(April 2019)
This is a repository of articles and analyses that relate to earlier editions of the Insurance Services Office (ISO) Commercial General Liability Coverage Forms and Policies.
Related Article: CG 00 01 and CG 00 02–Commercial General Liability Coverage Forms Analysis
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Archive Index |
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Analysis |
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Comparison |
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Comparison |
Comparison Of The 1998 CGL To The 1996 CGL Knowledge Tester Quiz |
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Comparison |
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Comparison |
Comparison Of The 1999 CGL To The 1998 CGL Knowledge Tester Quiz |
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Comparison |
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Analysis |
Commercial General Liability Policy Coverage Form Analysis (12 04 edition) |
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Comparison |
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Comparison |
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Analysis |
CG 00 01 and CG 00 02–Commercial General Liability Coverage Forms Analysis (12 07 edition) |
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Compare: CG 00
01–Commercial General Liability Coverage Form: 12 07 Edition to the |
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Comparison |
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ISO’s Commercial General Liability (CGL) Policy covers bodily injury and property damage liability exposures that are related to normal business operations and may be due to:
· negligence;
· unintentional tort;
· contractual obligations; and/or
· contingencies.
The CGL coverage part may be issued as a monoline policy or be grouped with one or more other lines of insurance to form a Commercial Package Policy. The basic areas covered by the CGL include the insured’s ownership or use of the premises; coverage for “insured” contractual agreements; coverage for products manufactured, sold or distributed by the insured; completed operations of the insured; “personal and advertising injury” liability of the insured; and medical payments coverage.
Two CGL Policy Programs are available. The first is the “Occurrence” based policy. This policy provides protection for covered losses where the actual injury itself occurred during the policy period, regardless of when notification of the loss or claim happened. The second available option is the “Claims-Made” policy where coverage is triggered by the actual filing date or receipt of the claim, in addition to the date (period) the loss occurred. Any covered loss or claim filed within the policy period is handled by that policy regardless of when the actual loss or injury occurred.
The make-up of a CGL Policy must contain more than just the CGL Coverage Form. To complete an ISO CGL, there must be:
· Common Policy Declarations;
· Common Policy Conditions;
· Commercial General Liability Declarations;
· Commercial General Liability Coverage Form;
· Endorsements.
This article analyzes the ISO (Insurance Services Office) Commercial General Liability Policy, focusing on the Occurrence Policy. The differences between the Occurrence Policy and the Claims-Made Policy are outlined in the CGL Program Coverage Comparison-Occurrence vs. Claims-Made.
Note: In addition to the Commercial General Liability Policy Conditions built into the coverage form, the CGL is also subject to the Common Policy Conditions—IL 00 17. The Common Policy Conditions are not included in this analysis. This detailed analysis incorporates the 1996, 1997, 1998 and the 1999 revisions.
NOTE: BOLD SECTIONS INDICATE WHERE LANGUAGE CHANGES ARE FOUND IN THE
07/98 and 09/99 FORMS OVER THE PRIOR VERSIONS.
Section V—DEFINITIONS contain defined words which appear throughout the policy in quotation marks.
1.a.(1)(2)—The insurer agrees to pay the sums for damages, up to the limits stated in Section III—Limits of Insurance, for covered occurrences of “bodily injury” and “property damage” that the insured becomes legally obligated to pay. The insurer has the right and the duty to defend the insured against any “suit” for those damages. The new wording clarifies that defense is for the insured only. However, the insurer has no duty to defend the insured for any “suit” for damages that the insurance does not cover. The CGL is not intended to provide defense for claims or suits which are ineligible for coverage under the policy.
The insurer may at any time and at the insurer’s discretion, investigate or settle any claim or “suit.” The insurer is no longer obligated to defend a suit when the limit of insurance is spent in payments of either judgments or settlements under any of the three Coverage Sections A, B or C.
Example: Marezee Dotes Inc., a publisher of children’s books, is covered by a CGL with an insurance limit of $1,000,000. During a school group’s tour of Marezee, part of the lobby flooring collapses, seriously injuring over a dozen child tourists. Each injured child’s family filed separate claims for injury and Fluffy Property and Casualty, Marezee’s insurer, began making settlements. Once the $1,000,000 general aggregate was paid out, Fluffy P&C was no longer obligated to respond to the remaining damages or outstanding lawsuits.
1.b.(1)—The insurance applies only to occurrences of “bodily injury” and “property damage” that take place in the “coverage territory.”
Example: Amprechaun Inc. has a foreign operation in Ireland. In this case, the products are both manufactured and distributed in Ireland. Under the definition of “coverage territory,” there is no coverage. On the other hand, should the products be manufactured in the U.S. but sold in Ireland, this would fit the definition of covered territory, as would products manufactured in Ireland, but sold in the U.S.
1.b.(2)—The insurance applies only to occurrences of “bodily injury” and “property damage” that take place during the policy period.
If a loss happens prior to the inception of the policy, there is no coverage for that loss under the occurrence policy, even if the claim for damages was made during the policy period.
1.c. Clarification is made explaining that bodily injury damages include three items: care, loss of services, or death of any party that is a result of the bodily injury that occurred.
(09/99 changes: In July of 1995, a significant appeals court decision
was made in California that has had a far-reaching impact on the Commercial
General Liability Policy (CGL). The case is that of Montrose Chemical
Corporation of California, Plaintiff and Appellant vs. Admiral Insurance
Company, Defendant and Respondent. CA Supreme Court #S026013. Filed July 3,
1995.
Decisions in other states have supported or complemented the California
decision. While it may not have been the intent of the original drafters of the
CGL verbiage in use to provide coverage for known loss resulting from the
“occurrence” of progressive or continuous exposure, coverage has been found in
the modern CGL. As a result, the Insurance Services Office, Inc. (ISO)
developed a mandatory endorsement, CG 00 57—Amendment Of Insuring Agreement—Known Injury Or Damage, to address the issue. This endorsement revised
the Insuring Agreements so that commercial liability policies will not respond
to any injury or damage known by the insured (or an “employee” of the insured
who was authorized to give or receive notice of injury, damage or claim),
before the policy inception.
The mandatory endorsement restates the entire Insuring Agreement. As
such, it may be used with any edition of the CGL where the Insuring Agreement
is found in Paragraph 1. of Section 1. In other words, the new Known Injury or
Damage endorsements may be attached to the 1988, 1993, 1996, and 1998 editions
of the CGL.
In their release of this change, ISO stated that the revision was not a
reduction in coverage but merely a restatement of the original intent of the
coverage. It should be noted that in those states where the wording was
determined to cover known, continuous, or progressive damage, however, that the
change is viewed as a coverage reduction.
1.b.(3) (added via endorsement CG 00 57)—The “bodily injury” and “property damage” liability applies only if no
insured and no “employee” of the insured who was given authority to give or
receive notice of an “occurrence” or claim, had any knowledge, prior to the
inception of the policy, that such had occurred. If an “occurrence” or claim
had occurred prior to policy inception of the policy and it continued into the
policy period, or it changed in its scope or it once again resumed during the
policy period, it is considered to have been known by the insured prior to the
policy period.
Revised 1.c. (added via endorsement CG 00 57)—The converse of 1.b.(3) is also true. If the insured or an “employee”
of the insured with the authority to give or receive notice of a claim or
“occurrence” had no knowledge of a claim or “occurrence” prior to the policy
period, then it is not considered to have been known before the policy period.
1.d. (added via endorsement CG 00 57)—”bodily injury” or “property damage” is considered to be known by the
insured or authorized “employee” of the insured, whenever the earliest of any
one of the following events occurs:
·
the
insured reports any part of any injury or damage to the current insurer or any
other insurer;
·
the insured
receives a written or verbal demand or claim for damages;
·
the
insured first becomes aware—by any means—that injury or damage has occurred or
has begun to occur.
This defines and significantly broadens the application of what is a
“known” loss or a “loss-in-progress.”
1.e.—Formerly labeled as item 1.c., now 1.e. in the new endorsement, states that “bodily injury” damages include three items: care, loss of services, or death of any party that is a result of the covered “bodily injury” that has occurred.
2.a. Expected or Intended Injury—Except for any “bodily injury” that may result from reasonable force used by any insured to protect or defend any person or property, any “bodily injury” or “property damage” that the insured expects or intends to cause, is not covered by this insurance.
This exclusion protects insurers from having to respond to damages or injuries that an insured intentionally caused. This exclusion is in the public interest to avoid permitting an insured from profiting under the insurance contract via theft or arson, or to inflict injury to competitors, or using it as an instrument of revenge or to cause any other purposeful harm.
The expected and intended wording is constantly challenged in various courts. One point of contention is unintended consequences that result from an intentional act. There is no current ISO endorsement available to buy back or delete this exclusion.
2.b.(1)(2) Contractual Liability—Damages for “bodily injury” or “property damage” that result from liability the insured has assumed in a contract or agreement are not covered unless either the contract or agreement is considered to be an “insured contract” and the “bodily injury” or “property damage” occurred after the contract or agreement was executed, or the insured would have been liable even if the contract or agreement had never occurred.
There is one note of clarification regarding assumption of liability by contract and the execution of the contract with respect to this exclusion. Even if the insured assumes liability by contract or agreement, which makes the insured liable on a retroactive basis for damages either prior to the inception date of the policy or prior to the execution date of that contract, there is no coverage under this insurance and the exclusion applies.
If and when the insured assumes liability in an “insured contract,” any reasonable attorney fees and necessary litigation expenses that have been incurred by or for a party other than the insured are considered to be damages from “bodily injury” or “property damage” and are covered as long as the following two criteria are met:
(a) the “insured contract” requires the insured to provide this type of defense coverage for the third party; and
(b) the expenses are for a civil or alternative dispute resolution proceeding that this insurance applies to. Payment for defense expenses is included in this coverage for liability for damages assumed under an insured contract as defense expense is considered to be part of the overall damages. Under the supplementary payments, clarification is made to reflect that defense of an indemnitee and the payments of an indemnitee’s defense expenses, up to the applicable limit of insurance, are provided.
An example of the type of contract where the insured is liable for injury whether or not there is a contract, is one in which a tenant or a customer requires the insured to warrant in that contract or agreement, that the premises are safe and meet all life or public safety regulations and requirements. The insured is responsible and liable for this type of injury, with or without a contract or agreement, so coverage is available for this type of loss—with or without a contract.
Contractual liability can be further limited by endorsement Contractual Liability Limitation Endorsement—CG 21 39. In this endorsement, the definition of "Insured Contract" is restricted by amending the Section V Definitions in CG 00 01 so that it does not include any contract or agreement pertaining to the business of the insured, that was made by the insured, which assumes the tort liability of another party.
2.c. Liquor Liability—For any insured in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages, “bodily injury” or “property damage” is excluded if it results from the following:
(1) causing or contributing to the intoxication of any person;
(2) furnishing alcoholic beverages to a person under the legal drinking age; or furnishing alcoholic beverages to a person under the influence of alcohol;
(3) any statute, ordinance or regulation that relates to the sale, gift, distribution, or use of alcoholic beverages.
This exclusion does not apply to host liquor situations for insureds that are not in the business of selling, manufacturing, distributing, servicing, or furnishing alcohol. Business lunches, parties and social functions sponsored by the insured are covered for host liquor liability unless there is a statute, ordinance or regulation relating to the particular event.
Example: CashGone.com, a rising new Internet firm, holds a company picnic to welcome its new employees and beer is served.
Example: Fish’N’Brew’s President takes the owner of EconoMeat Supply to lunch and pays for a bottle of wine to go with the meal.
The above situations are covered should loss or injury occur to the clients or guests as a result of the alcohol consumed. On the other hand, an example of an excluded situation would be the case as follows.
Example: Drywhere Launderers Inc. is losing their shirts from their backs so they sponsor a fundraiser by holding a “Casino Night.” The fundraiser includes betting and gambling opportunities, food and alcoholic beverages for a charge. The company did not obtain the proper permits and licenses required for this type of function. A patron who had been served alcohol was injured on the trip home from the fundraiser. Because this situation was subject to several state and local laws, coverage was not available under this insurance.
Additional coverage is available for liquor liability with the purchase of the Liquor Liability Coverage Form.
For an optional method of handling the insured's liquor liability exposure, a Liquor Liability Coverage Form is available under a separate policy. Two versions of the Liquor Liability Policy: Occurrence Policy Coverage Form—CG 00 33 or Claims-Made Policy Coverage Form—CG 00 34 are available.
2.d. Workers’ Compensation and Similar Laws This insurance does not apply to any requirement or obligation that the insured must assume resulting from any workers compensation, disability benefits, unemployment compensation or similar type laws. The extent of this exclusion and the one that follows is to prevent double indemnification for injury that should be covered under workers’ compensation or employer’s liability policies.
2.e.(1)(a)(b)(2)(a)(b) Employer’s Liability—Excluded is any “bodily injury” to an “employee” of the insured, or the spouse, child, parent, brother, or sister of that “employee,” as a consequence or result of:
(a) employment of that “employee” by the insured;
(b) performance of duties necessary and relating to the conduct of the insured’s business.
It is further clarified that the exclusion applies whether the insured is liable as an employer or in any other capacity, or whether the insured is obligated to share damages with or repay another party who must pay damages because of an injury. This is a particularly important clarification because of the widespread use of contractors, subcontractors, independent contractors, or leased employees, and much of the uncertainty with respect to who is responsible.
One other important note—watch carefully for situations in monopolistic states where workers’ compensation is provided or required by the particular state, but coverage for employers’ liability is not necessarily required or available. This could leave a major gap in the insured’s coverage. Many insurers in those states have developed manuscript or company endorsements and programs to add the employer’s liability to the CGL.
(07/98 changes: Previously, the definition of “pollutants” was found
within this exclusion. As a result of the 1998 policy changes, this definition
was moved to Section V with the rest of the policy definitions.)
2.f. Pollution—To get a better understanding of what pollution is, we will first look to the definition found in Section V where pollutants are defined to mean any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste also includes those materials that may be meant to be, but have not yet been, recycled, reconditioned or reclaimed.
A very broad definition of the term “pollutant” has been used for this exclusion. The initial intent behind this exclusion was to make it as comprehensive as possible to exclude virtually all potential occurrences of pollution. Originally it was considered by some to be a total pollution exclusion. In the past few years and with the recent versions of the CGL, exceptions to the exclusion have been made to add back reasonable and necessary coverage caused by incidents that may otherwise fall into the pollution exclusion.
(1) Excluded is any “bodily injury” or “property damage” that arises out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants:
(a) that are at or from any premises, site, or location that is now or ever was at any time owned, occupied, rented, or loaned to any insured;
(07/98 changes: All of the following very valuable exceptions to the pollution exclusion were added to give back coverage for specific incidents of pollution.)
Three exceptions to this exclusion are made:
(i) The first exception to the exclusion is for any occurrence of “bodily injury”—not property damage—resulting from the release of smoke, fumes, vapor or soot from the furnace or other heating equipment within a building.
Example: The Jones family, tenants in an apartment building, become ill from the fumes and vapors released by a faulty furnace unit. Serious long-term injury results. They sue their landlord. The landlord’s CGL will provide protection for the bodily injury suffered by the family because it was a result of a faulty heating unit used to heat the apartment building. The family claims the fumes also resulted in the death of their pet dog and cat. The deaths of the dog and cat are not covered.
(ii) If the insured is a contractor and the owner or lessee of a premises, site or location that the contractor is performing work at, requiring the contractor to add that owner or lessee as an additional insured, there is coverage for bodily injury or property damage that the insured contractor may be held liable for. However, this exception is available only if the insured contractor or any insured (other than the owner or lessee as additional insured) has never owned, occupied, rented or loaned the premises, site or location.
Example: D & K Contracting was building a small storage building on a premises owned by G. K. Properties. G. K. Properties required D & K Contracting to add G. K. as an additional insured to their CGL policy for the duration of the project. During construction, a neighboring premises experienced a pollution loss that was alleged to have been caused by conditions on the premises owned by G. K. The injured party sued G. K., who turned the suit over to D & K (where G. K had been added as an additional insured). If D & K is found liable, there would be coverage. However, if it was determined that last year D & K had rented the property temporarily from G. K. as a storage facility, there would be no coverage.
(iii) The third exception is for any “bodily injury” or “property damage” that results from any heat, smoke or fumes that are caused by or arise from a hostile fire, as defined in the policy.
Example: The insured, ChemTec, is a chemical research facility. During a research
project, a major fire begins that totally destroys ChemTec’s
premises. Toxic chemicals are released in a large black cloud over neighboring
facilities. Several people suffer serious illness as a result. There would be
coverage for the injuries.
(b) that are at or from any premises, site, or location that is now, or ever was at any time, used by or for any insured or others, for the handling, storage, disposal, processing, or treatment of waste;
(c) which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for any insured or any other party for whom you are or may be legally liable;
(d) at or from any premises, site or location that the insured, any contractor or subcontractor who is working directly or indirectly on behalf of any insured—is performing operations and where pollutants are brought on or to that premises, site or location by any insured, contractor or subcontractor.
(07/98 changes: This portion of the
pollution exclusion also contained exceptions to the exclusion—thus adding back coverage. The first and
third of the following three exceptions (i), (iii)
previously existed in a slightly different format. Exception two (ii) regarding
material brought onto the premises for building operations was new and resolved
some previous controversial claims coverage situations.)
(i) However, this exclusion does not apply when the damages, either “bodily injury” or “property damage” are caused by the escape of fuels, lubricants, or other operating fluids needed to perform the normal functions of the operation of “mobile equipment” or its parts, as long as the equipment is designed to hold, store or receive those items. No pollution coverage exists if the discharge, dispersal, escape, or release is intentional or is a part of the operation being performed.
In older versions of the CGL, contractors who brought pollutants onto the job site in any form had no coverage for any resultant pollution that may have occurred. In recent versions, limited pollution coverage is provided to contractors who bring mobile equipment onto the job site which may accidentally leak or spill gasoline, oil, or hydraulic fluids and cause pollution damages as a result. Coverage only applies if the fluids are necessary for the operation of the equipment and are not meant to be discharged in any way.
(ii) If “bodily injury” or “property damage” occurs within a building and is caused by the release of gasses, fumes or vapors from materials the insured or a contractor working for the insured brought onto the premises to perform building operations—the exclusion is excepted. This includes materials such as paint, cleaning solvents, chemical treatments or carpet/tile glue that are brought into a building by the insured or a contractor of the insured, to be used to repair or service the building.
Example: Should a customer become ill from paint fumes inside the building while the building interior is being painted, there is coverage. However, if the exterior of the building is being painted and a passerby claims injury, there would not be coverage.
(iii) The third exception is for any “bodily injury” or “property damage” that results from any heat, smoke or fumes that are caused by or arise from a “hostile fire” as defined in the policy.
(07/98 changes: In past versions of the
CGL, a definition of “hostile fire” was found at this point in the pollution
exclusion section. In the newest edition, the definition has been moved to
Section V—Definitions. The
definition itself remained untouched; only the location has been moved.)
(07/98 changes: The positioning of the following exclusion was revised
and some changes to the wording in the exclusion were implemented; however, the
rewording was for clarification purposes and did not appear to result in
coverage implications.)
(e) There is no coverage at or from any premises, site or location in which an insured, or contractors or subcontractors working directly or indirectly for or on behalf of any insured, are working or performing operations, if those operations are to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effect of pollutants.
(2)(a)(b) Excluded is coverage for the loss (such as claims or suits), costs or expenses (including awards, fines, or penalties) arising from any request, demand, order, statutory or regulatory requirements to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effect of pollutants. The exclusion further states that insurance does not apply to any claim or suit by or on behalf of a governmental authority for damages because of any of the above stated circumstances. This exclusion precludes coverage for any such action resulting from the Environmental Protection Act or on behalf of the Environmental Protection Agency (EPA) or any other governmental authority on any level.
(07/98 changes: The following new exception to the exclusion was added
for property damage liability that an insured would have had regardless of any
action taken by a governmental or regulatory agency.)
The previous exclusion will not apply to liability for “property damage” that the insured would have had in the absence of, or if the request, demand, order, statutory or regulatory requirement, claim or suit, had not occurred. Several endorsements are available to provide pollution coverage in various degrees.
(a)Endorsement CG 04 22—Pollution Liability Coverage Extension Endorsement - adds back pollution coverage by deleting the first paragraph of exclusion f; however, it leaves intact the exclusion for cleanup costs.
(b)Endorsement CG 00 39—Pollution Liability Coverage Form [Designated Sites] - is a claims-made only form that provides both pollution liability coverage and reimbursement of mandated off-site cleanup costs for designated sites.
(c)Endorsement CG 00 40—Pollution Liability Limited Coverage Form [Designated Sites] - a claims-made form that provides pollution liability coverage only for designated sites, with no reimbursement for off-site cleanup costs.
2.g. Aircraft, Auto or Watercraft—Any “bodily injury” or “property damage” resulting from the ownership, maintenance, use, or entrustment to others of any aircraft, “auto,” or watercraft. This includes the ownership of, loan or rental of, operation of, or “loading and unloading” by or to any insured.
Example: Gudword Image Consultants own a sailboat which it rents to its employees of the insured for pleasure use. If the vessel was not properly maintained and the “employee” of the insured was injured when the watercraft sank, the injury would not be covered.
Other items which would not be coverage involves any aircraft, including an airplane, hang glider, balloon, ultra-light, helicopter, etc., that is owned or rented by the insured.
Exceptions to the exclusion 2.g. are:
(1) watercraft while on shore on premises you own or rent. An example would be a boat in storage for the winter that poses an attractive nuisance exposure to neighboring children;
(2)(a)(b) non-owned watercraft that is less than 26 feet long and not being used to carry persons or property for a charge. An example would be a non-owned pontoon boat, under 26 feet, used for entertaining clients or customers;
(3) non-owned “auto” while it is being parked on or next to premises you own or rent; this means an “auto” that is not owned, rented or loaned to any insured. An example would be valet exposure;
(4) liability assumed under an “insured contract” pertaining to the ownership, maintenance or use of aircraft or watercraft; as in the case where the insured needs to charter an emergency flight for business purposes, and the charterer requires a hold-harmless agreement;
(5) any “bodily injury” or “property damage” that results from the operation of cherry pickers or similar devices mounted on automobile or truck chassis and used to raise or lower workers or equipment such as air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting, and well servicing equipment.
Example: A specially modified pickup truck carrying well drilling equipment accidentally struck the side of a building, causing damage, while maneuvering into place over a well; coverage would apply.
In addition, a CGL endorsement is available to delete the exclusion and extend coverage for those boats specifically scheduled. CG 24 12—Boats provides liability coverage for scheduled boats.
2.h.(1)(2) Mobile Equipment—“bodily injury” or “property damage” resulting from the transport of “mobile equipment” by an “auto” owned or operated by, rented or loaned to any insured; or mobile equipment used in, while practicing for or being prepared for any pre-arranged racing, speed, demolition, or stunt activity.
Example: A contractor is hauling a large crane on a trailer behind an owned truck to the job site. This would not be covered by the CGL when the hitch on the trailer snaps and overturns, causing damage to the vehicles traveling behind the trailer and crane.
The automobile liability policy of the towing vehicle should respond to any liability for a trailer being towed or for mobile equipment being transported by that vehicle.
For insurers and brokers that have access to coverage for a variety of difficult, unusual or specialty mobile equipment situations, refer to the section for Inland Marine Risks in The Insurance Marketplace, published by The Rough Notes Company, Inc.
2.i. War—No “bodily injury” or “property damage” for any liability assumed under a contract or agreement, resulting from any act, incident or condition of war, whether declared or undeclared is covered by the CGL. War is clarified to include in its definition such acts as civil war, insurrection, rebellion, or revolution.
Example: An insured manufactures guided missiles. The missiles are purchased by country X who, in a purchase agreement, requires the insured to guarantee the accuracy within one meter. When country X invades country Y, the missiles miss their targets causing extensive damage to country Z. There is no coverage.
2.j. Damage to Property—“Property damage” to any property owned, rented, loaned to or occupied by the insured or for any personal property in the care, custody or control of the insured, is not covered. The CGL is intended to protect the insured for negligence and tort liability to others. It does not apply to damages or injury to the insured. As such, it reinforces the need of the insured to maintain their own premises and properties in good condition and use reasonable care to prevent damage or injury. One note, however: if liability is assumed in a sidetrack agreement for property loaned to the insured or for personal property in the care, custody or control of the insured, the exclusion does not apply, so there is coverage.
The standard provisions for the Commercial General Liability insurance policy contain the following major exclusions.
This insurance does not apply to property damage to:
(1) property owned, rented or occupied by the insured;
(2) premises sold, given away or abandoned by the insured, if the property damage arises out of any part of the premises. Note, however, this exclusion does not apply if the premises are the insured's work (as in the case of a real estate agent) and were not occupied, rented or held for rental by the insured;
(3) property loaned by the insured, except for liability assumed under a sidetrack agreement;
(4) personal property in the insured's care, custody or control, except for liability assumed under a sidetrack agreement;
(5) the particular part of real property on which the insured or any contractors or subcontractors working on the insured's behalf are performing operations, if the property damage arises out of the operations; except for liability assumed under a sidetrack agreement; or
(6) the particular part of any property that must be restored, repaired or replaced because the insured's work was incorrectly performed; except for liability assumed under a sidetrack agreement. Further, this exclusion does not apply to property damage included in the products/completed operations hazard.
Examples of property in the insured’s care, custody, and control that are excluded under the liability coverage form include such exposures as:
· a VCR repair operation that takes into its care the VCRs of customers to clean, service and repair;
· a photo-lab that takes the film and negatives of customers into its care to develop photographs and prints;
· a retail fur coat shop that also offers its customers cleaning and storage facilities.
(07/98 changes: A new exception to the “property damage” exclusion was
added which gave coverage for “property damage” to property of others for any
premises—including contents of those
premises—at a location the insured
is renting or has rented for seven consecutive days or less. The exception
follows.)
Items (1), (3) and (4) of the above exclusion do not apply to “property damage” (other than damage by fire) to either the premises or the contents of a premises that an insured has rented for seven or less consecutive days.
A new separate limit of insurance will be shown in the Declarations under Section III—Limits Of Insurance—for this item. It is entitled: Damage To Premises Rented To You.
“Property damage” to any premises the insured sells, gives away or abandons is not covered if the damage arises out of any part of those premises. The one exception to this portion of the exclusion is if it is the business of the insured to sell property (as in the case of a real estate agent) and the insured never occupied, rented or held for rental that property or premises. Notice that only “property damage” is excluded from coverage for previously owned premises. For example, take a case where an insured previously owned a building but had since sold the building, and a serious loss occurred when the building collapsed. It was determined that the cause of the collapse was the negligence of the insured prior owner who was found liable in a judgment. The CGL would only respond to any “bodily injury” sustained from the collapse and no coverage would be available for “property damage.”
If “property damage” results to any part of real property in which the insured, including any contractor or subcontractor working directly or indirectly on behalf of the insured, is performing operations, insurance does not apply. Also, that part of the property that must be restored, repaired or replaced, because the work of the insured was incorrectly performed, is not covered, unless the “property damage” is included in the “products/completed operations hazard.” An example would be an insured who is in the process of laying a new roof on a portion of a building. Should that insured remove the shingles on the wrong portion of the roof that did not need repairs, insurance will not cover the damages to re-cover that portion of the roof.
This exclusion does not apply to liability that has been assumed under a sidetrack agreement. A sidetrack agreement is one between the owners of a premises and a railroad with respect to a railroad sidetrack (transfer or access track) on the premises of the insured. The railroad will allow use of the sidetrack as long as the property owner guarantees access by the railroad to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the railroad and property owner. To illustrate a sidetrack agreement, the insured is a distributor of large appliances. A railroad track passes next to the premises of the insured. The insured feels that sales could increase, expenses could be reduced and overall growth may occur if the railroad would build a sidetrack into the insured’s warehousing area to load and unload directly into the railroad car, saving shipping and trucking time. The railroad agrees to the arrangement on condition of 24-hour access to the sidetrack by the railroad and guarantees that the property owner will protect the track from vehicle damage, limit vehicle access and hold the railroad harmless for any collision or injury during loading and unloading. Railroad Sidetrack Agreements are covered contracts.
· Although the ISO CGL does not have an endorsement at the present time to make coverage available for items in the insured's care, custody or control, many insurers have developed their own version of this endorsement. However, inland marine insurance may be purchased for bailees’ coverage on the property of customers or clients of the insured. There are various forms of Bailees’ Coverages available through ISO-Insurance Services Office, AAIS—American Association of Insurance Services, or company specific forms, depending on the needs and operations of the insured.
2.k. Damage to Your Product—"Property damage" to the insured's product because of damage caused by the product or any part of it is not covered. For example, the insured manufactures gas furnaces. A furnace malfunctions and catches fire, destroying the furnace. There is no coverage for the furnace.
2.l. Damage to Your Work—"Property damage" to the insured's work or any part of it, that is also covered in the "products/completed operations hazard," is excluded. The exception to this exclusion is when that work has been performed on the insured's behalf by a subcontractor.
Example: Hectic Electric is the insured under a CGL. It repairs the electrical wiring in a customer’s building and the wiring is incorrectly done. There is no coverage under the CGL.
Example: Again Hectic Electric is the insured and they are installing new wiring at a client’s building. However, the top floor just requires some small repairs, so they subcontract the work to Minor Lectric. When a small fire results from a poor repair made by Minor, the damage is covered.
2.m.(1)(2) Damage to Impaired Property or Property not Physically Injured—“Property damage” to “impaired property” or property not physically damaged which is a result of either any defect, inadequacy or dangerous condition in the insured’s product or work; or has been caused by any delay or failure of the insured or anyone acting on the insured’s behalf in the performance of the terms of a contract or agreement, is not covered by the CGL. Wording is added to clarify that the exclusion does not apply if the loss of use of other property is the result of sudden or accidental injury to either the insured’s product or work, after it is being used as intended.
Two examples to help illustrate this exclusion follow.
Example: An insured makes on/off switches. A batch of defective switches was sold to other manufacturers to incorporate into their products. When installed, the other products would not turn on. The other manufacturers’ products were impaired as a result of the insured’s defective switches but are otherwise undamaged. This is an excluded loss and there is no coverage.
Example: Downtime Artwerk, the insured, agrees to have the graphics completed for a private art gallery brochure by a stated deadline. When the deadline arrives and the artwork is not complete, there is no physical injury to any property but the client loses potential income from being unable to distribute the brochure. This loss is not covered by the CGL.
There is currently no standard ISO endorsement available to buy back this coverage or delete this exclusion. For insurers and brokers that have access to coverage for a variety of difficult, unusual or specialty product situations, refer to the section for Products Liability in The Insurance Marketplace, published by The Rough Notes Company, Inc.
2.n.(1)(2)(3) Recall of Products, Work or Impaired Property—Damages for any loss, cost or expense, whether incurred by the insured or by others, because of loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the insured’s product, the insured’s work or “impaired property” is excluded when withdrawn, recalled, or removed because of a known or suspected defect, deficiency, inadequacy, or dangerous condition. Basically, if the insured knows or has reason to suspect that a product, work or property is defective or could cause injury or danger, there is no coverage for the expense and cost of the recall, repair or removal.
(07/98 changes: A new exclusion was added at this point for Personal
And Advertising Injury.)
2.o. Personal And Advertising Injury—There
is no coverage for any “bodily injury” that results from “personal and
advertising injury.”
Note: Under the CGL Coverage A Exclusions there is a clarification on exclusions c through n (c—Liquor Liability, d—Workers’ Compensation and Similar Laws, e—Employer’s Liability, f—Pollution, g—Aircraft, Auto or Watercraft, h—Mobile Equipment, i—War, j—Damage to Property, k—Damage to Your Product, l—Damage to Your Work, m—Damage to Impaired Property or Property not Physically Injured, n—Recall of Products, Work or Impaired Property). These exclusions do not apply to damage by fire to a premises which the insured is renting or temporarily occupying with permission of the owner. Under Section III referring to the Limits Of Insurance, a separate limit is provided for this coverage titled: Damage To Premises Rented To You.
(07/98 changes: A significant change occurred under the coverage for personal
and advertising injury liability. Previously, these two items were considered
two separate perils or causes of loss. Different insuring agreement sections
and exclusions applied. Now these items have been combined into one item. A
common definition for both was developed and is located in Section V—Definitions. Other relative amendments have
become necessary and will be clarified as the change is discussed.)
1.a.(1)(2) The insurer agrees to pay the sums for damages, up to the limits stated in Section III—Limits of Insurance, for covered offenses of “personal and advertising injury” that the insured is legally obligated to pay. The insurer has the right and duty to defend the insured for any “suit” for covered damages.
The insurer may at any time and at the insurer’s discretion, investigate, or settle any claim or “suit.” However, there is no duty for the insurer to defend against any “suit” that is not covered by this insurance.
The insurer’s obligation ends and the insurer’s right and duty to defend ends when the limit of insurance is spent in payments of either judgments or settlements under any of the three Coverage Sections A, B, or C.
The insurer does not have any other obligations to pay damages, perform acts or services, except those specifically detailed in the section on Supplementary Payments—Coverages A And B.
(07/98 changes: In item b of the insuring agreements, the exclusion for “personal and advertising injury” activities such as advertising, publishing, broadcasting or telecasting and advertising injury activities committed in the course of the insured’s advertising of products was removed at this point and will later be addressed in the exclusion section relating to this coverage.)
