COVERAGES

 

“COVERAGES” section is normally the first section of the policy (after the DECLARATIONS page), which outline the coverages provided by the insurer, and are divided into three types:

Coverage A.  Bodily Injury and Property Damage

Coverage B.  Personal and Advertising Injury Liability

Coverage C.  Medical Payments

 

Note:  In later discussions of coverages, the titles “Coverage A”, “Coverage B”, and “Coverage C” is not used per se.  Instead the coverages will be referred to as to their coverages; i.e.  “Coverage A” will be referred to as “Bodily Injury and Property Damage” coverage, etc.  Even though policy wording will refer to these types as “Coverages”, the functional description is used so that the student will become familiar with the provisions – instead of having to stop and think “Is Personal Liability part of Coverage A or Coverage B?”

 

An example of actual policy wording will be provided in detail later in this text.  At this point, it is important to recognize the provisions as to coverage and exclusions, etc., so that they can be recognized and understood in any liability policy. 

 

BODILY INJURY AND PROPERTY DAMAGE LIABILITY

 

1. Insuring Agreement:

 

The insurer will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which the insurance applies.  The insurer will have the right and duty to defend any "suit" seeking those damages. The insurer may at the insurer’s discretion investigate any "occurrence" and settle any claim or "suit" that may result.

 

F The important part of this agreement is that the insured must be legally obligated to pay.

 

However, the amount that the insurer will pay for damages is limited by the policy, and further, the insurer’s right and duty to defend stop when the insurer has used up the applicable limit of insurance in the payment of judgments or settlements under Bodily Injury or Property Damage Liability Coverage or medical expenses (under Coverage C).  Otherwise, the policy will pay only for those obligations or liability that are specifically listed as Supplementary Payments (Coverages A and B).

 

Insured "bodily injury" and "property damage"(BI & PD) must be caused by an "occurrence" that takes place in the "coverage territory"; and such injury/damage must occur during the policy period.

 

Under the policy, “Damages because of ‘bodily injury’ includes damages claimed by any person or organization for care, loss of services or death resulting at any time from the "bodily injury."

 

 

2. Exclusions.

 

This insurance does not apply to “Expected or Intended Injury” which is defined as "bodily injury" or "property damage" expected or intended from the standpoint of the insured.  In other words, the insured cannot purchase liability insurance with the intention of committing a punishable act upon another and expect that the insurance will pay for his actions.  However, if one exercises reasonable force to keep from being injured, or to protect his/her property, this exclusion does not apply.

 

The policy will not pay for any bodily injury or property damage if the liability for such damages has been assumed by the insured by contract or agreement.  This exclusion does not apply to liability for damages if the liability is specifically accepted by the insurer and if the act itself occurs after the effective date of the contract. 

 

 

Liquor Liability is specifically excluded.  The policy will not cover BI & PD if the claims arise because of causing or contributing to the intoxication of any person, furnishing alcoholic drinks to a minor or an intoxicated person, or if the insured was held liable because of any ordinance, regulation or statute relating to the sale, gift, distribution, or use of alcoholic beverages.  The exclusion only applies if a person is in the business of manufacturing, distributing, serving, or furnishing alcoholic beverages and would not cover casual use, such as company cocktail parties if incidental to the business.  However, courts have changed this concept considerably and further discussion will be found later in this text.

 

Obligations of the insured under a Workers Compensation, disability benefits or unemployment compensation law is excluded.

 

Excluded are bodily injury to an employee of the insured arising out of and in the course of employment by the insured; or performing duties related to the conduct of the insured's business; or the spouse, child, parent, brother or sister of that "employee" as a consequence of the employees employment as so stated.  This exclusion applies whether the insured may be liable as an employer or in any other capacity; and to any obligation to share damages with or repay someone else who must pay damages because of the injury.  This exclusion does not apply to liability assumed by the insured under an "insured contract."  An Insured Contract is defined as a lease of premises, a sidetrack agreement, an easement or license agreement in connection with vehicle or pedestrian or private railroad crossings, except in connection with construction of demolition operations on or within 50 feet of a railroad.  It also means an elevator maintenance agreement or any agreement which the insured assumes the tort liability of another person (see discussion previously) to pay damages because of BI or PD damage to a third party if the agreement is made prior to any such BI or PD damage.

 

 

The pollution exclusion is rather lengthy and detailed and quite broad.  There is no coverage for BI or PD arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, and release of escape of any pollutants:

 

(a) At or from any premises, site or location, which is or was at any time owned or occupied by, or rented or loaned to, any insured;

(b) At or from any premises, site or location which is or 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 the insurer at any time transported, handled, stored, treated, disposed of, or processed as waste by or for any insured or any person or organization for whom you may be legally responsible; or

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

(i) If the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor; or

(ii) If the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants.

