CG 00 01 AND CG 00 02–COMMERCIAL GENERAL LIABILITY COVERAGE FORMS ANALYSIS

The Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Forms are extremely broad. They insure the bodily injury, property damage, and personal and advertising injury 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.

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 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. It handles any covered loss or claims filed during the policy period. A retroactive date is often used to restrict how far back an occurrence can happen. Claims-made coverage then applies to claims made during the policy period but only for occurrences that took place after the retroactive date.

CG 00 01–Commercial General Liability Coverage Form–Occurrence Basis is analyzed first. At the end of this article, a summary analysis of CG 00 02–Commercial General Liability Coverage Form–Claims-Made Basis is provided that addresses only the differences between it and CG 00 01.

This analysis is of the 04 13 edition of these coverage forms. Changes from the 12 07 editions are in bold print.

CG 00 01–COMMERCIAL GENERAL LIABILITY COVERAGE FORM

This coverage form begins by stating that certain of its provisions restrict coverage. It encourages the named insured to carefully read the coverage form in order to understand each party’s 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 that qualifies as such under Section II–Who Is an Insured. The terms “we, us, and our” refer to the insurance company that provides 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. However, this right and duty is only for those suits that seek damages covered by this insurance.

The insurance company can investigate any loss and settle any claim or suit that results at its discretion, but the amount it pays as damages is limited as described under Section III–Limits of Insurance. Its right and, more importantly, its duty to defend ends when the limit of insurance that applies to pay judgments and settlements under Coverage A or Coverage B or medical expenses under Coverage C has been exhausted. The insurance company has no 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.

Examples:

· The Road Runner sues Wiley Coyote for numerous attempts on his life. The insurance company is not obligated to defend Wiley because the CGL Coverage Form does not insure intentional acts.

· Feels Good Mutual insures Eric's Etchings under the CGL Coverage Form with a $1,000,000 General Aggregate Limit. An explosion occurred due to Eric's negligence, and several people were injured. In addition, several adjacent properties were damaged. Each injured person and property owner file a separate claim for its injuries and damages, and Feels Good begins to make settlements. Once the $1,000,000 General Aggregate Limit is used up, Feels Good has no further obligation to pay for injuries or damages or to defend against any lawsuits that might be filed.

Note: The payments must actually be made or deposited with the court before the obligation to defend ends.

b. Coverage applies to bodily injury and property damage subject to both of the following:

· Is caused by an occurrence that takes place in the coverage territory

· Occurs during the policy period

Example: Charlie's Custom Machinery has an operation in Ireland that manufactures and distributes its products. There is no coverage for loss or injury in Ireland because of the definition of coverage territory. However, Charlie manufactures some products in the United States and sells them in Ireland. Loss or injury from these products meets the definition of covered territory, as do loss or injury from products manufactured in Ireland that Charlie distributes in the United States.

Coverage applies only if, prior to the policy period, none of the following knew that the property damage or bodily injury had occurred:

Any party who is an Insured based on part of the Who Is an Insured section based of the business type.
An employee who has been authorized to give or receive notice of an occurrence

Example: On 08/01/2021, Keith’s Excavating Company taps the gas line on Kingsley Drive. This results in gas escaping from the line. Paul operated the backhoe at the time and was new on the job. He knew that he caused some damage but did not notify anyone for fear of losing his job. Keith’s policy period is 09/01/2021 to 09/01/2022. A gas line explosion occurred on Kingsley Drive on 10/01/2021. The investigation reveals the damage to the gas line, and Keith is sued for contributing to the 10/01/2021 explosion. Because no one at Keith’s, in a position of responsibility, knew about the prior year’s property damage, the current policy period’s coverage responds to the 10/01/2021 claim.

If any of the parties described above knew about any bodily injury or property damage, then any continuation, change, or resumption of such bodily injury or property damage during or after the policy period is also considered to have been known before the policy period.

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. However, the policy that covered the prior period should respond.

c. Bodily injury or property damage that occurs during the policy period but that is unknown by the parties described above, prior to the policy period to have occurred includes any continuation, change, or resumption after the current policy period ends.