1.b.(1)(2)(3) “Personal and advertising injury” is covered for offenses resulting from the insured’s business operations.
The insurance applies only to those offenses that take place in the "coverage territory" and during the policy period for an occurrence policy or the proper timing of the notification of a claim for a claims-made policy.
For insurers and brokers that have access to coverage for a variety of difficult, unusual or specialty “personal and advertising injury” situations, refer to the section for Professional Liability in The Insurance Marketplace, published by The Rough Notes Company, Inc.
1.c. A claim will be considered to have been made at the earliest of one of the following two times:
(1) when the notice of claim has first been received and recorded by either the insured or insurer—whichever receives the notice first;
(2) when a settlement is made by the insurer in accordance with provisions already explained in item 1 above.
All of the “personal and advertising injury” claims that are received from the same person or organization and which are the result of the same offense, are considered to have been made at the time the first of the claims was made against an insured. So if a personal and advertising injury offense is committed by an insured against another entity, all of the claims submitted by that entity relative to the offense are considered to have been first made against the insured, the date that the first of those claims was received, irrespective of when the remainder was submitted.
There is no coverage for the following:
2.a. “Personal and Advertising Injury”—
(07/98 changes: Item number one was a new
exclusion under the personal and advertising injury coverage section pertaining
to the violation of the rights of another. All of the remaining exclusions have
been renumbered accordingly.)
(1) caused by or at the direction of the insured in which the insured had knowledge that the act would violate the rights of another and thus, inflict “personal and advertising injury.” An insured’s reporter has been following a famous athlete for a story. The athlete obtains a restraining order, but the insured instructs the reporter to go after the athlete for the story in spite of the restraining order. When the athlete sues, there is no coverage.
(2) caused by or at the direction of the insured when the insured knew that the information was false. An example would be a newspaper article that the insured published which stated the son of a famous politician was arrested for drunk driving when, in fact, the insured had knowledge that the son was merely stopped by a police officer but not ticketed or cited. No coverage would exist.
(3) offenses of either oral or written publications, whose first publication took place prior to the beginning of the policy period. An incorrect story was first published on December 20 but the policy did not go into effect until January 1. No coverage exists under this policy.
(07/98 changes: The previous exclusion
relating to the willful violation of a penal statute or ordinance was
eliminated and replaced with the following exclusion that relates to any
criminal act in general.)
(4) offenses arising from any criminal act committed by or at the direction of an insured. An insured’s reporter has been trying to obtain details of an incident for a story. The insured instructs the reporter to break into a building and make copies of confidential files which contain the desired details. When the insured is sued, there is no coverage.
(5) offenses or damages the insured has assumed via contract or agreement are excluded, unless the insured would have had that liability regardless of the contract or agreement.
An example would be a celebrity who agrees to an interview for publication by the insured but insists on a written agreement in which the insured promises not to slander or libel the celebrity. This liability would have existed whether or not there was a contract or agreement.
(07/98 changes: Exclusions 6, 7, 8 and 9
were revised to be applicable with the new combined definition of personal and
advertising injury liability. They were also moved from a different coverage
section to create a more logical sequence.)
(6) any breach of contract—other than an implied contact to use the advertising ideas of another in the insured’s advertisement.
Example: An insured is contracted to design, print and mail a promotional brochure for a client’s business. The project was date sensitive. The insured dropped the ball and missed the mailing date by several days. The client sued for breach of contract. There would be no coverage.
(7) offenses that result from failure of goods, products or services to comply with the advertised quality or performance.
Example: A customer of FlabFlite Diet Warehouse sues when their advertised FlabFlite Wafers guarantee weight loss of at least 10 pounds and the customer ends up gaining weight. The CGL’s insurance coverage would not apply.
(8) damages as a result of the incorrect description in an advertisement of the price of goods, products or services.
Example: PurpleShoppe Grocery Stores sues a ShopperRag Weekly when they lost revenue as a result of the newspaper misprinting several sales prices in PurpleShoppe’s advertisement. No coverage exists for this loss.
(9) offenses committed by insureds whose business operations are advertising, broadcasting, publishing or telecasting. An exception to the exclusion exists. Even if the insured business is one of the excluded operations, injury arising out of several offenses found within the definition of personal and advertising injury liability is not excluded. The excepted offenses—which are thus covered—are: false arrest; detention or imprisonment; malicious prosecution; and wrongful eviction from, entry into, or invasion of the right of private occupancy of a room, dwelling, or premises committed by or on behalf of its owner, landlord, or lessor.
Example: When a publishing firm, which also rents one floor of its building as an apartment, is alleged to have committed an offense of wrongful eviction, there would be coverage.
(10) any injury arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants.
2.b.(1)(2) Not covered are any loss, cost, or expense arising from any request, demand, or order to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond to, or assess the effect of pollutants. Also not covered is any claim or “suit” that is brought by or on behalf of a governmental authority—whether local, state, or federal—for such items.
Because of the wording of the personal injury liability coverage contained in previous versions of the CGL, attempts have been made to force coverage for various types of pollution losses by asserting that the loss was due to trespass, wrongful entry, or invasion of the right of private occupancy. It was never the intent of the personal or advertising injury coverage to protect against either pollution damages or cleanup costs. Wording in the ’99 CGL clarifies that no coverage exists for any pollution exposure that may arise out of personal and advertising injury wording.
1. Under this coverage provision, the insurer obligates itself to pay the reasonable medical expenses, regardless of fault, for “bodily injury” caused by an accident, as long as the specified limit per person is not exceeded. Neither negligence nor liability has any relationship to this coverage and none need be proved.
(a).(1)(2)(3) The accident must have occurred on premises the insured owns or rents; or on ways next to those premises; or as a result of the insured’s operation. Medical expenses to a passerby when a masonry contractor accidentally drops a brick from the second floor of a building under construction are covered.
(1) In addition, the accident must take place in the “coverage territory,” and during the policy period.
Note: Medical payments coverage applies only to premises exposures, as clarified in the following exclusions. Any medical expense as a result of injury from the insured’s product or work is covered under the “products/completed operations hazards.”
(2)(3) Only those expenses that have occurred and have been reported to the insurer within one year of the accident are eligible for coverage. After a year, coverage would be considered under Coverage A for “bodily injury” and liability would have to be determined. In addition, the injured person must be willing to submit to however many medical examinations required by the insurer. Any exams must involve a physician chosen by the insurer. However, the insurer must pay for all exam costs.
(b).(1)(2)(3) Medical expenses include first aid administered at the time of the accident, necessary medical, surgical, x-ray and dental services, including prosthetic (artificial arms, legs, hands, etc.) devices and ambulance, hospital, professional nursing, and funeral services.
“Bodily injury” expenses for the following are not covered:
(a) to any insured. One of the partners in the partnership named as the first insured slips and falls on ice on the front steps of the building and needs x-rays to determine if anything is broken. This is not covered under medical payments.
(b) to any “employee” or person hired to work for or on behalf of the insured or a tenant of the insured. The painter hired by the insured to paint the building and the rental dwelling is not covered under medical payments, when the painter falls from a ladder and breaks a wrist.
(c) to any person injured in the part of the premises that person normally occupies. The tenant of the insured falls down the stairs in the tenant’s own apartment and is injured. Medical payments do not apply.
(d) to any person otherwise covered under a workers compensation or disability benefits law or a similar type law. When a small fire burns the hand of an “employee” while on the job, coverage under medical payments does not apply.
(e) to any person while taking part in athletics. The insured sponsors a little league team where one child breaks a leg sliding into home plate. The medical payments coverage does not apply.
(f) to any loss or injury otherwise covered under the “products/completed operations hazard.” The appliance manufactured by the insured catches fire from faulty wiring and burns a consumer’s fingers. Coverage under the medical payments is not available.
(g) to any loss or injury excluded under Coverage A. An “employee” of the insured becomes angry at a customer and hits the customer in the nose, breaking the nose. Coverage does not apply under medical payments.
(h) to any loss or injury due to war whether declared or undeclared, any act or condition incident to war including civil war, insurrection, rebellion, or revolution.
Endorsements are available to either exclude the medical payments coverage entirely, or to delete the exposure for certain operations and exposures. Form CG 21 35 is the exclusion to delete Coverage C—Medical Payments entirely. Form CG 22 52 is available to exclude medical payments for inmates, patients or prisoners. Form CG 22 40 is available to exclude medical payments for day-care centers. Form CG 22 59 is available to exclude medical payment for members of horseback riding clubs.
(07/98 changes: One minor editorial change was made to the Supplementary
Payments Coverage. The numbering scheme was amended to a combination of letters
and numbers. No other change was made to the wording or coverage provided.)
Seven supplementary payments are provided in addition to the limits stated in Section III—Limits of Insurance. These extra coverages apply to any claim the insurer investigates or settles, or to any “suit” against an insured that the insurer defends.
1. They are as follows:
(a.) All expenses the insurer incurs; this item clarifies that the limit of insurance is not reduced by the insurer’s expenses.
(b.) If a bail bond is required because of accidents or traffic law violations based on the use of any vehicle covered by bodily injury liability coverage, up to $250 is available for the cost of such bond. Special notation is made to clarify that the insurer is not responsible for furnishing those bonds.
(c.) Cost of bonds needed to release attachments is provided for, if the amount of the bond is within the applicable policy limit. Again, clarification is made that the insurer is not responsible for providing the bonds.
(d.) If
the insurer requests the insured to participate in any investigation or
defense, reasonable expenses are provided for the insured. This includes any
actual loss of earnings, up to $250 a day, if the insured must take time off
work.
(e.) All costs taxed against the insured in the “suit.” In cases where the court assesses the costs and expense of the trial against the negligent party, this supplementary payment can provide some extensive benefits over and above the policy limits.
(f.) Insurer will pay prejudgment interest awarded against the insured for the part of the judgment the insurer pays. However, if the insurer offers to pay the limit of insurance, no prejudgment interest based on the period of time after the offer is made, will be paid.
(g.) Interest on the amount of the judgment that has accrued after the judgment has been entered but before the insurer has paid the judgment or the policy limits, is covered in full.
2.) Should the insurer defend the insured in a “suit” and an indemnitee of the insured is also named as a party to the same “suit,” then the insurer will also defend that indemnitee as long as all of the following conditions are met:
(a.) the “suit” must be for damages that the insured has agreed to assume liability for in a contract or agreement and that contract or agreement must also meet the definition of “insured contract”;
(b.) the liability assumed must be covered by this insurance;
(c.) the same “insured contract” must specify that the insured has also assumed the defense or cost of defense;
(d.) based on the details of the “suit” and the available information, there must be no known conflict between the interests of the insured and the interests of the indemnitee;
(e.) both the insured and the indemnitee must agree and ask the insurer to conduct and control the defense of both parties and the insurer has the right to assign the same counsel to defend both the insured and the indemnitee;
(f.)(1)(2) the indemnitee has to agree in writing to cooperate with the insurer in the investigation, settlement, or defense of the “suit”; to immediately send the insurer copies of any demands, notices, summonses, or legal papers that may be received in connection with the “suit”; notify any other insurer that may provide coverage to the indemnitee; and cooperate with the insurer in coordinating other applicable insurance available to the indemnitee. The indemnitee must also provide the insurer with written authorization to obtain records and other information related to the “suit” and to such authorization, must allow the insurer to conduct and control the defense of the indemnitee in the “suit.”
When all of the above conditions have been met, the insurer will cover attorney fees and necessary litigation expenses incurred by the insurer in the defense of the indemnitee or incurred by the indemnitee at the insurer’s request. They will be paid as supplementary payments, not as “bodily injury” or “property damage,” so the limits of insurance will not be reduced.
The insurer’s obligation to defend the indemnitee ends when the applicable limit of insurance has been used up in the payment of judgments or settlements or when the conditions and agreements above are no longer met.
1. If the declarations designate the insured to be:
(a) an individual, then the insured and spouse are insureds, for the conduct of any business of which the insured is sole owner;
Example: Mr. John is a sole proprietorship selling farm produce. In this instance, both Mr. and Mrs. John are insureds. Also, Mr. John has an additional sole proprietorship where, as an individual, he makes wood kitchen cabinets. Again, both Mr. and Mrs. John are insureds. However, in the carpentry business he owns as a partnership with his brother, no coverage exists under this policy for either he or Mrs. John. The partnership is not a covered entity.
(b) a partnership or joint venture, then the insured, members, partners, and their spouses are all insureds but only with respect to the conduct of the business of the insured;
Example: In this case Mr. John and Mr. Joe are partners in a carpentry business, both partners and their spouses are covered for their carpentry operations; however, no coverage is provided for the sole proprietorships nor any other partnership.
(c) a limited liability company, then the insured and the members and managers are covered but only with respect to conduct of the insured business;
A limited liability company is a hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand, have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals.
(d) if the insured is any organization other than a partnership, joint venture, or limited liability company, then the insured, “executive officers” and directors of the insured are all considered insureds, but only with respect to their duties as officers and directors of the insured. Stockholders of the insured are also insured but only with respect to their liability as stockholders. Outside interests, operations, and exposures of the “executive officers,” directors, or stockholders are not covered.
2.a.(1)(a)(b)(c) Also considered to be insureds are “employees” of the insured, (except “executive officers” of partnerships, joint ventures or limited liability companies and managers of limited liability companies), but only for acts while performing the duties of and in the scope of their employment to the insured. Excluded is any “bodily injury” or “personal and advertising injury” an “employee” causes to the insured, partner or member of the insured, or to a co-”employee”. Also excluded are any damages to any spouse, child, parent, brother, or sister of a co-”employee” because of injury caused by the “employee” to the co-”employee.” Both of the “employee”—co-”employee” exclusions apply, even if the insured is required to share damages with someone else or to reimburse another party for damages the other party may have paid.
The above exclusions regarding injuries caused by one “employee” to another or to the insured, partners, owners, and so forth, have become very relevant. In light of the increased incidents of worksite shootings and other acts of violence, the content of this exclusion is important. Should this type of incident occur, coverage is not provided by this insurance either to the injured person or to the spouse or family of the injured person who may suffer financial or emotional injury from the incident.
2.a.(1)(d) “Employees” are not insured with respect to their rendering or failing to render professional health care services. This clarification is intended to show that all medical professional liability exposure of either the insured or “employees” of the insured is not covered by this insurance.
2.a.(2)(a)(b) Other cases where the “employee” is not considered an insured is for “property damage” to any property that is owned, occupied, used by, rented to, in the care, custody or control of, or over which there is physical control by the insured, “employees” of the insured, or any partners or members of the insured.
Three other circumstances exist where other entities are considered to be insureds. These are:
2.b. any party (excluding “employees”), while acting as a real estate manager of the insured;
2.c.(1)(2) should the insured die, any party with proper temporary custody of the property of the insured for liability from the maintenance or use of the property and until a legal representative has been appointed;
2.d. at the death of the insured, the legal representative of the insured, but only with respect to the duties of the insured.
These clarifications were made in order to provide comprehensive coverage to the insured for exposures that are common to any business operation and which can be expected in a commercial venture.
3. When “mobile equipment” is registered to the insured under any motor vehicle registration law, the definition of insured includes any person driving that equipment on a public highway. Naturally the operation must occur with the insured’s permission.
Example: An employee of Krystul Kleer Windows has an accident as he takes a vehicle modified with a scissors-boom on the short public roadway between Krystul’s two offices. This would be covered.
Example: As a prank, a couple of inebriated city college students “hot wire” the same equipment mentioned in the previous example and collides with a pick-up truck on the same public roadway. This would not be covered by the CGL.
Also included as an insured is any other party that has responsibility for the conduct of the driver, but only with respect to liability for the operation of the equipment, and if no other insurance is available.
3.a.b. Excluded is any “bodily injury” to a co-”employee” of the driver of the equipment nor is there coverage for any “property damage” to property owned, rented, in the charge of, or occupied by the insured or the employer of those persons insured. This exclusion provides consistency with other exclusions in other sections and clarifies that circumstances of injury to fellow “employees” are excluded under this insurance. Also to provide consistency and clarification is the exclusion regarding damage to property of the insured or property in the insured’s care, custody or control, by either the insured or others working on the insured’s behalf.
4.a.b.c. If the insured forms or acquires a new organization, other than a partnership, joint venture or limited liability company, and as long as the insured has ownership and majority interest, that new organization is considered a named insured. However, this coverage applies only as long as no other insurance is available. In addition, this coverage only provides a temporary remedy. The coverage is available only to the 90th day after formation or acquisition or the end of the policy, whichever is earlier. No coverage applies to any injury, damage, offense or loss that occurred prior to the acquisition or formation of the organization.
The 90-day limitation is important. It is designed to provide the insured with temporary protection by amending the named insured to include the new organization. It gives the insured time to contact the insurer to add or amend the named insured or purchase specific coverage for that organization. On the other hand, some degree of protection is provided the insurer, because the coverage is temporary and the insured must make the insurer aware of the new organization and the additional exposures involved. The insurer then can decide whether to knowingly continue coverage for the new exposures.
Not included for coverage under this insurance is any current or past person, organization, partnership, joint venture, or limited liability company that has not been shown as a named insured in the declarations.
In addition to the above definitions of insured, the CGL policy has available over 25 endorsements to add as additional insureds, a variety of entities for a variety of circumstances.
1.a.b.c. The most the insurer is obligated to pay are the limits of insurance shown in the declarations, no matter how many insureds are covered, or how many claims are made or “suits” are brought, or how many persons or organizations make claims or bring “suits.” An illustration may clarify the intent. In a case where the named insured shows two parties, and a loss occurs where each of the two parties are named separately in “suits” by the injured person, the policy will respond; however, the limits do not apply separately to each named insured, but only once for both.
2.a.b.c. The general aggregate limit is the most the policy will pay for the total accumulation of all losses for Coverages A (bodily injury and property damage), B (personal and advertising liability), and C (medical payments), within the specified policy period. The general aggregate limit does not include “products/completed operations hazard,” which has its own separate aggregate limit. When this limit is exhausted by payment of claims, during a policy period, coverage ceases (again, except those claims that are covered by the “products/completed operations hazards”).
Example: A CGL with a general aggregate of $2,000,000 has a Coverage A premises loss of $1,000,000, two “personal and advertising injury” losses of $1,000,000 each for a total of $3,000,000. All were within a single policy period and all would have otherwise been covered, but the most that the policy would respond to is the general aggregate of $2,000,000.
3. The products/completed operations aggregate limit is the maximum the policy will respond to within that policy period for the total of all “products/completed operations hazard” occurrences. When this limit is exhausted by payment of claims, during a policy period, coverage ceases for “products/completed operations hazards.”
Example: A CGL with a $3,000,000 products/completed operations aggregate experiences a year with eight products claims for eight different injuries to customers from the use of their products. All occurrences were within the policy period and all would have been otherwise covered, but the total of all eight claims is $4,000,000. This policy would only respond to a maximum of $3,000,000.
4. The “personal and advertising injury” limit is the most the policy will respond to for the covered occurrence of that specified type of loss, subject to the general aggregate limit.
Example: A CGL with a “personal and advertising injury” limit of $1,000,000 and an each occurrence limit of $2,000,000. A covered “personal and advertising injury” loss of $2,000,000 occurs. The policy would only pay the $1,000,000 “personal and advertising injury” loss limit.
5.a.b. Each occurrence limit is the maximum the policy will pay for any one occurrence of an event, regardless of the number of claims that result from that occurrence.
Example: A CGL with an each occurrence limit of $1,000,000. The insured is a manufacturer that experienced an explosion while a tour group was on the premises, resulting in bodily injury to a number of the tourists. The total number of claims is 25 and the total value of all claims submitted is $5,000,000. The policy would only provide $1,000,000 resulting from that occurrence, subject to the general aggregate limit. The insured would have to respond to the remaining $4,000,000 in some other fashion.
(07/98 changes: The explanation of the application of the Fire Damage
Limit was rewritten to make it applicable to Damage To Premises Rented To You
coverage.)
6. The Damage To Premises Rented To You Limit is the most the insurer will pay under Coverage A for all covered “property damage” losses to any one premises while rented to an insured or from any one fire to premises rented to or temporarily occupied by the insured with permission of the owner. The Damage To Premises Rented To You Limit payments are subject to the each occurrence limit.
Example: A CGL has a Damage To Premises Rented To You Limit of $50,000 and a loss occurs while the insured is renting a premises where the operations of the insured cause a fire that burns down the building for a total loss of $250,000, the Damage To Premises Rented To You Limit will only pay the $50,000 limit. Further, if several persons are injured in the loss—each submitting substantial claims—the total of all claims for that occurrence including the $50,000 damage from fire, are covered by the insurance only up to the each occurrence limit shown in the declarations.
The limit of coverage for Damage To Premises Rented To You can be increased not only for specific locations and increased limits, but also for additional causes of loss via endorsement under the property coverage, CP 00 40—Legal Liability Coverage Form.
7. The medical expense limit is the maximum amount that would be paid for each person, and is subject to the general aggregate limit.
Example: A CGL policy has a $5,000 medical expense limit per person, and a general aggregate limit of $1,000,000. The policy had responded previously to two previous losses totaling $900,000. In the case of the manufacturer above who had injury to 25 tourists, the most medical expenses that would be paid for any one tourist is $5,000 and the total general aggregate remaining is $100,000; so if, after capping the most for any one tourist at $5,000, only $100,000 of the $125,000 would be paid by the policy.
The CGL policy limits apply separately to each 12-month policy period, starting at the inception of the policy. If there is any remaining period of less than 12 months, the limits apply separately to that period also, unless the policy was extended for that period. In the latter case, the extended period is part of the preceding policy period for purposes of application of the limits.
Example: The insured starts with a policy that was originally issued with January 1 to December 31 inception and expiration dates. In the second policy period, the insured requests the policy expiration be extended from December 31 to June 30 so, when it renews on July 1, it will match the insured’s accounting year. The policy limits apply separately to the first annual 12-month policy period of January 1 to December 31. They also apply separately to the second policy period which has been extended and is now 18 months long, from January 1, extended past the following January 1 to June 30. From that point, the annual 12-month periods of July 1 to June 30 will each have their own separate application of policy limits.
Two endorsements are available to amend the limits of insurance:
· Amendment—Aggregate Limits of Insurance (Per Location)—CG 25 04 and
· Amendment—Aggregate Limits of Insurance (Per Project)—CG 25 03.
Either of these will modify the definition of the general aggregate to an annual location aggregate or an annual project aggregate.
1. Bankruptcy
Even if the insured or the estate of the insured becomes bankrupt or insolvent, the insurer is still obligated under this coverage part and not relieved of any responsibilities.
2. Duties in the Event of Occurrence, Offense, Claim, or Suit
2.a. The insured must notify the insurer as soon as practicable of any “occurrence” or offense that may result in a claim. As much as possible, that notice should include:
(1) how, when and where the “occurrence” or offense took place;
(2) the names and addresses of both the injured persons and any potential witnesses;
(3) the nature and location of any injury or damage resulting from the “occurrence” or offense.
2.b. When a claim or “suit” is brought against any insured, the insured must:
(1) immediately record the specifics of the claim or “suit” as well as the date received;
(2) notify the insurer as soon as practicable.
The insured is obligated to make sure the insurer has written notice of the claim or “suit” as soon as practicable.
The term practicable is not defined in the policy. This particular term is used to allow the insured a reasonable amount of time to accomplish the conditions of the policy; however, the lack of clarity can result in disputes. It is to the insured’s advantage to use urgency in notification to the insurer and compliance with the conditions of the coverage forms. However, policy drafters may have chosen practicable as a synonym for practical and this is not the case. Practicable is typically defined as whether one is capable of taking an action or if some action is feasible. This is a definition that would allow an insured to take far more latitude than what is intended under a policy.
Example: Kostlee Katering is in the midst of the summer wedding season and it has dozens of jobs. A client sends them a notice of lawsuit because they, at the last moment, cancelled a scheduled wedding reception, creating thousands of expenses to the wedding couple. Kostlee’s owner decides that it is more important to get his current jobs done, so he doesn’t make copies and send them into his insurer until the end of August. By the time the insurer makes contact with the upset former clients, they are unwilling to discuss a settlement. While the insurer expected to be notified as soon as Kostlee’s owner could get to a phone or mailbox, in the insured’s view, he did give notice as soon as, in his mind, it was practicable.
2.c. All involved insureds must:
(1) send immediately to the insurer, copies of any demands, notices, summonses, or legal papers received in connection with any claim or “suit”;
(2) give authorization to the insurer to obtain records and other information;
(3) cooperate with the insurer in the investigation or settlement of the claim or defense against a “suit”;
(4) at the insurer’s request, assist in the enforcement of any right against any party which may be liable to the insured because of injury or damage that this insurance also applies to.
Basically, it is the insured’s duty and obligation to assist in every way possible to notify, authorize, cooperate, and protect the rights of the insurer in defending and settling all claims and “suits.”
2.d. Insureds are not authorized to make any voluntary payment, assume any obligation or incur any expense, other than first aid, without the insurer’s consent. To do so without consent may be to do so at the insured’s own expense. The insured must not jeopardize or compromise the position of the insurer in any way.
3.a.b.
Legal Action Against Insurer
No party has the right under this coverage part to either join the insurer as a party or bring the insurer into any “suit” for damages from an insured; or to sue the insurer unless all of its terms have been fully complied with.
The insurer may be sued by a party to recover an agreed settlement or final judgment against an insured that was obtained in an actual trial, but the insurer is not liable for damages that are not covered by the terms of this coverage part or that part which exceeds the applicable limit of insurance. An agreed settlement is defined as a settlement and release of liability signed by the insurer, the insured, and the claimant or legal representative of the claimant.
4. Other Insurance
If other insurance applies and is both valid and collectible for a covered loss under Coverages A and B, the obligations of the insurer are limited.
4.a. Primary Insurance
The insurance under this policy is primary except for those circumstances noted in excess insurance. When more than one applicable insurance is primary, see below for a description of the method of sharing.
4.b.
Excess Insurance
(07/98 changes: The sequence and numbering/lettering scheme of this item was re-ordered. Further, the applicability of coverage for premises where the insured is a tenant or which the insured rents was clarified.)
(1) This insurance is excess over any other insurance, regardless of whether that insurance is considered primary, excess, contingent, or on any other basis that is for fire, extended coverage, builder’s risk, installation risk or similar type of coverage for work performed by the insured; or if the other insurance is fire insurance for premises rented to the insured or temporarily occupied by the insured with permission of the owner.
When the insured is using this insurance to cover the insured’s property damage liability to the premises where the insured is a tenant or renter (with the permission of the owner), this policy is excess.
If the loss results from the maintenance or use of aircraft, “autos,” or watercraft and is not otherwise excluded in Coverage A, the coverage provided in this insurance is excess.
(07/98 changes: Item two was added to
explain how this insurance works if the insured is added as an additional
insured to another premises or operation.)
(2) If there is any other primary insurance available to an insured that will provide coverage for liability for damages arising out of a premises or operation for which the insured has been covered by an additional insured endorsement, this policy will be excess.
The insurer has no duty to defend the insured under Coverages A and B. If insurance is excess, this is the duty of the primary insurer. However, if no other insurer defends, this insurer will do so but is also entitled to the insured’s rights against the other insurer(s). In other words, if this insurance is excess but the primary insurer does not defend, this insurer retains the right to proceed against the primary insurer for the costs and expenses of defense and settlement.
When this insurance is excess, this insurer is only obligated to pay their share that exceeds the amount the other insurance would or should have paid if this insurance had never existed; this would be the excess over all deductibles and self-insurance amounts under all other insurance.
Example: An insured has a CGL on their contracting operation and a separate inland marine policy providing builder’s risk coverage on a commercial building under construction. These policies are with two different insurers. When the project originally began, the builder’s risk was for $500,000, which was adequate at the time. However, due to increased construction costs and modifications requested by the client, the value of the actual structure is now $750,000 and still not complete. Through the insured’s negligence, a covered loss occurs and the partially completed building is totally destroyed. The builder’s risk policy is primary and should pay the full limit provided under that policy or $500,000. The CGL will be excess over the builder’s risk and will only respond to the amount that exceeds the primary builder’s risk or the remaining $250,000.
Any losses not described in this provision as excess insurance, and which were not bought specifically as excess insurance, will be shared.
4.c.
Method of Sharing
Equal Shares—if all insurers agree, contribution will be by equal shares. Each insurer contributes equal amounts until each has paid their applicable limit of insurance or the loss is paid.
Example: An insured has three separate CGL policies, all in the same name. When a loss occurs in which the insured is liable for damages, all three respond. Policy A has an each occurrence limit of $50,000, Policy B has an each occurrence limit of $100,000, and Policy C has an each occurrence limit of $1,000,000. The total amount that the insured is judged liable for is $500,000.
In equal shares, each of the three policies contributes $50,000 for a total contribution of $150,000 of the $500,000. Policy A limits are now exhausted and no further coverage exists. Policy B and C each contribute an additional $50,000 making the total contribution now $250,000 and exhausting the coverage provided by Policy B. The remaining $250,000 is covered by Policy C to make the total of $500,000 in damages. No one policy pays more than its each occurrence limit.
Contribution by Limits—if equal shares are not agreed to, contribution will be proportionally by limits. Ratios will be determined based on each insurer’s percent of limits to the total limits applicable. The loss will be proportioned among the insurers accordingly.
Example: Using the same example as shown above, Policy A has an each occurrence limit of $50,000, Policy B has an each occurrence limit of $100,000, and Policy C has an each occurrence limit of $1,000,000. The total of all limits available to pay claims is $1,150,000. Company A has 50,000/1,150,000 of the obligation or roughly 4%. Company B has 100,000/1,150,000 of the obligation or about 9%. The remaining 87% is attributed to Company C with 1,000,000/1,150,000. The total amount that the insured is judged liable for is $500,000. So Company A pays $20,000, Company B pays $45,000, and Company C pays the remaining $435,000.
5. Premium Audit
5.a. It first clarifies that the premiums for this insurance have been calculated in accordance with the insurer’s rules and rates.
5.b. It also states that the premium shown is an advance or deposit premium only. At the end of each audit period, the insurer will calculate the actual earned premium for that period and bill the first named insured for any earned premium that exceeds the deposit premium. If the sum of all earned premium is less than the deposit, then the excess is returned to the first named insured. All notices are sent to the first named insured who is responsible for any payments.
5.c. In addition, it is the responsibility of the first named insured to keep records of all information needed to calculate the earned premium and provide this information at the request of the insurer.
Audit periods are not always annual. They may be monthly, quarterly or semi-annually, in addition to annual.
Example: Jim Shortkash buys a CGL and his insurer charges a deposit premium at the policy’s inception for the estimated annual premium. At the end of each month an audit is done to determine that month’s exposure. The actual earned premium is deducted from the deposit premium each month. A notice or statement is sent to Jim showing that month’s figures and calculations. When the actual earned premium exceeds the deposit, the notice contains a bill for the amount over the deposit and it is Jim’s obligation to pay the additional premium.
6. Representations
6.a. b. c. This condition clarifies that when the insured accepts the policy issued by the insurer, the insured agrees that the statements made in the declarations are both accurate and complete; and that those statements are based on the representations the insured has made to the insurer; that the insurer relied upon those representations when issuing the policy.
7. Separation of Insureds
7.a. b. Other than the Limits of Insurance or any rights and duties that have been provided only to the first named insured, insurance applies to each named insured as if it were the only named insured; and separately to each insured that a claim or “suit” is brought against.
8. Transfer of Rights of Recovery Against Others to Us
Once the insurer has made payments under this insurance, any rights the insured has to partially or fully recover that payment are transferred to the insurer. The insured must not jeopardize or in any way impair those rights. In addition, the insured must bring “suit”; transfer those rights; or assist in enforcing them, if the insurer so requests.
Example: An insured property owner is found liable for a negligent act from a condition of the premises. The insurer paid the claim to the injured party. It was determined in the course of the investigation that the prior owner of the property caused or contributed to the condition, but the prior owner had not been named in the “suit” by the injured party. The insured now has the right to take action against the prior owner to recover the damages. However, since it was the insurer who actually paid, those rights to recover damages are transferred to the insurer under this policy condition. The insured must cooperate and assist the insurer in any way possible during the recovery of those damages.
9. When We Do Not Renew
Should the insurer decide not to renew this insurance, the insurer will mail or deliver to the first named insured, written notice of the nonrenewal, not less than 30 days before the expiration date. In those cases where the notice is mailed, proof of mailing will be sufficient proof of notice.
This paragraph is modified in many states, by state specific requirements as to the amount of time that must be given and what is considered acceptable proof of mailing, as well as what are considered valid reasons for termination or nonrenewal of coverage. Care must be taken in evaluating the state specific amendments and changes that will modify this condition.
Each word or phrase shown in quotation marks within the policy is defined in the policy under this section. Below is a list of the defined words or phrases in alphabetical order. Twenty-one words or phrases are so defined.
(07/98 changes: The definition of Advertising Injury and Personal
Injury found in earlier editions of the CGL was deleted and new definitions for
Advertisement, Hostile Fire, Personal and Advertising Injury and Pollutants
were added. The numbering sequence was re-ordered to accommodate the change.)
1. "Advertisement" is a notice that is broadcast or published to the general public or to a specific market segment about the goods, products or services of the insured for the purpose of attracting customers or supporters.
2. “Auto” is a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment, but this definition does not include vehicles otherwise defined as “mobile equipment.”