 

 

Subparagraphs (a) and (d)(i) do not apply to "bodily injury" or "property damage" arising out of heat, smoke or fumes from a hostile fire.  A “hostile fire” is considered to be any fire which occurs in a location other than where it was meant to be, or a fire which while friendly in the inception, becomes out of control and burns in another area or destroys material that it was not intended to destroy.

 

Specifically excluded is any loss, cost or expense arising out of any request, demand or order that any in­sured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants; or claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of pollutants.  Pollutants means 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.

 

 

Bodily Injury or property damage arising out of the ownership, maintenance, use or entrusting to others, of any aircraft, automobile or watercraft owned or operated by or rented to or loaned to any insured, is excluded.  “Use” includes operation and loading or unloading such vehicle or craft.  The exclusion does not apply to a watercraft while ashore on premises owned or rented by the insured, watercraft that is less than 26 feet long or watercraft used to carry persons for a charge.  In respect to an automobile, it does not apply if the auto is parked next to or on premises owned or leased by the insured (not the auto owned by or rented/loaned to the insured) and subject to the equipment listed as “Mobile Equipment” in this policy.

 

 

Excluded is any BI or PD arising out of transporting mobile equipment by an auto that is owned or operated by, or rented or loaned to the insured.  Excluded is BI or PD as the result of the use of mobile equipment in, or while in practice for, or while being prepared for, any prearranged racing, speed, demolition or stunting activity.

 

Property damage is excluded if the property is owned, rented or occupied by the insured, property loaned to the insured or in the care of custody of the insured.  Also, property damage will be excluded if property damage occurs because of business operations on real property used or being worked on by the insured.  Subject to the “products completed operations hazard” portion of the policy, excluded is that part of any property that must be replaced or repaired because the work was incorrectly performed on the property.

 

 

There is a rather typical “War Exclusion”, that excludes BI or PD due to war, whether or not declared, or any act or condition incident to war.  War includes civil war, insurrection, rebellion or revolution.  This exclusion applies only to liability assumed under a contract or agreement.

 

Property damage to the insured’s product is excluded.  Property damage to the work of the insured arising out of it or any part of it and included in the “products completed operations hazard” section of the policy is excluded, unless a subcontractor performed the work

 

There is no coverage for property damage to “impaired property” (defined in “Definitions Section below) or property that has not been physically injured arising out of a defect, deficiency, inadequacy or dangerous condition in the insured’s product or work, or a delay or failure by the insured, or anyone acting on his behalf, to perform a contract or agreement in accordance of the contract in question.  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 his work after it has been put to its intended use.

 

Specifically excluded are any 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, work or impaired property, 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.  This is a long statement, which follows the wording in the policy, but basically it states that any claims that arise because a product is deficient, etc., will not be covered if the defect was known.

 

 

 

 

 

 

PERSONAL AND ADVERTISING INJURY LIABILITY

 

The insurer will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which the insurance applies.  The insurer will have the right and duty to defend any "suit" seeking those damages. The insurer may at the insurer’s discretion investigate any "occurrence" or offense and settle any claim or "suit" that may result.

 

The amount that the insurer will pay is limited to the “Limits of Insurance” as stated in the policy, and the insurer’s right and duty to defend end when the limits have been met.  The coverage applies to "Personal injury" caused by an offense arising out of the insured’s business, excluding advertising, publishing, broadcasting or telecasting done by or for the insured, and "Advertising injury" caused by an offense committed in the course of advertising the insured’s goods, products or services; but only if the offense was committed in the "coverage territory" during the policy period.

 

This coverage does not apply to "Personal injury" or "advertising injury" arising out of oral or written publication of material, if

1. done by or at the direction of the insured with knowledge of its falsity;
2. arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;
3. arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured; or
4. for which the insured has assumed liability in a contract or agreement. 

 

This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.

 

Further, this coverage does not apply to “Advertising injury" arising out of breach of contract, other than misappropriation of advertising ideas under an implied contract; the failure of goods, products or services to conform with advertised quality or performance; the wrong description of the price of goods, products or services; or an offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting.

 

 

 

 

 

MEDICAL PAYMENTS

 

The insurers will pay medical expenses "bodily injury" caused by an accident on the insured’s owned or rented premises, on ways next to premises owned or rented by the insured, or because of the operations of the insured.  These medical expenses will be paid  (1) if the accident takes place in the "coverage territory" and during the policy period,  (2) are incurred and reported to the insurer within one year of the date of the accident; and   (3) the injured person submits to examination, at the insurer’s expense, by physicians of the insurer’s choice as often as the insurer reasonably requires.