Example: Speedy Plumbing sends Charlie to install a water heater in a vacant unit in the Golden Heights Apartment building. Charlie does not close the faucet properly when he leaves. Because the unit is vacant, nobody notices the constant drip until the unit ceiling below collapses. Speedy Plumbing’s coverage runs from 10/01/2021 to 10/01/2022. Charlie installed the water heater on 09/15/2021, and the ceiling collapsed on 10/30/2021. The policy that runs from 10/01/2021 to 10/01/2022 pays the loss. On 10/15/2021, the tenant in the previously vacant unit falls through the floor of his unit into the one below it. The claims adjuster determines that the water leak weakened the floor joists, and Speedy Plumbing is sued again. While the injury occurred on 10/15/2021, the policy that ran from 10/01/2021 to 10/01/2022 responds because this injury is a continuation of the prior loss.

d. Bodily injury or property damage is considered known at the earliest date when any of the parties defined above:

Reports any part of any injury or damage to the current insurance company or any other company
Receives a written or verbal demand or claim for damages
First becomes aware in any other way that bodily injury or property damage either has occurred or has begun to occur

e. Bodily injury damages include damages that any person or organization claims for care, loss of services, or death that results 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 that is either expected or intended by the insured. There is one exception. Any bodily injury that is the result of reasonable force being used to protect persons or property is covered.

Note: The primary reason for this exclusion is to keep the insurance company from becoming involved with non-accidental losses. This exclusion is in the public interest to make sure that the insured is not using the insurance coverage as cover for gain (such as theft), to inflict injury on a competitor, as an instrument of revenge, or to cause any other intentional harm.

This exclusion's wording continues to be challenged and interpreted by the courts, especially in cases where the action was intentional but the type and extent of injury or damage that resulted was not.

Related Article: Expected or Intended Injury Exclusion

Related Court Cases:

Intentional Damage Exclusion Barred Claims Against Liability Insurer of Store Owner

Insured’s Intended Damage Not Covered

Expected or Intended Injury Exclusion Did Not Apply to Bar Patron's Injuries

Does Masseur's Sexual Impropriety Constitute "Bodily Injury"?

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 contract or agreement. However, coverage does apply to liability for damages under either of the following circumstances:

Liability the insured would have had without a contract or agreement

Winery_1

Example: Wally's Winery owns the building it occupies for wine tasting and sales operations. Wally leases some extra space to Delicate Patterns, a fine glassware shop. Delicate Patterns insists that Wally guarantees that the premises are safe and meet all life safety regulations and requirements in the written lease. Coverage applies to this requirement because Wally is responsible and liable for it anyway, whether it is written into the contract or not.

Liability the insured assumed in an insured contract or agreement. The bodily injury or property damage must occur after the contract or agreement is executed. Attorney fees and litigation expenses that are incurred by or for a party other than the insured are considered damages because of bodily injury or property damage and are covered within the coverage limits, but only if both of the following apply:

o The cost of that party's defense is assumed in the same insured contract

o The fees and expenses are associated with damages that this insurance covers

Note: It is very important to note that while the defense expenses are part of the coverage provided, they are paid within the limits of the policy. This means that every dollar spent defending the case will reduce the amount of limits available to pay for the loss by a dollar. However, Supplementary Payments–Coverages A and B may cover payment for defense expenses related to damages assumed under an insured contract or agreement outside the limit. The indemnitee portion of the Supplementary Payments section should be reviewed to determine when defense of an indemnitee and payment of those expenses is included outside the limits.

Example: Millie falls at Delicate Patterns and sues Wally’s Winery and Delicate Patterns. Delicate Patterns claims coverage under Wally’s policy. Wally’s insurer assumes the duty of defending both. The suit against Wally is settled for $125,000, and the suit against Delicate is settled for $150,000. The defense cost for Delicate is $200,000:

Scenario 1: If Delicate’s suit is handled based on the conditions described in Supplementary Payments, a total of $275,000 is charged against the policy occurrence and aggregate limits. The $200,000 defense cost is paid without impacting any limits.