3. “Bodily injury” is bodily injury, sickness or disease, including death from any of these, experienced by a person.
4. “Coverage territory”
(a) the United States of America, its territories and possessions, Puerto Rico and Canada;
(b) international waters or airspace except when in the course of travel or transportation, other than transportation to and from places listed above;
(c) (1)(a)(b)(2) worldwide when the injury or damage results from goods or products made or sold by the insured in a territory described above; or if the injury or damage results from activities of a person whose home is in the territory described above, but is away for a short time on business of the insured. Worldwide coverage also exists if the insured’s responsibility to pay damage is determined in a “suit” on the merits that takes place in the territory described above or in a settlement the insurer agrees to.
5. “Employee” includes a “leased worker,” but does not include a “temporary worker.”
6. “Executive officer” is a position of officer of the insured, created by the insured’s by-laws, charter or similar document.
7. "Hostile fire" is a fire which becomes uncontrollable or breaks out from where it was intended to be.
8. “Impaired property’ is tangible property, excluding any product or work of the insured that has lost full or partial use because:
(a) it contains a product or work of the insured that is either known or thought to be defective, deficient, inadequate or dangerous and if that property can be restored by repair, replacement, adjustment, or removal of the product or work of the insured; or if
(b) the insured has failed to fulfill the terms of a contract or agreement and the property can be restored by the insured fulfilling the terms of that contract or agreement.
9. “Insured contract” is:
(a) a contract for a lease of premises, except for that part of any contract that agrees to indemnify for fire damage to any premises that is leased, rented or temporarily occupied by the insured;
(b) a sidetrack agreement;
A sidetrack agreement is one between the owners of a premises and a railroad with respect to a railroad sidetrack (transfer or access track) on the premises of the insured. The railroad will allow use of the sidetrack as long as the property owner guarantees access by the railroad to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the railroad and property owner.
Example: The insured is a distributor of large appliances. A railroad track passes next to the premises of the insured. The insured feels that sales could increase, expenses could be reduced and overall growth may occur if the railroad would build a sidetrack into the insured’s warehousing area to load and unload directly into the railroad car, saving shipping and trucking time. The railroad agrees to the arrangement on condition of 24-hour access to the sidetrack by the railroad and guarantees that the property owner will protect the track from vehicle damage, limit vehicle access and hold the railroad harmless for any collision or injury during loading and unloading. Railroad Sidetrack Agreements are covered contracts.
(c) an easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;
(d) any obligation required by ordinance to indemnify a municipality, except when in connection with work for a municipality;
(e) an elevator maintenance agreement;
(f) that part of any contract or agreement relating to the insured’s business (including an indemnification contract with a municipality for work performed for that municipality), in which the insured assumes the tort
liability of another party to pay for “bodily injury” or “property damage” to a third party. Tort liability is the liability imposed by law, with or without a contract or agreement.
(f)(1) However, excluded is any part of any contract or agreement that indemnifies a railroad for losses that result from construction or demolition within 50 feet of any railroad property, or that affects any railroad bridge, trestle, track, road-bed, tunnel, underpass, or crossing.
(f)(2)(a)(b) Also excluded is any part of any contract that indemnifies an architect, engineer or surveyor for losses resulting from preparing, approving or failure to prepare or approve maps, shop drawings, opinions, reports, surveys, field orders, change orders, or drawings and specifications; or for giving or failing to give directions or instructions, if that is the main cause of injury or damage.
(f)(3) If the insured is an engineer, architect or surveyor, then also excluded is any loss from liability the insured has assumed for the insured’s rendering or failure to render the professional services discussed above, as well as the additional services of supervisory, inspection, architectural, or activities.
10. “Leased worker” is any person leased to the insured by agreement with a labor-leasing firm in which the person will perform the duties relating to the conduct of the insured’s business. This does not include any “temporary workers.”
11. “Loading or unloading”
(a) once accepted, it is the handling or movement of property onto or into any aircraft, watercraft, or “auto”;
(b) while on or in any aircraft, watercraft or “auto”;
(c) until delivered, it is the handling or movement of property off of or from any aircraft, watercraft or “auto”;
however, excluded is the movement of property by mechanical devices other than a hand truck or those attached to the aircraft, watercraft or “auto.”
12. “Mobile equipment” is any of the following types of land vehicles including attached machinery or equipment:
(a) bulldozers, farm machinery, forklifts, and other vehicles designed for off-road use;
(b) vehicles solely for use on or next to the premises owned or rented by the insured;
(c) vehicles that travel on crawler treads;
(d)(1)(2) vehicles used to provide mobility for permanently mounted power cranes, shovels, loaders, diggers, drills, road construction, or resurfacing equipment such as graders, scrapers or rollers, whether or not the vehicle is self-propelled;
(e)(1)(2) vehicles not previously described and not self-propelled and used to provide mobility for the following permanently attached equipment: cherry pickers or similar devices used to raise or lower workers or equipment such as air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting, and well servicing equipment;
(f)(1)(a)(b)(c)(2)(3) vehicles not previously described and used for purposes other than transporting persons or cargo. Self-propelled vehicles with the following permanently attached equipment, however, will be considered as “autos”: equipment designed for snow removal, road maintenance (but not construction or resurfacing), street cleaning, cherry pickers or similar devices mounted on automobile or truck chassis and used to raise or lower workers or equipment such as air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting, and well servicing equipment.
13. “Occurrence” is an accident, which includes continuous or repeated exposure to the same harmful condition.
14. "Personal and advertising injury" is injury, including consequential "bodily injury," arising out of one or more of the following offenses:
(a) false arrest, detention or imprisonment;
(b) malicious prosecution;
(c) wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
(d) oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
(e) oral or written publication of material that violates a person's right of privacy;
(f) the use of another's advertising idea in the insured’s "advertisement"; or
(g) infringing upon another's copyright, trade dress or slogan in the insured’s "advertisement."
15. "Pollutants" are any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
16. “Products/completed operations hazard”
(a)(1)(2) Includes all “bodily injury” and “property damage” that occurs away from any premises owned or rented to the insured and resulting from the product or work of the insured, except those products still in the insured’s physical possession or work that has not yet been completed or abandoned.
(b)(1)(2)(3) Work is considered completed as soon as one of the following occurs: either
· all the work in the insured’s contract has been completed; or
· all of the work done at the site has been completed if the contract calls for work at more than one site; or
· that part of work done at a site has been put to its intended use by any party other than a contractor or subcontractor working on the same project.
Work that is otherwise complete, but which may need service, maintenance, correction, repair, or replacement, is considered completed.
(c) Excluded from this hazard is:
(1) transportation of property, unless injury or damage arises out of a condition in or on a vehicle not owned or operated by any insured, and which is created by the “loading or unloading” of that vehicle by any insured;
(2) the existence of tools, uninstalled equipment or abandoned or unused materials; or
(3) products or operations for which the classification has been listed in the declarations or policy schedule and which state the products/completed operations are subject to the general aggregate limit.
17. “Property damage” is both the physical injury to tangible property, including all resulting loss of use of that property, as well as the loss of use of tangible property that has not been physically injured. Loss of use is considered to have occurred at the time of the injury or “occurrence” that caused it.
18. “Suit” is a civil proceeding that alleges damages for injury or offenses covered by this insurance. Included is any arbitration or other alternative dispute resolution proceedings, where such damages are claimed and to which the insured must submit with insurer consent.
19. “Temporary worker” is any person who is furnished to the insured to substitute for a permanent “employee” on leave or to meet a seasonal or short-term workload.
20. “Your product” is:
(a)(1)(2)(3) any goods, products (other than real property) that is manufactured, sold, handled, distributed, or disposed of by the insured; or others trading under the insured’s name; or any party whose business or assets the insured has acquired;
(b) containers (excluding vehicles), materials, parts, or equipment furnished in connection with such goods or products.
Also included are:
(a) warranties or representations made with respect to the fitness, quality, durability, performance, or use of the product;
(b) the providing of or failure to provide warnings or instructions.
Not included are vending machines or other property rented to or located for the use of others but not sold.
21. “Your work” is:
(a) work or operations performed by or on behalf of the insured;
(b) materials, parts or equipment furnished in connection with such work or operations;
as well as:
(a) warranties or representations made with respect to the fitness, quality, durability, performance, or use of the work;
(b) the providing of or failure to provide warnings or instructions.
This article discusses the changes between these editions which, in our opinion, have coverage impact.
Four important changes have been made from the 1996 CGL:
1. Hostile fire and pollution now defined words: Two definitions, those of hostile fire and of pollution itself, have been moved. The location of these two definitions is no longer in the pollution exclusion, but rather in Section VI--Definitions, at the end of the CGL. The wording contained in the two definitions did not change, only the location.
2. Pollution resulting from building heating equipment now covered in CGL policy: In the 1997 multistate update to the CGL, a mandatory endorsement was developed to provide coverage in the CGL for pollution resulting from building heating equipment. The wording of this endorsement, CG 00 54--Amendment Of Pollution Exclusion--Exception For Building Heating Equipment, has now been incorporated into this latest revision. Thus, CG 00 54 becomes obsolete as the 1998 CGL becomes effective and, accordingly, the endorsement has been withdrawn.
This mandatory endorsement had originally been developed to alleviate the controversy arising from whether fumes released by a faulty furnace were excluded as pollution or covered as building operations. The CGL now makes clear that such injury or damage is covered as it is part of the premises exposures which may arise from the operations of a building.
3. Release of gases, fumes and vapors from materials brought into building in connection with operations performed on or on behalf of insured now covered: A new exception to the pollution exclusion has been added which will now provide coverage for injury or damage that results from the release of gases, fumes or vapors from materials that have been brought into a building in connection with operations performed by or on behalf of the insured. This includes items such as paint, cleaning solvents, chemical treatments or carpet/tile glue that are brought into a building by the insured or a contractor of the insured, to be used to repair or service the building. Should a customer become ill from paint fumes while the building is being painted, there is now coverage.
4. Pollution cleanup now covered for property damage to third party: Another important exception to the pollution exclusion has been made. If property damage to a third party is covered by the policy, any resultant clean-up claims will also be covered. A common example would be hostile fire. If chemicals or pollutants were inadvertently released from the insured’s premises during a hostile fire, causing property damage to a third party, not only is the damage covered, but any necessary clean-up is now covered under the CGL.
Other editorial changes have been made to the pollution exclusion such as rearranging the location of verbiage, none of which changes coverage; these changes only improve readability.
Coverage B--Personal and Advertising Injury Liability has gone through a major overhaul. Most of the changes are a result of the way our society advertises today and the new venues available to sell products to the public. Insurance policy language has been updated to reflect today’s trends.
1. The Coverage B changes
begin with a revised definition of personal and advertising injury. Instead of
two separate definitions, there is now one combined definition.
These changes will make a noticeable impact on what is and is not considered to be personal or advertising injury offenses.
In the new definition of Personal and Advertising Injury, where it previously stated "injury other than bodily injury," it now states "injury, including consequential "bodily injury."" A new exclusion has been added to Coverage A to assure that bodily injury arising out of a personal and advertising injury offense is not covered. Under Coverage B, bodily injury that is suffered as a consequence of a covered personal and advertising injury offense is covered.
2. The insuring
agreements have been streamlined.
3. The entire section on Exclusions has been revised, keeping within the same vein of one coverage grant instead of two. One set of combined exclusions applies to both personal and advertising injury liability.
The previous exclusion regarding willful violation of a penal statute or ordinance has been replaced with exclusion a.(4) which excludes criminal acts by or at the direction of an insured. There is no coverage for acts of the insured or for those acts done at the direction of the insured, which would violate the rights of another and that would inflict personal and/or advertising liability.
A new exclusion is added
to eliminate personal and advertising injury coverage for insureds in the
advertising, broadcasting, publishing or telecasting industries.
Advertisement is now a
defined term to clarify what it means in relationship to the insurance
contract.
Overall, Coverage B--Personal and Advertising Injury Liability has undergone a tremendous change and should be reviewed carefully.
Short-term premises liability coverage extended to insured: The 1996 CGL provided limited coverage for premises used or occupied by the insured on a temporary or short-term basis, for fire damage only.
To broaden this coverage, an exception to the property damage exclusion (j.) was added in the 1998 policy which gives premises liability coverage including contents of the premises for property of others at a location the insured is renting for 7 consecutive days or less.
Changes to the Railroad Protective Liability Program, the Underground Storage Tanks Liability Program and the Pollution Liability Program have been made to reflect the above Commercial General Liability Program revisions and to include editorial changes and previously made endorsement changes.
In addition, many endorsements have undergone revisions too numerous to mention here. Most are editorial or reflect the overall program changes. Time and attention should be given to analyses of the overall impact of this revision upon each individual insured.
1. Is pollution such as fumes and vapors from building heating equipment covered or excluded in the 1998 Revision?
2. If a contractor brings materials to the insured’s premises to perform work and pollution from those materials causes bodily injury, is there any coverage in the CGL or is it excluded as pollution?
3. Pollution clean-up costs are always excluded. True or False? Explain your answer.
4. How have the definitions for Personal Injury and Advertising Injury Liability been changed?
5. Explain the newly revised coverage for damage to premises rented to an insured--short-term basis.
1. In the 1997 multistate update to the CGL, a mandatory endorsement was developed to provide coverage in the CGL for pollution resulting from building heating equipment. The wording of this endorsement, CG 00 54--Amendment Of Pollution Exclusion--Exception For Building Heating Equipment, has now been incorporated into this latest revision. The CGL now makes clear that such injury or damage is covered, as it is part of the premise exposures, which may arise from the operations of a building.
2. A new exception to the pollution exclusion has been added which will now provide coverage for injury or damage that results from the release of gases, fumes or vapors from materials that have been brought into a building in connection with operations performed by or on behalf of the insured. This includes items such as paint, cleaning solvents, chemical treatments or carpet/tile glue that are brought into a building by the insured or a contractor of the insured, to be used to repair or service the building. Should a customer become ill from paint fumes while the building is being painted, there is now coverage.
3. False. An important exception to the pollution exclusion has been made. If property damage to a third party is covered by the policy, any resultant clean-up claims will also be covered. A common example would be hostile fire. If chemicals or pollutants were inadvertently released from the insured’s premises during a hostile fire, causing property damage to a third party, not only is the damage covered, but also any necessary clean up is now covered under the CGL.
4. Coverage B--Personal and Advertising Injury Liability, has gone through a major overhaul. Most of the changes are a result of the way our society advertises today and the new venues available to sell products to the public. Insurance policy language has been updated to reflect today’s trends.
The Coverage B changes
begin with a revised definition of personal and advertising injury. Instead of
two separate definitions, there is now one combined definition.
5. The 1996 CGL provided limited coverage for premises used or occupied by the insured on a temporary or short-term basis--for fire damage only.
To broaden this coverage in the 1998 policy, an exception to the property damage exclusion (j.) has been added which gives premises liability coverage including contents of the premises for property of others at a location the insured is renting for 7 consecutive days or less.
The 1999 revisions to the Commercial General Liability Policy (CGL) were made via the attachment of mandatory endorsement to the various commercial liability coverage parts. As a result, all of the following changes are new and reflective of the 1999 CGL versus the 1998 CGL. This revision clarifies and strengthens the known loss or loss-in-progress exclusion, as a result of recent court decisions.
These changes have been approved in many states with effective dates starting September 1, 1999 and carry a form edition date of 09/99.
In July of 1995, a significant appeals court decision was made in California that is having a far-reaching impact on the Commercial General Liability Policy (CGL) as we know it. The case is that of Montrose Chemical Corporation of California, Plaintiff and Appellant vs. Admiral Insurance Company, Defendant and Respondent. CA Supreme Court #S026013. Filed July 3, 1995. CCH 1995 Fire and Casualty Cases, Paragraph 5376.
Montrose Chemical Corporation of California, which had already gone out of business, manufactured the pesticide commonly called DDT (dichloro-diphenyl-trichlorethane) at one of its sites in Torrence, California. Montrose had manufactured this chemical since about 1947 until the time it went out of business in 1982. When Federal law made it illegal to sell DDT domestically, Montrose continued production for export outside the USA.
It was determined that seven insurance companies provided policies for Montrose during the period of time DDT was manufactured, ending with Admiral Insurance Company. Admiral’s policies provided coverage between 1982 and 1986.
Law suits were filed against Montrose for damage and injury from the disposal of hazardous or toxic wastes at a number of sites in California. Although the other 6 carriers provided defense under reservation of rights, Admiral denied coverage and defense contending that its policy did not have to respond—as the coverage trigger resulting in loss and injury did not occur during its policy periods and that the actions were uninsurable as losses-in-progress existing prior to the inception of Admiral’s policies.
The case of Montrose Chemical vs. Admiral Insurance addressed the issue of defense only. Other, separate cases have similarly addressed the coverage issues and affirmed the Montrose decision. These cases include Pittston Company, Ultramar America Limited, Ultramar Pittston Company, Ultramar American Limited, Ultramar Petroleum, Inc. v. Allianz Ins. Company, et. al., US Court of Appeals for the Third Circuit, Nos. 96-5166 and 96-5167, August 27, 1997. (See footnote 1.)
The initial trial court, in a summary judgment, decided in favor of Admiral. Montrose appealed.
The California Court of Appeals overturned the summary judgment decision of the trial court. The appeals court based its ruling upon the fact that the property damage was a continuous, progressive deterioration that was still in progress throughout the period covered by Admiral’s policies, thus triggering coverage. It was further contended that the wording in the CGL policy was not strong enough to preclude such losses. It also decided that the loss-in-progress rule did not preclude coverage in this case. Finally, it decided that the expected or intended exclusion did not bar coverage in a progressive damage situation.
The case went to the California Supreme Court and in July of 1995, the decision of the appeals court was affirmed by the Supreme Court.
Over the last few years, the consequences of this decision have been debated. Decisions in other states have supported or complemented the California decision. While it may not have been the intent of the original drafters of the CGL verbiage to provide coverage for known loss resulting from the occurrence of progressive or continuous exposure, coverage has been found in the modern CGL.
Such decisions have significant impact for risks such as contractors, manufacturers or businesses with pollution exposures that regularly face progressive or continuous exposures and that involve more than one policy period—risks that previously thought these exposures uninsurable, but that now find they may be covered after all. Some examples of who would benefit from the broad interpretation of loss-in-progress or known loss include:
A building contractor who uses inferior plumbing materials in a housing development and claims begin to arise from water damage developing from plumbing leaks (crumbling foundations, warped supports causing flooring to buckle and so forth).
The manufacturer of the piping used by the contractor, who had used a new chemical process to manufacture the piping which ended up deteriorating over time.
Prior to Montrose, if losses spanned more than one policy period, coverage triggers such as manifestation, exposure and continuous trigger, needed to be evaluated to determine whether or not the current insurer could be called upon to respond. As a result of Montrose, damage that starts in a prior policy period could be covered under a subsequent carrier’s policy if the damages were to other claimants who were not known at the time of policy inception; or if the insured was not aware that additional claims could or would be filed; or if the insured was not aware that he/she (the insured) could or would be held legally liable for that damage or injury.
Because of Montrose and subsequent cases, the wording of the CGL policy has undergone extensive scrutiny over the last few years. As a result, the Insurance Services Office, Inc. (ISO) has developed a new set of mandatory endorsements to address the issue.
The new mandatory endorsements included in the 1999 CGL changes apply to each of the Commercial Liability Coverage Parts including the Commercial General Liability Coverage Part, the Owners and Contractors Protective Liability Coverage Part, the Railroad Protective Liability Coverage Part, the Products/Completed Operations Liability Coverage part, the Liquor Liability Coverage Part (Occurrence Version) and CG 28 07—Principals Protective Liability Coverage. Note, however, that only the occurrence versions of the coverage parts are affected by these changes. The new endorsements revise the Insuring Agreements so that commercial liability policies will not respond to any injury or damage known by the insured (or an employee of the insured who was authorized to give or receive notice of injury, damage or claim), before the policy inception.
Because of the format of the new mandatory endorsements, where the entire Insuring Agreement is restated, these endorsements can be used with any edition of the CGL where the Insuring Agreement is found in Paragraph 1. Of Section 1. In other words, the new Known Injury or Damage endorsements may be attached to the 1988, 1993, 1996 and 1998 editions of the CGL.
ISO has stated in their release of these new changes that the revisions are not a reduction in coverage but merely a restatement of the original intent of the coverage provided. It should be noted that in those states where the wording was determined to cover known, continuous or progressive damage, this change will be viewed as a reduction in coverage.
The endorsement explains what the circumstances are or when an event is considered to be “known,” which are the earliest of any of the following:
1. when the insured reports any part of any injury or damage to the current insurer or any other insurer
2. when the insured receives a written or verbal demand or claim for damages
3. when the insured first becomes aware by any means that injury or damage has occurred or has begun to occur
This defines and significantly broadens the application of what is a “known” loss or a “loss-in-progress.”
The new mandatory commercial liability endorsements are:
· CG 00 57—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the CGL Policy)
· CG 00 58—Amendment Of Insuring Agreement—Known Injury Or Damage And Inspections And Surveys Condition (use with the OCP Liability Policy)
· CG 00 59—Amendment Of Insuring Agreement—Known Injury Or Damage And Inspections And Surveys Condition (use with the Railroad Protective Liability Policy)
· CG 00 60—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the Products/Completed Operations Liability Policy—Occurrence Version)
· CG 00 61—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the Liquor Liability Policy—Occurrence Version)
Revised similarly is endorsement CG 28 07, Principals Protective Liability Coverage.
1. The new mandatory endorsements for the Owners and Contractors Protective Liability Coverage Part and the Railroad Protective Liability Coverage Part also contain a revision to the condition on inspections and surveys that has already been addressed in the most recent version of the Common Policy Conditions—IL 00 17, now used by the other commercial liability coverage parts.
The revision to the condition states that inspections, surveys, reports or recommendations made by the insurer do not warrant that the physical conditions are safe, healthful or comply with laws, codes or regulations—with one exception. If the inspection or survey pertains specifically to the certification of boilers, pressure vessels or elevators under state or municipal statute, the exclusion does not apply.
2. A new pollution exclusion endorsement has been developed to allow the exclusion of all pollution loss from a policy with the exception of injury from any smoke fumes, vapor or soot that may be released by building heating equipment; and injury or damage from the heat, smoke or fumes that result from a hostile fire. The new endorsement is:
CG 21 65—Total Pollution Exclusion With A Building Heating Equipment Exception And A Hostile Fire Exception
3. Two other pollution endorsements have been revised to make them compatible with the exclusion wording that has been amended in the CGL over the last couple revisions. The revised endorsements are:
· CG 21 49—Total Pollution Exclusion
· CG 21 55—Total Pollution Exclusion With A Hostile Fire Exception
4. Finally, a number of other CGL endorsements have been updated to reflect the new wording and numbering in the commercial liability insuring agreements. Basically, the changes are editorial in nature. They are:
· CG 22 65—Optical and Hearing Aid Establishments (use with CGL Policy)
· CG 24 18—Seed Merchants—Coverage For Erroneous Delivery Or Mixture And Resulting Failure Of Seed To Germinate (use with CGL Policy)
· CG 24 19—Seed Merchants—Coverage For Erroneous Delivery Or Mixture (Resulting Failure Of Seed To Germinate Not Included) (use with CGL Policy)
· CG 24 20—Seed Merchants—Coverage For Erroneous Delivery Or Mixture And Resulting Failure Of Seed To Germinate (use with Products/Completed Operations Liability Policy)
· CG 24 21—Seed Merchants—Coverage For Erroneous Delivery Or Mixture (Resulting Failure Of Seed To Germinate Not Included) (use with Products/Completed Operations Liability Policy)
Footnote 1:
In 1954, Pittston Company purchased property that, until the 1930’s, had been used as an oil refinery. Pittston would use the property as an oil storage and transfer facility.
Between 1954 and 1983, Pittston experienced three known, major oil spills at the property. Pittston was able to provide evidence that these spills were substantially cleaned up. No citations or demands were made against Pittston by regulatory authorities.
In 1979, Pittston commissioned an environmental study that showed the property had been substantially contaminated by oil, most likely from the prior operation when environmental concerns and controls were not as stringent.
In 1983, Ultramar purchased the property and operation. As part of the purchase, Pittston agreed to indemnify Ultramar for contamination damages. Ultramar purchased insurance coverage for pollution and added Pittston as an additional insured.
Ultramar operated the facility briefly, but in 1985 closed the operation because of the contamination. Ultramar was forced to begin a decontamination, clean-up process. As a result, Ultramar made a claim against Pittston for clean-up costs. Accordingly, Pittston filed claims with their insurance carriers.
Subsequently, Ultramar and Pittston reached an agreement between them, whereby Pittston was responsible for 80% of the costs and Ultramar 20%.
Pittston’s insurers denied coverage based upon the “known” loss exclusion. Pittston began legal action against the insurers and Ultramar later joined the action.
The District Court of the State of New Jersey issued a Summary Judgment in favor of the insurers which basically stated that liability for events or damages occurring prior to the 1979 study commissioned by Pittston were covered. Coverage for damages occurring after the 1979 study were precluded from coverage as “known” loss.
This decision was appealed to the US Court of Appeals where it was overturned and remanded back to the lower courts for trial.
Pittston Company, Ultramar America Limited, Ultramar Pittston Company, Ultramar American Limited, Ultramar Petroleum, Inc. v. Allianz Ins. Company, et. al., US Court of Appeals for the Third Circuit, Nos. 96-5166 and 96-5167, August 27, 1997. CCH 1997 Fire and Casualty Cases, Paragraph 6242.
1. How is the 1999 change to the CGL accomplished?
2. What is the core concept of this revision?
3. What is the name of the court decision that has been the impetus for this change?
4. What are the other changes that affect the Owners and Contractors Protective Liability Coverage Part and the Railroad Protective Liability Coverage Part?
5. What is the new pollution endorsement that has been developed and released with these revisions? Give details.
1. The 1999 revisions to the Commercial General Liability Policy (CGL) were made via the attachment of mandatory endorsement to the various commercial liability coverage parts. The new mandatory commercial liability endorsements are:
CG 00 57—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the CGL Policy)
CG 00 58—Amendment Of Insuring Agreement—Known Injury Or Damage And Inspections And Surveys Condition (use with the OCP Liability Policy)
CG 00 59—Amendment Of Insuring Agreement—Known Injury Or Damage And Inspections And Surveys Condition (use with the Railroad Protective Liability Policy)
CG 00 60—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the Products/Completed Operations Liability Policy—Occurrence Version)
CG 00 61—Amendment Of Insuring Agreement—Known Injury Or Damage (use with the Liquor Liability Policy—Occurrence Version)
2. This revision clarifies and strengthens the known loss or loss-in-progress exclusion, as a result of recent court decisions.
3. In July of 1995, a significant appeals court decision was made in California that is having a far-reaching impact on the Commercial General Liability Policy (CGL) as we know it. The case is that of Montrose Chemical Corporation of California, Plaintiff and Appellant vs. Admiral Insurance Company, Defendant and Respondent. CA Supreme Court #S026013. Filed July 3, 1995. CCH 1995 Fire and Casualty Cases, Paragraph 5376.
4. The new mandatory endorsements for the Owners and Contractors Protective Liability Coverage Part and the Railroad Protective Liability Coverage Part also contain a revision to the condition on inspections and surveys that has already been addressed in the most recent version of the Common Policy Conditions—IL 00 17, now used by the other commercial liability coverage parts.
The revision to the condition states that inspections, surveys, reports or recommendations made by the insurer do not warrant that the physical conditions are safe, healthful or comply with laws, codes or regulations—with one exception. If the inspection or survey pertains specifically to the certification of boilers, pressure vessels or elevators under state or municipal statute, the exclusion does not apply.
5. A new pollution exclusion endorsement has been developed to allow the exclusion of all pollution loss from a policy with the exception of injury from any smoke fumes, vapor or soot that may be released by building heating equipment; and injury or damage from the heat, smoke or fumes that result from a hostile fire. The new endorsement is:
CG 21 65—Total Pollution Exclusion With A Building Heating Equipment Exception And A Hostile Fire Exception
In reality, the 2001 edition of the CGL is merely a cleanup edition to the Commercial General Liability Program. While some changes may have far reaching impacts, such as the inclusion of some amendatory wording, other changes are meant to simplify the policy.
The latest edition of the CGL expands the "who is the insured" section. Coverage is broader since trusts, trustees and “volunteer workers” are now defined as insureds.
A very important part of the cleanup process is the incorporation of the 1999 mandatory amendment CG 00 57 wording into the basic policy form. The CG 00 57 endorsements were created in response to the Montrose vs. Admiral Insurance case in California.
The physical placement of the language into the CG 00 01 now finalizes the “clean-up” and means that mistakes in attachment will not occur.
The other cleanup items include:
· Re-formatting the Personal and Advertising Injury exclusions
· Re-formatting the Medical Payments exclusions
· Adding a title for each of the above coverage limitations
These exclusions now match the policy’s Coverage A exclusions. The simple change should improve the form’s readability and make it easier to add policy and program changes in the future.
Two changes may be considered to be restrictions of coverage. First, the exclusion of losses involving autos, aircraft and watercraft was revised (Negligent Supervision). Second, ISO is addressing the Internet, attempting to define how the CGL will respond (Internet Liability).
The policy wording now states that the exclusion is enforceable even if it can be proved that the insured did not exercise proper supervision over the operator (negligent supervision). The policy intent has been that the CGL was not meant to cover losses involving autos, aircraft and watercraft. Separate policies (and their accompanying premiums) exist to cover these exposures. However, various courts have shown some tendency to accept the argument of lack of supervision, thereby opening the limits of the CGL for certain losses. The revised wording was made in the hope that the exclusion will be consistently interpreted as an absolute exclusion.
Is the revised wording a restriction? If the jurisdiction of an insured is one that accepts negligent supervision to pre-empt the exclusion, then the change should be considered a coverage reduction. However in most jurisdictions, this is merely a clarifying action.
This new area needs to be defined as prior editions of the CGL did not specifically address the Internet. The policy has added three exclusions and modified a fourth exclusion which focus on Internet liability exposures.
More language changes should be expected as time, claims and court case activity work to interpret this dynamic medium. The precedents are not in place and case law must evolve. The changes should be considered to be a restriction. This new wording should alert insurance professionals to update applications and questionnaires to ask about Internet and Website involvement.
The Commercial General Liability (CGL) coverage part is used as either a stand alone monoline policy or combined with one or more additional lines of insurance to form a Commercial Package Policy. Instead of selecting specific areas of coverage (which can result in coverage gaps), broad comprehensive liability coverage is provided. The basic areas covered by the CGL include the insured’s:
· ownership or use of the premises;
· operations;
· contractual agreements;
· products made, sold or distributed;
· completed operations;
· personal and advertising injury;
· medical payments coverage.
There are two different Commercial General Liability Coverage Parts. One form provides coverage on an Occurrence basis. This form provides coverage for eligible losses when the actual injury or damage occurs during the policy period, regardless of when the insurance company is notified of the loss. The key to coverage is the date of loss.
Important: The insured has a duty to notify the insurance company about a loss. Depending on the circumstances of a given loss, late notification could affect policy coverage.
The other form provides coverage on a Claims-Made basis. In it, coverage is triggered by the actual filing date, or receipt of the claim plus the date when the loss occurred. Any covered loss or claim filed within the policy period is handled by that policy, regardless of when the actual loss or injury occurred, subject to the retroactive date, if any.
This analysis begins with the Occurrence Policy, form CG 00 01, followed by an analysis of the Claims Made Policy, form CG 00 02. Note that, in addition to the Commercial General Liability Policy Conditions built into the coverage form, the CGL policy is also subject to the Common Policy Conditions, form IL 00 17. The Common Policy Conditions are not addressed in this analysis.
The 2004 edition of the program and related revisions are analyzed here. Note: REMARKS IN BOLD TEXT INDICATE WHERE LANGUAGE CHANGES ARE FOUND IN THE 12/04 FORMS VERSUS THE PRIOR VERSIONS.
Section V—DEFINITIONS contains defined words. Defined words are in quotation marks.
1. INSURING AGREEMENTS
1.a. (1)(2) The insurance company (company) agrees to pay the sums for damages, up to the limits stated in Section III, Limits of Insurance, for covered occurrences of "bodily injury" and "property damage" that the insured becomes legally obligated to pay. The company has the right and the duty to defend the insured against any "suit" for those damages. However, the company has no duty to defend the insured for any "suit" for damages that the insurance does not cover.
Example: Wiley Coyote is sued by the Road Runner for numerous attempts to end his life. Since intentional acts are not covered by the CGL policy, there is no coverage. So, the insurance company is not required to defend Wiley.
The company may, at any time and at its discretion, investigate or settle any claim or "suit." The company is not obligated and its right and duty to defend ends when the limit of insurance is spent in payments of either judgments or settlements under any of the three Coverage Sections A, B or C.
Example: An insured is covered by a CGL policy, with a general aggregate limit of $1,000,000. Because of the insured’s negligence, an explosion occurs that injures many people and damages several other premises. Each injured person and property owner files separate claims for his/her losses. The company begins making settlements with the injured persons. Once the $1,000,000 general aggregate limit is exhausted, the company has no obligation to provide legal defense for the remaining lawsuits filed against the insured. Note that the money must actually have been paid out before the obligation to defend ends.