 

The medical payments will be made regardless of who is at fault and within the limits of the policy.  The insurer will pay reasonable expenses for first aid administered at the time of an accident, for necessary medical, surgical, x‑ray and dental services, including prosthetic devices; and for necessary ambulance, hospital, professional nursing and funeral services.

 

Excluded are expenses paid for "bodily injury" to any insured or any person hired to do work for or on behalf of any insured or a tenant of any insured, to a person injured on that part of premises owned or rented by the insured that the person normally occupies.  Benefits will not be paid to a person, whether or not an "employee" of any insured, if benefits for the "bodily injury" are payable or must be provided under a workers compensation or disability benefits law or a similar law.  Excluded are payments to a person injured while taking part in athletics, those claims excluded under the BI and PD Coverage section of the policy, or due to war, whether or not declared, or any act or condition incident to war. War includes civil war, insurrection, rebellion or revolution. 

 

 

 

 

SUPPLEMENTARY PAYMENTS

 

In addition to the coverages as described above, the policy will pay, with respect to any claim or "suit" the insurer defends, and all expenses the insurer incur, up to $250 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which the Bodily Injury Liability Coverage applies.  The insurer does not have to furnish these bonds.

The coverage will apply to the cost of bonds to release attachments, but only for bond amounts within the applicable limit of insurance. The insurer does not have to furnish these bonds. 

 

The policy will also pay all reasonable expenses incurred by the insured at the insurer’s request to assist in the investigation or defense of the claim or "suit", including actual loss of earnings up to a printed amount, (such as $100 a day) because of time off from work. 

 

Further, the policy will pay all costs taxed against the insured in the "suit" and prejudgment interest awarded against the insured on that part of the judgment the insurer pays.  If the insurer make an offer to pay the applicable limit of insurance, the insurer will not pay any prejudgment interest based on that period of time after the offer. 

 

The policy will pay all interest on the full amount of any judgment that accrues after entry of the judgment and before the insurer has paid, offered to pay, or deposited in court the part of the judgment that is within the applicable limit of insurance.

 

Under this part of the policy, these payments will not reduce the limits of insurance.

 

 

 

DEFINITION OF INSURED

 

Since this type of policy is designed for business purposes, the definition of Insured is not as simple as for individual policies.  The definitions pertain to individuals, partnership/joint ventures, or other organizations – such as corporations.

 

In respect to an individual, the named insured and spouse are insured’s, but only in regards to the conduct of a business of which the insured is the sole owner.

 

If the business is a partnership or joint venture, they (one or the other) are the insured.  The executive officers and directors are insureds but only in regards to their duties as officers or directors.

 

If the organization is other than the categories above, the company is the insured and officers and directors are insureds while performing duties related to the business.  In addition, stockholders are insureds but only with respect to their liabilities as stockholders.

 

Employees are also insureds, but only for acts within the scope of their employment by the insured or while performing duties while performing duties related to the conduct of the business.  There are several specific situations wherein employees (other than executive officers) are not considered as insureds. 

 

No employee is an insured for PD or BI to the insured (employer), partners, or partner/joint venture members, or to another employee while in course of performing duties related to the conduct to the business – or spouse, child, parent, brother or sister or the other employee.  No employee is an insured for BI or PD arising out of his/her providing or failing to provide professional health care services.

 

An insured may be any organization while acting as a real estate manager for property damage liability only.

 

If the insured dies, an insured may be a person or organization having property temporary custody in regards to liability arising out of the maintenance or use of the property and until a legal representative has been appointed.  The legal representative will then assume the role as insured in respect to duties as such.

 

Mobile Equipment is treated different, as any person driving such equipment along a public highway with the permission of the employer/insured may be considered an employee.  Any other person or organization responsible for the conduct of such person (equipment operator) is also an insured, but only with respect to liability arising out of the operation of the equipment, and only if no other insurance of any kind is available to that person or organization for this liability.

 

This classification of insured is restricted as no person or organization is an insured with respect to bodily injury to a co‑employee of the person driving the equipment; or  "Property damage" to property owned by, rented to, in the charge of or occupied by the insured or the employer of any person who is an insured under this provision.

 

Businesses have a tendency to purchase other businesses or to merge or to form new organizations, and any such newly merged, acquired or started business over which the insured business maintains ownership or majority interest, will qualify as a Named Insured provided there is no other similar insurance available to that organization.  This coverage is provided only for a period, usually 90 days, after the new venture has been acquired, merged or started.  Coverage will not be provided for any bodily injury or property damage occurring before the new venture is acquired or formed.  All insureds must be shown as a Named Insured in the Declarations in respect to the conduct of any current or past partnership or joint venture.

