Ch. 9 Commercial General Liability Coverage
Extended Reporting Period (Tail Coverage)
- If a claims-made policy isn't renewed or replaced, the claims-made form contains a provision for the extension of time during which claims must be reported. This time frame is called an extended reporting period or tail coverage. The policy provides for two different options: one is included in the policy at no charge and the other requires the addition of an endorsement and the payment of an additional premium.
Retroactive Date
-A date specified in the Declarations, after which an occurrence must take place to be covered. If an occurrence takes place before the retroactive date, it's not covered, even if a claim is made during the policy period. The retroactive date may be the policy's effective date or any date in the past that the insurer agrees to, such as the effective date of the first claims-made policy issued to the insured.
Supplemental Extended Reporting Period (SERP)
-An optional reporting period of unlimited duration may be purchased by endorsement if requested within 60 days of the end of the policy term. The SERP isn't available for purchase after 60 days beyond policy expiration. The SERP covers claims arising from occurrences that took place after the retroactive date and before the end of the policy term, regardless of when the claim is made. Cost may be up to 200% of the CGL's annual premium. Premium for this optional coverage is a one-time charge and is fully earned at issuance. The SERP can't be cancelled and no refunds are made.
Premises and Operations Exposure
-If a business, or anyone acting on its behalf, causes bodily injury or property damage, the business may be considered legally liable for such injury or damage. CGL coverage is provided for the insured's legal liability for bodily injury or property damage arising out of the insured's premises or the insured's operations. -Covered occurrences must take place during the policy period and within the coverage territory.
Insured Contracts Use the acronym LEASE + to remember the 6 types of insured contracts.
-Lease -Easement -An obligation to indemnify a municipality, except in connection with work for a municipality. -Sidetrack agreement -Elevator maintenance agreement -In addition to these five contracts, any other contract or agreement pertaining to the insured's business under which one assumes the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization.
Provisions that are unique to the Claims-Made Form include:
-Retroactive Date -Extended Reporting Period (Tail Coverage) -Basic Extended Reporting Period (BERP) -Supplemental Extended Reporting Period (SERP)
Commercial General Liability Coverage Forms
-The Commercial General Liability Coverage Part of the Commercial Package Policy is available in two forms of coverage: Occurrence Form Claims-Made Form -The forms are identical in all respects, except for the way coverage is activated, or triggered.
Contingent Liability Exposure
-The liability of others arises when a business is held legally liable for the actions, or failures to act, of other parties, such as sub-contractors or independent contractors. Owners and Contractors Protective (OCP) liability, arises out of the work an independent contractor or sub-contractor performs for, or on behalf of, the insured. -For example, ABC Building hires Paul's Plumbing to replace the sink in Harry Homeowner's kitchen. If Paul damages the cherry cabinets in Harry's kitchen while doing his work, ABC Building may be considered legally liable for Paul's actions. -A business may also be held legally liable for the actions of, or failures to act, of parties per the language of a contract or legal agreement. This is called Contractual Liability. Examples of such contracts and agreements include: A lease of premises A service contract A hold harmless or indemnification agreement
Basic Extended Reporting Period (BERP)
-This extended reporting period is a provision in a claims-made form and allows claims to be reported after the policy term for a specific period of time, such as 60 days after the policy's expiration or cancellation date.
Completed Operations Exposure
-When a business performs services or work, such as installation, construction, or repair, it's vulnerable to lawsuits and claims resulting from improper or defective workmanship. This exposure typically begins after the insured's operations have been completed and the insured leaves the job site. Injury or damage must occur away from the premises the insured owns or rents. Examples of completed operations exposures include: -A cabinetmaker who builds kitchen cabinets and, a week after he installs them in a customer's kitchen, one of the cabinets falls off the wall and injures the customer's family dog, and A carpet cleaner uses a solvent that emits a chemical that causes injury to his customer. -Coverage will pay for bodily injury and/or property damage caused by negligent or faulty workmanship by an insured, but will not pay for the cost to replace the work that caused the loss.