Scenario 2: If Delicate’s suit is not handled as described in Supplementary Payments, a total of $475,000 is charged against the policy occurrence and aggregate limits.

c. Liquor Liability (04 13 changes)

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

Causing or contributing to a person becoming intoxicated
Furnishing alcoholic beverages to a person who is under the legal drinking age
Furnishing alcoholic beverages to a person who is already under the influence of alcohol
Any law that relates to the sale, gift, distribution, or use of alcoholic beverages

Related Court Cases:

CGL Policy's Liquor Exclusion Inapplicable to Sales During Festival

Liquor Liability Exclusion Held Applicable to Nonprofit VFW Post

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

The following significant changes are in the 04 13 edition:

Any of the actions described above may result in an occurrence. In that case, there is also no coverage if any of the following claims related to that occurrence are brought against the insured:

Hiring, employing, monitoring, or training others

Example: Bubba applies for a bartending position at Buster’s Brewskies and tells Buster he has already taken TIPS training. Buster hires him on the spot and does not schedule TIPS training. Buster serves Barbie beers even though she is visibly intoxicated. Barbie leaves, starts her car, drives off, and strikes a pedestrian. The pedestrian sues her and Buster’s Brewskies. The argument is that Buster is negligent because he did not properly hire and train Bubba and his lack of TIPS training is proof of the negligence. Because of this addition to the exclusion, liability for such negligence is now explicitly excluded.

Noting that a person is intoxicated and either providing transportation to that person or failing to provide such transportation

270_C397, Can Insurer Duck Liability for Drunk-driving Deaths?

Example: Buster’s Brewskies uses a local taxi service to provide rides home for intoxicated customers. Beulah takes advantage of this service but is injured when the driver turns the wrong way on a one-way street and strikes an oncoming vehicle. Beulah sues Buster’s Brewskies because it hired a cut-rate taxi service that did not verify licenses or prior violations.

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

Examples:

· Mel's Medical Supplies Distribution holds a company Christmas party and serves alcoholic beverages at no charge.

· Paul at Peter Piper's Printing takes Mary to lunch and pays for a bottle of wine to go with the meal.

Both examples are covered if bodily injury or property damage occurs due to consuming alcoholic beverages.

On the other hand, consider this:

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 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.

The named insured may not serve alcoholic beverages but does allow others to bring such beverages onto its premises. In that case, this exclusion does not apply even if a license is required to operate this way. This named insured is not considered such a liquor-related business even if it charges a fee to consume the beverages on the premises.

Example: Jersey Set-ups is a pizza parlor and billiards hall. Jersey cannot obtain a liquor license because of past indiscretions, but its patrons demand the right to drink while on premises. Jersey reaches a compromise. It will sell “set-ups,” and its patrons can bring any alcohol they like to add. There is also a refrigerator on premises where regulars keep their beer. Jersey Set-ups is not subject to the liquor exclusion because of this new language.

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 laws such as workers compensation, disability benefits, unemployment compensation, and others.

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 that workers compensation or employers’ liability policies cover.

e. Employers Liability

Bodily injury to an employee of the insured as a result of his or her employment by the insured or while that employee is performing duties that are in support of the insured’s business is excluded. Bodily injury to the spouse, children, parents, brothers, or sisters of that employee as a consequence of his or her bodily injury is also excluded.

This exclusion applies whether the insured is liable because it is the employer or for any other reason.

Example: Justin, an employee of Metal Part, Inc., is repairing a machine that is manufactured by Metal Part. He is injured and sues Metal Part, Inc., not as his employer but as the manufacturer of the machine. This exclusion continues to apply, and the insurance company will not defend the action.

The exclusion applies whether it must share damages with or repay someone else who must pay damages because of the injury.

Example: Justin, in the above example, also sues Pembrake, who regularly services the machine that injured him. Pembrake is found liable for the injury, but Metal Part is found primarily liable. Pembrake will not be compensated from this coverage form for any of its payments or costs.

However, it does not apply to liability the insured assumes under an insured contract.