1.b. (1) The insurance applies only to occurrences of "bodily injury" and "property damage" that take place in the "coverage territory."
Example: An insured has an operation in Ireland. In this case, the products are both manufactured and distributed in Ireland. Under the policy definition of "coverage territory," there is no coverage. On the other hand, if the products were manufactured in the U.S. but sold in Ireland, this situation would meet the definition of covered territory, as would products manufactured in Ireland, but sold in the U.S.
1.b. (2) The insurance applies only to occurrences of "bodily injury" and "property damage" that take place during the policy period.
If a covered loss resulting in injury or damage occurs before the policy inception date, there is no coverage for that loss under the occurrence policy form. This ineligibility applies even if the claim is made during the policy period.
1.b. (3) The "bodily injury" and "property damage" liability applies only if neither an insured nor any insured "employee" authorized to handle loss notification had prior knowledge that a loss had occurred. An "occurrence" or claim that happens before the policy inception date and either:
is considered known by the insured before the policy period and would be excluded.
1.c. The converse of 1.b. (3) is also true. If the insured or an authorized "employee" had no knowledge of a claim or "occurrence" prior to the start of the policy period, then there is no prior knowledge of the loss before the policy period began.
1.d. "Bodily injury" or "property damage" is considered known by the insured or an authorized "employee" whenever the earliest of any one of the following events occurs:
This defines and significantly broadens the application of what is a known loss or a loss-in-progress.
1.e. Bodily injury damages includes three items: care, loss of services or the death of any party resulting from the covered "bodily injury" that has occurred.
2. EXCLUSIONS
2.a. Expected or Intended Injury—Except for any "bodily injury" that results from reasonable force used by any insured to protect or defend any person or property, any "bodily injury" or "property damage" that the insured expects or intends to cause is not covered by this insurance.
This exclusion protects the company from responding to damages or injuries that an insured intentionally causes. It acts in the public interest and ensures that an insured is not using the insurance contract for personal gain (such as theft), to injure competitors, as an instrument of revenge or for some other selfish purpose.
This wording is being challenged and clarified in several current court cases across the country. The challenges may clarify whether a policy must respond to an intentional act that results in unexpected or unintended damage or injury.
Cases now before state supreme courts may have an impact on this exclusion and should be watched carefully. There is no current Insurance Services Office (ISO) endorsement available to buy back coverage or delete this exclusion.
2.b. (1)(2) Contractual Liability—Damages for "bodily injury" or "property damage" resulting from liability assumed by the insured under a contract or agreement are excluded. An exception exists, however, if the loss involves an "insured contract" and the "bodily injury" or "property damage" occurs after the contract or agreement was executed. Another exception concerns a loss for which an insured would have been liable, even if the contract or agreement was never executed. In this situation, a contract does not affect the CGL policy’s coverage obligation. The exclusion is intended to avoid handling loss obligations specifically created by a contract with an outside party.
Liability assumed by the insured under an "insured contract" includes any reasonable attorney fees and necessary litigation expenses incurred by parties other than the insured and are considered to be damages from "bodily injury" or "property damage." Such expenses are covered IF:
Payment for defense expenses for damages assumed under an insured contract is covered, because these costs are considered part of the overall damages. Under the supplementary payments section of the policy, it is clear that defense of an indemnitee, and the payments of an indemnitee’s defense expenses, are covered, up to the applicable limit of insurance. Under certain defined circumstances, the defense costs may be outside the limit of insurance.
Example: An insured owns a building that houses his fur shop and fur storage facility. He has extra space that he leases to a person who operates a stamp and coin shop. That shop owner requires the insured to guarantee in writing (in the lease) that the premises are safe and meet all life or public safety regulations and requirements. The insured is responsible and liable for this type of obligation, with or without a contract or agreement, so coverage applies to this type of obligation.
The company obligation to respond to contractual liability can be further limited by endorsement, form CG 21 39. In this endorsement, the definition of "Insured Contract" is restricted by amending the Section V Definitions in form CG 00 01.The amended definition states that it does not include any contract or agreement pertaining to the business of the insured, made by the insured, which assumes the tort liability of another party.
2.c. Liquor Liability—If any insured is in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages, "bodily injury," or "property damage" is excluded if it results from:
1. causing or contributing to the intoxication of any person;
2. furnishing alcoholic beverages to a person under the legal drinking age; or furnishing alcoholic beverages to a person under the influence of alcohol;
3. any statute, ordinance or regulation that relates to the sale, gift, distribution or use of alcoholic beverages.
This exclusion does not apply to host liquor situations for insureds that are not in the business of selling, manufacturing, distributing, servicing or furnishing alcohol. Business lunches, parties and social functions sponsored by the insured are covered for host liquor liability, unless there is a statute, ordinance or regulation that applies to the particular event.
Example: The insured, a medical supplies distributor, holds a company Christmas party, where the insured serves alcoholic beverages at no charge.
Example: The owner of a printing operation takes a client to lunch and pays for a bottle of wine to go with the meal.
Both of these situations are covered host liquor liability situations if loss or injury occurs to the clients or guests as a result of consuming alcoholic beverages.
On the other hand, consider this:
Example: Brightshyne Liquor Manufacturing, Inc. sponsors a fundraiser by holding a "Casino Night." The event includes betting and gambling opportunities and the food and alcoholic beverages are provided for a charge. Brightshyne did not obtain the proper permits and licenses required for the function. A patron who had been served alcoholic beverages was injured on the trip home from the event. Because this situation was subject to several state and local statutes and ordinances, coverage was not available under the unendorsed CGL policy.
Some liquor liability coverage is available with form CG 24 08, Liquor Liability Endorsement, which deletes the CGL liquor liability exclusion.
An optional method of handling the insured's liquor liability exposure is through a separate Liquor Liability Policy. Two versions of this policy that are available are the Occurrence Policy Coverage Form, CG 00 33, or the Claims-Made Policy Coverage Form, CG 00 34. Examples of court cases that illustrate the policy liquor liability exclusion:
For agents and brokers with accounts in the liquor business and needing liquor liability coverage, refer to the section for Drugs and Alcohol Risks (Liquor) in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.d. Workers Compensation and Similar Laws—This insurance does not apply to any requirement or obligation of the insured under a workers' compensation, disability benefits, unemployment compensation law or any similar law.
The extent of this exclusion and the one that follows is to eliminate double coverage for injury that should be handled by either a workers compensation policy or an employer’s liability policy.
For agents and brokers that have accounts with a variety of difficult, unusual or specialty workers compensation situations, refer to the section for Workers Compensation in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.e. (1)(a)(b)(2)(a)(b) Employer’s Liability—The policy excludes any "bodily injury" to an "employee" of the insured, or the spouse, child, parent, brother or sister of that "employee" as a consequence or result of:
This exclusion of work-related injuries applies regardless of the reason that the insured may be held liable. In other words, it makes no difference if the liability is due to direct or indirect employment or contractually. All bodily injury related to an insured’s work is excluded under the CGL policy.
This is particularly important to understand, because of the current widespread use of contractors, subcontractors, independent contractors or leased employees, and much uncertainty with respect to who is responsible for such workers.
Note: Be careful of situations in monopolistic states where workers compensation is provided or required by the particular state, but coverage for employer’s liability is not similarly necessary, required or available. This inconsistency could leave a major gap in coverage for the insured. Many insurance companies in those states have developed their own endorsements to add the employer’s liability coverage to the CGL policy. An ISO endorsement to cover this exposure is not currently available.
For agents and brokers that have accounts with a variety of difficult, unusual or specialty employer liability situations, refer to the section for Workers Compensation in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.f. Pollution—A good understanding of what pollution is can be found in the definition in Section V, where pollutants are defined to include any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste also refers to materials that have not yet been recycled, reconditioned or reclaimed.
A very broad definition of the term "pollutant" is used in this exclusion. The original intent was to make the exclusion broad and comprehensive enough to exclude virtually all occurrences of pollution. In the beginning, it was considered an absolute pollution exclusion. In the past few years, and with the recent revisions of the CGL policy, exceptions to the exclusion have been made to add back reasonable and necessary coverage caused by incidents that may otherwise fall into the pollution exclusion.
1) The policy excludes any "bodily injury" or "property damage" that arises out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(a) that are at or from any premises, site or location that is now or ever was at any time owned, occupied, rented or loaned to any insured. There are three exceptions to this exclusion:
The first is for any occurrence of "bodily injury" (not "property damage") resulting from the release of smoke, fumes, vapor or soot from the furnace or other heating, cooling or humidifying equipment within a building.
Example: The Jones family, tenants in an apartment building, becomes ill from the fumes and vapors released by a faulty furnace unit. Serious, long-term injury results. They sue their landlord. The landlord’s CGL policy will cover the bodily injury suffered by the family because it was a result of a faulty heating unit used to heat the apartment building. The family also claims that the fumes resulted in the deaths of their pet dog and cat. The deaths are not covered.
Another limited exception applies to insureds who are contractors. If an insured contractor is working at a location, and the owner or lessee of that location requires being named as an additional insured under the policy, there is coverage for bodily injury or property damage for which the insured contractor is liable. However, this exception is available only if the insured contractor never owned, occupied, rented or loaned the premises, site or location involved.
Example: D&L Contracting (D&L) was constructing a small storage building on a premises owned by G.K. Properties (G.K.). G.K. required D&L to add G.K. as an additional insured on their CGL policy for the duration of the building project. During construction, a neighboring business experienced a pollution loss that was alleged to have been caused by conditions on the premises owned by G.K. The injured party sued G.K., who turned the suit over to D&L (under whose policy G.K. had been added as an additional insured). If D&L was found liable, there would be coverage. However, if it was found that D&L had rented the property temporarily from G.K. as a storage facility last year, there would be no coverage.
The third exception is for any "bodily injury" or "property damage" that results from any heat, smoke or fumes that are caused by or arise from a hostile fire, as defined in the policy.
Example: The insured, ChemTec, is a chemical research facility. During a research project, a major fire occurs and totally destroys ChemTec’s premises. During the fire, toxic chemicals are released in a large black cloud over neighboring facilities and several people suffer serious illnesses as a result. There would be coverage under the policy for the injuries sustained.
(b) that are at or from any premises, site, or location that is now, or ever was at any time, used by or for any insured or others, for the handling, storage, disposal, processing or treatment of waste;
(c) which are or were at any time transported, handled, stored, treated, disposed of or processed as waste by or for any insured or any other party for whom the insured is or may be legally liable;
(d) at or from any premises, site or location that the insured, any contractor or subcontractor who is working directly or indirectly on behalf of any insured is performing operations and where pollutants are brought on or to that premises, site, or location by any insured, contractor or subcontractor. However, this exclusion does not apply:
(i) when the damages, either "bodily injury" or "property damage," are caused by the escape of fuels, lubricants or other operating fluids needed to perform the normal functions of the operation of "mobile equipment" or its parts, as long as the equipment is designed to hold, store or receive those items. No pollution coverage exists, however, if the discharge, dispersal, escape or release is intentional or is a part of the operation being performed.
In older versions of the CGL, contractors who brought pollutants onto the job site in any form had no coverage for any resulting pollution. In more recent versions, limited pollution coverage is provided to those contractors who bring mobile equipment onto the job site which may accidentally leak or spill gasoline, oil or hydraulic fluids, causing pollution damages. Coverage only applies if the fluids are necessary for the operation of the equipment and are not meant to be intentionally discharged.
(ii) If "bodily injury" or "property damage" occurs within a building and is caused by the release of gases, fumes or vapors from materials the insured or a contractor working for the insured brought onto the premises to perform building operations, the exclusion does not apply. This exception extends to materials such as paint, cleaning solvents, chemical treatments or carpet/tile glue brought into a building by the insured or a contractor of the insured and are used to repair or service the building.
Example: White-wash, Inc. was hired to paint the hallway of an office building. During the third day of work, an employee of one of the building tenants was rushed to a hospital after being overcome by paint fumes inside the building. The CGL policy would cover costs related to that employee’s illness.
Example: Again, White-wash, Inc. was hired to paint an office building. This time they were using an ammonia-based paint to cover some metal fencing surrounding the property. An employee of one of the building tenants, while returning from lunch, fainted from the fumes, hit her head on the sidewalk and was rushed to the hospital. Since the incident occurred outside the building, the CGL policy would not respond.
(iii) for any "bodily injury" or "property damage" that results from any heat, smoke or fumes that are caused by, or arise from, a "hostile fire" as defined in the policy.
(e) There is no coverage for damages caused by an insured or by persons working (directly or indirectly) for the insured if the damages are related to testing, monitoring, cleaning, removing, containing, treating, detoxifying, neutralizing, responding to or assessing the effect of pollutants.
(2) (a) (b) The CGL policy does not cover for the loss (such as claims or suits), costs or expenses (including awards, fines, or penalties) arising from any request, demand, order, statutory or regulatory requirements to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effect of pollutants. This exclusion further states that insurance does not apply to any claim or suit by or on behalf of a governmental authority for damages because of any of the above stated circumstances. This exclusion precludes coverage for any such action resulting from the Environmental Protection Act or on behalf of the Environmental Protection Agency (EPA) or any other governmental authority. In other words, the CGL policy intends to avoid coverage for anything related to pollution, even if an insured is mandated to incur expense related to damages caused by pollution.
The previous exclusion will not apply to liability for "property damage" that the insured would have had in the absence of a contract, or if the request, demand, order, statutory or regulatory requirement, claim or suit, had not occurred.
Several endorsements are available to provide various degrees of pollution coverage:
For agents and brokers with accounts that have a variety of difficult, unusual or specialty pollution situations, refer to the section for Environmental Risks in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.g. Aircraft, Auto or Watercraft—Insurance does not apply to any "bodily injury" or "property damage" resulting from the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft. This includes the ownership of, loan or rental of, operation of or "loading and unloading" by or to any insured.
Example: A watercraft owned by the insured and rented to the employees of the insured for pleasure use is not properly maintained. An "employee" of the insured is injured when the watercraft sinks. The injury is not covered.
This exclusion applies even to a claim in which the insured was negligent in supervision, hiring, employment, training or monitoring of the individual(s) who caused the accident. Exceptions to the exclusion allow coverage for:
Example: A pontoon boat is stored on the insured's premises in the winter. The neighboring children choose to slide off the ice-covered watercraft and are seriously injured.
Example: The insured rents a pontoon boat for an afternoon sales presentation and a small hibachi grill is used for cooking appetizers. The grill causes a fire and, when the guests move away from the fire, the boat shifts, spilling the guests into the water. Several of them are injured. There would be coverage but, of course, the owner of the boat will also be involved in any lawsuit that is brought.
Example: The insured has arranged for valet parking during a dinner on his premises to entertain his top customers. The valet places the car he is parking in reverse in error. A woman walking behind the car is pinned between it and the car behind it. There would be coverage for this situation.
Example: An insured charters an emergency flight to meet an important client and the charter company requires a hold-harmless agreement.
Example: An ATV is required to be licensed. A pulley is welded to the back of the ATV and is used to pull up a log. It swings the log and the log strikes a person passing by. There is coverage, because the operation of the pulley caused the accident, not the ATV.
Example: A specially modified pickup truck carrying well drilling equipment accidentally strikes the side of a building while maneuvering into place over a well, causing damage to the building. Coverage would apply.
For agents and brokers with accounts that have a variety of
difficult, unusual or specialty aviation or aircraft situations, refer to the
section for Aircraft in The Insurance
Marketplace, a publication of The Rough Notes Company, Inc.
2.h.(1)(2) Mobile Equipment—Insurance does not apply to "Bodily injury" or "property damage" caused by transporting "mobile equipment" by an "auto" owned or operated by, rented or loaned to any insured; or mobile equipment involved in racing or stunt activities. The exclusion extends to related practices or other event preparation. It is extremely important to review the definitions of mobile equipment and auto. There are exceptions that could be advantageous to the insured.
Example: A contractor uses one of his own trucks to haul a large crane and trailer to a job site. The hitch on the trailer snaps and it overturns, causing damage to several vehicles traveling behind the trailer and crane. The losses would not be covered by the CGL. The automobile liability policy of the towing vehicle should respond to any liability for a trailer being towed or for mobile equipment being transported by that vehicle.
2.i. War—No "bodily injury" or "property damage"
resulting from any act, incident or condition of war, whether declared or
undeclared, is covered by the CGL policy. The definition of War is clarified to
include such acts as civil war, insurrection, rebellion or revolution.
The 12/04 revision of the War exclusion replaces the previous wording
with the wording that had been part of the mandatory war exclusion
endorsement.
2.j. Damage to Property—"Property damage" liability to any property owned, rented, loaned to or occupied by the insured or to any personal property in the care, custody or control of the insured is not covered. The CGL policy protects the insured for his/her negligence and legal liability to others. It does not apply to damages or injury to the insured. This exclusion reinforces the need for the insured to maintain his/her own premises and property in good condition and to use reasonable care to prevent damage or injury to such property.
This insurance does not apply to property damage to:
(1) property owned, rented or occupied by the insured, including costs or expenses incurred for the repair, replacement, enhancement, restoration or maintenance of such property for ANY REASON, including prevention of injury to a person or damage to another's property;
(2) premises sold, given away or abandoned by the insured, if the property damage arises out of any part of those premises;
(3) property loaned to the named insured;
(4) personal property in the care, custody or control of the insured;
(5) that particular part of real property on which the insured or any contractors or subcontractors working directly or indirectly on the insured's behalf are performing operations, if the property damage arises out of the operations; or
(6) that particular part of any property that must be restored, repaired or replaced because the insured's work was incorrectly performed on it.
There are several very important exceptions to the six exclusions listed above.
The first is that exclusions j.(1), j.(3), and j.(4) do not apply to "property damage" (other than damage by fire) to premises, including the contents of such premises, rented to the named insured for seven or fewer consecutive days. A separate limit of insurance applies to Damage To Premises Rented to You as described in Section III Limits – of Insurance.
The second exception is that exclusion j.(2) does not apply if the premises are "your work" (meaning that the named insured performed operations or work on the premises), and were never occupied, rented or held for rental by the named insured. This is particularly important to home-builders. Since they build and sell homes, if this exclusion did not have this exception, there would be no coverage once the home was sold. However, if the named insured ever used the home as a model home, this exclusion would apply.
In the third exception, exclusions j.(3), j.(4), j.(5), and j.(6) do not apply to liability assumed under a sidetrack agreement. A sidetrack agreement is one between the owner of a premises or property and a railroad company, with respect to a railroad sidetrack (a transfer or access track) on the premises of the insured. The railroad company will allow use of the sidetrack by the property owner as long as the property owner guarantees access to the sidetrack by the railroad company and agrees to certain conditions of property maintenance. A mutual hold-harmless agreement between the railroad company and the property owner may also be required.
Example: The insured is a distributor of large appliances. A railroad track passes next to the insured’s premises. The insured feels that he could increase sales and reduce expenses if the railroad would build a sidetrack into the insured’s warehousing area, where merchandise could be loaded and unloaded directly into and out of railroad cars. The railroad agrees to the arrangement on the condition that it has 24-hour access to the sidetrack. The railroad also requires a guarantee that the property owner will protect the track from vehicle damage, limit vehicle access, and hold the railroad harmless for any collision or injury during loading and unloading. Remember, railroad sidetrack agreements are covered contracts under the CGL policy.
In the fourth and final exception, exclusion j.(6) does not apply to "property damage" included in the "products and completed operations hazard."
Examples: Property in the care, custody and control of the insured that is excluded under the liability coverage form includes such exposures as:
· a VCR repair operation that takes into its care the VCRs of customers to clean, service and repair;
· a photograph developing laboratory that takes the film and negatives of customers into its care to develop photographs and prints;
· a retail fur coat shop that also offers fur cleaning and storage facilities to its customers.
If "property damage" occurs to any real property on which the insured is directly or indirectly performing operations, coverage does not apply. Neither does coverage apply to any damaged property that must be restored, repaired or replaced because of work incorrectly performed by an insured, unless the "property damage" qualifies under the policy’s "products/completed operations hazard."
Example: An insured is in the process of installing a new roof on a portion of a building and erroneously removes shingles from a portion of the roof not needing repairs. The CGL policy does not cover the damage or expense to re-cover that portion of the roof.
Although the ISO CGL policy does not currently have an endorsement to provide coverage for items in the insured's care, custody, or control, many insurance companies have developed their own forms or endorsements. In addition, Inland Marine (Bailee) insurance coverage on the property of customers or clients in the care, custody or control of the insured is available. There are various forms of this coverage available through ISO, AAIS (American Association of Insurance Services), or individually filed specific company endorsement forms, depending on the nature of the insured’s operations.
For agents and brokers with accounts that have a variety of difficult, unusual or specialty property situations, refer to the section for Inland Marine in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.k. Damage to Your Product—"Property damage" to the insured's product, because of damage caused by the product or any part of it, is not covered.
Example: The insured manufactures gas furnaces. A furnace malfunctions and catches fire, destroying the furnace. There is no coverage for the furnace.
For agents and brokers with accounts that have a variety of difficult, unusual or specialty product situations, refer to the section for Products Liability in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.l. Damage to Your Work—"Property damage" to the insured's work arising out of it or any part of it, that is also covered in the "products/completed operations hazard," is excluded. An exception to this exclusion exists for such work that a subcontractor performs on behalf of the insured.
· Example: An insured repairs the electrical wiring in a building and the wiring is done incorrectly. In this case, there is no coverage. However, if the wiring repair was done by a subcontractor on behalf of the insured, and not by the insured, coverage would apply.
2.m. Damage to Impaired Property or Property not Physically Injured—Insurance does not apply to "Property damage" to "impaired property" or property that has not been physically injured in two circumstances. One is for cases arising out of a defect, inadequacy or dangerous condition in the insured’s product or work. The other is for cases arising out of a delay or failure by the insured or anyone acting on behalf of the insured to perform a contract or agreement in accordance with its terms. Additional wording clarifies that the exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to the insured’s product or work after it has been put to its intended use.
Example: The insured manufactures switches that turn a variety of products on and off. A batch of defective switches was sold to other manufacturers who incorporated them into their products. When these switches were installed, the other products would not operate. The other manufacturers’ products were impaired because of the insured’s defective product, but otherwise undamaged. This loss is excluded and not covered.
Example: The insured agrees to have the artwork for a client's brochure completed by a stated deadline. When the deadline arrives and the artwork is not complete, there is no physical injury to any property but the client loses potential income by being unable to distribute the brochure. This loss is not covered by the CGL policy.
There is no standard ISO endorsement currently available to buy back this coverage or to delete this exclusion. For agents and brokers with accounts that have a variety of difficult, unusual or specialty product situations, refer to the section for Products Liability in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.n. Recall of Products, Work or Impaired Property—Insurance does not apply to damages claimed for any loss, cost or expense incurred by the insured or others, for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of the insured’s product, the insured’s work or "impaired property." The exclusion applies if such product, work or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.
In other words, if the insured knows or has reason to suspect that a product, work or property is defective or could cause injury or danger, there is no coverage for the expense and cost of any product recall, repair or removal.
There is no standard ISO endorsement currently available to buy back this coverage or to delete this exclusion. For agents and brokers with accounts that have a variety of difficult, unusual or specialty product situations, including product recall, refer to the section for Products Liability in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
2.o. Personal And Advertising Injury—There is no coverage for any "bodily injury" arising out of "personal and advertising injury." This is a separate coverage available elsewhere in the policy.
2.p. Electronic Data –There is no coverage for any damages that are due to the inability to access any electronic data. The definition of electronic data includes anything that is transmitted electronically including the various types of media that are used to store the data. (Added in the 12/04 edition.)
One final notation in the CGL Coverage A Exclusions pertains to a clarification on the following exclusions:
· c––Liquor Liability;
· d––Workers Compensation and Similar Laws;
· e––Employer’s Liability;
· f––Pollution;
· g––Aircraft, Auto or Watercraft;
· h––Mobile Equipment;
· i––War;
· j––Damage to Property;
· k––Damage to Your Product;
· l––Damage to Your Work;
· m––Damage to Impaired Property or Property not Physically Injured; and
· n––Recall of Products, Work or Impaired Property.
These exclusions do not apply to fire damage suffered at premises the named insured rents or temporarily occupies (with permission of the owner). Under Section III, Limits Of Insurance, a separate limit is provided for this coverage. It is titled: Damage To Premises Rented To You.
1. INSURING AGREEMENTS
1.a. The insurance company agrees to pay the sums for damages, up to the limits stated in Section III, Limits of Insurance, for covered offenses of "personal and advertising injury" that the insured is legally obligated to pay. The company has the right and duty to defend the insured for any "suit" for covered damages.
The company may, at any time and at its discretion, investigate or settle any claim or "suit." However, there is no duty for it to defend against a "suit" that does not qualify for coverage under this section of the CGL policy.
The company obligation to respond to or defend against a suit ends when the limit of insurance is spent in payments of either judgments or settlements under any of the three Coverage Sections A, B or C.
There is no other obligation to pay damages, perform acts or services, except those specifically detailed in the section on Supplementary Payments—Coverages A and B.
1.b. "Personal and Advertising Injury" is covered for offenses resulting from the insured’s business operations.
The insurance applies only to those offenses that take place in the "coverage territory" and during the policy period for an occurrence policy or with the proper timing of the notification of a claim for a claims-made policy.
For agents and brokers that have accounts with a variety of difficult, unusual or specialty "personal and advertising injury" situations, refer to the section for Professional Liability in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
1.c. A claim is considered to have been made at the earliest of one of the following two times:
· when the notice of claim has first been received and recorded by either the insured or the company, whoever receives it first;
· when a settlement is made by the company in accordance with provisions already explained in item 1 above.
All "personal and advertising injury" claims that are received from the same party resulting from the same offense are considered made at the time the first claim was made. If a personal and advertising injury offense committed by an insured against another entity results in a claim, all claims submitted by that entity relative to that offense are considered to be first made against the insured on the date that the first claim was received, regardless of the dates the other claims are filed.
Example: Happysmile Dentists are sued by BigPayne Dental Factory on June 6, 20XX for erecting a billboard advertisement that looks remarkably similar to a campaign previously used by BigPayne. Later, on July 2 and July 19, 20XX, BigPayne files two other suits upon discovering two other "copycat" billboard ads. Happysmile immediately sent all three notices to their insurance company, who tells them that they consider all of the claims to have been made on June 6, 20XX.
2. EXCLUSIONS
2.a. Knowing Violation of Rights of Another
"Personal injury and advertising injury" caused by or at the direction of the insured in which the insured had knowledge that the act would violate another's rights and subsequently inflict "personal and advertising injury" Is not covered.
Example: An insured’s reporter follows a famous athlete to get a story. The athlete obtains a restraining order against the publication, but the insured instructs the reporter to go after the athlete for the story despite the restraining order. When the athlete sues the publication, there is no coverage.
2.b. Material Published with Knowledge of
Falsity
"Personal and advertising injury" caused by written or oral publication of material by or at the direction of the insured, when the insured knew that the information was false is not covered.
Example: A newspaper publishes an article stating that the son of a famous politician was arrested for drunk driving. However, at the time the article was printed and distributed, the insured knew that the son was only stopped by a police officer and not ticketed or cited. There is no coverage if the politician’s son sues the paper.
2.c. Material Published Prior to Policy Period
"Personal and advertising injury" based on oral or written publication of information before the policy period began is not covered under the policy.
Example: The policy is effective 1/1/2004. Although the official date of the publication is 1/2/2004, it was advance released on 12/28/2003, so the first publication was before the start of the policy period and no coverage is available.
2.d. Criminal Acts
"Personal and advertising injury" due to criminal acts committed by or at the direction of the insured is not covered.
Example: An insured’s reporter has been trying to obtain details of an incident for a story. The insured instructs the reporter to break into a building and make copies of confidential files that contain the desired details. When the insured is sued, there is no coverage. However, if the reporter broke in WITHOUT KNOWLEDGE of the newspaper, there would be coverage for the publication but not for the reporter.
2.e. Contractual Liability
"Personal and advertising injury" for which the insured has assumed liability in a contract or agreement is excluded, unless the insured would have had that liability regardless of the existence of the contract or agreement.
Example: A celebrity agrees to an interview for publication by the insured but insists on a written agreement in which the insured promises not to slander or libel the celebrity. This liability would have existed anyway, regardless of the existence of the agreement.
2.f. Breach of Contract
"Personal and advertising injury" due to any breach of contract is not covered. The only exception is an implied contract to use the advertising ideas of another in the insured’s advertisement.
Example: An insured contracted to design, print and mail a promotional brochure for a client’s business. The project was date sensitive. The insured dropped the ball and missed the mailing date by several days. The client sued for breach of contract. There is no coverage.
2.g. Quality or Performance of Goods – Failure to Conform to Statements
"Personal and advertising injury" offenses due to failure of goods, products or services to match the advertised quality or performance are not covered.
Example: A customer sues because the weight loss product guaranteed weight loss of 10 pounds and the customer gained weight instead. This insurance would not apply to this situation.
2.h. Wrong Description of Prices
"Personal and advertising injury" due to the incorrect price description in an advertisement for goods, products or services is not covered.
Example: A customer sues a newspaper for lost revenue because of an advertisement where the newspaper incorrectly printed the decimal point in the price of a product on sale. No coverage exists for this loss.
2.i. Infringement of Copyright, Patent,
Trademark or Trade Secret
"Personal and advertising injury" due to infringement of copyright, patent, trademark, trade secret or intellectual property rights, unless covered under "advertisement," is not covered. This is another Internet change to help clarify coverage intent.
2.j. Insureds in Media and Internet Type
Businesses
"Personal and advertising injury" committed by insureds whose business operations are those of advertising, broadcasting, publishing or telecasting is not covered. In addition, insureds that design or determine content of Websites and Internet service providers are not covered. There is an exception to the exclusion. Even if the insured business is one of those excluded, injury from several offenses found in the definition of personal and advertising injury liability is covered. The offenses that qualify under the exception (resulting in being covered) are false arrest, detention or imprisonment; malicious prosecution; and wrongful eviction from, entry into or invasion of the right of private occupancy of a room, dwelling or premises committed by or on behalf of its owner, landlord or lessor.
Example: A publishing firm owns the building it occupies and also rents one floor of it as apartments. If the firm is alleged to have wrongfully evicted a tenant, there would be coverage under the policy.
2.k. Electronic Chat Rooms or Bulletin Boards
"Personal and advertising injury" caused by or resulting from an electronic chat room or bulletin board that the insured hosts or exercises control over is not covered.
2.l. Unauthorized use of Another's Name or Products
"Personal and advertising injury" due to the unauthorized use of others’ names or products in order to mislead customers is not covered.
2.m. Pollution
"Personal and advertising injury" resulting from the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants is not covered.
2.n. Pollution Related
Losses, costs or expenses due to any request, demand or order to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond to or assess the effect of pollutants are not covered. Any claim or "suit" that is brought by or on behalf of a governmental authority—whether local, state or federal—for such items is also not covered.
Because of the wording of the personal injury liability coverage contained in past versions of the CGL policy, attempts have been made to force coverage for various types of pollution losses into it, under the guise of trespass, wrongful entry or invasion of the right of private occupancy. The personal or advertising injury coverage never intended to pay for any pollution damages or cleanup costs. This exclusion clarifies that no coverage exists for any pollution exposure that may arise out of the personal and advertising injury wording in the policy.
2.o. War
No "personal and advertising injury "resulting from any act, incident or condition of war, whether declared or undeclared, is covered by the CGL. War is clarified to include in its definition such acts as civil war, insurrection, rebellion or revolution.” (12/04 edition – same as the mandatory war exclusion endorsement.)
1. INSURING AGREEMENTS
This insurance company agrees to pay the reasonable medical expenses, regardless of fault, for "bodily injury" caused by an accident, up to the specified limit per person. Neither negligence nor liability needs to be proved for this coverage to apply.
1.a. The accident must occur on premises the insured owns or rents, on ways next to those premises or as a result of the insured’s operations. In addition, the accident must take place in the "coverage territory," and during the policy period. The expenses and report must be made to the insurance company within one year of the date of the incident.
Example: Medical expenses incurred by a jogger struck by a brick dropped by a masonry contractor’s bricklayer from the second floor of an insured construction site are covered.
Note: Medical payments coverage applies only to premises exposures. Any medical expense because of injury as a result of the insured’s product or work is covered under the "products/completed operations hazards."
As stated above, the only expenses eligible for coverage are ones that occur during the policy period and which are reported to the insurance company within one year of the accident. After that, the loss would have to be considered under Coverage A for "bodily injury" and liability would need to be established. In addition, the injured person must submit to examinations at the expense of the insurance company, by a physician of their choice, as often as necessary.
1.b. Medical expenses include first aid administered at the time of the accident, necessary medical, surgical, x-ray and dental services, including prosthetic devices and ambulance, hospital, professional nursing and funeral services.
2. EXCLUSIONS
Expenses for "bodily injury" sustained by any of the following are not covered:
2.a. Any Insured
However, volunteer workers are an exception to this exclusion and are covered.
Example: One of the partners of a partnership listed in the policy as the first named insured slips and falls on ice on the front steps of the owned building premises and needs x-rays to determine the extent of his injuries. The x-ray expense is not covered.
2.b. Hired Person
Any person hired by the insured or a tenant of the insured to do work is not covered.
Example: A painter hired by the insured to paint the building falls from a ladder and breaks his wrist. This is not a covered medical payments loss.