Four major liability exposures
1. Premises & Operations 2. Products 3. Completed Operations 4. Contingent Liability
Section V - Definitions Advertisement
A notice broadcast or published to the general public or specific market segments about the insured's goods, products, or services to attract customers or supporters.
All of the following are insured under the CGL, except:
A person participating in an athletic event -Others covered are those named in the Declarations, including employees other than executive officers or managers.
Volunteer Worker
A person who is not an employee of the insured but who donates his/her work and acts at the direction of the insured. A volunteer worker is not paid a fee, salary, or other compensation by the insured for work performed for the insured.
Products Exposure
A product, as defined by the CGL policy, means any goods or products that are manufactured, sold, handled, distributed, or disposed by the insured and others conducting business under the insured's name. Real property, such as buildings and land, are not considered a product. -Goods and merchandise are not typically considered a product until after their sale by the insured and once they leave the insured's premises. Not only does this exposure leave a business vulnerable to legal liability for defects in product design or manufacture, it also leaves a business exposed to liability for the failure to warn or explain with respect to its products. -Examples of products exposures include: A restaurant customer who contracts food poisoning after eating spoiled fish, and A man who suffers an eye injury after the pen he's using explodes. - Coverage applies to bodily injury or property damage the product causes, but not to loss to the product itself, and the injury or damages must occur away from the premises the insured owns or rents. Example: An aircraft manufacturer builds an aircraft altimeter that fails and causes an aircraft to crash.
Occurrence
An accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Your Product
Any goods or products (other than real property) that are manufactured, sold, handled, distributed, or disposed of by the named insured, others trading under the named insured's name, or a person or organization whose business the named insured has acquired.
Coverage C Exclusions
Any insured (other than a volunteer worker) Any person hired by the insured or the insured's tenant A person who normally occupies any portion of the insured premises Injuries that should be covered by Workers' compensation and similar laws Athletic activities Injuries within the products-completed operations hazard Coverage A exclusions
Which of the following is not a peril covered by personal injury?
Breach of contract -Libel, slander, misappropriation of advertising ideas or style of business, infringement of copyright, title, or slogan in the insured's advertisement, and violation of privacy are also personal injury perils.
Expected or Intended Injury
Expected or intended injury is the result of the insured's intention to cause injury. The intentional act is only excluded when the insured should have expected or intended to cause injury. An exception exists for bodily injury resulting from the use of reasonable force to protect persons or property.
Which of the following legal liability exposures is covered if bodily injury or property damage is caused by the insured's negligent or faulty work?
Completed operations -Coverage is for the bodily injury or property damage caused by negligent work by the insured, but this policy does not cover the actual work.
Which of the following legal liability exposures is covered if a business employs an independent contractor?
Contingent liability -This legal liability occurs when a business is held responsible for the actions or failures of others through a binding contract or agreement.
Sidetrack Agreement
Contract between a railroad and a business the railroad may service. Under this agreement, the business holds the railroad harmless if an accident occurs while the railroad is using the sidetrack to deliver goods to the business.
Coverage A - Bodily Injury and Property Damage Liability (cont'd) Exclusions
Coverage A doesn't cover bodily injury or property damage arising from: Expected or Intended Injury Contractual Liability Liquor Liability Workers' Compensation Employer's Liability Pollution Aircraft, Auto, and Watercraft Transportation of Mobile Equipment
Section I Coverages
Coverage A: bodily Injury and Property Damage Liability Coverage B: Personal and Advertising Injury Liability Coverage C: Medical Payments Supplementary Payments: Coverages A & B
Product Recall
Coverage is excluded when the product, work, or property is withdrawn or recalled from the market, or from use, by a person or organization because of a known or suspected defect, deficiency, inadequacy, or dangerous condition. In addition to the loss of use being excluded, the withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the insured's product, work, or any impaired property is also excluded. This is sometimes called the Sistership Exclusion.