 

 

 

 

 

LIMITS OF INSURANCE

 

The source of the limits of insurance information will be found on the Declarations Page.  From the previous example of a Declarations Page, the following limits were shown:

 

GENERAL AGGREGATE LIMIT (Other Than Products ‑Completed Operations)                           $500,000            

PRODUCTS‑COMPLETED OPERATIONS AGGREGATE LIMIT                                                          $ 500,000

PERSONAL & ADVERTISING INJURY LIMIT                                                                                          $ 100,000

EACH OCCURRENCE LIMIT                                                                                                                        $ 100,000

FIRE DAMAGE LIMIT                                                                                                                                     $  50,000         ANY ONE FIRE

MEDICAL EXPENSE LIMIT                                                                                                                           $  10,000         ANY ONE PERSON

 

The Limits of Insurance shown in the Declarations are subject to certain specified rules regarding the limits, and regardless of the number of Insureds, Claims made or "suits" brought; or persons or organizations making claims or bringing "suits".

 

The General Aggregate Limit is the most the insurer will pay for the sum of Medical expenses under Bodily Injury and Property Damage Liability coverages, and Personal and Advertising Injury Liability coverages, and damages under the Medical expense coverage section. 

The Products‑ Completed Operations Aggregate Limit is the most the insurer will pay under BI and PD coverage for damages because of "bodily injury" and "property damage" included in the "products completed operations hazard".

 

Subject to the General Aggregate Limit above, the Personal and Advertising Injury Limit is the most the insurer will pay under Personal and Advertising Injury Liability Coverage for the sum of all damages because of all “personal injury" and all "advertising injury" sustained by any one person or organization.

 

Subject to the Aggregate Limit or the Products-Completed Operations Aggregate Limit, whichever applies, the Each Occurrence Limit is the most the insurer will pay for the sum of damages under the BI and PD coverage and Medical Expense coverage.

 

Subject to the immediate preceding paragraph, the Fire Damage Limit is the most the insurer will pay for damages because of "property damage" to premises, while rented to the insured or temporarily occupied by the insured with permission of the owner, arising out of any one fire.

 

The Medical Expense Limit is the most the insurer will pay under the Medical Expense Coverage for all medical expenses because of "bodily injury" sustained by any one person.

 

The Limits of Insurance of this Coverage Part apply separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than 12 months.  In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.

 

 

 

COMMERCIAL GENERAL LIABILITY CONDITIONS

 

Conditions under this policy consist of specific provisions under which the insurance company will or will not pay.  The policy will list the coverages available, and to whom the coverages apply.  The limits of the coverage amounts have been covered in previous sections.  Remaining are the conditions under which payments will or will not be made, and definitions of terms used in the policy.

 

The First condition pertains to bankruptcy or insolvency of the insured.  If this should happen, the insurer still must pay any obligations under the policy.

Duties of the Insured in the Event of Occurrence, Offense, Claim or Suit - In case claims to be made under the policy occur, by occurrence, offense, claim or suit, there are certain specific duties that the insured(s) must take.  This “Occurrence” type of policy form is brought to the forefront in this section.

 

The insured(s) has a duty to notify the insurer as soon as practicable of an "occurrence" or an offense, which may result in a claim.  To the extent possible, notice should include the following items:

 

(1) How, when and where the "occurrence" or offense took place;

(2) The names and addresses of any injured persons and witnesses; and

(3) The nature and location of any injury or damage arising out of the "occurrence" or offense.

 

If a claim is made or "suit" is brought against any insured, the insured must immediately record the specifics of the claim or "suit" and the date received; and notify the insurer as soon as practicable.  Further, the insured(s) must  (1) immediately furnish to the insurance company copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit",  (2) authorize the insurance company to obtain records and other information;  (3) cooperate with the insurance company in the investigation, settlement or defense of the claim or "suit"; and  (4) assist the insurer, upon the insurer’s request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage which is or may be covered under the policy.

 

An important provision is that no insureds will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without the insurer’s consent.  It continues to amaze liability claims personnel as to how many insureds will assume obligations, although most often quite innocently.  Some people seem to feel, particularly if it is a business situation, that if they have done wrong, they should “belly up to the bar” and admit it in order to maintain good customer relations.

 

 

Legal Actions Against the Insurer - In respects to legal actions against the insured, no person or organization has a right to join the insurer to bring suit against an insured.  Also, the insured may not sue the insurer unless all of the insurer’s terms as stated in the policy have been fully complied with.

 

A person or organization may sue the insurer to recover on an agreed settlement or on a final judgment against an insured obtained after an actual trial but the insurer will not be liable for damages that are not payable under the terms of the policy that are in excess of the applicable limit of insurance.  An agreed settlement means a settlement and release of liability signed by the insurer, the insured and the claimant or the claimant's legal representative.

 

Other Insurance - Provisions are made for those situations where there is (are) other insurance coverage(s).  If other valid and collectible insurance is available to the insured for a loss, the insurer covers the insurer’s obligations are limited as primary insurance, excess insurance, and the methods of sharing with other insurers.