2.c. Injury On Normally Occupied Premises
Persons who normally or regularly occupy or who are on the premises owned or rented by the named insured are not covered.
Example: A tenant in the insured's building falls down the stairs in his own apartment and is injured. Coverage does not apply to his injuries or medical expenses.
2.d. Workers Compensation And Similar Laws
Any person eligible for or otherwise covered by a workers compensation, disability benefits or similar type law is not included under this coverage.
Example: A small fire burns the hand of an "employee" while he is on the job. Medical payments coverage does not apply to his injuries or expenses.
2.e. Athletic Activities
Any person taking part in athletic activities, exercise or games is not covered. The 12/04 edition expands this exclusion to clarify that taking part means practicing, instructing, or participating in athletics. It further explains that athletics means any physical exercise, game, sports or athletic contest.
Example: The insured sponsors a little league team and a child breaks a leg sliding into home plate. Medical payments coverage does not apply to his injuries or medical expenses.
2.f. Products-Completed Operations Hazard
Any loss or injury otherwise covered under the "products/completed operations hazard" Is not covered.
Example: An appliance manufactured by the insured ignites due to faulty wiring and burns the consumer’s fingers at his home. Medical payments coverage does not apply to his injuries or expenses.
2.g. Coverage A Exclusions
Any loss or injury excluded under Coverage A of the policy is also excluded under medical payments coverage.
Example: An "employee" of the insured becomes angry and strikes a customer, breaking his nose. Medical payments coverage does not apply. (Note: Since none of the rest of the store’s employees liked the customer either, they all donate to the "battling employee’s" legal defense fund).
Note: Previous policy editions contained a war exclusion under medical
payments. That exclusion is deleted under Medical Payments in the 12 04 policy
edition, since war is now an exclusion under Coverage A.
Endorsements are available to either exclude medical payments coverage entirely or to delete the exposure for certain operations and exposures. Some examples are:
· CG 21 35 completely deletes Coverage C, Medical Payments,
· CG 22 52 excludes medical payments for inmates, patients or prisoners
· CG 22 40 excludes medical payments for day care centers
· CG 22 59 excludes medical payment for members of horseback riding clubs.
Seven supplementary payments are provided. These benefits are in addition to the limits stated in Section III—Limits of Insurance. They apply to any claim the insurance company investigates or settles, or to any "suit" against an insured that the company defends. These payments are:
1.a. All expenses the company incurs. This item provides payment for expenses incurred by the insurance company in the handling of a claim or suit and states that the limit of insurance is not reduced by payment of these expenses. This is important, since such expenses are sometimes substantial and could severely reduce the limits available, if they were part of the insurance policy limits.
1.b. Bail bonds, up to $250, if required, due to accidents or traffic law violations related to the use of any vehicle covered by bodily injury liability coverage. However, the insurance company is not responsible for supplying the bonds.
1.c. The cost of bonds needed to release attachments is provided if the bond amount is within the applicable policy limit. Again, the insurance company is not responsible for supplying these bonds.
1.d. Reasonable expenses of the insured (up to $250 per day actual loss of earnings, for time away from work) if the insurance company requests the insured to participate in any claim investigation or defense.
1.e. Any or all costs levied against the insured in a lawsuit. When courts assess the costs and expenses of the proceeding against the negligent party, this supplementary payment can provide considerable benefits beyond the policy limits.
1.f. The insurance company pays any prejudgment interest award against the insured for that part of the judgment that the company is obligated to pay. However, if the insurance company offers to pay the policy limit, no prejudgment interest that accumulates during the period of time after the offer is made will be paid.
1.g. Interest on the total amount of a judgment that accumulates after entry of the judgment but before the insurance company payment of the judgment or the policy limits.
Example: Let’s revisit the BigPayne Dental Factory vs. Happysmile Dentists lawsuit. Happysmile’s CGL policy has an advertising and personal injury insurance limit of $1,000,000. Just before their court date, BigPayne offers a settlement. The insurance company, having already spent nearly $300,000 on research costs and experts in copyright law, decides that settling is a good idea. Happysmile’s company and BigPayne agree to settle for $850,000. Since claim-related costs are included and outside the insurance limits, Happysmile’s policy can accommodate all of the following costs without affecting the total amount of their insurance limit:
$850,000 Advertising Injury Settlement
$300,000 Research & Expert Witness Costs
$6,000 Adjusting Costs
$32,900 Attorney Fees
$1,188,900 Total
The second part of the Supplementary Payments section addresses the relationship between the insured and an indemnitee of the insured and how that affects which supplementary payments will be made on behalf of the indemnitee.
2. When the insurance company defends the insured in a "suit," and an indemnitee of the insured is named as a party to that "suit," the insurance company will defend that indemnitee as well, if all of the following conditions are met:
a. the "suit" must be for damages where the insured has agreed to assume the liability of the indemnitee in a contract or agreement that falls within the definition of an "insured contract";
b. the liability assumed by the insured must be covered by this insurance;
c. the insured has also assumed the burden of defense or cost of defense in the same "insured contract";
d. based on all available information and the details of the "suit," there cannot be any known conflict between the respective interests of the insured and the indemnitee;
e. the insured and the indemnitee agree and request the insurance company to conduct and control the defense for both parties, as well as giving the insurance company the right to assign the same counsel to defend both parties in any "suit";
f. (1)(2) the insured must agree in writing to cooperate with the company in any investigation, settlement, or defense of the "suit" and to immediately send copies of any demands, notices, summons or legal papers received related to the "suit" to the company. Cooperation includes giving the company notices and copies of all legal papers promptly, dealing with other sources of insurance coverage or payment and providing written authorization to obtain records and other information related to the "suit" to the company. Finally, the insured must let the company conduct and control the defense of the indemnitee in the "suit."
When all these conditions are met, the company pays all attorney fees and other necessary litigation expenses related to defending the insured. They also reimburse the expenses paid by the insured when such expenses are at the request of the company. These expenses are paid as supplementary payments and not as "damages," so the policy insurance limits are not reduced.
The company obligation to defend the indemnitee ends when the applicable limit of insurance has been used up in the payment of judgments or settlements or when the conditions, agreements and requirements outlined above are no longer met.
Payment for defense expenses is covered as liability for damages assumed under an insured contract. At one time, only damages were covered. The policy now provides for the defense of such, as defense expense is considered to be part of the overall damages. Supplementary payments cover the defense of an indemnitee and the payments of an indemnitee’s defense expenses up to the applicable limit of insurance.
1. If the declarations designate that the insured is:
1.a. An individual, then both the insured and spouse are insureds, but only for any business conducted where the insured is a sole owner.
Example: Mr. John is a sole proprietor, selling farm produce. Both he and Mrs. John are insureds. In addition, Mr. John is the sole proprietor in another venture where he makes wood kitchen cabinets. Here again, both he and Mrs. John are insureds. However, if he and his brother owned the carpentry business as a partnership, there would be no coverage under this policy.
1.b. A partnership or joint venture, including the insured, members, partners, and their spouses are all insureds but only with respect to the conduct of the business of the insured partnership or joint venture.
Example: Mr. John and Mr. Joe are partners in a carpentry business. Both partners and their spouses are insureds and covered for the conduct of the carpentry operations. However, there is no coverage for either Mr. John’s or Mr. Joe’s sole proprietorships, nor for any other partnership that either partner has with any other parties.
1.c. A limited liability company, then the insured and the members and managers are covered but only with respect to conduct of the insured business.
A limited liability company is a hybrid form of business between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members, who have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit earned by the limited liability company is not taxed against the company but remains the obligation of the members as individuals.
1.d. Any organization other than a sole proprietorship, partnership, joint venture or limited liability company, then the insured, "executive officers," and directors of the described organization are all considered insureds, but only with respect to their duties as officers and directors. Stockholders of the insured are also insured but only with respect to their liability as stockholders. Outside interests, operations, and exposures of the "executive officers," directors, or stockholders are not covered.
1.e. A Trust, then the trust is an insured and the trustees are also insureds but only with respect to their duties to the described trust.
2.a.(1)(a)(b)(c) Also considered as insureds are "volunteer workers" and "employees" of the insured (except "executive officers" of partnerships, joint ventures or limited liability companies and managers of limited liability companies). Volunteers are insured for liability only while performing their duties and while in the scope of their volunteer activities. The policy excludes any "bodily injury" or "personal and advertising injury" an "employee" or "volunteer worker" causes to the named insured, partner or member of the insured or to a co-"employee" or to other "volunteer workers." It also excludes any damages to any spouse, child, parent, brother or sister of a co-"employee" because of injury caused by the "employee" to the co-"employee." Both of the "employee" and co-"employee" exclusions apply, even if the insured is required to share damages with someone else or to reimburse another party for damages the other party may have paid.
The exclusions listed above, concerning injuries caused by one "employee" to another or to the insured, partners, owners and so forth, have become very relevant recently. Because of many incidents of shootings and other violent acts in the workplace, the content of this exclusion is important. If this type of incident occurs, coverage is not provided by this insurance either to the injured person or to the spouse or family of the injured person, who may suffer financial or emotional injury from the incident. Note that another portion of the CGL policy that would also act to bar coverage in cases such as these is the policy exclusion of intentional acts.
2.a.(1)(d) "Employees" are not insured with respect to their rendering or failing to render professional health care services. This clarification shows that no medical professional liability exposures of either the insured or the insured’s "employees" are covered by this insurance.
Example: The Cramtowne Daily Journal is covered by a CGL policy. One day, Cramtowne employee A begins to choke while eating lunch in the Cramtowne break room. Employee B rushes over and tries to apply the Heimlich Maneuver. Unfortunately, it does not work and Employee A dies before a city emergency unit arrives. Employee A’s family sues employee B when it is discovered that he did not administer the Heimlich Maneuver properly. Cramtowne’s CGL policy would not respond to this intra-employee lawsuit.
2.a.(2) Other cases where the "employee" is not considered an insured is for "property damage" to any property that is owned, occupied, used by, rented to, in the care, custody or control of or over which there is physical control by the insured, "employees" or "volunteer workers" of the insured, or any partners or members of the insured.
Example: Carkrash Manufacturing is getting ready for its annual employee awards dinner. Some friends of a top manager volunteer to set up and decorate their meeting hall. As two volunteers move a large wooden ladder to the hall, they lose control of it and the ladder crashes onto a new high-speed color copier, destroying it. The damage to the copier would not be covered.
There are three other circumstances where other entities are considered to be insureds. These are:
2.b. any party (excluding "employees" or "volunteer
workers"), while acting as a real estate manager of the insured;
2.c if the insured dies, any party with proper temporary custody of the property of the insured for liability from the maintenance or use of the property and until a legal representative has been appointed; or
2.d. at the death of the insured, the legal representative of the insured, but only with respect to the duties of the insured with respect to the policy coverage.
These clarifications are made and the definition of insured is clarified for the circumstances outlined above, to provide comprehensive coverage to the insured for exposures that are normal to any business operation and that can be expected in a commercial venture.
The 12 04 edition no longer includes individuals who are using the
insured’s mobile equipment with permission of the owner as insureds. This was
applicable when the CGL policy was used to satisfy the financial responsibility
laws when particular types of mobile equipment were subject to such laws. Since
damages caused by such mobile equipment are no longer covered under the CGL
policy, the "who is an insured" section relating to it is also
removed.
3.a.b.c. If the insured forms or acquires a new organization, other than a partnership, joint venture or limited liability company, and as long as the insured has a majority interest, that new organization is included as a named insured. However, if there is other insurance coverage applying to the new organization, the CGL provision no longer applies. In addition, this coverage is only temporary. It is only available until the 90th day after formation or acquisition occurs or until the end of the policy period, whichever date is earlier. No coverage applies to injury, damage, offense or loss that occurs before the acquisition or formation of the organization.
The 90-day limitation is important. It is designed to provide the insured with temporary protection and coverage by amending the named insured to include the new organization. It provides the insured a reasonable amount of time to contact the insurance company to add or amend the named insured or to purchase specific coverage for that organization. On the other hand, some degree of protection is provided the insurance company, because the coverage is only temporary and the insured must make the insurer aware of the existence of the new organization and the additional exposures involved. The company can then decide whether to continue coverage on the new exposures.
This insurance coverage does not include any current or past person, organization, partnership, joint venture or limited liability company that does not appear as a named insured in the declarations. In addition to the definitions of insured outlined above, the CGL policy has more than two dozen endorsements for adding various parties as additional insureds, for a variety of circumstances.
1. The most the insurance company is obligated to pay for a given, eligible occurrence is the limits of insurance shown in the declarations. This maximum financial obligation is unaffected by the number of parties involved. It does not matter how many insureds are covered, the number of claims presented or "suits" brought or how many parties file claims or lawsuits.
Example: Chim and Panzy Jewelry Mart is a partnership that is sued when a customer finds that her diamond engagement ring has an imitation diamond. The angered bride-to-be files separate actions against Mr. Chim and Mr. Panzy. Both partners send in their notices of the suit to their insurer. The insurance company claims adjuster tells them that the most coverage available to respond to the lawsuit is their single $200,000 insurance limit.
2.a.b.c. The general aggregate limit is the most the policy will pay for the total accumulation of all losses for Coverage A (bodily injury and property damage), Coverage B (personal and advertising liability) and Coverage C (medical payments), within the specified policy period. The general aggregate limit does not include the "products/completed operations hazard," which has its own separate aggregate limit. When the general aggregate limit is exhausted by payment of claims during a policy period, coverage ceases.
Example: A CGL policy with a $2,000,000 general aggregate limit has a Coverage A premises loss of $1,000,000 and two "personal and advertising injury" losses of $1,000,000 each, for a total loss of $3,000,000. All are within the given policy period and all are covered losses, but the most that the policy will pay is the $2,000,000 general aggregate.
3. The products/completed operations aggregate limit is the maximum that the policy will pay within that policy period for the total of all "products/completed operations hazard" occurrences. When this limit is exhausted by payment of such claims during a specific policy period, coverage ceases.
Example: A CGL policy with a $3,000,000 products/completed operations aggregate limit has eight products claims for eight different occurrences of injury to customers from the use of products in a single policy year. All occurrences are within the policy period and all are covered losses, but the total of all eight claims is $4,000,000. This policy only responds for its $3,000,000 aggregate limit.
4. The "personal and advertising injury" limit is the most the policy will pay for the covered occurrence of that specified type of loss, subject to the general aggregate limit.
Example: A CGL policy has a $1,000,000 "personal and advertising injury" limit and a $2,000,000 each occurrence limit. A covered "personal and advertising injury" loss of $2,000,000 occurs. The policy pays only the $1,000,000 "personal and advertising injury" limit.
5.a.b. Each occurrence limit is the maximum the policy will pay for any one occurrence of an event, regardless of the number of claims that result from that occurrence.
Example: The insured is a manufacturer and has a CGL policy with a $1,000,000 each occurrence limit. This insured experiences an explosion while a tour group is on the premises that results in bodily injury to a number of the tourists. There are 25 claims for a total value of $5,000,000. The policy provides only $1,000,000 for the claims resulting from that occurrence, subject to the policy general aggregate limit. The insured must respond to the remaining $4,000,000 in claims in some other manner.
6. The Damage To Premises Rented To You Limit is the most the insurance company will pay under Coverage A for all covered "property damage" losses to any single premises while rented to an insured. It is also the maximum available to pay for any single fire loss to premises rented to or temporarily occupied by the insured (with the owner’s permission). The Damage To Premises Rented To You Limit payments are subject to the each occurrence limit.
Example: The Damage To Premises Rented To You Limit is $50,000. A loss occurs while the insured is renting a location where the operations of the insured cause a fire that burns down the building, resulting in a total loss of $250,000. The Damage To Premises Rented To You Limit will pay only its $50,000 limit. In addition, if several persons are injured in the fire, with each one submitting substantial claims, the total of all claims for that occurrence, including the $50,000 damage from fire, are covered by the insurance only up to the each occurrence limit shown in the declarations.
The limit of coverage for Damage To Premises Rented To You can be increased not only for specific locations and increased limits, but also for additional causes of loss via the CP 00 40, Legal Liability Coverage Form.
7. The medical expense limit is the maximum amount paid for each
person, and is subject to the general aggregate limit.
Example: A CGL policy has a $5,000 Medical Expense Limit per person, and a General Aggregate Limit of $1,000,000. The policy had previously responded to two covered Each Occurrence losses during the policy period totaling $900,000. Referring to the case above of the manufacturer who had injury to 25 tourists, the most medical expense that would be paid for any one tourist is $5,000. The total General Aggregate remaining is $100,000, so, after capping the most for any one tourist at $5,000, only $100,000 of the $125,000 would be paid by the policy.
Clarification is needed concerning application of the policy limits. The limits apply separately to each annual 12-month policy period, starting with the inception date of the policy. If there is any remaining period of less than 12 months, the limits apply separately to that period as well. However, if the policy was extended less than a 12-month period, the extended period is part of the preceding policy period for the purpose of application of the policy limits.
Example: The insured’s policy was originally issued with January 1 inception and expiration dates. In the second policy period, the insured requested the policy expiration date be extended from January 1 until July 1, so that when it renewed on July 1, the next policy period would match the insured’s accounting year. The policy limits applied separately to the first annual 12-month policy period of January 1 to January 1. They also applied separately to the second policy period which had been extended and was now 18 months long, from January 1, extended past the following January 1 to July 1. From that point forward, the annual 12-month periods of July 1 to July 1 would each have their own separate application of policy limits.
Two endorsements are available to amend the limits of insurance. The first is the Amendment, Aggregate Limits of Insurance (Per Location) CG 25 04, and second, the Amendment, Aggregate Limits of Insurance (Per Project) CG 25 03. Either of these will modify the definition of the general aggregate to an annual location aggregate or an annual project aggregate.
1. Bankruptcy
Even if the insured or the estate of the insured becomes bankrupt or insolvent, the insurance company is still obligated under this coverage part and not relieved of any of its responsibilities and duties.
2. Duties in the Event of Occurrence,
Offense, Claim, or Suit
a. The insured must notify the insurance company as soon as possible of any "occurrence" or offense that may become a covered claim. The notice should include as much information as possible but at the very least:
(1) the time, date, location and circumstances of the "occurrence" or offense that took place;
(2) the names, addresses and any other pertinent information of not only the injured persons but also of any potential witnesses;
(3) the location of the incident and a description of any injury or damage as a result of the "occurrence" or offense.
b. Whenever a claim or "suit" is brought against any insured, they need to do at least two things:
(1) record and detail all the specifics of the claim or "suit" immediately and document the date it was received;
(2) put the insurance company on notice as soon as practicable.
The insured is obligated to make sure the insurance company has written notice of the claim or "suit" as soon as practicable but this term is not defined in the policy. This particular term is used to allow the insured a reasonable amount of time to comply with the conditions of the policy but the lack of clarity can occasionally result in disputes. The insured is well advised to use urgency in notification to the insurance company and compliance with the policy conditions.
c. Any and all insureds involved in a claim must:
(1) send copies of any demands, notices, summonses, or legal papers received in connection with any claim or "suit" to the insurance company immediately or as soon as practicable;
(2) give approval and authorization to the insurance company to obtain records and other information;
(3) cooperate fully with the insurance company in investigating or settling the claim or in any defense against a "suit";
(4) assist in enforcing any right against any party which may be liable to the insured because of injury or damage that this insurance applies to, when the insurance company requests.
It is the duty and obligation of the insured to assist the insurance company in every way possible to notify, authorize, cooperate, and protect the rights of the company in defending and settling all claims and "suits."
d. The Insured is not authorized to make any voluntary payment, assume any obligation or incur any expense, other than first aid, without the consent of the insurance company. To do so without the consent of the company may be to do so at the insured’s own expense. The insured must not jeopardize or compromise the position of the company in any way.
3. Legal Action Against Insurer
In this policy, nobody has the right to either join the insurance company as a party, to bring the company into any "suit" for damages from an insured or to sue the company unless all of its terms have been totally completed by the company.
The company may be sued by a party to recover an agreed settlement or final judgment against an insured, but they are not liable for damages not covered by the terms of the policy or that part of a settlement or judgment that exceeds the applicable limit of insurance. An agreed settlement is defined as a settlement and release of liability agreement signed by the company, the insured and the claimant or the legal representative of the claimant.
4. Other Insurance
If there is other insurance that is both valid and collectable for a covered loss under Coverage A and Coverage B, the obligations of the insurance company are limited.
a. Primary
Insurance
This insurance policy coverage is primary (first to respond to a loss) except for those circumstances noted in excess insurance. When there is more than one source of primary insurance available, refer to the policy section on excess insurance for a description of the method of loss sharing.
b. Excess Insurance
(1) This insurance is excess over any other insurance, regardless of whether that insurance is considered primary, excess, contingent or on any other basis, in a number of cases. They include fire, extended coverage, builders risk, installation risk or any similar type of coverage for work performed by the insured, or if the other insurance is fire insurance for premises rented to the insured or temporarily occupied by the insured with permission of the owner.
It is also excess when the insured is using this insurance to cover the property damage liability to the premises where the insured is a tenant or renter (with the permission of the owner).
Finally, if the loss results from the maintenance or use of aircraft, "autos," or watercraft, and is not otherwise excluded under Coverage A, this insurance coverage is also excess.
(2) If there is any other primary insurance available to an insured that provides coverage for liability for damages arising from premises or operations for which the insured has been covered by an additional insured endorsement, this policy is excess.
The insurance company has no duty to defend the insured under Coverage A and Coverage B, if its insurance is excess. That is the duty of the primary insurance company. However, if no other company defends, this company will do so but it is also entitled to the insured’s rights against the other insurance companies in return. In other words, if this insurance is excess but the primary insurance company does not defend, this company retains the right to take legal action against the primary carrier for the costs and expenses of defense and settlement it incurred.
When this insurance is excess, this company is only obligated to pay their share in excess of the amount the other insurance would pay if this insurance had never existed or the excess over all deductibles and self-insurance amounts under all other insurance.
Example: The insured has a CGL policy on their contracting operation and a separate inland marine builders risk policy on a commercial building under construction. These policies are with two different insurance companies. When the project began, the builders risk limit was $500,000, which was adequate at the time. However, because of increased construction costs and modifications requested by the client, the estimated value of the still incomplete structure is now $750,000. Through the insured’s negligence, a covered loss occurs and the partially completed building is totally destroyed. The builders risk policy is primary and should pay its full limit of $500,000. The CGL policy will be excess over the builders risk and will respond only to the amount that exceeds the primary builders risk policy limit or the remaining $250,000.
Any losses not described in this provision as excess insurance, and which were not bought specifically as excess insurance, will be shared.
c. Method of Sharing
Contribution by Equal Shares—if all insurance companies agree, contribution will be on this basis. Each company will contribute equal amounts until each has paid their applicable limit of insurance or the entire loss is paid.
Example: The insured has three separate CGL policies, all written in the same name. When a loss occurs in which the insured is liable for damages, all three respond. Policy A has an each occurrence limit of $50,000, Policy B has an each occurrence limit of $100,000, and Policy C has an each occurrence limit of $1,000,000. The total amount of the judgment for which the insured is liable is $500,000.
In equal shares, each of the three policies contributes $50,000 for a total contribution of $150,000 of the $500,000. Policy A limits are now exhausted and no further coverage exists. Policy B and C each contribute an additional $50,000 making the total contribution now $250,000 and exhausting the coverage provided by Policy B. The remaining $250,000 is covered by Policy C to make the total of $500,000 in damages. No one policy pays more than its each occurrence limit.
Contribution by Limits—if equal shares are not agreed to, contribution will be proportionally by limits. Ratios will be determined based on each insurer’s percent of limits to the total limits applicable. The loss will be proportioned among the insurers accordingly.
Example: Using the previous example, Policy A has an each occurrence limit of $50,000, Policy B has an each occurrence limit of $100,000, and Policy C has an each occurrence limit of $1,000,000. The total of all limits available to pay claims is $1,150,000. Company A has 50,000/1,150,000 of the obligation or roughly 4%. Company B has 100,000/1,150,000 of the obligation or about 9%. The remaining 87% is attributed to Company C with 1,000,000/1,150,000. The total amount that the insured is judged liable for is $500,000. So Company A pays $20,000, Company B pays $45,000, and Company C pays the remaining $435,000.
5. Premium Audit
a. This provision states that the premiums for this insurance have been calculated in accordance with the rules and rates of the insurance company.
b. It also states that the premium shown is an advance or deposit premium only. At the end of each audit period, the company will calculate the actual earned premium for that period and bill the first named insured for any earned premium that exceeds the deposit premium. If the sum of all earned premium is less than the deposit, then the excess is returned to the first named insured. All notices are sent to the first named insured, who is responsible for all payments.
c. In addition, it is the responsibility of the first named insured to keep records of all information needed to calculate the earned premium and to provide this information to the company at its request.
Audit periods may be monthly, quarterly or semi-annual, in addition to annual. Using the example of a monthly audit, a deposit premium is charged at policy inception for the estimated annual premium. Each month an audit and adjustment is done after the end of the month for that month’s exposure. The actual earned premium is deducted from the annual deposit premium each month. A notice or statement is sent to the first named insured showing that month’s figures and calculations. When the total actual earned premium from the monthly reports exceeds the annual deposit, the notice contains a bill for the amount earned over the deposit. The first named insured is obligated to pay the additional premium due when they receive the statement or invoice.
6. Representations
This condition clarifies that when the insured accepts the policy issued by the insurance company, the insured agrees that the information shown in the declarations is both accurate and complete. The insured also affirms that information in the policy is based on the representations the insured made to the company in the application and that the company relied on that information when it issued the policy.
7. Separation of Insureds
Other than the Limits of Insurance or any specific rights and duties provided exclusively to the first named insured, insurance applies to each named insured as if it was the only named insured and separately to each insured against whom a claim or "suit" is brought.
8. Transfer of Rights of Recovery Against Others to Us
Once the insurance company has made payments under this insurance, any rights the insured has to recover any payment are transferred to the company. The insured must not jeopardize those rights. In addition, the insured must bring "suit," transfer those rights, or assist in enforcing them, if the company requests.
Example: The insured property owner was liable for damages due to a negligent act that arose from a condition on the premises. The insurance company paid the claim to the injured party. In the course of the investigation, it was determined that the previous owner of the property contributed to the condition of the premises, but had not been named in the "suit" by the injured party. The insured had the right to take action against the previous owner to recover the damages but since it was the company which actually paid the claim, those rights to recover damages were transferred to the insurance company under this policy condition. The insured had to cooperate with and assist the company in any way possible during the recovery of those damages.
9. When We Do Not Renew
Should the insurance company decide to not renew the insurance, they must mail or deliver to the first named insured written notice of the non-renewal not less than 30 days before the expiration date. In cases where the notice is mailed, proof of mailing is sufficient proof of notice.
This paragraph is modified in many states, by specific endorsements stating the requirement for the amount of time notice that must be given, what is considered acceptable proof of mailing and what are considered valid reasons for termination or non-renewal of coverage. Take care in evaluating the state-specific endorsements or amendments and other changes that modify this condition.
Each word or phrase shown in quotation marks in the policy is defined in this section. A list of the 22 defined words or phrases follows, in alphabetical order.
1. "Advertisement" is a notice that is broadcast or published to the general public or to a specific market segment about the goods, products or services of the insured, for the purpose of attracting customers or supporters.
a. Notices that are published include material on the Internet or other similar places of electronic communication.
b. Website
content is only considered an advertisement if it is about the named insured's
goods, products and services and done with the intention of gaining customers.
2. "Auto" is a land motor vehicle, trailer or
semi-trailer designed for travel on public roads, including any attached
machinery or equipment, but this definition does not include vehicles otherwise
defined as "mobile equipment."
The definition in the 12 04 edition also includes mobile equipment or any land
vehicle subject to compulsory or financial responsibility laws or similar motor
vehicle requirements. This moves this type of mobile equipment out of the
liability coverage of the CGL policy and to the auto policy.
Example: The laws in Mary’s state require that ATVs be registered and comply with financial responsibility laws. She travels off road from her business to a neighbor’s home and strikes and kills the neighbor’s llama. The value of the llama is $5,000 but there is no coverage under the CGL policy for the loss. In addition, since Mary had not listed the ATV on her auto policy, there is no coverage for this loss under the auto policy either.
3. "Bodily injury" is bodily injury, sickness or disease, including death from any of these, experienced by a person.
4. "Coverage territory"
5. "Employee" includes a "leased worker," but does not include a "temporary worker."
6. "Executive officer" is a position of officer of the insured, created by the by-laws, charter or similar document of the insured.
7. "Hostile fire" is a fire that becomes uncontrollable or breaks out from where it was intended to be.
8. "Impaired property" is tangible property, excluding any product or work of the insured, that has lost full or partial use because:
a. it contains a product or work of the insured that is either known or thought to be defective, deficient, inadequate or dangerous and if that property can be restored by repair, replacement, adjustment, or removal of the product or work of the insured; or if
b. the insured has failed to fulfill the terms of a contract or agreement and the property can be restored by the insured fulfilling the terms of that contract or agreement.
9. "Insured contract" is:
a. a contract for a lease of premises, except for that part of any contract that agrees to indemnify for fire damage to any premises that is leased, rented or temporarily occupied by the insured;
b. a sidetrack agreement;
Refer to the discussion on sidetrack agreements that appears earlier in this analysis.
c. any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;
d. an obligation required by ordinance to indemnify a municipality, except when in connection with work for a municipality;
e. an elevator maintenance agreement;
f. that part of any contract or agreement relating to the insured’s business (including an indemnification contract with a municipality for work performed for that municipality), where the insured assumes the tort liability of another party to pay for "bodily injury" or "property damage" to a third party. Tort liability is the liability imposed by law, with or without a contract or agreement.
(1) Any part of any contract or agreement that indemnifies a railroad for losses that result from construction or demolition within 50 feet of any railroad property, or that affects any railroad bridge, trestle, track, road-bed, tunnel, underpass or crossing is not covered.
(2) Any part of any contract that indemnifies an architect, engineer or surveyor for losses resulting from preparing, approving or failure to prepare or approve maps, shop drawings, opinions, reports, surveys, field orders, change orders, or drawings and specifications is not covered. The giving or failing to give directions or instructions, if that is the main cause of injury or damage is also not covered.
(3) If the insured is an engineer, architect or surveyor, any loss due to liability assumed by the insured for his rendering or failure to render the professional services indicated above, as well as the additional services of supervisory, inspection, architectural or activities, is not covered.
10. "Leased worker" is any person leased to the insured by agreement with a labor-leasing firm in which the person is to perform the duties relating to the conduct of the insured’s business but this definition does not include any "temporary workers."
11. "Loading or unloading"
a. Once accepted by the insured, it is property handled or moved onto or into any aircraft, watercraft, or "auto";
b. Property while on or in any aircraft, watercraft or "auto";
c. Until delivered, it is property handled or moved off of or from any aircraft, watercraft or "auto.”
However, the movement of property by mechanical devices other than a hand truck or those attached to the aircraft, watercraft or "auto" is not covered.
12. "Mobile equipment" is any of the following types of land vehicles including attached machinery or equipment:
a. Bulldozers, farm machinery, forklifts and other vehicles designed primarily for off-road use;
b. Vehicles used only on or next to the insured owned or rented premises;
c. Vehicles that move only on crawler treads;
d. Vehicles used to provide mobility for permanently mounted power cranes, shovels, loaders, diggers and drills, and road construction or resurfacing equipment such as graders, scrapers or rollers, whether or not the vehicle is self-propelled;
e. Vehicles not previously described and not self-propelled but used to provide mobility for permanently attached equipment, such as cherry pickers or similar devices used to raise or lower workers or equipment such as air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment;
f. Vehicles not previously described and used for purposes other than transporting persons or cargo. Self-propelled vehicles with permanently attached equipment, such as that designed for snow removal, road maintenance (not construction or resurfacing) or street cleaning, cherry pickers or similar devices mounted on automobile or truck chassis and used to raise or lower workers or equipment and air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment are considered "autos."
The 12 04 edition of the CGL policy removes from eligibility all land
vehicles subject to an individual state’s financial or compulsory
responsibility laws or similar motor vehicle rules. These are now considered
autos instead of mobile equipment and coverage for such vehicles must be
provided in the auto policy.
13. "Occurrence" is an accident, which includes continuous or repeated exposure to the same harmful condition.
14. "Personal and advertising injury" is injury, including consequential "bodily injury," arising out of one or more offenses consisting of:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
c. Wrongful eviction from, wrongful entry into or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services. This can take place in any form of communication, including the Internet and other electronic forms of communication;
e. Oral or written publication of material that violates a person's right of privacy. This violation can take place in any form of communication, including the Internet and other electronic forms of communication;
f. The use of somebody else's advertising idea in the insured’s "advertisement"; or
g. Infringing on the copyright, trade dress or slogan of another in the insured’s "advertisement."
15. "Pollutants" are any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
16. "Products/completed operations hazard"
a. Includes all "bodily injury" and "property damage" that occurs away from any premises owned by or rented to the insured that results from the product or work of the insured. It does not include those products still in the insured’s physical possession or work that has not yet been completed or abandoned.
b. Work is considered completed when either all the work called for in the insured’s contract has been completed, all of the work at one site has been completed (if the contract calls for work at more than one site) or that part of work done at a site has been put to its intended use by any party other than a contractor or subcontractor still working on the same project. Work is considered completed, even if it may still need service, maintenance, correction, repair or replacement.
c. Excluded items are:
(1) Transportation of property, unless injury or damage is caused by a condition in or on a vehicle not owned or operated by any insured, and is created by the "loading or unloading" of that vehicle by any insured;
(2) Existence of tools, uninstalled equipment or abandoned or unused materials; or
(3) Products or operations for which the classification listed in the declarations or policy schedule states that the products/completed operations are subject to the general aggregate limit.