Other Insurance
Coverage may be written as primary or as excess. When written on a primary basis and other collectible primary insurance is also available, the loss is shared either on a contribution basis or by limit of liability.
Employee
Employee includes a leased worker. A leased worker is a full or part-time employee who has contracted with an employee leasing service (also known as a professional employer organization). Employee does not include a temporary worker. Temporary workers are employees of the supplying company.
The most the insurer will pay during the policy period for medical expenses under Coverages A, B, and C is which of the following limits of liability?
General Aggregate Limit -The Products-Completed Operations is another limit, and all the limits pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits.
Which of the following is NOT an exclusion in the CGL policy?
Host Liquor Liability for those with incidental exposure -Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won't apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.
Which of the following is not considered a product liability exposure?
Goods stored on the insured premises -A product exposure involves the manufacture, sale, handling, distribution, or disposal of insured property away from the insured premises.
When the Insurer Does Not Renew
If the insurer decides not to renew, the First Named Insured is to be notified, in writing, 30 days before the expiration date.
Claims-Made Form
In a claims-made form, coverage is triggered if an "occurrence" takes place AFTER the retroactive date AND is REPORTED within the policy period. Determining the coverage trigger in the claims-made form is a two-step process: Step 1. Did the loss occur AFTER the retroactive date? Step 2. Was the loss REPORTED during the policy period? If the answer to both questions is yes, then coverage is triggered.
Occurrence Form
In the occurrence form, insurance coverage is triggered when an "occurrence" takes place during the policy period and within the coverage territory. Essentially, determining the coverage trigger is a single-step process. Step 1. Did the loss occur during the policy period? If the answer is yes, coverage is triggered.
Bodily Injury
Includes bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
Insured Contract
Insured individuals and organizations often enter into legal contracts and, many times, the insured assumes liability in those contracts. An insured contract is such a contract that is insured by the policy. In other words, if the insured assumes liability under an insured contract, that liability is transferred to the insurance company according to the terms of the insurance poli
Each of the following provides buy back coverage for the insured, except:
Modified pollution extension endorsement -The CGL policy excludes bodily injury or property damage arising from discharge, dispersal, seepage, migration, and release or escape of pollutants, and these three coverages are bought back for coverage on an individual account basis.
Contractual Liability
Liability assumed by the insured under a contract with two exceptions: Liability that would exist whether the contract was in place or not. A contract that is specifically listed as being covered under the policy.
Lease
Liability assumed under a lease of premises. It does not include that portion of the contract that indemnifies any person or organization for fire damage to premises rented or temporarily occupied with the owner's permission.
Easement
Liability assumed under the right to use someone's land or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad.
Bankruptcy
Neither bankruptcy nor insolvency of the insured or of the insured's estate will relieve the insurer from its obligations.
Damage to Insured's Product
No coverage is provided for damage to the insured's own product. Also excluded is damage that arises out of the product or any of its parts.
Damage to Insured's Work
No coverage is provided for damage to the insured's work that is included in the Products or Completed Operations Hazards. An exception exists for damage caused by the work performed by a sub-contractor.
Pollution
No liability coverage is provided for bodily injury and property damage arising out of actual, alleged, or threatened pollution or the escape of "pollutants." The exclusion also applies to the cost of clean-up. This coverage may be purchased with a Pollution Extension Endorsement.
Aircraft, Auto, and Watercraft
No liability coverage is provided for bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment to others of aircraft, autos, and watercraft IF such crafts and vehicles are owned by, operated by, rented to, loaned to, or being loaded or unloaded by any insured. This coverage may be purchased on a separate policy or under a business auto coverage part.