 

Primary Insurance - This insurance is primary except when if it considered as excess insurance (as discussed below).  If this insurance is primary, the insurer’s obligations are not affected unless any of the other insurance is also primary.  Then, the insurer will share with all that other insurance by the method described below.

 

Excess insurance - This insurance is excess over any of the other insurance, whether primary, excess, contingent or on any other basis,  (1) that is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for the insured’s “work";  (2) that is Fire insurance for premises rented to the insured; or  (3) if the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusions in the policy.

 

When this insurance is excess, the insurer will have no duty under Coverages BI & PD or Individual or Advertising Liability to defend any claim or "suit" that any other insurer has a duty to defend.  If no other insurer defends, the insurer will undertake to do so, but the insurer will be entitled to the insured's rights against all those other insurers.

 

When this insurance is excess over other insurance, the insurer will pay only the insurer’s share of the amount of the loss, if any, that exceeds the sum of the total amount that all such other insurance would pay for the loss in the absence of this insurance; and the total of all deductible and self‑insured amounts under all that other insurance.

 

Method of Sharing - The insurer will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not bought specifically to apply in excess of the Limits of Insurance shown in the Declarations.  If all of the other insurance permits contribution by equal shares, the insurer will follow this method also.  Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.

 

If any of the other insurance does not permit contribution by equal shares, the insurer will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

 

Premium Audit – The insurer will use their usual rules and rates in computing the premium.  The premium that is shown, as “advance premium” is a deposit premium only and at the end of each audit period, the insurer will determine the earned premium for that period.  Audit premiums are due and payable on notice to the first Named Insured.  If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium; the insurer will return the excess to the first Named Insured.

 

The first Named Insured must keep records of the information the insurer will need for premium computation, and send copies to the insurer at such times as the insurer may request.

 

Representations – By the fact that the insured accepts the policy is proof that the insured agrees that the statements in the Declarations are accurate and complete and based upon representations made by the insured to the insurer.  The insurer issued the policy in reliance upon the representations of the insured.

 

Separation Of Insureds – Since there may be multiple “insureds” under this policy, as defined in the policy, there is a provision that except with respect to the Limits of Insurance, and any rights or duties specifically assigned in the policy to the first Named Insured, the insurance would apply as if each Named Insured were the only Named Insured; and separately to each insured against whom claim is made or "suit" is brought.

 

Transfer Of Rights Of Recovery Against Others To The Insurer - If the insured has rights to recover all or part of any payment the insurer has made under this policy, those rights are transferred to the insurer.  The insured must do nothing after loss to impair them.  At the insurer’s request, the insured will bring "suit" or transfer those rights to the insurer and will help the insurer to enforce them. 

 

When The insurer Does Not Renew - If the insurer decides not to renew this policy, the insurer will mail or deliver to the first Named Insured shown in the Declarations written notice of the non-renewal not less than 30 days before the expiration date.  If notice is mailed, proof of mailing will be sufficient proof of notice.

 

 

 

 

DEFINITIONS

 

It can be properly asked as to why the Definitions appear as the last Section of the policy.  For one not familiar with Liability Insurance, reading a policy for the first time might entail continually referring to the “Definitions” section in order to understand the policy.  Regardless, the format was established by the ISO who evidently feels differently.  The definitions are numbered in a policy, which is necessary as some definitions refer to other definitions, which can then be recalled, by number (or letter).  Therefore, this same type of format is used here.  Also, in this discussion of Definitions, the first party format (“you”, “your” and ”we”, “our”, and “us”) may be used as it is used in most policies.

 

1. "Advertising injury" means injury arising out of one or more of the following offenses:

a. 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;

b. Oral or written publication of material that violates a person's right of privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan,

 

 

2. "Auto" means a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment. But "auto" does not include "mobile equipment".

 

3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

 

4. "Coverage territory" means:

a. The United States of America (including its territories and possessions), Puerto Rico and Canada;

b. International waters or airspace, provided the injury or damage does not occur in the course of travel or transportation to or from any place not included in a. above; or

c. All parts of the world if:

(1) The injury or damage arises out of:

(a) Goods or products made or sold by you in the territory described in a. above or

(b) The activities of a person whose home is in the territory described in a. above, but is away for a short time on your business; and

(2) The insured's responsibility to pay damages is determined in a "suit" on the merits, in the territory described in a. above or in a settlement the insurer agree to.

 

5. "Employee" includes a "leased worker". "Employee" does not include a "temporary worker".

 

6. "Executive officer" means a person holding any of the officer positions created by your charter, constitution, by‑laws or any other similar governing document.