This clarification is especially important because contractors, subcontractors, independent contractors, or leased employees are being used to an increasing extent, and there is uncertainty about who is responsible for their injuries.

Note: Coverage for employers’ liability is provided under the Workers Compensation Policy in most states.

However, monopolistic states provide only workers compensation coverage and do not provide employers’ liability coverage. This results in a significant gap in coverage for the insured. Many insurance companies in such states have developed manuscript or company coverage forms or utilize recently developed state-specific ISO endorsements that add employers’ liability coverage to the CGL Coverage Forms.

Workers Compensation Monopolistic State Funds

Stop Gap–Employers’ Liability Coverage

f. Pollution

Pollutants are defined in the definitions section as irritants or contaminants that can be solid, liquid, gaseous, or thermal. Smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste are listed as examples. The term waste specifically includes materials that are intended to be recycled, reconditioned, or reclaimed.

(1) Coverage does not apply to any bodily injury or property damage that arises because pollutants have been discharged, dispersed, seeped, migrated, released, or if they have escaped. The events may have actually occurred or may have been alleged or were threatened. The exclusion applies under the following circumstances:

(a) At or from any location, site or premises that the insured ever owned, occupied, rented, or had loaned to it. There are four exceptions:

Bodily injury that is sustained inside a building when the bodily injury is caused by smoke, vapor, fumes, or soot coming from any type of heating, cooling, or dehumidification equipment.
Bodily injury that is sustained inside a building when the bodily injury is caused by smoke, vapor, fumes, or soot coming from equipment that heats water for the building's occupants. The heated water must be intended for only personal use.

Example: The Jones family continues to occupy a unit in an apartment building being renovated because the work takes place on the other side of the building. The entire family becomes ill from fumes released by a faulty water heater. 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 claims that its pet dog and cat died because of the fumes. Damages from those deaths are not covered because the exception does not apply to property damage.

Bodily injury or property damage for which the named insured may be liable as a contractor. This exception applies only when the owner or lessee of the location, site, or premises has been was added as an additional insured for the named insured's ongoing operations at that specific location, site, or premises. In addition, the location, site, or premises must never have been owned, occupied by, or rented or loaned to any insured except this additional insured.

Example: G.K. Properties hires D&L Contracting to construct a storage shed on its owned property. Their contract agreement requires that G.K. be added as insured on D&L’s CGL Coverage Form for the duration of the building project. During construction, a pollution release occurs that damages a neighboring business. That business sues G.K., and G.K. turns the suit over to D&L to handle under its CGL Coverage Form. Coverage applies if D&L is found liable.

Bodily injury or property damage that arises out of heat, smoke, or fumes from a hostile fire

Example: ChemTec, the named insured, is a chemical research facility. During a research project, a major fire destroys ChemTec’s premises. Toxic chemicals released during the fire in a black cloud that hovers over adjacent neighborhoods causes several people to become ill. The CGL Coverage Form covers the injuries to those persons.

(b) At or from any location or site used to handle, store, dispose of, process, or treat waste. This applies regardless of who was involved with the waste-related activity.

(c) That were transported, handled, stored, treated, disposed of, or processed as waste. This applies only if the insured or someone the named insured is legally responsible for was involved with the waste-related activity.

(d) At or from any location or site where any insured is performing operations if it brings the pollutants to the location or site as a part of those operations. This also applies to contractors and subcontractors working for any insured and bringing pollutants to the site. There are three exceptions:

Bodily injury or property damage that result when necessary mobile equipment fuels, lubricants, or other operating fluids escape from the reservoir in the equipment designed to contain them. This exception does not apply if the fluids were intentionally released or if the fluids were brought to the location with the intent to release them as part of the operations.

Examples:

· Bob is a contractor working on the Granite Building site. While driving a forklift, he turns too quickly, and the forklift overturns. Oil seeps out of the engine, and hydraulic fluid also leaks. The pollutant damage to the site is covered.

· Changing the example, Bob decides to change the forklift's oil while it is on the site. He lets the oil spill onto the ground, replaces the oil in the forklift, and drives off. This pollution damage is excluded.