Transportation of Mobile Equipment
No liability coverage is provided for bodily injury or property damage arising out of the transportation of "mobile equipment" by an auto that's owned by, operated by, rented to, or loaned to any insured. Neither is liability coverage provided for the use of "mobile equipment" in, or while practicing or preparing for any prearranged racing, speed, demolition, or stunting activity. Mobile equipment subject to compulsory insurance or financial responsibility laws is considered an "auto" and must be insured on the business auto policy.
War Exclusion
No liability coverage is provided for bodily injury or property damage resulting from war—regardless of how caused and whether damage is a direct or indirect loss. War includes undeclared and civil war, warlike action by a military force, insurrection, rebellion, revolution, usurped power, etc.
Employer's Liability
No liability coverage is provided for bodily injury to an employee of the insured that arises out of and during the course of employment by the insured or while performing duties related to the insured business. In addition, no liability coverage is provided to the spouse, child, parent, or sibling of any employee who's injured while on the job. The exclusion applies regardless of the reason for the employers legal liability.
Electronic Data
No liability coverage is provided for damages arising out of the loss of electronic data, including loss of use, corruption of data, and the inability to access or manipulate electronic data. The exclusion defines electronic data as being information, facts, and programs that are stored as or on; created or used on; or transmitted to or from computer software.
Workers' Compensation
No liability coverage is provided if the insured has a legal obligation to provide workers' compensation insurance, disability benefits, unemployment compensation, or any similar type of insurance. This exclusion applies whether or not the insured actually purchased any coverage required by law. The CGL policy excludes these perils because they may be insured elsewhere and, in many jurisdictions, the insured is required by law to provide coverage.
Damage to Impaired Property or Property Not Physically Injured
No property damage liability coverage is provided for "impaired property"—which is property that has not been physically injured - IF the damage arises out of a defect, deficiency, inadequacy, or dangerous condition in the insured's product or work.
Which form provides coverage for a loss that takes place during the policy period and is not required to be reported within a certain time frame?
Occurrence Form -The occurrence form is appropriate when the insured knows that the loss occurred during the policy period, but not necessarily when it was reported.
Property Damage
Physical injury to tangible property, including all loss of use of the damaged property. "Property damage" is also loss of use of tangible property that is not physically injured. (Electronic data is not tangible property.)
Which of the following legal liability exposures is covered if the employee of a business causes bodily injury to another person while working at the insured's business location?
Premises and Operations -This exposure involves an insured business that conducts its operations on premises, either described or elsewhere, and covers occurrences that take place during the policy period and in the policy territory.
The Condition that states that the insurance applies separately to each insured is called __________________.
Severability -Several suits against several insureds do not increase the insurance for that occurrence or policy period.
Supplementary Payments - Coverages A and B
Supplementary Payments apply only to Coverages A and B, are paid in addition to any applicable limit of liability, and include: All claim-related expenses incurred by the insurance company The cost of bail bonds, up to $250 The cost of bonds to release attachments All reasonable expenses incurred by the insured, at the insurer's request, including actual loss of earnings up to $250 per day to the insured for time off from work All court costs taxed against the insured in a suit Payments for prejudgment interest, which is the amount of interest that accrues on a judgment from the time of the accident or loss until the insurer makes payment or offers to make payment Payments for post-judgment interest, which is the amount of interest that accrues on a judgment after it's entered and before the insurer has paid or offered to pay Supplementary payments do NOT reduce the limits of insurance provided by the policy
Impaired Property
Tangible property, other than an insured's product or work, which cannot be used because it is thought or known to be defective, inadequate, deficient, or dangerous.
Which of the following is not included in the definition of an insured contract?
Tenant agreement -The insured contract describes the liability assumed by the insured and also includes an obligation to indemnify a municipality, an elevator maintenance agreement, and an agreement in which an insured assumes tort liability.