 

7. "Impaired property" means tangible property, other than "your product" or "your work", that cannot be used or is less useful because:

a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous; or

b. You have failed to fulfill the terms of a contract or agreement;

if such property can be restored to use by:

a. The repair, replacement, adjustment or removal of "your product" or "your work"; or

b. Your fulfilling the terms of the contract or agreement.

 

8. "Insured contract" means:

a. A contract for a lease of premises. However, that portion of the contract for a lease of premises that indemnifies any person or organization for damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner is not an "insured contract";

b. A sidetrack agreement;

c. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;

An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;

e. An elevator maintenance agreement;

f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in con­nection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization.  Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

Paragraph f. does not include that part of any contract or agreement:

(1) That indemnifies a railroad for "bodily injury" or "property damage" arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, road‑beds, tunnel, underpass or crossing;

(2) That indemnifies an architect, engineer or surveyor for injury or damage arising out of:

(a) Preparing, approving or failing to pre­pare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; or

(b) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage; or

(3) Under which the insured, if an architect, engineer or surveyor, assumes liability for an injury or damage arising out of the insured's rendering or failure to render professional services, including those listed in (2) above and supervisory, inspection or engineering services.

 

9. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business.  "Leased worker" does not include a "temporary worker".

 

10."Loading or unloading" means the handling of property:

a. After it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft or "auto";

b. While it is in or on an aircraft, watercraft or "auto"; or

c. While it is being moved from an aircraft, watercraft or "auto" to the place where it is finally delivered;

but "loading or unloading" does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft or "auto".

 

11. "Mobile equipment" means any of the following types of land vehicles, including any attached machinery or equipment:

a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;

b. Vehicles maintained for use solely on or next to premises you own or rent;

c. Vehicles that travel on crawler treads;

d. Vehicles, whether self‑propelled or not, maintained primarily to provide mobility to permanently mounted:

(1) Power cranes, shovels, loaders, diggers or drills; or

(2) Road construction or resurfacing equipment such as graders, scrapers or rollers;

e. Vehicles not described in a., b., c. or d. above that are not self‑propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:

(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or

(2) Cherry pickers and similar devices used to raise or lower workers;

f. Vehicles not described in a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo.

However, self‑propelled vehicles with the following types of permanently attached equip­ment are not "mobile equipment" but will be considered "autos":

(1) Equipment designed primarily for:

(a) Snow removal;

(b) Road maintenance, but not construction or resurfacing; or

(c) Street cleaning;

(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and

(3) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.

 

12."Occurrence" means an accident, including con­tinuous or repeated exposure to substantially the same general harmful conditions.

 

13."Personal injury" means injury, other than "bodily injury", arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies 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; or

e. Oral or written publication of material that violates a person's right of privacy.

 

14.a. "Products ‑ completed operations hazard" includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned.

b. "Your work" will be deemed completed at the earliest of the following times:

(1) When all of the work called for in your contract has been completed.

(2) When all of the work to be done at the site has been completed if your contract calls for work at more than one site.

(3) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

c. This hazard does not include "bodily injury" or "property damage" arising out of:

(1) The transportation of property unless the injury or damage arises out of a condition in or on a vehicle created by the "loading or unloading" of it;

(2) The existence of tools, uninstalled equip­ment or abandoned or unused materials; or

(3) Products or operations for which the clas­sification in this Coverage Part or in the insurer’s manual of rules includes products or completed operations.

 

15. "Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured, if such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

 

16."Suit" means a civil proceeding in which damages because of "bodily injury", "property damage", "personal injury" or "advertising injury" to which this insurance applies are alleged.  Suit" includes:

a. An arbitration proceeding in which such damages are claimed and to which you must submit or do submit with the insurer’s consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which you submit with the insurer’s consent.

 

17. "Your product" means:

a. Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(1) You;

(2) Others trading under your name; or

(3) A person or organization whose business or assets you have acquired; and

b. Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.

 

18. "Your product" includes:

a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product"; and

b. The providing of or failure to provide warnings or instructions.

"Your product" does not include vending machines or other property rented to or located for the use of others but not sold.

 

19.”Temporary worker" means a person who is furnished to you to substitute for a permanent "employee" on leave or to meet seasonal or short‑term workload conditions.

 

20. "Your work" means:

a. Work or operations performed by you or on your behalf; and

b. Materials, parts or equipment furnished in connection with such work or operations.

 

21. "Your work" includes:

a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work"; and

b. The providing of or failure to provide warnings or instructions.

 

COMMERCIAL GENERAL LIABILITY CLAIMS MADE FORM

 

As described earlier in this text, there are two versions of the Commercial General Liability policy.  The “Occurrence” version has been discussed in the preceding pages and covers bodily injury and property damage, which occurs during the policy period.