17. "Property damage" is both the physical injury to tangible property, including all resulting loss of use of that property, as well as the loss of use of tangible property that has not been physically injured. Loss of use is considered to have occurred at the time of the injury or "occurrence" that caused it.
Electronic data is not tangible property. Electronic data includes information, facts or programs stored or used by the computer. Anything that could be considered computer software such as hard and floppy disks, CD-Roms, or any media is not tangible property.
This is extremely important and limiting and its importance cannot be overemphasized. If the named insured somehow passes a computer virus to the computer of another party and that virus destroys important data on that computer, there could have been some argument for coverage in the past. With this definition, that argument no longer applies.
18. "Suit" is a civil proceeding that alleges damages for injury or offenses covered by this insurance. Arbitration or other alternative dispute resolution methods, where such damages are claimed and to which the insured must submit with insurer consent, qualify as a "suit."
19. "Temporary worker" is any person who is furnished to the insured as a substitute for a permanent "employee" on leave or in order to meet a seasonal need or a short-term workload situation.
20. "Volunteer worker" acts at the named insured's direction and within the scope of duties set by the named insured but is not paid by the named insured or anyone else.
21. "Your product" is:
a. Any goods, products (other than real property) that are manufactured, sold, handled, distributed or disposed of by the insured, others trading under the insured’s name or any party whose business or assets have been acquired by the insured. This includes containers (excluding vehicles), materials, parts or equipment furnished in connection with such goods or products.
b. Also included are:
(1). Warranties or representations made with respect to the fitness, quality, durability, performance, or use of the product;
(2). Providing of or failure to provide adequate warnings or instructions.
c. Vending machines or other property rented to or located for the use of others but not sold are not included.
22. "Your work" is:
· Work or operations performed by or on behalf of the insured;
· Materials, parts or equipment furnished in connection with work or operations performed by or on behalf of the insured;
· Warranties or representations made with respect to the fitness, quality, durability, performance or use of the work;
· Providing of or failure to provide adequate warnings or instructions.
This policy starts with a very bold warning that the coverages respond on a claims-made basis.
This notice is intended to alert the insured that there is something different about this policy. This analysis will look only at the items in the CG 00 02 that are different from the CG 00 01, specifically in the following areas:
· Section I – Coverage A Insuring Agreement
· Section I – Coverage B Insuring Agreement
· Section IV – Duties in the Event of Occurrence, Offense, Claim or Suit
· Section IV – Other Insurance
· Section IV- Your Right to Claim and Occurrence Information
· Section V – Extended Reporting Periods
Items 1.b, 1.c, 1.d and 1.e are all deleted and replaced by items 1.b and 1.c below. These are all about the WHEN and WHERE. Both forms agree that the WHERE is the coverage territory but then the differences begin.
1.b. (2) and (3) Bodily injury or property damage must NOT occur before the Retroactive Date indicated on the policy declarations or after the end of the policy period AND the claim must be made during the policy period or in the extended reporting period, if any. There is a provision that there does not even have to be a retroactive date. If the policy was “pure” claims–made, the retroactive date would not exist and only the claim date would impact the settlement. Few, if any, policies are issued without a retroactive date, so it is a critical coverage consideration.
Example: The policy period is 1/1/05-1/1/06 when written on a claims-made basis for the first time. It is subsequently renewed twice on claims-made forms. Three claims are reported during the time period. (1) a 12/1/04 occurrence with 1/15/06 claim date, (2) a 5/1/05 occurrence with 12/1/05 claim date and (3) a 2/1/05 occurrence with a 6/1/06 claim date.
Scenario 1––Retroactive date is moved to match the effective date of each policy term:
Claim (1) is denied because the occurrence was prior to the retroactive date. Since the previous policy was written on an occurrence basis, that policy should respond.
Claim (2) is considered, because both the occurrence and the claim were made in the same year.
Claim (3) is denied because the occurrence was during the first policy term but the claim wasn’t made until the second policy term.
Scenario 2––Retroactive date is the effective date of the first claims-made policy.
Claim (1) is denied because the occurrence was prior to the retroactive date. Since the previous policy was written on an occurrence basis, that policy should respond.
Claim (2) is considered because both the occurrence and the claim were made in the same year.
Claim (3) is considered because the occurrence is following the retroactive date of the second policy and the claim was made in the second policy term.
Scenario 3––The retroactive date on the declarations says NONE.
Claim (1) is considered because the claim is made in the first policy period. However, it will be handled as excess over the occurrence policy that was in effect at the time of the occurrence.
Claim (2) is considered because there is no retroactive date and the claim was made in the first policy year.
Claim (3) is considered because there is no retroactive date and the claim was made in the second policy term.
1.c. Since the claim date is important in determining coverage, it is very important to establish what is meant by the term claims-made. The claim is made at the earliest of the dates when:
(1) Notice is received and recorded by an insured or by the company. The notice can be given to ANY insured, not just the named insured: OR
(2) The insurance company makes a settlement.
The policy points out that additional claims may be filed because of an injury to a particular person and if so, the claims-made date is set based on the date that the initial claim was made for the injury to that particular person. This keeps all of the claims in the same policy year and eliminates stacking of limits.
Example: Lois is crushed by a falling piece of equipment. A claim is presented for her medical bills on 2/1/06. On 7/1/06, Lois’ husband notifies the insurance company that he is claiming loss of consortium. On 3/1/08 Lois dies and her family files a wrongful death claim against the insured. On 9/1/08, the workers compensation carrier for Lois subrogates for the injuries she had suffered. All of these claims are treated as having the claims made date of 2/1/06.
Similarly, all property damage claims to a specific person or organization are considered made as of the first date the claim is made against the insured.
Example: Carl’s pontoon boat smashed into a dock. A claim was made for damage to the dock on 9/1/06. Then, during the winter, it was revealed that more damage had occurred and a second claim was made. The damage was so extensive that the marina could not open on time so a third claim for loss of use was made. All claims submitted for the same loss would have the same claims-made date of 9/1/06.
This section is almost identical to the Coverage A Insuring Agreement except that reference is made to offense as opposed to occurrence and, instead of referring to bodily injury or property damage, it refers to personal and advertising injury.
Example: Dreamy’s Malts policy period is 5/1/06 to 5/1/07, on a claims-made basis, with a retroactive date of 5/1/03. During Thanksgiving in 2005, Dreamy told a newspaper reporter that Dalton’s Fine Foods had shipped them contaminated milk and they would never use them again. Dalton’s Fine Foods filed suit on 6/1/06. This policy would respond because of the date of the claim made, since the offense was after the retroactive date and prior to the expiration date of the policy.
Section IV––Duties in the Event of
Occurrence, Offense, Claim or Suit
Under item 2.a one additional line is included. It states that
notification to the insurance company of an occurrence or offense is not the
same as a notice of claim. This is a very important distinction because the
notice of claim date sets the policy year under which the claim must be
settled. Until the injured party actually notifies the insured or the insurance
company, no claim is considered to have been made.
Example: Pamela sees a customer in her grocery store slip and fall near the frozen food section. She calls back to the storeroom to send someone out to help but by the time they arrive, the customer has disappeared. Pamela notifies the insurance company of the occurrence that same day, on 8/1/07. On 6/15/08 Pamela receives suit papers informing her that the customer died and the family is suing because the fall in the store began a series of subsequent hospitalizations that led to her death. If Pam had a claims-made policy during the time period, the claims-made date is 6/15/08 NOT 8/1/07, so the policy with coverage on 6/15/08 is the one to respond (provided the retroactive date is prior to 8/1/07).
An addition is made to this section for claims-made. It states that the policy is excess over any policy that meets the following criteria:
1. Its effective date is prior to the current policy’s effective date.
2. It covers bodily injury and/or property damage.
3. It is not issued as a claims-made policy.
4. There is no retroactive date in the current policy declarations or the policy period on the other policy goes beyond the retroactive date on the current policy.
This essentially means that if the claims-made policy is replacing an occurrence policy, the occurrence policy is primary and the claims-made policy is excess in case of any overlap of coverage due to the setting of the retroactive date.
Example: Using the grocery store example above, if the policy in effect on 8/1/07 was an occurrence policy and the policy in effect on 6/15/08 was a claims-made policy WITH a retroactive date prior to 8/1/07, the occurrence policy is primary and the claims-made policy is excess.
This section only applies to the Claims-Made Policy.
The insurance company agrees to provide certain information to the FIRST named insured for all claims-made policies issued to the named insured over the past three years. The reason for the information is because of the very important Notice of Occurrence requirement. This allows the insured to notify any new insurance company of occurrence notices. It also allows the named insured to be aware of outstanding potential claims that might affect future coverage decisions.
a. Some sort of record indicating any occurrence that has been reported to the insurance company to fulfill the Duties requirement in the Condition Section is needed. This record requires only a date and a limited description of the occurrence. An important limitation to this list is that it contains ONLY new items reported to that particular insurance company. If that insurance company had received notice of an occurrence from a previous insurance company, that information does not have to be supplied. It is up to the insured to accumulate that data and provide it.
b. A summary record of payments made and reserves set for the General Aggregate and Product-Completed Operations Aggregate Limit is needed. There is no requirement for specific occurrence-by-occurrence information. The only information needed is a summary so that the insured can be aware of the impact on the General Aggregate and Products-Completed Operations Aggregate.
The insurance policy states that all reserves are based on the best judgment of the insurance company and can be changed and that the named insured agrees to NOT disclose any of this information to a claimant, unless the insurance company has agreed to the release of such information.
The insurance company agrees to provide this information at least 30 days before any cancellation or termination, if the insurance company is the one initiating cancellation or non-renewal. Under any other circumstance the insured can request this information at any time within 60 days after the end of the policy term and the insurance company then has 45 days after receiving a written request from the insured to furnish the information requested.
Example: Crane Inc.'s CGL was covered by a claims-made policy with ABC Insurers for the past three years. ABC sends them a notice that they are not renewing the policy and supplies Crane with two different reports. The first reads as follows:
|
5/08/05 |
Product Ingestion claim |
5 individuals |
|
12/15/05 |
Property damage |
fire – 1 business |
|
8/19/06 |
Product Ingestion claim |
10 individuals |
|
9/15/07 |
Product Ingestion claim |
2 individuals |
The report does not include 10 other occurrences that had been on a similar report they had received from their prior carrier.
The second report reads as follows:
|
1/1/05-1/1/06 |
$50,000 |
$300,000 |
|
1/1/06-1/1/07 |
0 |
$400,000 |
|
1/1/07-1/1/08 |
0 |
$150,000 |
The last part of this section states that any information is provided without warranty or representation but with reasonable care. It goes further to say that even if the information is inaccurate, it will not affect the cancellation or non-renewal of the policy.
This means that the company is responsible for getting accurate information to the insured but if they do not, there are no consequences to them for any inaccurate information.
1. The Extended Reporting Period Section is a conditional Section. It applies only if one of the following occurs:
· The insurance company cancels or non-renews the policy or;
· The insurance company renews the policy but moves the retroactive date forward; or
· The insurance company renews the policy but not on a claims-made policy.
This means that if the insured is the one canceling or non-renewing the policy, the extended reporting period section does not apply. This aspect must be considered carefully when switching coverage from one insurance company to another.
2. The Extended Reporting Period is not an extension of the policy period nor an expansion of coverage. It is simply an extension of the time period for filing a report. Once the Extended Reporting Period starts, it cannot be cancelled by either party.
3. The Basic Extended Reporting Period has two time periods. There are five years following the policy expiration date for a claim to be filed or any occurrence or offense that the insured has been notified of during the policy period or within 60 days after the end of the time period. There are only 60 days after the end of the policy period for the insured to make claims for occurrences that had not been previously reported.
Note: This extended reporting period does not apply to any claim that is covered under a subsequent policy owned by the insured, even if the limits of that policy have been exhausted.
4. The Extended Reporting Period does not provide new limits of coverage.
Example: ABC Insurance Company issues Planet O’s renewal on an occurrence policy. This triggers the Extended Reporting Period for the previous policy. The Planet O policy had been on a claims-made basis for the past four years. The retroactive date was the date of the first claims-made policy and had never changed. The first claims-made policy effective date was 1/1/03 and the expiration of the last claims-made policy was 1/1/07.
(1) A loss occurred on 5/6/05 and the company was notified. The claim was made on 1/1/09. Since the claim is made in the extended reporting period and was reported prior to the policy expiration, coverage could be available.
(2) A loss occurred on 1/5/04 but was never reported to the insurance company. A claim for it is made on 3/15/07 but there is no coverage, because the claim is made more than 60 days after the end of the policy period, and there had been no previous notice of an occurrence.
5. A Supplemental Extended Reporting Period is available for a premium charge. The Supplemental form has no end date and the charge cannot exceed 200% of the expiring annual premium. In order for the insured to have the right to purchase this, he must notify the insurance company within 60 days after the end of the policy period and must pay the premium charge when notified. A separate endorsement to the policy is issued that explains exactly how the Supplemental Extended Reporting Period works.
6. When the Supplemental Extended Reporting Period is purchased, the insured receives a new set of Aggregate limits. This means that if the previous aggregate was $1,000,000, there is now $2,000,000 total available. However, the new aggregate is available ONLY for claims that are first reported during the Supplemental Extended Reporting Period.
This is the first revision of the CGL policy following the events of 9/11 and it reflects part of that reality. It also makes some other major changes.
The War Exclusion wording was changed following the events of 9/11 and War Exclusion endorsement CG 00 62 was required to be attached to the CG 00 01. Since the wording from this endorsement is now included in the CG 00 01 12 04 edition, endorsement CG 00 62 is no longer attached to the policy.
The pollution exclusion is modified slightly by amending the exception for heating equipment to include cooling and dehumidifying equipment.
The CGL policy will no longer be used to satisfy the compulsory or financial responsibility laws of certain states with respect to mobile equipment. In order to make this change, revisions have been made in the "Aircraft, Auto or Watercraft" Exclusion, Section II "Who is an Insured" and the definitions of "Auto" and "Mobile Equipment." Any mobile equipment required to be licensed and registered and meet a state’s compulsory, financial responsibility or other motor vehicles laws is treated as an auto in that state. However, the same equipment continues to be mobile equipment in those states without such laws or requirements. This very unusual situation could create significant coverage gaps, especially for risks with multi-state operations. An item of such defined equipment could change from mobile equipment to auto simply by moving from one state to another.
The Electronic Data exclusion eliminates coverage for damage resulting from the loss of use of electronic data. "Electronic Data" is defined within the exclusion and is very inclusive of information that is kept in or for use in computer systems and even beyond computer systems.
At the same time, ISO is
introducing a new coverage form to buy back this exclusion. The coverage form
is called Electronic Data Liability Coverage Form – CG 00 65.
The Medical Payments athletics exclusion is moving from non-specific language to very specific language. Athletics now includes physical exercise, games, sports or contests. This means that medical payments to treat a paper cut received while playing cards are now excluded. In addition, practicing, instructing and participating are all excluded. This wording is extremely expansive and, while it may limit the medical payments claims, it could move some obvious medical expense claims to the more costly bodily injury claims category. Now the question: is a fan who is watching a basketball game now considered a participant?
Although these endorsements were added earlier, they are significant enough to discuss in this advisory.
The additional insured endorsements are being changed. Depending on who is discussing the form, the change is the way the forms were always intended to act or there is a severe restriction of coverage. The change is that the additional insured endorsements respond only if the named insured was at least partially responsible for the injury. If the additional insured is the sole cause of the injury or damages, the additional insured endorsement will not respond.
Two significant exclusions have also been added. One excludes damages due to Exterior Insulation and Finish Systems (EIFS). Many companies have been excluding this coverage with manuscript forms but this is the first ISO specific form. In addition, the Fungi exclusion is added. Both are added in response to major concerns in the industry and are optional forms.
The last area of endorsements is the terrorism endorsements. Originally added in 2002 they continue to change as the Terrorism Risk Insurance Act (TRIA) changes. The current endorsements have a provision in case the act is not expanded beyond 2005. This is a constantly changing area that will be in discussion for years to come.
This is a discussion of the two 12 04 edition date Commercial General Liability Coverage Parts that are available.
Of the two available CGL forms, the first is the occurrence-based policy. This policy provides protection for covered losses when the actual injury occurs during the covered policy period, regardless of when notification of the loss or claim happened. Coverage is triggered by the date of the occurrence.
Example: Roger has a CGL policy with effective dates of 3/1/04-3/1/05. A customer trips and falls in his store on 4/1/04; there is a possibility of coverage because the slip and fall occurred during the policy period. The customer doesn’t tell Roger or the insurance company about the slip and fall until 4/1/05. Even though the claim is a year late and in another policy period, Roger’s policy would still be the responding form because the fall took place in the 3/1/04-3/1/05 time period.
The second policy option offered is the Claims-Made policy. For Claims-Made policies, coverage is triggered by the actual filing date or receipt of the claim, in addition to the date (period) the loss occurred. Any covered loss or claim filed within the policy period is handled by that policy regardless of when the actual loss or injury occurred, subject to the Retroactive Date.
Example: Again we have Roger and a CGL policy with effective dates of 3/1/04-3/1/05. A customer trips and falls in his store on 4/1/04, but the incident is not reported to Roger or the insurance company until 4/1/05. In this instance, there would no coverage under the 3/1/04-3/1/05 claims-made policy because the claim was not reported until after the policy expired.
The intent in the development of the Claims-Made Policy was to assist the insurance industry's claim adjusting, actuarial, and rate-making processes in dealing with the long-tail development of liability claims. There can be a gap of many years from the time of the actual occurrence of the incident of loss and when the claim is finally made. Because of this, the statistics used to develop loss costs and rates are often not credible. The Claims-Made Policy helps to eliminate some of the gap in the tail by offering coverage when the claim is made versus when the loss occurs. The hoped-for results are more credible loss costs and rates, with a resultant premium adequacy.
Because the Insuring Agreements, Coverages, and Exclusions between the two policies are basically the same, this discussion will only compare those areas where they differ.
Claims-Made policies have not proven to be highly popular with most commercial risks. Although the pricing may provide an advantage, most insureds are more concerned with the potential long tail exposure. The Claims-Made Coverage Part is normally chosen by an insured who has been on an occurrence policy when there is no other option.
There are many examples where an insured has been sued for occurrences that happened more than twenty-five years after the expiration date of a policy. Occurrence policy responses to long tail exposures have been very helpful to the insured but disastrous to insurers that never anticipated the losses. Illustrations of this are the liability policies that were called upon to handle the asbestos exposures many years after the policies had been issued and priced. The extent of the exposure was not known at inception and many insurers had no way to recoup any of the tremendous expenses and claims payments made years or even decades after the inception and expiration of those early policies. A Claims-Made coverage would have been better suited to such exposures
Caution should be used, however, anytime coverage for one type of policy is replaced with another, either going to Claims-Made from Occurrence or to Occurrence from Claims-Made. Both the agent and the insured must have a full understanding of the potential gaps in coverage that may result when one policy type replaces another.
These gaps most often occur in two areas. The first is the Retroactive Date applied in the Claims-Made Policy. The second area involves the endorsements applied at the time of conversion. One common example is a known product concern or previous entity that may be excluded in a Claims-Made Policy by endorsement.
Coverage A—Bodily Injury and Property
Damage Liability
Coverage A is the same until reference is made to WHEN the policy responds:
· The Claims-Made policy only responds IF the bodily injury or property damage occurred AFTER the retroactive date on the policy but BEFORE the end of the policy AND the claim was FIRST made during the policy period of the policy subject to the Extended Reporting provisions.
· The occurrence policy only responds if the bodily injury and property damage actually occur during the policy period.
Coverage A—Exclusions
The Coverage A lists of Exclusions are the same for both policies.
Coverage B—Personal and Advertising Injury
Liability
The Occurrence policy requires that the offense be committed during the policy period. The Claims-Made policy requires that the offense be committed between the retroactive and expiration dates of the policy AND that the first claim be presented during the policy period or the extended reporting period. As with Coverage A, the difference is not WHAT but WHEN.
Coverage B—Exclusions
With reference to the Exclusion to oral or written publications, the Occurrence policy states that if the first publication of the material took place prior to the inception of the policy period, coverage does not apply. The Claims-Made version states that coverage does not apply if the first publication took place prior to the Retroactive Date shown in the Declarations (if any has been shown). The remainder of the Coverage B Exclusions is the same in both coverage parts.
Coverage C—Medical Payments
The entire section on Coverage C Medical Payments is the same for both policies.
Coverage C—Exclusions
The entire section on Coverage C Exclusions is the same for both policies.
Supplementary Payments—Coverages A and B
The entire Supplementary Payments section for Coverages A and B is the same for both versions.
The entire Section II for Who is an Insured is the same for both versions.
The entire Section III—Limits of Insurance, is the same for both versions.
Under Section IV for Commercial General Liability Conditions, one additional item has been inserted in the paragraph on Duties In the Event of Occurrence, Offense, Claim or Suit with respect to the Claims-Made Policy. This additional item states that notice of an occurrence or offense does not constitute notice of a claim in the Claims-Made Policy.
In the Excess Insurance subparagraph, the Claims-Made version reinforces that the protection is on an excess basis. It responds only after any insurance that is effective before this policy's effective period. However, the other coverage must not be another Claims-Made form and no Retroactive Date must apply or, if there is a retro date, the other occurrence coverage continues after that Retroactive Date.
Example: Michel’s Metals has been insured by occurrence policies for 10 years. On 1/1/06 he accepts a claims-made policy with a retroactive date of 1/1/03. On 3/1/06 a claim is presented for a loss that occurred on 6/1/05. The Claims-Made policy will respond as excess over the occurrence policy that was in effect 1/1/05-1/1/06.
Item 10. Your Right to Claim and Occurrence Information is a condition that is applicable to the Claims-Made policy only. It details the type of information that the insurance company must supply to the insured and when it is required.
This section is unique to the Claims-Made policy. It explains the Extended Reporting Periods available to the insured if the Claims-Made policy is cancelled by the insurance company and replacement policy is not Claims-Made or, if Claims-Made, the retroactive date has been moved forward.
Both the Claims-Made and the Occurrence Policies have identical Definitions Sections; however, the Claims-Made is labeled Section VI and the Occurrence is labeled Section V.
The following are examples of how the
coverage triggers differ:
Time Line for Coverage Trigger on an
Occurrence Policy
The claim filed on 12-1-04 for the injury that occurred on 7-15-03, is covered by the Occurrence Policy effective
3-1-03 to 3-1-04.
The occurrence date of the injury or offense must be within the policy period, but the date of the claim has no impact (except for possible statutes of limitation issues).
|
|
3-1-03 Policy Inception |
7-15-03 Occurrence of Injury |
3-1-04 Policy Expiration |
12-1-04 Claim Filed |
Time Line for Coverage Trigger on Claims-Made Policy
If the policy period was the same, but the policy was Claims-Made, the same example results in a denial of coverage because the claim is made outside the policy period.
|
3-1-03 Retroactive Date |
3-1-03 Policy Inception |
7-15-03 Occurrence of Injury |
3-1-04 Policy Expiration |
12-1-04 Claim Filed |
CG
00 01 AND CG 00 02–COMMERCIAL GENERAL LIABILITY COVERAGE FORMS ANALYSIS
|
Index Introduction CG 00 01–Commercial General Liability Coverage Form (Occurrence Basis)
Section I–Coverages Coverage A–Bodily Injury And Property Damage Liability 1. Insuring Agreement 2. Exclusions Coverage B–Personal And Advertising Injury Liability 1. Insuring Agreement 2. Exclusions Coverage C–Medical Payments 1. Insuring Agreement 2. Exclusions Supplementary Payments–Coverages A And B Section II–Who Is An Insured Section III–Limits Of Insurance Section IV–Commercial General Liability Conditions Section V–Definitions CG 00 02–Commercial General Liability Coverage Form (Claims-Made
Basis) |
INTRODUCTION
The Insurance Services Office (ISO) Commercial General Liability (CGL)
Coverage Forms are extremely broad. They insure the bodily injury liability and
property damage liability exposures of a variety of commercial businesses,
enterprises and ventures. Their broad nature eliminates having to select and
group individual or specific hazards, with the resulting potential gaps in
coverage.
The ISO CGL Coverage Forms can be offered on either an occurrence or a
claims-made basis, as a monoline policy, or combined with one or more other
lines of insurance to form a commercial package policy. The basic exposures of
the named insured that CGL coverage forms insure include:
Each of these coverages is subject to certain definitions, exclusions
and limitations.
There are two ISO CGL Coverage Forms. CG 00 01 is the Occurrence
Coverage Form. It covers liability or damage losses that occur during the
policy period, regardless of when the insurance company is notified of the loss
or claim. The key to this coverage approach is the date of loss or when the
loss occurs.
CG 00 02 is the Claims-Made Coverage Form. Coverage triggers by the
actual filing date or receipt of the claim, in addition to the date of loss or
injury. It handles any covered loss or claim filed during the policy period,
regardless of when the actual loss or injury occurred, subject to the
retroactive date on the declarations. While the retroactive date can be any
date, it should be the first date when claims-made coverage applied to the
risk, because an occurrence coverage form applies to any loss or damage that
occurs prior to that date. Claims-made coverage applies only to covered losses
that occur after the retroactive date.
G 00 01–Commercial General Liability Coverage Form–Occurrence Basis is
analyzed first. It is followed by a summary analysis of CG 00 02–Commercial
General Liability Coverage Form–Claims-Made Basis that addresses only the
differences between it and CG 00 01.
This analysis is of the December 2007 edition of these coverage forms. Changes from the December 2004 editions are
in bold print.
CG 00 01–COMMERCIAL GENERAL LIABILITY COVERAGE FORM (OCCURRENCE BASIS)
This coverage form begins by stating that certain of its provisions restrict
coverage and encourages the named insured to carefully read it in order to
understand its rights and duties and to determine what is covered and not
covered. It also points out that the terms you and your refer to the named
insured and that an insured is any person or entity qualifying as such under
Section II–Who Is An Insured. The terms we, us and our refer to the insurance
company providing the coverage. Reference is made to Section V–Definitions
because understanding the definitions is critical to understanding the coverage
form.
SECTION I–COVERAGES
COVERAGE A–BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. The insurance company agrees to pay amounts the insured is legally
obligated to pay as damages for bodily injury and property damage that this
insurance covers. It also has the right and duty to defend the insured against
any suit that seeks those damages but only suits that seek damages that this
insurance covers. It can investigate any loss and settle any resulting claim or
suit at its discretion but the amount paid as damages is limited as described
under Section III–Limits Of Insurance. Its right and duty to defend ends when
the applicable limit of insurance is used up paying judgments and settlements
under Coverage A or Coverage B, or medical expenses under Coverage C. The
insurance company does not have any other obligation or liability to pay sums
or perform acts or services except for those specifically listed and described
under Supplementary Payments–Coverages A And B.
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Examples:
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Note: The payments must actually be made before the obligation to defend ends.
b. Coverage applies to bodily injury and property damage caused by an occurrence that takes place in the coverage territory and the bodily injury or property damage occurs during the policy period.
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Example: Charlie's Custom
Machinery has an operation in |
Coverage applies only if, prior to the policy period, no insured or employee authorized to give or receive notice of an occurrence or a claim knew that the bodily injury or property damage had occurred.
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Example: On 08/01/10, Keith’s Excavating Company tapped the gas
line on |
If either an insured or an authorized employee knew about any bodily injury or property damage, any continuation, change, or resumption of such bodily injury or property damage during or after the policy period is considered known before the policy period.
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Example: Continuing the example above, this time Paul tells Keith what he did. Keith notifies the gas company to alert it to the problem. The gas company agrees to investigate and adds it to the stack of items to check. When the explosion occurs, Keith’s current policy does not respond because of the prior incident but his prior year policy should respond. |
c. Bodily injury or
property damage that occurs during the policy period unknown by any insured or
employee authorized to give or receive notices of claims prior to the policy
period to have occurred includes any continuation, change, or resumption after
the policy period ends.
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Example: Speedy Plumbing
sends Charlie to the Golden Heights Apartment complex to install a hot water
heater in |
d. Bodily injury or
property damage is considered known by any insured or by its employee it
authorized to give or receive notices of claims when the earliest of the
following events occurs:
e. Bodily injury damages
include damages that any person or organization claims for care, loss of services,
or death resulting from the bodily injury at any time.
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 expected or
intended by the insured. This exclusion has an exception that covers bodily
injury resulting from the insured using reasonable force to protect persons or
property.
Note: The primary reason for this exclusion is to keep the insurance company
from becoming involved with non-accidental losses and is in the public
interest. It ensures that the insured will not use the insurance coverage for
gain, such as theft, to inflict injury on a competitor, as an instrument of
revenge, or to cause any other intentional harm. This exclusion's wording
continues to be challenged and interpreted by the courts, especially in cases
where the action was intentional but the type and extent of injury or damage
that resulted was not.
b. Contractual Liability
There is no coverage for bodily injury or
property damage in cases where
the insured must pay damages based on its having assumed liability in a written
contract or agreement. However, coverage does apply to liability for damages
that:
Notes: The liability assumed must occur during the
policy period. A retroactive agreement is not covered because it unfairly
manipulates coverage.
Payment for defense expenses related to damages assumed under an insured
contract or agreement may be covered under Supplementary Payments. That section
should be reviewed to determine when defense of an indemnitee and payment of
those expenses is included outside the limits.
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Example: Wally's Winery owns
the building it occupies for its wine tasting and sales operations. Wally
leases some extra space in the building to a fine glassware shop. The
glassware shop owner insists that Wally guarantee in the written lease that
the premises is safe and meets all life safety regulations and requirements.
Coverage applies to this requirement, since Wally is responsible and liable
for it anyway, whether written into the contract or not. |
c. Liquor Liability
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.
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Examples:
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On the other hand, consider this:
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Example: Harry's Hard Rock Malt Manufacturing, Inc. sponsors a fundraiser by holding a Casino Night. The event includes betting and gambling opportunities and charges are made for the food and alcoholic beverages. Harry does not obtain the proper permits and licenses required for the function. Iggy was served alcoholic beverages, was injured on his way home, and claimed the injuries were due to the liquor he was served. Iggy's injuries are not
covered because Harry is in the business of manufacturing alcohol and this
situation was subject to several state and local statutes and ordinances. |
Note: CG 24 08–Liquor Liability provides limited liquor liability coverage by deleting the liquor liability exclusion.
Another way to cover an
insured's liquor liability exposure is through separate Liquor Liability
Coverage. The two ISO Liquor Liability
Coverage Forms are CG 00 33–Liquor Liability Coverage Form (Occurrence Basis)
and CG 00 34–Liquor Liability Coverage Form (Claims-Made Basis).
d. 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 the insured being indemnified under this coverage
form for an injury covered by workers compensation or employer’s liability
policies.
e. Employers Liability
Bodily injury to an employee of the insured as a result of his or her
employment by the insured or performing duties in conjunction with the conduct
of the insured’s business is excluded. Bodily injury to the spouse, children,
parents, brothers or sisters of that employee as a consequence of the
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. However, it does not apply to
liability the insured assumes under an insured contract.
Note: This clarification is particularly important because of increasing use
of contractors, subcontractors, independent contractors, or leased employees
and the uncertainty about who is responsible for injuries to them.
Note: Monopolistic states that provide or require
workers compensation coverage do not provide employer’s liability coverage.
This could result in a significant gap in coverage for the insured. Many
insurance companies in those states have developed manuscript or company
coverage forms or utilize recently developed state-specific ISO endorsements
that add employer’s liability coverage to the CGL Coverage Forms.
f. Pollution
Pollutants are any solid, liquid, gaseous, or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste
also includes materials intended for recycling, reconditioning or reclamation.
(1) Coverage does not
apply to bodily injury or property damage arising out of the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or escape of
pollutants:
(a) At or from any
location or site any insured ever owned, occupied, rented or had loaned to it.
There are three exceptions:
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Example: The Jones family continues to occupy a
unit in an apartment building being renovated because the work is being done
on the other side of the building. The entire family becomes ill from the
fumes released by a faulty furnace. The illness leads to permanent injuries
and the family sues its landlord. The landlord’s CGL Coverage Form
insures the bodily injury the family sustained because it resulted from a
faulty heating unit used to heat the apartment building. The family also
claimed that the fumes resulted in the deaths of their pet dog and cat. Those
deaths are not covered because property damage is not included in the
exception. |
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Example: D&L Contracting erected a
small storage building at a site owned by G.K.