Section III - Limits of Insurance
The Limits of Insurance shown in the Declarations are the most the insurer will pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits. -General Aggregate Limit -Products-Completed Operations Aggregate Limit -Personal and Advertising Injury Limit -Per Occurrence Limit -Medical Expense Limit
Pollution Liability Coverage
The Pollution Exclusion incorporated in the policy excludes bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants. Insurers have three options available that they may use at their discretion, on an individual account basis, to provide "Buy Back" coverage to insureds: -Pollution Liability Coverage Form (Designated Sites) -Limited Pollution Liability Coverage Form (Designated Sites) -Pollution Extension Endorsement
Premium Audit
The advance premium is only a premium deposit, and the earned premium will be based on an audit at the end of the policy period. The insured must maintain records necessary for the insurer to compute the premium, as premiums are based on sales, receipts, payroll, or some combination thereof. An additional premium is required if the earned premium is greater than the premium deposit.
Coverage Territory -
The coverage territory of the CGL is the United States, its territories and possessions, Puerto Rico, and Canada. International waters and airspace are included in the coverage territory but only if injury or damage occurs in the course of travel or transportation between any places included in the coverage territory.
Section II - Who is an Insured
The following persons are an insured based on the designation on the Declarations--but only with respect to the conduct of the insured business: If an individual is designated, the individual and his or her spouse are insureds. If a partnership or joint venture is designated, the partnership, joint venture, and members, partners, and their spouses are insureds. If a limited liability company (LLC) is designated, the LLC, its members, and its managers are insureds. If a trust is designated, the trust and its trustees are insureds. If any other type of organization is designated, the organization, its executive officers, its directors, and its stockholders are insureds. Even if not designated on the Declarations, the following parties are also insureds when performing duties related to the conduct of the insured's business: The insured's volunteer workers and employees who are not executive officers, directors, or managers. Any other person while acting as the insured's real estate manager. Any person or organization having temporary custody of the insured's property if the insured dies. The insured's legal representative if the insured dies, but only with respect to duties as legal representative.
Transfer of Rights of Recovery Against Others to the Insurer (Subrogation)
The insured agrees to transfer to the insurer any rights to recover any payment the insurer has made on behalf of the insured.
Legal Action Against the Insurer
The insured cannot sue the insurer until all terms have been fully complied with, such as notice of occurrence, etc.
Duties in the Event of Occurrence, Claim, or Suit
The insured must see that the insurer is notified as soon as practicable, in writing, of an occurrence or an offense that may result in a claim. The notice should include when and where the occurrence or offense took place, the names and addresses of injured persons and witnesses, and the nature of any injury or damage.
Insuring Agreement Coverage B excludes a number of offenses. Neither coverage nor defense applies to the following types of offenses that cause damage:
The insured's knowledge that an act will violate another's rights and would inflict personal and advertising injury The oral or written publication of material by the insured, or at the insured's direction, when knowing the material is false Criminal acts committed by, or at the direction of, the insured Contractual liability unless the insured would be liable for the act in the absence of the contract Breach of contract The failure of the insured's goods, products, or services to conform to advertising statements Damage that arises out of the wrong description of goods, products, or services
Coverage C - Medical Payments Insuring Agreement
The insurer will pay for medical expenses, due to the bodily injury, caused by an accident on the insured's premises or because of the insured's operations. The accident must take place in the coverage territory and during the policy period. Expenses include first aid administered at the time of the accident, and expenses that have been incurred and reported within one year of the date of the accident. These payments are made regardless of fault.
Coverage A - Bodily Injury and Property Damage Liability Insuring Agreement
The insurer will pay those sums the insured becomes legally obligated to pay as damages because of bodily injury and/or property damage to which coverage applies, provided the occurrence took place during the policy period and in the coverage territory. The coverage territory includes the United States of America including its territories and possessions, Puerto Rico, and Canada. If the insured's products are made or sold in the coverage territory and a suit is brought in the coverage territory, the policy would then respond to a product-related claim worldwide. The insurer has the right and duty to defend the insured against any suit seeking damages. There is no duty to defend any claim or suit to which insurance does not apply.