 

The “Claims-Made” version covers claims that are made during the term of the policy, i.e. while the policy was in force.  However, there are several other qualifying dates that must be considered in determining the liability of the insurance company. 

 

Otherwise, in most respects the two policies are alike and in most areas, are identical.  The principal difference is what situations or circumstances that will “trigger” the coverage.

 

COVERAGES

 

Coverage under this form applies to claims that are made when a notice of claim is received and recorded by the insured or the insurance company.  The policy wording that further illustrates this would be under Bodily Injury and Property Damage Liability coverage:

 

The Bodily Injury or Property Damage did not occur before the Retroactive Date, if any, as shown in the Declarations, and a claim for damages because of the “bodily injury or property damage is first made against any insured during the policy period or any Extended Reporting Period afforded under the policy.

 

A claim by a person or organization seeking damages will be deemed to have been made at the earlier of the following times:

 

1.  When notice of such claim is received and recorded by any insured or by the insurer, whichever comes first; or

2.  When the insurer makes a settlement.

 

All claims for damage because of bodily injury to the same person, including damages claims by any person or organization for care, loss of services or death resulting any time from the bodily injury, will be deemed to have been made at the time the first of those claims is made against any insured.  All claims for damages because of property damage causing loss to the same person or organization will be deemed to have been made at the time the first of those claims is made against any insured.

 

It is interesting that the notice does not have to be in writing, although is difficult to imagine a claim of any size not being in writing.

 

 

RETROACTIVITY

 

The policy provides for a Retroactive Date to be inserted in the policy.  If there is no Retroactive Date requested, the policy will show “none.”  If a date is entered, it creates a specific time on occurrences, which took place before the Retroactive Date.  Any occurrence predating the Retroactive Date are not covered under the policy, even if the claim is made during the period of the policy.

 

The policy applies to personal injury and advertising injury caused by an offense arising out of normal business functions, or advertising normal business functions, but only if the offense was not committed before the Retroactive Date, if any, shown in the Declarations or after the end of the policy period, and a claim for damages because of the personal injury or advertising injury is first made against any insured during the policy period or extended period.

 

A claim made by a person or organization seeking damages will be deemed to have been made at the earlier of the time when notice of the claim is received and recorded by any insured or by the insurer – whichever comes first – or when settlement is made.

 

All claims for damages because of personal or advertising injury to the same person or organization as a result of an offense will be deemed to have been made at the time the first of those claims is made against any insured.

 

Excluded is any personal or advertising injury arising out of oral or written publication of material whose first publication took place before the Retroactive Date, if any, shown in the Declarations.

 

A Retroactive Date may be advanced only if the insured approves of the new date, and

1.  the new insurance policy is being issued by another (different) insurance company, or

2.  there has been an essential and substantial change in the insured’s business operation, which has resulted in a greater loss exposure.

 

It should be noted that if an insured has been continuously insured under “occurrence” policies, and now elects to be insured under a claims-made policy, the Retroactive Date under the new policy can be the same as the effective date and should therefore not provide for any lapse in coverage.

 

 

 

 

 

DUTIES OF INSURED

 

In respects to the duties of the insured and insurer in the even of occurrence, offense, claim or suit, with the claims-made policy, notice of an occurrence or offense is not notice of a claim.  If a claim is received, the insured must immediately record the specifics of the claim and the dates received, and notify the insurer as soon as practicable.

 

 

 

EXCESS INSURANCE

 

The “Excess insurance” provision under the Claims-Made form varies because of the Retroactive provision.  This form is excess over any other insurance, whether primary, excess, contingent or on any other basis that is effective prior to the beginning of the policy period shown in the Declarations.  It applies to bodily injury or property damage on other than a claims-made basis, if no Retroactive Date is shown in the Declarations or the other insurance has a policy period which continues after the Retroactive Date shown in the Declarations.

 

RIGHT TO CLAIM AND OCCURRENCE INFORMATION

 

The insurance company will provide to the “first Named Insured” as listed on the Declarations page, certain information relating to any current liability claims and any preceding general liability claims-made that was issued to the insured during the previous three years.  This information will include a list or record of each occurrence not previously reported to any other insurer, of which the insurance company had been notified in compliance with other provisions in the policy, plus a summary by policy year of payments made and amounts reserved under any applicable policy limits.  Not only is the information required by the Insurance Departments, it would be required if or when the insured replaces the existing policy.

 

The amounts provided are based on the judgement of the insurer and the insured is cautioned about disclosing this information to any claimant without the insurer’s consent.  The insurer will provide this information to the insured only on the written request from the insured, or 30 days prior to non-renewal by the insurer.  The “30-day prior to non-renewal” provision is obviously for the benefit of acquiring new liability insurance.  There is a reason for the “secrecy” in respect to revealing any of this information regarding claims and pending claims.  For example, an existing claimant whose claim has not as yet been adjudicated, discovers the amount that was “reserved” by the insurer for settlement of a particular claim, and that amount was higher than what was expected by the claimant.  The claimant (or probably, the claimant’s attorney) would then “raise the ante” and claim for more money on the basis that the insurer was prepared to pay more.