Properties. G.K. required being included as an
additional insured on the D&L CGL Coverage Form for the duration of the building
project. During construction, a neighboring business experienced a pollution
loss it alleged was caused by conditions on the G.K.
site. The business sued G.K. and G.K. turned the suit over to D&L
to handle under its CGL Coverage Form. Coverage applies if D&L is found liable. However, there is no coverage if
it is determined that D&L had temporarily
rented the property as a storage facility from G.K.
the year before. |
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Example: ChemTec, the named insured, is a chemical research
facility. During a research project, a major fire completely destroys ChemTec’s premises. Toxic chemicals released during the
fire in a black cloud over adjacent neighborhoods caused several people to
become ill. The CGL Coverage Form covers those injuries. |
(b) At or from any
location or site any insured or others ever used to handle, store, dispose of,
process or treat waste
(c) That any insured
(or any other party the named insured is legally responsible for) ever
transported, handled, stored, treated, disposed of, or processed as waste
(d) At or from any
location or site where any insured, its contractors, or subcontractors are
performing operations if the pollutants are brought to the location or site in
conjunction with such operations. There are three exceptions:
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Examples:
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Examples:
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(e) At or from any location or site where any insured performs operations involving testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way. This exclusion also applies if contractors or subcontractors working on an insured's behalf perform these operations.
(2) Coverage does not
apply to any loss, cost or expense that arises out of any:
a. Request, demand,
order, or statutory or regulatory requirement for any insured or others to test
for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond
to, or assess the effects of pollutants in any way
b. Claim or suit by a governmental authority (or on its behalf) for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way
Note: Item f.2. does not apply to liability for property damage the insured has without such request, demand, order or statutory or regulatory requirement, or claim or suit brought by or on behalf of a governmental authority.
Pollution coverage can be provided to varying degrees by the following:
If additional pollution liability coverage is needed, a separate
pollution policy should be considered.
g. Aircraft, Auto Or Watercraft
Insurance does not apply to bodily injury or property damage that arises
out of ownership, maintenance, use, including operation, loading or unloading,
or entrustment to others of any aircraft, auto, or watercraft owned, operated
by, or rented or loaned to any insured. This exclusion applies even if a claim
alleges negligence or other wrongdoing by any insured in supervising, hiring,
employing, training or monitoring others.
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Example: A watercraft the insured owns and rents to its employees
for pleasure use is not properly maintained and an employee is injured when
the watercraft sinks. Coverage does not apply to the injury. |
This exclusion does not apply to:
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Example: Ollie at Ollie's
Oriental Grill rents a pontoon boat for an afternoon sales
presentation and cooks appetizers on a small charcoal grill. The grill causes
a fire. When the guests move to the other side of the boat to get away from
the fire, the weight shift causes the boat to tip and several guests fall
into the water. A few are injured. Coverage applies but the pontoon boat's
owner would also be involved in any subsequent lawsuits. |
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Example: Ollie's Oriental
Grill arranges for valet parking during a dinner held for its top
customers at its location. One of the valets inadvertently puts a car he is
parking in reverse and pins a woman walking behind it against another
vehicle. Coverage applies to the woman's injuries. |
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Example: Ollie charters an emergency flight to meet an important client and the charter company requires it to sign a hold-harmless agreement. |
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Example: An all terrain vehicle (ATV) is required to be licensed. A pulley welded to the back of it and used to pull a log suddenly swings the log and strikes a person passing by. Coverage applies in this case because the pulley's operation caused the accident, not the ATV. |
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Example: The well-drilling
equipment mounted on a truck chassis accidentally strikes the side of a
building while maneuvering into position over a well, causing damage to the
building. Coverage applies to the building damage. |
h. Mobile Equipment
Coverage does not apply to bodily injury or property damage that arises
out of transporting mobile equipment by an auto that any insured owns,
operates, rents or has loaned to it. It also does not apply to mobile equipment
used in any prearranged race, speed, stunt, or demolition activity.
Note: The towing vehicle's auto liability coverage insures loss or damage caused by a trailer being towed or for mobile equipment being transported by that vehicle.
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Example: Conan's
Construction uses one of its owned trucks to haul a large crane on a
trailer to a job site. The trailer hitch snaps, the trailer overturns, and
several vehicles following behind are damaged. The CGL Coverage Form excludes
the damage to those vehicles. |
i.
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, including 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.
j. Damage To Property
The insurance company does not pay for property damage to:
(1) Property the named insured owns, rents or occupies. Costs or expenses
it or any other party incurs to repair, replace, enhance, restore or maintain
such property for any reason are not covered. Costs to prevent injury to
persons or damage to property of others are also not covered.
(2) Premises the named insured sold, gave
away, or abandoned if the property damage arises out of any part of those
premises
(3) Property loaned to the named insured
(4) Personal property in the insured's care,
custody or control
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Examples: Property in the insured's care, custody and control includes:
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Note: The CGL Coverage Form does not have endorsements that cover property of
others in the insured’s care, custody or control. However, some insurance
companies have developed their own versions of this endorsement. Another alternative
is Inland Marine Insurance. Bailees Coverage is available to cover the property
of customers or clients of the insured. Various forms of bailees coverage is
available through ISO, the American Association of Insurance Services (AAIS),
and company-specific forms, depending on the insured's needs and operations.
(5) The specific part of real property the
named insured (or others on its behalf) perform operations on if the property
damage arises out of those operations
(6) The specific part of any property that
must be restored, repaired, or replaced because the named insured's work was
done incorrectly
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Example: Rowdy's Rootin Tootin Roofin is installing a new roof on a portion of a
building and mistakenly removes shingles from a portion of the roof that does
not need repairs. The CGL Coverage Form does not cover the damage or expense
to re-cover that portion of the roof. |
Paragraphs (1), (3) and (4) above do not apply to property damage (other
than by fire) to a location, including its contents, that the named insured
rents for seven or fewer consecutive days. A separate limit applies as
described in Section III–Limits Of Insurance.
Paragraph (2) above does not apply if the location is the named insured's
work and the named insured never occupied or rented the location or held it for
rent.
Note: This is particularly important to homebuilders that build and
sell homes. Without this exception, there would be no coverage once the home
was sold. However, this exclusion still applies if the named insured ever used
the home as a model home.
Paragraphs (3), (4), (5) and (6) above do not apply to any liability
assumed under a sidetrack agreement.
Note: Railroad sidetrack agreements are covered contracts under the CGL Coverage Form.
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Example: Appliances Unlimited distributes large appliances. Because a railroad track passes next to its premises, Appliances believes its sales would increase and expenses decrease if the railroad built a sidetrack into its warehousing area. Merchandise could then be loaded and unloaded directly into and out of railroad cars. The railroad agrees to the arrangement, subject to it having 24-hour access to the sidetrack. It also requires that Appliances guarantee that it will protect the track from vehicle damage, limit vehicle access, and hold the railroad harmless for any collision or injury during loading and unloading. |
Paragraph (6) above does not apply to property damage included in the
products/completed operations hazard.
k. Damage To Your Product
Coverage does not apply to property damage to the named insured's product
arising out of it or any part of it.
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Example: Harry's Heaters manufactures
gas furnaces. A furnace malfunctions, catches fire, and destroys the furnace.
Coverage does not apply to the furnace that was destroyed. However, coverage
applies to the damage the furnace caused when it malfunctioned. |
l. Damage To Your Work
There is no coverage for property damage to the named insured's work that
arises out of it or any part of it included in the products/completed
operations hazard.
Note: This exclusion does
not apply if a subcontractor did the work on the named insured's behalf.
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Example: Excellent
Electrical Contractors incorrectly repairs the electrical wiring in a
building that subsequently causes a fire in the building. The property damage
as a result of the fire is not covered. However, coverage would apply if a
subcontractor did the incorrect wiring repair work for Excellent. |
m. Damage To Impaired Property Or Property Not Physically Injured
The insurance company does not cover property damage to impaired
property, or property not physically injured when caused by a defect,
inadequacy, or dangerous condition in either the named insured’s product or its
work. Coverage also does not apply if it is caused by a delay or failure by the
named insured or others acting on its behalf to meet contract terms and
conditions.
However, this exclusion does not apply to loss of use of other property
that arises out of the sudden and accidental physical injury to work performed
by the contractor for the named insured.
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Examples:
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Note: There is no standard ISO endorsement currently available to buy back this coverage or to delete this exclusion.
n. Recall Of Products, Work Or Impaired Property
Coverage does not apply to damages claimed for any loss, cost or expense
the named insured or others incurs for loss of use, withdrawal, recall,
inspection, repair, replacement, adjustment, removal or disposal of the named
insured's product, work, or impaired property. This exclusion applies if the
withdrawal or recall is because of a known or suspected defect, deficiency, inadequacy
or a dangerous condition in the item recalled.
Note: CG 00 66–Product Withdrawal Coverage Form reimburses the named insured's product withdrawal expenses because of a product withdrawal that the endorsement covers.
o. Personal And Advertising Injury
There is no coverage for any bodily injury that arises out of personal and advertising injury.
Note: Bodily injury that arises from personal and advertising injury is
covered under Coverage B–Personal And Advertising Injury Liability.
p. Electronic Data
Coverage does not apply to damages that arise out of the loss of, loss
of use of, damage to, corruption of, inability to access or inability to
manipulate electronic data. Electronic data is defined as information, facts or
programs used with computer software or any other media used with
electronically controlled equipment.
q. Distribution Of Material In Violation Of Statutes (12 07 addition)
Insurance coverage does not apply to bodily
injury or property damage that arises directly or indirectly out of any act or
omission that violates or allegedly violates:
Note: This exclusion replaces CG 00 67–Exclusion–Violation Of Statues
That Govern E-Mails, Fax, Phone Calls Or Other Methods Of Sending Material Or
Information which was a mandatory amendatory endorsement.
Exclusions c. through n. do not apply to damage by fire to premises while
rented to or temporarily occupied by the named insured with the owner's permission.
A separate limit of insurance for this coverage is available and described in
Section III–Limits Of Insurance.
COVERAGE B–PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a. The insurance company agrees to pay amounts the insured is legally
obligated to pay as damages because of personal and advertising injury that
this insurance covers. It has the right and duty to defend the insured against
any suit that seeks those damages but only those suits seeking damages that
this insurance covers. The company can investigate any loss and settle any
offense and settle any resulting claim or suit at its discretion but the amount
paid as damages is limited as described under Section III–Limits Of Insurance.
Its right and duty to defend ends when the applicable limit of insurance is
used up paying judgments and settlements under Coverage A or Coverage B, or
medical expenses under Coverage C. There are no other obligations or liability
to pay sums or perform acts or services other than those specifically listed
and described under Supplementary Payments–Coverages A And B.
This coverage applies to personal and
advertising injury caused by an offense that arises out of the named insured's
business. The offense must be committed in the coverage territory and during
the policy period.
2. Exclusions
The insurance coverage provided does not apply to any of the following,
except as noted:
a. Knowing Violation Of Rights Of Another
The insurance
company does not pay for personal and advertising injury that the insured
causes or directs. This exclusion applies only if the insured knew that the act
would violate the rights of another and result in personal and advertising
injury.
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Example: Roger Reporter for Shady and Sneaky Sports Tabloid
shadows a famous athlete to get a story. Even though the athlete obtains a
restraining order against it, Shady forces Roger to get the story, regardless
of the consequences. Shady is not covered if the athlete decides to sue it
for violating the restraining order. |
b. Material Published With Knowledge Of
Falsity
Coverage does not
apply when personal and advertising injury is caused by material published by
or at the insured's direction with its knowledge that the information was
false.
Note:
The
publication can be either oral or written.
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Example: An article in
the Whoville Gazette discloses that a famous politician's son was
arrested for drunk driving. At the time the article was published, Whoville
knew it was only a traffic stop that did not even result in a ticket or
citation. Coverage does not apply if the politician’s son decides to sue the
newspaper. |
c. Material Published Prior To Policy
Period
There is no coverage for personal and
advertising injury arising out of oral or written publication of material that
first began before the coverage inception date.
Note:
The
publication can be either oral or written.
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Example: CGL coverage is
effective 01/01/11. The official date of a publication is 01/02/11 but
an advance copy was released on 12/28/10. Since the first publication took
place before the 01/01/11 effective date, there is no coverage if a suit is
filed seeking damages for personal and advertising injury. |
d. Criminal Acts
Insurance does not apply to personal and
advertising injury arising out of a criminal act committed by the insured or at
its direction.
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Example: Norm Newsworthy
is unsuccessful in obtaining details of an incident for a story. The Newtown
Daily News tells Norm to break into a building and copy the confidential
files that contain the information needed. There is no coverage if the
break-in is discovered and the newspaper is sued. However, if Norm broke in
without |
e. Contractual Liability
There is no coverage for liability the
insured assumed in a contract or agreement. However, this exclusion does not
apply to liability the insured has without a contract or agreement.
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Example: A celebrity agrees to an interview to be published by
The Tattler Tabloid but insists on a written agreement including a clause
that The Tattler will not slander or libel the celebrity. This liability
exists whether it is written into the agreement or not. |
f. Breach Of Contract
Coverage does not apply to personal and
advertising injury arising out of breach of contract. However, this exclusion
does not apply to an implied contract to use the advertising idea of another in
the named insured's advertisement.
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Example: Johnny On The
Spot Printing contracted to design, print and mail a promotional
brochure for Brad's Bowling Bonanza. The project was date sensitive. The
Johnny dropped the ball and missed the mailing date by several days. Brad
sued for breach of contract. There is no coverage. |
g. Quality Or Performance Of Goods–Failure To Conform To Statements
Personal and advertising injury that arises out of failure of the named
insured's goods, products or services to conform to statements of quality or
performance stated in its advertisement is excluded.
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Example: Dolly Weighsalot sues because the weight loss product
guaranteed weight loss but Dolly gained weight instead. Coverage does not
apply in this case. |
h. Wrong Description Of Prices
The insurance company does not pay for personal and advertising injury
that arises out of incorrect descriptions of goods, products or services as
stated in the named insured's advertisement.
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Example: A newspaper subscriber sues the paper 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 not covered. |
i. Infringement Of Copyright, Patent,
Trademark Or Trade Secret (12 07 change)
Coverage does not
apply to personal and advertising injury that arises out of any infringement of
copyright, patent, trademark, trade secret, or any other intellectual property
rights.
Note:
There
is no requirement that the named insured, an insured, or even someone acting on
behalf of either does the infringing. All infringement is excluded.
There are two
exceptions. This exclusion does not apply:
j. Insureds In Media And Internet Type
Businesses
There is no
coverage for personal and advertising injury committed by an insured in the
businesses of advertising, broadcasting, publishing, or telecasting. 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 sections of the definition of
personal and advertising injury that address false arrest, detention or
imprisonment, malicious prosecution, or wrongful eviction, entry, or invasion
of private occupancy.
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Example: Poe's Publishing owns the building it occupies and also rents
one floor of it as apartments. Coverage applies if Poe's allegedly wrongfully
evicts a tenant from the building. |
k. Electronic Chatrooms Or Bulletin Boards
Personal and advertising injury that arises
out of an electronic chatroom or bulletin board that the insured owns, hosts,
or controls is not covered.
l. Unauthorized Use Of Another's Name Or Products
The insurance company does not pay for
personal and advertising injury that arises when the named insured tries to
mislead another’s customers or potential customers on the Internet. This
exclusion applies when the misleading is caused by unauthorized use of the name
or product of another party in the named insured's email address, domain or metalog.
m. Pollution
Coverage does not apply to personal and advertising injury arising out of
the actual, alleged or threatened discharge, dispersal, seepage, migration,
release, or escape of pollutants at any time.
n. Pollution Related
Coverage does not apply to any loss, cost or
expense that arises out of:
Note: Because of the personal injury liability coverage wording in previous editions, numerous attempts were made to provide coverage for various types of pollution losses. These attempts were disguised as trespass, wrongful entry, or invasion of the right of private occupancy. Personal and advertising injury coverage was never intended to pay for any pollution damages or cleanup costs. This exclusion clarifies that there is no coverage for any pollution exposure that may arise out of the personal and advertising injury wording in the coverage form.
o. 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, including 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.
p. Distribution Of Material In Violation Of Statutes (12 07 addition)
Insurance coverage does not apply to
personal and advertising injury that arises directly or indirectly out of any
act or omission that violates or allegedly violates:
Note: This exclusion replaces CG 00 67–Exclusion–Violation Of Statues That Govern E-Mails, Fax, Phone Calls Or Other Methods Of Sending Material Or Information which was a mandatory endorsement.
COVERAGE C–MEDICAL PAYMENTS
1. Insuring Agreement
a. The insurance company
pays certain medical expenses for bodily injury caused by an accident. The
accident must occur on premises the named insured owns or rents, on ways
adjoining such premises, or because of the named insured's operations. Coverage
applies if the accident occurs in the coverage territory and during the policy
period. The expenses must be both incurred and reported to the insurance
company within one year of the date of the accident. In addition, the injured
person must submit to examinations as often as reasonably required. The
insurance company pays for the examinations and uses physicians it chooses.
|
Example: Medical expenses incurred by a jogger struck by a brick
dropped by Mitchell's Masonry Service's apprentice bricklayer from the second
floor of a jobsite are covered. |
Note: Medical payments coverage applies only to premises and operations exposures. This coverage does not apply to the products/completed operations hazard.
b. Payments are made
without regard to fault but do not exceed the limit of insurance. The insurance
company pays reasonable expenses for first aid rendered at the time of the
accident. It also pays the necessary medical, surgical, x-ray, dental services,
prosthetic devices, ambulance, hospital, professional nursing and funeral
services.
2. Exclusions
The insurance company does not pay expenses for bodily injury:
a. Any Insured
Coverage does not apply to any insured, except for volunteer workers.
|
Example: Bailey of Bailey, Bailey, and Bailey slips and falls on
ice that accumulated on the front steps of the building that the partnership
owns and occupies. He needs x-rays to determine the extent of his injuries.
The x-ray expenses are not covered because he is an insured. |
b. Hired Person
There is no coverage for persons hired to do work for or on behalf of any
insured or any tenant of any insured.
|
Example: Olson Office
Services hires Paul Paintsfast to paint its office
in the |
c. Injury On Normally Occupied Premises
The insurance company does not pay medical expenses of persons injured on
that part of the premises that the named insured owns or rents that those
persons normally occupy.
|
Example: Jerry, a tenant in the Bombs Away Apartment Building,
falls down the stairs in his own apartment unit and is injured. His medical
expenses are not covered. |
d. Workers Compensation And Similar Laws
Coverage does not apply to any person, whether an employee of any insured
or not, if benefits for bodily injury are payable or must be provided under
workers compensation, disability benefits, or similar laws.
|
Example: A small fire burns Elmer's hand while he is on the job.
Medical payments coverage does not apply to his medical expenses. |
e. Athletic Activities
There is no coverage for any person injured while practicing,
instructing, or participating in any physical exercises, games, sports, or
athletic contests.
|
Example: Lou's
Lumberjacks sponsors a little league baseball team and little Bradley
breaks a leg sliding into home plate. Medical payments coverage does not
apply to Bradley's injuries or medical expenses. |
f. Products/Completed Operations Hazard
The insurance company does not pay for any bodily injury included in the
products/completed operations hazard.
|
Example: A stove
manufactured by Hot StovesRUs purchased by Freddy ignites
due to faulty wiring and burns Freddy's fingers. Medical payments coverage
does not apply to Freddy's injuries or medical expenses. |
g. Coverage A Exclusions
The insurance company does not pay for any bodily injury excluded by
Coverage A.
|
Example: Brawlin' Bob's
employee becomes angry, strikes a customer, and breaks his nose.
Medical payments coverage does not apply because of the expected or intended
injury exclusion under Coverage A. |
Several different endorsements are available that either completely exclude medical payments coverage or delete the coverage for certain operations and exposures. These include:
SUPPLEMENTARY PAYMENTS–COVERAGES A AND B
Note: Payments made under this section do not reduce the limits of insurance.
1. The insurance company pays the following amounts in addition to payments
made in investigating and settling any claim or defending any suit against an
insured.
a. All expenses it incurs
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.
b. Cost of bail bonds required because of traffic law violations or
accidents as a result of using any motor vehicle covered for bodily injury
liability. The cost is limited to $250. The insurance company is not required
to furnish the bonds.
c. Cost of bonds to release attachments. This is limited to the cost of
bond amounts within the limit of insurance that applies. The cost of the excess
amount of the bond is at the insured’s expense. The insurance company is not
required to furnish any bonds.
d. Reasonable expenses the insured incurs at the insurance company's
request to assist it to investigate or defend a claim or suit. This includes up
to $250 per day in lost earnings if the insured is required to be away from
work.
e. A suit's court costs that are the insured's responsibility. This does
not include attorney fees or expenses that are the insured's responsibility.
(12 07 addition)
Note: This recent
change and restriction can be very costly to the insured especially when a
court assesses the costs and expenses of the proceeding against the negligent
party.
f. Prejudgment interest on the part of any
judgment the insurance company pays provided the interest is awarded against
the insured. However, prejudgment interest that accrues during the period of
time after the insurance company offers its full limits is not covered.
g. Interest that accrues on the full amount of
any judgment after it is entered but before the insurance company pays, offers
to pay, or deposits with the court the part of the judgment that is its
responsibility and that is within the limits of insurance
2. If an indemnitee of the insured is named in a suit against the insured
that the insurance company defends, it also defends the indemnitee, subject to
the following conditions being met:
a. The suit against the indemnitee must seek damages for which the insured
assumed the indemnitee's liability in an insured contract or agreement.
b. The insurance this coverage form provides must apply to the liability
the insured assumed.
c. The insured assumed the obligation to defend or the cost of defense in
the same insured contract or agreement.
d. Based on what the insurance company knows about the occurrence and the
allegations contained in the suit, there must not appear to be a conflict
between the respective interests of the insured and the indemnitee.
e. Both the insured and the indemnitee ask the insurance company to handle
the indemnitee's defense in the suit and agree that the same legal
representative will handle the interests of both parties.
f. The indemnitee agrees in writing to cooperate with the insurance company
in investigating, defending or settling the suit, and to promptly send copies
of any demands, notices, summonses or legal documents it receives related to
the suit. The indemnitee must also agree to notify any other insurance company
having coverage available to the indemnitee and to cooperate with that company
in coordinating such other insurance. In addition, it agrees to provide the
insurance company with written authorization to obtain records and other
information related to the suit and to conduct and control the indemnitee's
defense in the suit.
Subject to these conditions, attorney fees and all litigation expenses
are paid but these payments do not reduce the limits of insurance. The
insurance company's obligation to defend the indemnitee ends when the
applicable limit of insurance is exhausted by paying judgments or settlements
or when these conditions and agreements are not met.
Important Note: If the indemnitee does not meet the above
criteria but is still an indemnitee in a suit or claim, all of its defense
expenses must be paid out of the limit of insurance available for the
particular claim.
SECTION II–WHO IS AN INSURED
1. This section identifies insureds with
respect to this insurance. This applies
to the entity or entities on the declarations:
a. If the named insured is an individual, that individual is the named
insured as well as the named insured's spouse. They are insureds only with
respect to operations of the business the named insured solely owns.
|
Example:
Mr. John, a sole proprietor, sells farm produce. Both he and Mrs.
John are insureds. In addition, Mr. John is the sole proprietor in another
venture where he makes wood kitchen cabinets. Here again, both he and Mrs.
John are insureds. However, if he and his brother own the carpentry business
as a partnership, coverage does not apply to the partnership. |
b. If the named insured is a partnership or joint venture, that partnership
or joint venture is an insured. In addition, the named insured's members and
partners, as well as their spouses, are insureds. Their status as insureds is
limited to operations of the named insured's business.
|
Example: Mr. John and Mr. Joe are partners in a
carpentry business. Both partners and their spouses are insureds with respect
to conduct of the carpentry business. However, none of them are insureds
under this coverage form for any personal exposures or for any other business
activities. |
c. If the named insured is a limited liability company, the limited
liability company is an insured. In addition, members of the company are
insureds but only with respect to conduct of the named insured's business. The
named insured's managers are also insureds but only to the extent of their
specific duties as managers.
d. If the named insured is any other organization, it is an insured. In
addition, the executive officers and directors are insureds but only to the
extent of their duties as such. Stockholders are also insureds but their status
is limited to the extent of their liability as stockholders.
e. If the named insured is a trust, the trust is an insured. In addition,
the trustees are insureds with respect to their duties within the trust
2. Each of the following is also an insured:
a. Volunteer workers but only when performing duties related to the named
insured's business. Employees, excluding executive officers and managers of a
limited liability company, are insureds within the narrow range of activities
within the scope of their employment or while conducting the named insured's
business.
(1) Volunteers and employees are not insureds for bodily injury or personal
and advertising injury:
|
Example: The Hometowne Daily Journal is
insured under a CGL Coverage Form. Joe shares some candy with Ken, a visiting
salesman. Ken starts to choke. Joe, a trained EMT,
attempts the Heimlich Maneuver. Unfortunately, Joe's efforts are unsuccessful
and Ken dies before a city emergency unit arrives. Ken's family sues Joe when
it learns that he did not administer the Heimlich Maneuver properly. Hometowne’s CGL Coverage Form
does not respond to this lawsuit. |
(2) Volunteers and
employees are not insureds for property
damage to property owned, occupied or used by, rented to, or in the named
insured's physical custody.
Note: It is important to
understand how coverage extends
to volunteers and their duties. Their covered duties are not the same as
employee duties. Volunteers are usually involved in non-work activities, such
as special events and charitable functions. For this reason, their covered
duties are those that the business establishes for them.
b. Any party (other than an employee or volunteer) who acts as the named
insured's real estate manager
c. Any party that has proper temporary legal custody of a deceased named
insured's property but only with respect to liability that arises out of or is
caused by maintenance or use of that property and then only until a legal
representative is appointed
d. A properly appointed legal representative for a deceased named insured
but only while carrying out its duties as the legal representative.
Note: The legal representative assumes all of the deceased named insured's
rights and duties. This goes beyond the standard insured status and extends to
rights to cancellation, conditions and other elements assigned only to named
insureds.
3. Any newly formed or acquired organization qualifies as a named insured
if there is no other similar coverage available to it. This does not include
partnerships, joint ventures or limited liability companies the named insured
has majority interest in or owns.
a. This provision applies for only 90 days after the organization is formed
or acquired, or until the end of the policy period, whichever comes first.
b. Coverage A does not apply to bodily injury or property damage that occurred
before the organization was acquired or formed.
c. Coverage B does not apply to personal and advertising injury that arises
out of an offense committed before the organization was acquired or formed.
No party is an insured concerning conduct of any current or previous
partnership, joint venture, or limited liability company that is not on the
declarations as an insured.
Note: In addition to the parties included as insureds as outlined above, ISO has produced numerous endorsements used to add a variety of additional insureds under certain circumstances or limited to specific purposes.
SECTION III–LIMITS OF INSURANCE
1. 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 or suits brought, and number of parties making claims
or bringing suits.
|
Examples: Ying and Yang Jewelry Mart is a partnership. It is sued when a customer finds that the diamond in her engagement ring is actually an imitation. The angered bride-to-be files separate actions against Ying and Yang. Each partner sends his copy of the notice of the suit to the insurance company. The company claims adjuster tells them that the limit that responds to the lawsuit is the single occurrence limit. Mary Jones is the named insured. Since she is an individual, her
husband Todd is also an insured. A loss occurs and Mary and Todd are both
sued. The CGL Coverage Form responds and defends each as if he or she is the
only insured. However, the limit applies to each occurrence, not to each
individual. |
2. The General Aggregate Limit is the most the insurance company pays for
the total of damages for Coverage A, other than damages for bodily injury or
property damage included in the products/completed operations hazard, damages
under Coverage B, and medical expenses under Coverage C.
Note: Coverage ends when this limit is exhausted by claims payments made
during a policy period.
|
Example: The CGL Coverage Form's General Aggregate
Limit is $2,000,000. Three covered losses occur during the policy period.
Each is for $1,000,000 for a total of $3,000,000. The most paid is the
$2,000,000 General Aggregate Limit for all covered losses that occur during
the policy period. |
3. The Products-Completed Operations Aggregate Limit is the most paid under
Coverage A for damages because of bodily injury and property damage included in
the products/completed operations hazard.
Note: Coverage ends when this limit is exhausted by claims payments made
during a policy period.
|
Example: A CGL Coverage Form with a $3,000,000 products/completed
operations aggregate limit sustains eight products claims for eight different
injuries to customers from use of the named insured's products in a single
policy year. Although all the losses are covered and occur during the policy
period, the total of all eight claims is $4,000,000. The CGL Coverage Form
responds only up to the $3,000,000 aggregate limit. |
4. The Personal And Advertising Injury Limit is the most paid under
Coverage B for the total of all damages arising out of personal and advertising
injury sustained by any one person or organization. This is subject to the
General Aggregate Limit.
|
Example: The CGL Coverage
Form has a $1,000,000 personal and advertising injury limit and a
$2,000,000 general aggregate limit. A covered personal and advertising injury
claim arises for $2,000,000. Coverage applies only for the $1,000,000
personal and advertising injury limit. |
5. The Each Occurrence Limit is the most paid under Coverage A for the
total of damages under Coverage A and medical expenses under Coverage C due to
all bodily injury and property damage that arises out of any one occurrence.
This is subject to the General Aggregate Limit or the Products/Completed
Operations Aggregate Limit.
|
Example: Rocky's Rockets
and Munitions has a CGL Coverage Form with a $1,000,000 each
occurrence limit. While a tour group is on the premises, an explosion occurs
that injures 25 members of the tour group. The 25 subsequent claims filed for
damages for bodily injury amount to $5,000,000. The $1,000,000 each
occurrence limit is the only amount that applies to those claims, subject to
the general aggregate limit. The remaining $4,000,000 in claims must be
covered by other insurance or Rocky must pay for them from his own funds. |
6. The Damage To Premises Rented To You Limit, subject to the Each
Occurrence Limit, is the most paid under Coverage A for damages because of property
damage to any one premises rented to the named insured. This includes damage by
fire involving premises rented to or temporarily occupied by the named insured
with the owner's permission.
|
Example: The Damage To Premises Rented To You Limit is $50,000. A
loss occurs while the insured rents a location where its operations cause a
fire that burns down the building, resulting in a
total loss of $250,000. The Damage To Premises Rented To You Limit pays only
its $50,000 limit. If the fire also injures several persons, this insurance
covers the value of their claims and the $50,000 fire damage per occurrence
limit on the declarations. |
Note: The Damage To Premises Rented To You limit can be increased for both specific locations and higher limits as well as for additional causes of loss using CP 00 40–Legal Liability Coverage Form.
7. The Medical Expense Limit is the most paid under Coverage C for all
medical expenses because of bodily injury sustained by any one person. This is
subject to the Each Occurrence Limit.
|
Example: Pinkie’s Punks has
a $5,000 Medical Expense Limit per person limit, a $1,000,000 occurrence
limit, and a $1,000,000 general aggregate. Two covered losses totaling
$900,000 were paid earlier in the policy year. A concern on Pinkie’s premises
results in injuries to 100 persons. Each person could receive $5,000 for his
or her medical bills that would result in a $500,000 loss. Although it is
still below the $1,000,000 per occurrence limit only $100,000 is available
because $900,000 has already been paid out of the General Aggregate. Pinkie’s
Punks is responsible for all losses amounts in excess of the $100,000. |
Note: The limits of insurance can be amended by using either of two endorsements.
This section also clarifies application of the limits of insurance. The
limits apply separately to each consecutive annual period and to any remaining
period of less than 12 months. This begins with the coverage inception date on
the declarations, unless extended after issuance for any additional period of
less than 12 months. If that occurs, the additional period is treated as part
of the last preceding period for the purpose of determining the limits of
insurance.
|
Example: The original 12-month policy period ran
from January 1 to January 1. During the second policy period, the insured
requested that the policy period be extended to July 1 to match its accounting
year. The limits apply separately to the first annual 12-month policy period
of January 1 to January 1. They also apply separately to the second policy
period that was extended an additional six months, from the original January
I expiration date to the new July 1 date. From that point forward, the annual
12-month period of July 1 to July 1 has a separate set of limits. If a
short-term policy were issued in place of the six-month extension, it would
have had its own set of limits. Since the original policy period was
extended, the original limits applied to both the original period and the
extension period. |
SECTION IV–COMMERCIAL GENERAL LIABILITY CONDITIONS
1. Bankruptcy
The insurance company is not relieved of its obligations if the insured
or its estate becomes bankrupt or insolvent.
. Duties In The Event Of Occurrence,
Offense, Claim Or Suit
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 any occurrence or offense that may result
in a claim as soon as practicable. As a minimum, the notice should include
information concerning how, when and where the event 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 or damage as a result of the occurrence
or offense.
b. Concerning claims
made or suits brought, the named insured must immediately record the details of
the claim or suit, the date it was received, and notify the insurance company
quickly. This is in addition to being sure to provide the insurance company with
timely written notice of the claim or suit.
c. Every insured
involved in or with the claim must:
d. No insured may
voluntarily make any payments, assume any obligations, or incur any expenses
(other than first aid) without the insurance company's consent. If it does, it
does so at its own cost or expense.
3. Legal Action Against Us
Nobody has the
right to join the insurance company in any way, bring it into a suit claiming
damages from an insured, or sue it unless all the coverage form's terms and
conditions are completely met.
The 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
this coverage form's terms or that are more than the applicable limit of
insurance.
An agreed
settlement is a settlement and release of liability that the insured, the
insurance company, and the claimant or its legal representative sign.
4. Other Insurance
The insurance company's obligations to pay are limited if other valid
and collectible insurance is available that applies to the loss, as follows:
a. Primary Insurance
This insurance is primary except when paragraph b. Excess Insurance
applies. When it 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
This insurance is excess over any other primary, excess, contingent or
other basis insurance:
This insurance is also excess over any other primary insurance available
to the named insured that covers liability for damages that arise out of
premises, operations, products and completed operations for which the named
insured has been added as an additional insured by endorsement.