The Insured's Right to Claim Information (Claims Made Form only)
The insurer will provide, upon cancellation, non-renewal, or written request of the First Named Insured, a summary of paid claims, claims for which the insurer has established reserves, and notices received by the insurer of occurrences that could give rise to claims.
Representations
The named insured agrees that all statements made in the application are accurate and complete, that the statements are based on representations made by the named insured to the insurer, and that the insurer has issued the policy based upon such representations.
Coverage B - Personal and Advertising Injury Insuring Agreement
The policy provides protection for liability arising from "personal and advertising injury" offenses that are committed in the coverage territory and during the policy period. Personal and advertising injury offenses include: False arrest, detention, or imprisonment. Malicious prosecution. Wrongful eviction from wrongful entry into, or invasion of privacy of the right of private occupancy. Libel or slander. Violation of privacy. Use of another's idea in the insured's "advertisement." Infringement of copyright, trade dress, or slogan in the insured's "advertisement."
Separations of Insureds (Severability)
The term insured is used severally and not collectively in the policy, and it is to be applied as meaning the insured against whom claim is made or suit is brought. The insurance afforded applies separately to each insured. Multiple suits against multiple insureds do not increase the amount of insurance for that occurrence or policy period.
Section IV - Commercial General Liability Conditions
These conditions apply in addition to the Common Policy Conditions: -Bankruptcy -Duties in the Event of Occurrence, Claim, or Suit -Legal Action Against the Insurer -Other Insurance -Premium Audit -Representations -Separations of Insureds (Severability) -Transfer of Rights of -Recovery Against Others to the Insurer (Subrogation) -When the Insurer Does Not Renew -The Insured's Right to Claim Information (Claims Made Form only)
Personal and Advertising Injury
This coverage is provided under Coverage B.
Pollution Extension Endorsement
This endorsement deletes the Pollution Exclusion for bodily injury and property damage liability, but continues to exclude clean up costs.
Damage to Property
This exclusion applies to the insured's own property and any property in the care, custody, or control of the insured. The Commercial Property Part and the Commercial Inland Marine Part of the Commercial Package Policy provide this coverage.
Liquor Liability
This exclusion only applies to insureds who are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. Liquor Legal Liability Insurance, or Dram Shop Liability Insurance, is available under a separate policy for businesses who need coverage to fill the coverage gap created by the exclusion. This exclusion does not apply to a building owner who leases space to a bar. Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won't apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.
Limited Pollution Liability Coverage Form (Designated Sites
This form is identical to the Pollution Liability Coverage Form; except that it does not include clean up.
Pollution Liability Coverage Form (Designated Sites)
This form provides coverage on a claims-made basis with its own limit of liability. Coverage includes a leak from a waste disposal facility located on the premises. The form provides coverage for clean up imposed by governmental direction if the cost is incurred because of environmental damage caused by a pollution incident.
Your Work
Work or operations performed by the named insured or on the named insured's behalf. Your work includes materials, parts, or equipment furnished in connection with such work or operations. Your work also includes warranties or representations made at any time with respect to the fitness, quality, durability, performance, or use of "your product" and also includes the providing of, or failure to provide, warnings or instructions.
The Per Occurrence Limit
is the most the insurer will pay for damages under Coverage A and medical expenses under Coverage C because of bodily injury or property damage arising out of any one occurrence.
The Personal and Advertising Injury Limit
is the most the insurer will pay under Coverage B for the sum of all damages because of all personal and advertising injury sustained by any one person or organization
The Products-Completed Operations Aggregate Limit
is the most the insurer will pay, during the policy period, for losses payable under Coverage A included in the Product and Completed Operations Hazard.
The General Aggregate Limit
shown is the most the insurer will pay, during the policy period, for medical expenses under Coverage C, damages under Coverage A (except damages that are included in the Product and Completed Operations Hazard), and damages under Coverage B.
The Medical Expense Limit
the most the insurer will pay under Coverage C for all medical expenses because of bodily injury sustained by any one person.