outlined below. It also does not include fees and expenses of independent adjusters the insurance company hires. It includes all of the following:

5. Employee

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

6. Executive officer

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

7. Implementing agency

This is the federal Environmental Protection Agency (EPA). In cases where an individual state has a similar program approved under the Hazardous and Solid Waste Amendment of 1984, or pursuant to a memorandum of agreement with the EPA, it includes the designated state or local agency responsible for executing the approved underground storage tank program.

8. Insured tank

This is any underground storage tank used to store petroleum products and not excluded or exempt from the definition of underground storage tanks under the Hazardous and Solid Waste Amendments of 1984. It includes attached underground pumps and piping of tanks listed on the declarations that the named insured owns or operates. It does not include any tank the named insured replaced during the policy period or any Extended Reporting Period that was done without the insurance company's written consent.

9. Leased worker

This is a person a labor-leasing firm leases to the named insured under a written contract or agreement. Leased workers perform duties related to conduct of the insured's business. They are not the same as temporary workers.

10. Property Damage

This is physical injury to or destruction of tangible property. It includes contamination of that property and resulting loss of use of that property. Loss of use is considered to have occurred at the same time as the loss to tangible property.

It is also loss of use of tangible property that must be removed, taken out of use, or that cannot be accessed because of an underground storage tank incident even though it is not injured, destroyed or contaminated. Loss of use is considered to have occurred at the same time as the incident that caused it.

Tangible property does not include electronic data.

Note: This is an important restriction of coverage. Without this definition, if a computer virus passed to another party in some way destroys important data on that party's computer, coverage might apply.

11. Release

This is petroleum products that spill, leak, emit, discharge, escape, leach, or dispose from an underground storage tank that enter water or subsurface soil.

12. Suit

This is a civil proceeding alleging damages for bodily injury or property damage that this insurance covers. It includes arbitration proceedings the insured submits to with the insurance company’s consent. It can also include alternative dispute resolution proceedings that the insured submits to with the insurance company's consent. This definition also includes civil proceedings or administrative hearings that seek payment of corrective action costs.

13. Temporary worker

This is any person furnished to the named insured to either substitute for a permanent employee temporarily away from the business or to assist the named insured to meet seasonal or short-term workload conditions.

14. Underground storage tank incident

This is any release from an insured tank. Continuous or repeated releases from the same tank are treated as a single underground storage tank incident.