Bodily injury or property damage caused by the release of gases, fumes, or vapors from materials if those materials had been brought into the building as part of operations being performed by the named insured or by a contractor, or subcontractor who is acting on behalf of the named insured. An important part of this exception is that the injury or damage must be sustained within the building.

Examples:

· Whitewash, Inc. is hired to paint an office building's hallway. During the third day of work, a building tenant’s employee is rushed to the hospital after being overcome by paint fumes inside the building. The insurance the CGL Coverage Form provides applies to the costs related to that employee’s illness.

· Whitewash, Inc. is hired to paint an office building. It uses an ammonia-based paint on the metal fence that surrounds the property. A building tenant’s employee returns from lunch, faints from the fumes, strikes her head on the sidewalk, and is rushed to the hospital for treatment. There is no coverage in this case because the incident occurred outside the building.

Bodily injury or property damage that arises out of heat, smoke or fumes from a hostile fire

(e) At or from any location or site where any insured performs operations that involve pollutant testing, monitoring, cleaning up, removing, containing, treating, detoxification, neutralization, response, or assessment in any way. This exclusion also applies if contractors or subcontractors that work 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 requirements the insured must comply with regarding the effects of pollutants. These may involve the insured or others testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing those effects.

(b) Claim or suit by or on behalf of a governmental authority for damages due to testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way

Item f. (2). does not apply to any liability for property damage the insured would have even if any of the above hadn’t been required or subject to a government authority.

Pollution coverage can be provided to varying degrees by the following:

CG 04 22–Pollution Liability Coverage Extension adds pollution coverage by deleting the first paragraph of the pollution exclusion. However, it does not delete the exclusion for cleanup costs.
CG 00 39–Pollution Liability Coverage Form–Designated Sites is a claims-made coverage form. It provides both pollution liability coverage and reimbursement of mandated off-site cleanup costs for designated locations.
CG 00 40–Pollution Liability Limited Coverage Form–Designated Sites is a claims-made coverage form. It provides pollution liability coverage but only for designated sites. There is no reimbursement for off-site cleanup costs.

ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses

Pollution Exclusion and Limited Coverage

CG 00 42–Underground Storage Tank Policy Analysis

A separate pollution policy should be considered if additional pollution liability coverage is needed.

Related Court Cases:

Is Wastewater A Pollutant?

Paper Recycler Fire Damages Excluded

Estate Challenges Pollution Exclusion in Carbon Monoxide Deaths

Pollution Exclusion Deemed Ambiguous So Coverage Applies

Pollution Exclusion Applied Although Pollution Was Caused by Former Owner

Pollution Exclusion Ambiguous Regarding Permitted Emissions

g. Aircraft, Auto, or Watercraft (04 13 change)

Coverage does not apply to bodily injury or property damage when it arises out of owning, maintaining, using, operating, loading, unloading, or entrusting to others any aircraft, auto, or watercraft. This exclusion applies if any insureds owns, operates, rents, or has loaned to it the aircraft, auto or watercraft and applies even if a claim is due to any insured being negligent or engaged in wrongdoing in supervising, hiring, employing, training, or monitoring of others.

Example: A watercraft the insured owns and rents to its clients for pleasure use is not properly maintained, and a client is injured when the watercraft sinks. Coverage does not apply to the injury.

This exclusion has five exceptions. It does not apply to:

Watercraft on the shore that is part of the premises the named insured owns or rent
Watercraft the named insured does not own, that is less than 26 feet long and that is not used to transport people or property for a fee

Example: Ollie at Ollie's Oriental Grill rents a 22-foot-long pontoon boat for an afternoon sales presentation and cooks appetizers on a small charcoal grill. The grill causes a fire. The guests move to the other side of the boat to get away from the fire, but 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 will also be involved in any subsequent lawsuits.

The parking of autos either on the named insured’s owned or rented premises or next to that premises. The autos being parked must not be owned by, rented, or loaned to the named insured or any insured.

Example: Ollie's Oriental Grill arranges for valet parking during a dinner it hosts 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.