 

 

EXTENDED REPORTING PERIODS

 

The policy provides for a basic extended reporting period without extra charge, for a period of five years, which arise out of claims because of BI and PD or for personal injury and advertising injury arising out of an occurrence reported not later than 60 days after the end of the policy period, and 60 days for claims arising from occurrences or offenses not previously reported to the insurer.

 

 

Claims must be made during the 60 days immediately following the expiration of the policy.  Occurrence or offenses of the claim must occur between the Retroactive Date and the expiration date of the policy.  To reiterate, a claim must be reported within 60 days of the policy’s termination date.  After that time, claims for damages arising from a reported occurrence can be brought at any time for a period of 5 years.

 

A Supplemental Extended Reporting Period of unlimited duration is available for an extra charge.  The policy spells out the provisions if this added period is selected but importantly, separate insurance limits are provided if this supplemental provision is chosen.

 

The remainder of the Claims-Made Form is the same as for the Occurrence Form.  There will be differences in some of the Endorsements that reflect the difference in the two forms.

 

 

 

STUDY QUESTIONS

 

1.  What information is not contained on the Declarations Page of a Commercial General
 Liability (CGL) Policy?

      A.  Company Name

      B.  Exclusions

      C.  Premiums

      D.  Limits of insurance.

 

2.  Under the Insuring Agreement provision of a CGL policy, the insurer will pay

      A.  those sums that the insured is legally obligated to pay as damages.

      B.  whatever loss the insured determines is fair.

      C.  the amount specified by the loss adjuster.

      D.  the loss amount as determined by the insurance agent.

 

3.  Bob’s Tannery has been constructed on the Little Big River.  The owners are aware that some new chemicals that they will be using for some specialized leather treatments will probably pollute the stream.  Therefore, they buy a CGL policy to avoid paying expensive lawsuits.  Will the policy pay?

A.  Sure.  That is the purpose of a liability policy.

B.  No.  They will need a Professional Liability policy to pay for that.

C.  No.  Not only could the insurer say the loss was “expected”, but the pollution exclusion would apply also.

D.  The policy will pay for cleaning up the material, but not for any lawsuits that may occur as a result.

 

4.  Brighton’s Sports has a CGL policy.  They decide they want to sponsor a racecar so that their logo can become better known.  While trying out the car in the parking lot at their plant, the car strikes a gas main that is being worked on, releasing gas, with resulting damage to the car and the property.

      A.  The insurer will pay.  This is a good example of why this type of insurance is bought.

      B.  The insurance will not pay as damage was to an auto owned by Brighton’s and the property was owned by Brighton’s, both exclusions.

      C.  The insurance will only pay for the damage to the car.

      D.  The insurance will only pay for property damage.

 

5.  Liability assumed by the insured under an insured contract is

      A.  covered under the liability policy.

      B.  not covered under the liability policy.

      C.  covered for 50% of the loss.        

      D.  covered but only for the amount that the insurer would have paid if the liability was
      not assumed, less the amount that the insured assumed.

 

6.  Under the Medical Expenses provision of the liability policy, the insurer will pay  _______ expenses for first aid.

      A.  all

      B.  any

      C.  reasonable

      D.  none

 

7.  Under the products-completed operations area, a policy has aggregate limits of $50,000.  If bodily injury limits is $50,000 and property damage is $25,000, what is the maximum the insurer will pay for a products-completed operations claim?

      A.  $75,000

      B.  $50,000

      C.  $25,000

      D.  100,000

 

8.  The insured must notify the insurer immediately if a claim is made.  The information that must be filed does not include

      A.  how, when and where the occurrence or offense took place.

      B.  the names and addresses of any injured persons and witnesses.

      C.  the name and address of the insurance agent.

      D.  the nature and location of any injury or damage arising out of the occurrence.

 

9.  Under the Commercial General Liability policy, “Covered Territory” means

      A.  the contiguous 48 states.

      B.  all U.S. 50 states.

      C.  the U.S., its possessions and territories, Puerto Rico and Canada.

      D.  the U.S., its possession, territories, Puerto Rico and Mexico.

 

10.  For Bodily Injury and Property Damage claims under a CGL policy, the Extended Reporting Period provides for an extended reporting period of

        A.  60 days.

        B.  5 years.

        C.  1 year.

        D.  any reasonable time, not to exceed 3 years.

 

ANSWERS TO STUDY QUESTIONS

 

1B     2A     3C     4B     5B     6C     7B     8C     9C     10B