When this insurance is excess, the insurance company does not have a
duty to defend the insured against any suit if the other insurance has that
duty. However, the company will attempt to defend according to the coverage
form provisions if no other carrier does. In that case, the insurance company is
entitled to the insured's rights against the other carrier or carriers.
When this insurance is excess, it does not begin to pay until the loss
exceeds the sum of all other such insurance that pays for the loss, including
all deductible and self-insured amounts.
The insurance company shares any remaining loss with any other insurance
not included in this Excess Insurance Condition and that was not purchased
specifically to apply in excess of this coverage form's limits of insurance.
c. Method Of Sharing
This insurance permits contribution by equal
shares if other coverage does. Each insurance company contributes equal amounts
until it uses up its limit of insurance or the loss is paid, whichever occurs
first.
|
Example: Jack's Jumpinstix has three separate CGL Coverage Forms, all written in its name. When a loss for which Jack is liable for damages occurs, all three respond. Policy A's each occurrence limit is $50,000, Policy B's is $100,000 and Policy C's is $1,000,000. The total amount of Jack's liability based on the judgment is $500,000. Under contribution by
equal shares, each of the three policies contributes $50,000 for a total
contribution of $150,000 of the $500,000. Policy A's limits are now
exhausted. Policies B and C each contribute an additional $50,000, for a
total contribution of $250,000. This exhausts Policy B's limits. Policy C
covers the remaining $250,000 to make the total of $500,000 in damages. No
one policy pays more than its each occurrence limit. |
If contribution is not by equal shares, it 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 carrier's limit as a percentage of
the total applicable limits and the loss is then apportioned between the
various policies.
|
Example: Using the previous example, Policy A's each occurrence
limit is $50,000, Policy B's is $100,000 and Policy C's is $1,000,000. The
total of all limits available to pay claims is $1,150,000. Company A has
$50,000 of the obligation or roughly 4%. Company B has $100,000 for about 9%.
Company C has the remaining 87% with $1,000,000. The total amount of the
insured's liability is $500,000. As a result, Company A pays $20,000, Company
B pays $45,000, and Company C pays the remaining $435,000. |
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 any additional
premium owed is the due date on the billing notice. If the audit determines
that a return premium is due, it refunds the excess to the first named insured.
c. The first named insured is required to keep records and information the
insurance company needs to calculate the premium and must send copies of such
records and information to it when requested to do so.
6. Representations
By accepting this coverage form as issued, the named insured agrees that
the statements on the declarations are complete and accurate and based on its
representations. It further agrees that coverage issued by the insurance
company is based on those representations.
Note: This is very important because these
statements allow the insurance company to use statements that are not accurate
in any application to void coverage.
7. Separation Of Insureds
Other than the Limits Of Insurance and any rights and duties that apply
specifically to the first named insured, the insurance provided applies to each
named insured as if it was the only named insured. It also applies separately
to each insured against whom 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 made by the
insurance company are transferred to the insurance company. The insured must
preserve those rights and do nothing 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 the company enforce them.
|
Example: Lax Leonard
the Landlord was found liable for damages due to a negligent act that arose
from conditions on his premises. During the investigation, Feels The Pain
insurance company determined that the Ernie Escaped Early, the property's
previous owner, contributed to the premises condition but the injured person
did not name him in the suit. The insurance company subsequently paid the
claim to the injured person. Leonard had the right to take action against
Ernie to recover the damages before the insurance company paid the loss.
However, once payment was made, this condition transferred the rights to
recover damages to Feels The Pain. Leonard had to cooperate with and assist
Feels The Pain in any way possible to recover those damages from Ernie
Escaped Early. |
9. When We Do Not Renew
If the insurance
company decides to not renew, it mails or delivers written notice of the
non-renewal to the first named insured on the declarations at least 30 days
before the expiration date. If notice is mailed, proof of mailing is sufficient
proof of notice.
Note: State amendatory endorsements may supersede
this paragraph.
|
Example: Do Right Casualty Insurance Company wrote
a policy for BigLoss Machine Tools Manufacturing
for the period 01/01/10 to 01/01/11. Because of problems with the account, a
Do Right senior underwriter sent notice of non-renewal on 11/28/10 that BigLoss received on 12/01/10. The chief financial officer
at BigLoss sent a letter to Do Right and demanded
that it issue the renewal policy for the period 01/01/11 to 01/01/12. The
letter included an excerpt from the AnyState
Insurance Code that clearly stated that the named insured must receive at
least 45 days advance notice of non-renewal. Do Right immediately issued the
renewal as demanded. |
SECTION V–DEFINITIONS
Defined words are used throughout the coverage form. Restricting their
meaning to the definition in the coverage form gives all parties a clearer
understanding of the coverage intended.
1. Advertisement
This is a published or broadcasted notice to the general public or
specific market segments concerning the named insured's goods, products or
services in order to attract customers or supporters. Published notices include
material placed on or in the Internet and other electronic forms of
communication. An entire website is not considered an advertisement but notices
on websites that provide information about the named insured's goods, products
or services in order to attract customers or supporters are.
2. Auto
This is a land motor vehicle, trailer or semi-trailer designed for
travel on public roads. It includes any attached machinery or equipment. Auto
is also any other land vehicle subject to compulsory or financial
responsibility laws or motor vehicle laws in the state where it is licensed or
principally garaged. It does not include mobile equipment.
3. Bodily Injury
This is bodily injury, disability, sickness or disease sustained by a
person. This includes death resulting from bodily injury, sickness or disease
whenever it occurs.
4. Coverage Territory
This is the United States of
America, its territories and possessions, Puerto Rico and Canada. This includes
international waters or airspace, but only for injury or damage that occurs
during travel or transportation between is the United States of America, its territories and possessions, Puerto
Rico and Canada.
Coverage territory includes other parts of the
world, if the injury or damage arises out of the following, and subject to the
insured's responsibility to pay damages being determined in a suit based on the
merits in the territory described above or in a settlement the insurance
company agrees to:
5. Employee includes leased workers. It does not include
temporary workers.
6. Executive Officer
This is any person who occupies any officer position created by the named
insured's charter, constitution, by-laws or similar governing documents.
7. Hostile Fire
This is a fire that becomes uncontrollable or burns outside of its intended
receptacle.
8. Impaired Property
This is tangible property that is not the named insured’s work or
product that cannot be used or is less useful because of the insured’s
defective, deficient, inadequate or dangerous product or work incorporated into
it. Property can also be considered impaired when the named insured has not
satisfactorily completed the terms of a contract or agreement. Impaired
property must be capable of being restored to use by repairing, replacing,
adjusting, or removing the named insured's product or work, or by the named
insured fulfilling the terms of the contract or agreement.
9. Insured Contract
The six types of insured contracts are:
a. Contracts for a lease of premises. This does
not include that part of any contract that agrees to indemnify for fire damage
to any premises that the named insured leases, rents or temporarily occupies.
b. Sidetrack agreements
c. Easement or license agreements. These do not
include those related to construction or demolition operations on or within 50
feet of a railroad
d. Obligations that ordinances require to
indemnify a municipality, except those related to work for the municipality
e. Elevator maintenance agreements
f. The part of any contract or agreement
relating to the named insured’s business where the named insured assumes the
tort liability of another party to pay for bodily injury or property damage to
a third party. This includes indemnification contracts with municipalities for
work performed for them.
Tort liability is liability imposed by law, not by contract.
The contracts in f. above have exceptions. The following are not
considered insured contracts.
10. Leased Worker
This is a person a labor leasing firm leases to the named insured under
a written contract or agreement to perform duties related to conduct of the
named insured's business. Leased workers are not the same as temporary workers.
11. Loading Or Unloading
This is handling of property beginning when it is moved from its place
of acceptance onto or into a watercraft, auto or aircraft. It continues while
it is in or on the watercraft, auto or aircraft. It ends when the property is
delivered from the aircraft, auto or watercraft to its final destination.
Property being moved by mechanical devices not attached to the watercraft,
auto, or aircraft is not considered loading or unloading. Hand trucks are not
considered mechanical devices and movement by them is considered loading and
unloading.
This is handling of property beginning when it is moved from its place
of acceptance onto or into a watercraft, auto or 12. Mobile Equipment
This includes the following land vehicles and
machinery attached to them.
a. Bulldozers, farm machinery, forklifts and
other vehicles designed primarily for off-road use
b. Vehicles intended for use only on or next to
the owned or rented premises
c. Vehicles that use crawler treads to move
d. Vehicles used to provide mobility for the
described permanently mounted equipment. This is power cranes, shovels,
loaders, diggers and drills, and road construction or resurfacing equipment
such as graders, scrapers or rollers. The vehicle that provides the mobility
can be self-propelled or not.
e. Vehicles not described in a., b., c., or d.
above and not self-propelled but used to provide mobility for permanently
attached equipment. This is cherry pickers or similar devices used to raise or
lower workers. Others are equipment such as air compressors, pumps and
generators, including spraying, welding, building cleaning, geophysical
exploration, lighting and well servicing equipment.
f. Vehicles not described in a., b., c., or d.
above and used for purposes other than transporting persons or cargo. Self-propelled
vehicles with permanently attached equipment designed for snow removal, road
maintenance, other than construction or resurfacing, or street cleaning are
considered autos, not mobile equipment. Cherry pickers or similar devices
mounted on automobile or truck chassis and used to raise or lower workers or
equipment and air compressors, pumps and generators permanently mounted on
self-propelled vehicles are considered autos, not mobile equipment.
Mobile equipment does not include any vehicle subject to compulsory or
financial responsibility laws or motor vehicle insurance laws in the state
where it is licensed or garaged. These vehicles are treated as autos.
13. Occurrence
This is an accident. It includes continuous or repeated exposure to
essentially the same harmful conditions.
14. Personal And Advertising Injury
This is any injury that arises out of one or more of the following
offenses. It includes consequential bodily injury.
a. False arrest, detention or imprisonment
b. Malicious prosecution
c. Wrongful eviction from, wrongful entry into,
or invasion of the right of private occupancy of a room, dwelling or premises
that a person occupies when committed by or on behalf of the property owner,
landlord, or lessor
d. Any oral or written publication of material
that slanders or libels a person or organization or disparages a person's or
organization's goods, products or services. This can take place using any form
of communication, including the Internet and other electronic forms.
e. Oral or written publication of material that
violates a person's right of privacy. The violation can take place using any
form of communication, including the Internet and other electronic forms.
f. The named insured using the advertising idea
of another in its advertisement
g. The named insured's advertisement infringing
on the copyright, trade dress or slogan of another
15. Pollutants
These are irritants and contaminants such as smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste of a solid, liquid, gaseous or thermal
nature. Waste includes property to be disposed of, as well as property to be
recycled, reconditioned or reclaimed.
17. Products-Completed
Operations Hazard
This includes all bodily injury and property damage that occurs away
from the named insured's owned or rented premises that results from the named
insured's product or work. It does not include those products still in the
named insured's physical possession or work not yet completed or abandoned.
Work is considered completed when the work called for in the named
insured’s contract has been completed. Work at one site that has been completed
is a completed operation even if the contract calls for work at more than one
site. In addition, part of work done at a site that is put to its intended use
by any party other than a contractor or subcontractor still working on the same
project is a completed operation. Work is considered completed, even if it may
still need service, maintenance, correction, repair or replacement.
This definition does not include bodily injury or property damage that
arises out of any of the following:
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Example: Jolly Foods hired Hauling, Inc. to
transport its “Homemade Chicken Salad” from Indiana to California. The
product arrives and is sold at local outlets. Individuals who eat it soon
become ill. It turns out that Hauling, Inc. neglected to activate its
refrigerating unit during the long trip. Jolly Foods is covered for the
products losses because of the exception to this definition. |
17. Property Damage
This is physical injury to tangible property, including resulting loss
of use of that property. The loss of use is treated as having occurred at the
same time as the physical injury that caused it. It is also loss of use of
tangible property not physically injured. The loss of use is treated as having
occurred at the time of the occurrence that caused it.
Electronic date is not considered tangible property. It means
information, facts or programs stored as or on, created or used on, or
transmitted to or from computer software or any other media used with electronically
controlled equipment.
18. Suit
This is a civil proceeding that alleges damages for bodily injury,
property damage, or personal and advertising injury that this insurance covers.
It includes arbitration proceedings or any other alternative dispute resolution
proceeding claiming such damages that the insured submits to with the insurance
company's consent.
19. Temporary Worker
This is any person furnished to the named insured to substitute for a
permanent employee temporarily away from the business or to meet seasonal or
short-term workload conditions.
20. Volunteer Worker
This is a person that the named insured does not employ but who donates
his or her work and acts at the direction of, and within the scope of duties
prescribed by, the named insured. Volunteer workers are not paid fees, salaries
or any other form of compensation by the named insured or any other party for
the work performed.
21. Your Product
a. This is any goods or products manufactured,
sold, handled, distributed or disposed of by the named insured, by others
trading under the named insured’s name, or by any party whose business or
assets the named insured acquired. It includes containers (excluding vehicles),
materials, parts or equipment furnished in connection with such goods or
products. It does not include real property.
b. It is also warranties or representations
made concerning the fitness, quality, durability, performance, or use of the
product and providing (or failing to provide) adequate warnings or
instructions.
c. It is not vending machines or other property
rented to or located for the use of others but not sold.
22. Your Work
This is work or operations performed by the named insured, or by others
on its behalf. It is also materials, parts or equipment furnished in connection
with such work. Warranties or representations made concerning the fitness,
quality, durability, performance, or use of the work and providing or failing
to provide adequate warnings or instructions is all considered Your Work.
CG 00 02–COMMERCIAL GENERAL LIABILITY COVERAGE FORM (CLAIMS-MADE BASIS)
The header section of this coverage form states that Coverage A and Coverage B provide claims-made coverage and encourages the named insured to read it carefully. This statement is intended to alert the named insured to the fact that certain parts of this coverage form are different than in the occurrence coverage form.
This analysis addresses only the parts of the claims-made coverage form that are different than the occurrence coverage form. This includes the following sections:
Note: It is clear
that the HOW, WHAT, WHO, and WHERE aspects of coverage are unchanged. All
differences center on the “simple” question of WHEN.
COVERAGE A–BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
Paragraphs b. and c. replaces paragraphs b., c., d., and e.
b. Coverage applies to bodily injury and property damage only if:
c. Claims made by persons or organizations seeking damages are treated as having been made when the notice of claim is first received and recorded by any insured or the insurance company, or when the insurance company makes a settlement, whichever occurs first.
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Example: The policy period is 01/01/11 to 01/01/12 when coverage is written on a claims-made basis for the first time. It subsequently renews twice, each time on a claims-made form. Three claims are reported during the time period. Claim #1 is a 12/01/10 occurrence reported on 01/15/11. Claim #2 is a 05/01/11 occurrence reported on 12/01/11. Claim #3 is a 02/01/11 occurrence reported on 0 6/01/11. Scenario 1–The retroactive date changes to match the effective date of each policy term:
Scenario 2–The retroactive date is the effective date of the first claims-made policy.
Scenario 3–The retroactive date indicated on the declarations is "None."
Claim (3) is considered because there is no retroactive date and the date the claim was reported is in the second policy term. |
All claims for damages because of bodily injury to the same person are treated as having been made at the time that the first of those claims was made against any insured.
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Example: Lois is crushed by falling equipment. A claim for her medical bills is presented on 07/01/11. Lois’ husband sends notification of his claim for loss of consortium to the insurance company. On 03/01/13, Lois dies and her family files a wrongful death claim against the insured. On 09/01/13, Lois' workers compensation carrier subrogates against the insured for the costs of the injuries she sustained that it paid. Each of these claims is treated as having the initial claims-made date of 07/01/11. |
All claims for damages because of property damage causing loss to the same person or organization are treated as having been made at the time that the first of those claims was made against any insured.
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Example: Carl’s pontoon boat smashed into a dock. A claim for the damage to the dock was made on 09/01/11. Additional damage was discovered during the winter and a second claim was made in the spring. The marina could not open on time because of the extent of the damage and a third claim was made for loss of use. Each of the claims submitted for the same loss have the same initial claims-made date of 09/01/11. |
COVERAGE B–PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
Paragraphs b. and c. replace paragraph b. This section is almost identical to the Coverage A. Insuring Agreement above except that reference is made to offense as opposed to occurrence and instead of referring to bodily injury or property damage; it refers to personal and advertising injury.
Coverage applies to personal and advertising injury only if:
Claims made by persons or organizations are treated as having been made when the notice of claim is first received and recorded by any insured or the insurance company, or when the insurance company makes a settlement, whichever occurs first.
All claims for damages because of personal and advertising injury to the same person or organization as a result of an offense are treated as having been made at the time that the first of those claims was made against any insured.
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Example: Dreamy Malts' claims-made CGL Coverage Form is written for the period 05/01/11 to 05/01/12. The retroactive date is 05/01/08. Over the 2010 Thanksgiving holiday, Dreamy told a newspaper reporter that it once received contaminated milk from Dalton’s Fine Foods and would never use them again. Dalton’s sued Dreamy on 06/01/11. This coverage form responds because of the date the claim was made because the offense was committed after the retroactive date and before the expiration date. |
2. Exclusions
The personal and advertising injury liability exclusions are identical
in both coverage forms with one exception. Exclusion c. Material Published
Prior To The Policy Period in the claims-made coverage form states that
coverage does not apply to personal and advertising injury that arises out of
oral or written publication of material that first took place before any
retroactive date on the declarations.
SECTION IV–COMMERCIAL GENERAL LIABILITY CONDITONS
Condition 2. Duties In The
Event Of Occurrence, Offense, Claim Or Suit, subparagraph a. has an entry that is not in the occurrence coverage
form. It states that notice of an occurrence or offense is not notice of a
claim. This is a very important distinction because the notice of claim
date sets the policy year under which the policy must be settled. Injured
parties do not always make a claim following a claim or they think a while
before pursuing it. Until the injured party notifies the insured or the
insurance company, no claim has been made.
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Example: On 08/01/10, Pamela sees a customer in her grocery store slip and fall near the frozen food section. She calls back to the storeroom for assistance but the customer disappears before help arrives. Pamela notifies the insurance company of the occurrence on the same day. On 06/15/11 Pamela receives suit papers from that customer's family because he died as a result of the fall in the store and after a series of subsequent hospitalizations. If Pam had claims-made coverage in force during the time period, the claims-made date is 06/15/11, not 08/01/10, and the coverage in force as of 06/15/11 responds, provided the retroactive date is prior to 08/01/10. |
Condition 4. Other Insurance, subparagraph b. Excess Insurance, in the
claims made coverage form has an additional provision that is not in the
occurrence coverage form. It states that this insurance is excess over any
other insurance written on any other basis that is effective before the
effective date of this policy on the declarations and that applies to bodily
injury or property damage on other than a claims-made basis if:
This basically means
that, if the claims-made coverage replaces an occurrence policy, the occurrence
policy is primary and the claims made policy is excess in cases where coverage
overlaps because of setting the retroactive date.
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Example: Continuing the grocery store example above, if occurrence coverage was in effect on 08/01/10 and claims-made coverage was in effect on 06/15/11 with a retroactive date prior to 08/01/10, the occurrence coverage is primary and the claims-made coverage is excess. |
Condition 10. Your Right To Claim And Occurrence Information in the
claims-made coverage form is not in the occurrence coverage form. This
condition details the claims-made claim information the insurance company
releases for all periods that it provided coverage on that basis, the parties
the information is released to, and the conditions related to release of this
information. The detailed analysis follows.
10. Your Right To Claim And Occurrence
Information
The insurance company provides the first named insured information
relating to any claims-made CGL coverage issued to it during the previous three
years. The required information is:
Reserve amounts are based on the insurance company's judgment, are
subject to change at any time and without notice, and should not be considered
as final settlement amounts.
Note: It is extremely important to remember that none of this information
should be disclosed or provided to any claimant or its representative without
the insurance company's consent.
If the insurance company decides to cancel or not renew, it provides
this claim information 30 days or more before the cancellation or non-renewal
date. In other cases, it provides this information only after it receives a
written request from the first named insured. That request must be received no
later than 60 days after the expiration date. The insurance company must
provide the information within 45 days of the date it received the request.
The insurance company carefully develops and maintains claim and
occurrence information for its own business purposes and does not make any
representations or warranties to anyone receiving it from or on behalf of any
insured concerning its accuracy. Cancellation or non-renewal is still
effective, even if the information provided is not accurate.
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Example: Crane Inc. has been insured on a claims-made CGL Coverage Form written by Cranky Insurance Company for the past three years. Cranky notifies Crane that it is not renewing coverage and provides Crane with two different reports. The first report reads as follows:
This report does not include ten other occurrences included on a similar report received from its previous carrier. The second report reads as follows:
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SECTION V–EXTENDED REPORTING PERIODS
This section is in only the claims-made coverage form. It explains the
extended reporting periods and terms available if the coverage is cancelled,
not renewed, or replaced by coverage with a retroactive date later than the one
on this coverage form. It also applies if coverage is renewed on other than a
claims-made basis.
This section also explains how the limits of insurance apply and how the
premium is charged for the extended reporting period. The detailed analysis
follows.
1. The insurance company provides one or more described Extended Reporting
Periods if any of the following applies:
Note: If the named insured requests the
retroactive date change or that claims made coverage be replaced with coverage
on a different basis the extended reporting period does not apply.
2. Extended Reporting Periods do not change the nature of the coverage
provided or extend the coverage period. These periods only apply to claims for:
3. A Basic Extended Reporting Period is included automatically and without
any additional premium charge. It begins at the end of the coverage period. It
lasts for:
This period does not apply to claims covered under any subsequent
insurance coverage the named insured purchases or that would be covered except
for the limit of insurance applying to such claims being used up.
4. The Basic Extended Reporting Period does not increase or reinstate the
Limits Of Insurance.
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Example: Intergalactic Insurance Company renews Planet O’s CGL coverage on an occurrence form. This triggers the Basic Extended Reporting Period for the previous policy. Planet O's CGL coverage had been on a claims-made basis for the past four years. The retroactive date was the date of the first claims-made policy and had never changed. The first claims-made coverage was effective 01/01/06 and the last claims-made CGL coverage form expired 01/01/10.
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5. A Supplemental Extended Reporting Period is available by endorsement and
for an additional premium charge. It is of unlimited duration and begins when
the Basic Extended Reporting Period ends.
The named insured must request this endorsement in writing no later than
60 days after the end of the policy period. This period does not take effect
unless the named insured pays the additional premium by the due date.
The insurance company calculates the additional premium according to its
rules and rates. In doing so, it considers the nature of the exposures,
previous types and limits of insurance, limits of insurance remaining under
this coverage form for future payment of damages, and other relevant factors.
In any event, the additional premium is not more than 200% of the annual
premium charged for this coverage form.
The endorsement establishes the terms that apply to the Supplemental
Extended Reporting Period consistent with this section. It must include a
provision that essentially states that the insurance available for claims first
received during the period is excess over any other valid and collectible
insurance in force after the Supplemental Extended Reporting Period begins.
6. The insurance company provides the supplemental aggregate limits of
insurance described below if the Supplemental Extended Reporting Period is in
effect. These limits apply only for claims first received and recorded during
the Supplemental Extended Reporting Period and are equal to the dollar amount
on the declarations in effect at the end of the policy period for each of the
following limits of insurance where a dollar amount has been entered:
Section III–Limits Of Insurance, Paragraphs 2 and 3 are amended
accordingly. The Personal And Advertising Injury Limit, the Each Occurrence
Limit and the Damage To Premises Rented To You Limit on the declarations
continue to apply, as established under Section III–Limits Of Insurance,
Paragraphs 4, 5 and 6.
COMPARE:
CG 00 01–COMMERCIAL GENERAL LIABILITY COVERAGE FORM: 12 07 EDITION TO THE 12 04
EDITION
INTRODUCTION
This is the
second revision of the Insurance Services Office (ISO) CG 00 01–Commercial
General Liability (CGL) Coverage Form since 2001. The changes made in the
December 2007 edition compared to the December 2004 edition primarily involve
clarification of intellectual property rights and a new exclusion concerning
distribution of material in violation of two recently enacted consumer
protection acts for Bodily Injury Liability and Property Damage Liability as
well as Personal and Advertising Injury Liability. The only other change
involves limiting what is included in court costs taxed against the insured in
a suit under Supplementary Payments.
COVERAGE
A–BODILY INJURY AND PROPERTY DAMAGE LIABILITY: 2007 EDITION
Exclusion q.,
Distribution Of Material In Violation Of Statutes, is a new exclusion in the
2007 edition. It excludes coverage for bodily injury or property damage that
arises directly or indirectly out of any act or omission that violates or
allegedly violates:
Note: This wording was
introduced in the 03 05 edition of mandatory endorsement CG 00
67–Exclusion–Violation Of Statutes That Govern E-Mails, Fax, Phone Calls, Or
Other Methods Of Sending Materials Or Information and is now incorporated into
the coverage form.
COVERAGE
B–PERSONAL AND ADVERTISING INJURY LIABILITY: 2007 EDITION
Exclusion i., Infringement Of Copyright, Patent, Trademark Or Trade
Secret contains a limitation in the 2007 edition. This exclusion is limited to
the extent that such other intellectual property rights do not include using
another party's advertising idea in the named insured's advertisement.
COVERAGE
B–PERSONAL AND ADVERTISING INJURY LIABILITY: 2007 EDITION
Exclusion p.,
Distribution Of Material In Violation Of Statutes, is a new exclusion in the
2007 edition that is not in the 12 04 edition. It excludes coverage for bodily
injury or property damage that arises directly or indirectly out of any act or
omission that violates or allegedly violates:
Note: This wording was
introduced in the 03 05 edition of mandatory endorsement CG 00
67–Exclusion–Violation Of Statutes That Govern E-Mails, Fax, Phone Calls, Or
Other Methods Of Sending Materials Or Information and is now incorporated into
the coverage form.
SUPPLEMENTARY
PAYMENTS–COVERAGES A AND B: 2007 EDITION
Supplementary
Payments, item 1.e. has a limitation in the 2007
edition that is not in the 2004 edition. In both editions, the insurance
company pays all court costs taxed against the insured in the suit with respect
to claims it investigates or settles or suits it defends. However, the 2007
edition states that these payments do not include attorneys’ fees or attorneys’
expenses taxed against the insured.
COMPARE:
ISO COMMERCIAL GENERAL LIABILITY COVERAGE FORMS–CG 00 01 (OCCURRENCE BASIS) TO
CG 00 02 (CLAIMS-MADE BASIS)
INTRODUCTION
There are two Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Forms. CG 00 01 covers on an occurrence basis. It covers liability or damage losses that occur during the policy period, regardless of when the insurance company is notified of the loss or claim. The key to this coverage approach is the date of loss or the period of time when the loss occurs. Coverage triggers based on the date of the occurrence.
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Example: Malarky's Market is insured under CG 00 01 for the period 03/01/11 to 03/01/12. A customer slips, falls and sustains injuries on 04/15/11. In this case, coverage applies because the fall that resulted in injury occurred during the policy period. However, the customer neglects to inform Malarky or the insurance company of the injury until 04/15/12. Even though the claim is over a year late in being reported and is actually reported during another policy period, Malarky’s coverage for the period when the injury occurred responds because the injury occurred during the 03/01/11 to 03/11/12 policy period. |
CG 00 02 covers on a claims-made basis. Coverage triggers based on the actual filing date or receipt of the claim, in addition to the date of loss or injury. It handles any insured loss or claim filed during the policy period, regardless of when the actual loss or injury occurred, subject to the retroactive date on the declarations. While the retroactive date can be any date, it should be the first date that claims-made coverage applied to the risk, because an occurrence coverage form applies to any loss or damage that occurs prior to that date. Claims-made coverage applies only to covered losses that occur after the retroactive date.
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Example: Referring to the example above, Malarky is insured under CG 00 02. All other details are the same. In this case, subject to the retroactive date and any extended reporting periods, coverage may not apply because it was not reported to the insurance company until after the coverage period ended. |
CG 00 02 was developed to help the insurance industry deal with long-tail
loss development in certain types of liability claims and to enhance the claims
adjusting, actuarial and ratemaking processes. In some cases, many years can
pass between the date that a loss occurred and the date it is reported to the
insurance company. As a result, some of the traditional statistical approaches
used in the ratemaking process are not always credible. Claims-Made Coverage
eliminates some of the gap in the tail and offers coverage at the time the
claim is made instead of when the loss actually occurs. This results in more
credible statistics, loss costs and rates, and more adequate premium charges.
Since the two coverage forms are mostly identical, this analysis briefly touches on the areas that are identical and more thoroughly examines the areas that are different.
WHEN TO USE CLAIMS-MADE
COVERAGE INSTEAD OF OCCURRENCE COVERAGE
CG 00 02 has not been very popular with or well received by most commercial insurance customers. While the premium charged is usually lower than the premium charged for CG 00 01, most insurance buyers are more concerned with potential long-tail exposures. In many cases, CG 00 02 is the coverage form of last resort for customers who cannot obtain coverage under CG 00 01.
Numerous cases exist where an insured is sued for loss events that occurred 25 or more years earlier, long after the occurrence coverage's expiration date. While the insured benefits by the coverage this form provides many years after the fact, the insurance company sustains losses it never expected and that the premium charge did not anticipate.
An example is the occurrence coverage form written for a comparatively small premium charge that must respond to an asbestos claim brought for today's dollars for an incident that occurred decades earlier. In this case, all the potential exposures involved with asbestos were not known at the time when coverage was written. As a result, insurance companies are unable to recoup the huge claims and loss expenses they incurred. CG 00 02 would have been the more appropriate coverage form for these exposures and situations if they were known at the time and the coverage form was available.
CONCERNS OVER REPLACING ONE
COVERAGE FORM WITH ANOTHER
Extreme caution must be taken when one of these coverage forms is replaced with the other because of the potential gaps in coverage that can result. Both the insurance agent and the named insured must be aware of these gaps and understand the possible consequences.
Gaps in coverage usually occur in one of two areas. The first is the retroactive date in every claims-made coverage form. The other area involves the type of endorsements when the change takes place.
COMPARE: ISO COMMERCIAL
GENERAL LIABILITY COVERAGE FORMS–CG 00 01 (OCCURRENCE BASIS) TO CG 00 02
(CLAIMS-MADE BASIS)
SECTION I–COVERAGES
COVERAGE A–BODILY INJURY AND
PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
2. Exclusions
The bodily injury and property damage liability exclusions are identical in both coverage forms.
COVERAGE B–PERSONAL AND
ADVERTISING INJURY LIABILITY
1. Insuring Agreement
2. Exclusions
The personal and advertising injury liability exclusions are identical in both forms with one exception.
COVERAGE C–MEDICAL PAYMENTS
1. Insuring Agreement
This is identical in both coverage forms.
2. Exclusions
These are identical in both coverage forms.
SUPPLEMENTARY
PAYMENTS–COVERAGES A AND B
This section is identical in both coverage forms.
SECTION II–WHO IS AN INSURED
This section is identical in both coverage forms.
SECTION III–LIMITS OF
INSURANCE
This section is identical in both coverage forms.
SECTION IV–COMMERCIAL
GENERAL LIABILITY CONDITONS
Note: The term "suit" is not in the claims-made form.
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Example: Michael’s Metals insurance has been written on occurrence coverage forms for the past ten years. On 01/01/11, coverage is written on a claims-made form with a retroactive date of 01/01/08. On 03/01/11, Michael receives a claim for a loss that occurred on 06/01/10. The 01/01/10 to 01/01/11 occurrence form is primary on this claim but the claims-made coverage form is available as excess over it. |
SECTION V–EXTENDED REPORTING
PERIODS
This section is in only the claims-made coverage form. It explains the extended reporting periods and terms available if the coverage is cancelled, not renewed, or replaced by coverage with a retroactive date later than the one on this policy. It also applies if coverage is renewed on other than a claims-made basis. It explains how the limits of insurance apply and how the premium is charged for the extended reporting period.
SECTION V–DEFINITIONS (CG 00
01) SECTION VI–DEFINITIONS (CG 00 02)
This section is identical in both coverage forms, other than the different section number used for the definitions in the claims-made form because it includes the section on extended reporting periods.
ADDENDUM
The following example illustrates the differences in triggering coverage in the occurrence coverage form versus triggering coverage in the claims-made form.
Time line to trigger coverage on an
occurrence coverage form:
The claim is filed on 12/01/11 for a covered
injury loss that occurred on 07/15/10 under the occurrence coverage form
written for the period 03/01/10 to 03/01/11.
The date of occurrence of the covered injury
loss must be within the coverage period but the date the claim is filed has no
effect, other than potential statute of limitations that apply in certain
jurisdictions.
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Coverage inception date |
Occurrence date |
Coverage expiration date |
Date claim filed |
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03/01/10 |
07/15/10 |
03/01/11 |
12/01/11 |
Time line to trigger coverage on a claims-made coverage form:
Using the example above, the same scenario results in coverage being
denied because the claim is submitted after the policy period. This assumes no
extended reporting period is involved.
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Retroactive Date |
Coverage inception date |
Occurrence date |
Coverage expiration date |
Date claim filed |
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03/01/10 |
03/01/10 |
07/15/10 |
03/01/11 |
12/01/11 |