Liability that is assumed through any insured contract that applies to owning, maintaining, or using aircraft or watercraft

SmallJet

Example: Ollie charters an emergency flight to meet an important client, and the charter company requires him to sign a hold-harmless agreement.

Bodily injury or property damage caused by machinery or equipment that is attached to mobile equipment that is defined in this policy as auto only because it is subject to motor vehicle financial responsibility laws.
Bodily injury or property damage caused by mobile equipment that is mounted on automotive or truck chassis and is used to raise and lower workers or equipment. The injury or damage must be due to the operation of the equipment, not the movement of the vehicle.
Bodily injury or property damage caused by mobile equipment air compressors, pumps, and generators that are permanently mounted on self-propelled vehicles is also excepted. The injury or damage must be due to the operation of the equipment, not the movement of the vehicle.

The 04 13 edition deleted the words “in the state” before “where it is licensed” in the prior edition with respect to licensing and garaging locations.

ATV

Example: An all-terrain vehicle (ATV) is required to be licensed. A pulley welded to the back of it 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.

Example:

The well-drilling equipment mounted on a truck chassis accidentally strikes and damages the side of a building while maneuvering into position over a well. Coverage applies to the building damage because the equipment operation caused the damage.

CA 00 01–Business Auto Coverage Form Analysis

Aircraft Insurance Coverage Analysis

ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses – See the paragraph on CG 24 12 Boats that is available to delete this exclusion and extend coverage for certain boats.

Related Court Cases:

Injury from Truck Damage to Sidewalk Held Not Within Automobile Exclusion

Does Auto Exclusion Apply to Negligent Driver?

CGL's Automobile Exclusion Held to Apply, Regardless Of Contention That An Unlicensed And Unregistered Truck Was "Mobile Equipment"

Business Liability Policy Cannot Be Construed as Automobile Policy

h. Mobile Equipment

This is actually two separate exclusions put together as one, but both apply to mobile equipment.

There is no coverage for bodily injury or property damage that arises when an auto that any insured owns, operates, rents, or has loaned to it is transporting mobile equipment.

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, but the auto policy should respond.

There is no coverage for bodily injury or property damage when mobile equipment is used in any prearranged race, speed, stunt, or demolition activity.

Example: Perry and Josh are bored; they are waiting for the subcontractors to arrive. They suddenly get the brilliant idea to race their bulldozers. Perry miscalculates and exits onto the road striking an oncoming vehicle. Coverage applies to the damage Perry’s bulldozer causes because the racing was a spontaneous, not pre-arranged, event.

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.

An interesting part of this exclusion is that costs or expenses the named insured or any other party incurs to repair, replace, enhance, restore, or maintain such property for any reason are excluded even if these were undertaken to prevent injury to persons or damage to property of others. This part of the exclusion seems more like a condition than an exclusion.

Example: Meryl received recommendations from her insurance company that will reduce the chance of liability loss. She is excited and immediately hires contractors to make the improvements. She then sends the bill to her insurance company. She is very disappointed to discover that she will not be compensated for her loss prevention measures.

(2) Premises that the named insured sold, gave away, or abandoned. This applies only when the property damage arises out of any part of those premises.

Example: Mary bought a two-story building that Phil had owned and used for ten years. She moves her personal property into the building. One day Mary notices a crack, sees dust and can exit her office just before the ceiling falls as the upper floor caves in. Mary sues Phil for the property damage because the floor joists were only 2 x 6 instead of the required 2 x 10. Phil has no coverage because of this exclusion. However, if Mary had been injured, bodily injury coverage may have been available.

(3) Property that is loaned to the named insured

(4) Personal property in the insured's care, custody, or control

Examples: Property in the insured's care, custody, or control includes:

Computers that customers leave with a computer repair service to be cleaned, serviced, or repaired
Fur coats that customers leave with a retail fur shop that also offers fur cleaning and storage facilities

Related Article: Care, Custody, or Control

Note: The CGL Coverage Form does not cover property of others in the insured’s care, custody, or control. However, some insurance companies have developed their own versions of endorsements that do so. Another alternative is Inland Marine Insurance. Bailees Coverage is available to cover property of the insured’s customers or clients. Various forms of bailees coverage are available through ISO, the American Association of Insurance Services (AAIS), and company-specific forms, depending on the insured's needs and operations.

AAIS Bailee Customers Floater Coverage–Dry Cleaners and Laundry Form

AAIS Miscellaneous Bailee–Processor Floater

ISO Bailees Customers Coverage Form

(5) The specific part of real property the named insured or others working on its behalf perform operations on, if the property damage arises out of those operations

Example: The scaffolding is in place, and brick work is almost complete when an inexperienced backhoe operator backs into the scaffolding, causing it to give way, taking most of the brick work with it. There is no coverage for the damage to the building because the brick workers and the backhoe worker were all working on behalf of the named insured.

(6) The specific part of any property that must be restored, repaired, or replaced because the named insured's work was done incorrectly

Example: Rowdy's Rootin Tootin Roofin is hired to install a new roof on a building addition. His demo crew misunderstands and removes the shingles from the entire building so that they can roof the entire building, including the addition. The CGL Coverage Form does not cover the damage or expense to re-roof the building.

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 especially important to homebuilders that build and sell homes. Without this exception, there is no coverage once the home is 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.

RRSidetrack_2

Example: Appliances Unlimited distributes large appliances. A railroad track passes next to its premises. Appliances believe 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 that arises out of it or any part of it.

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 does apply 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 when the damage arises out of that work or any part of it that is included in the products-completed operations hazard.

There is an exception to this exclusion for work that is performed by a subcontractor hired by an insured. Coverage applies if the damage to property is the result of the subcontractor’s completed work.

Example: Gretchen had a contract to install an assembly line at Gregg’s factory. Gregg accepts the line as completed and begins to use it. One day the line starts to smoke and suddenly catches on fire. The assembly line had overheated due to a safety trigger not having been installed. Gregg sues Gretchen for the damage to his building, his stock and the assembly line.

Scenario 1: Coverage is available for the damage to Gregg’s building and stock but not to the assembly line because that was Gretchen’s work.

Scenario 2: Coverage is available for all the damage because the safety trigger was the responsibility of Phyllis, a subcontractor.

Related Court Cases:

Commercial General Liability Damage from Leaky Windows Covered Under Contractor's Policy

Work Product Exclusion in Contractor's Liability Insurance Held Applicable To Claim for Negligent Location of House

Work Project Exclusion Held Applicable To Control of Project by Construction Manager

m. Damage to Impaired Property or Property Not Physically Injured

The insurance company does not cover property damage to impaired property or to property that is not physically injured when the property damage is caused by a defect, inadequacy, or dangerous condition in either the named insured’s product or its work. Coverage also does not apply if the damage is caused by a delay or failure by the named insured or others who act on its behalf to meet contract terms and conditions.

There is an exception. This exclusion does not apply to any loss of use of other property that arises because of a sudden and accidental physical injury to the named insured’s product or work after it has been put to its intended purpose.

Note: The definition of property damage is physical damage to tangible property and the loss of use of tangible property. There is no requirement that the loss of use and the physical damage to tangible property be related.

Examples:

· Steve's Super Switches manufactures switches that start and stop a variety of products. Steve sells a batch of defective switches to other manufacturers to incorporate into their products. Unfortunately, those products do not operate after these switches are installed. The other manufacturers’ products are impaired because of the insured’s defective product but are otherwise undamaged. This loss is excluded.

· Not Serious About My Work agrees to have the artwork for a client's brochure completed by a specific date. The date arrives, and the artwork is not complete. There is no physical injury to any property, but the client loses potential income by not being able to distribute the brochure. This loss is also excluded.

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

There is no coverage for any incurred loss, cost, or expense when the named insured’s product, work, or any impaired property is recalled or withdrawn from the market or from any use. There is also no coverage for costs and expenses the named insured, or others incur because they can no longer use the recalled or withdrawn item. This exclusion also applies to withdrawal, recall, inspection, repair, replacement, adjustment, removal, and disposal expenses.

This exclusion applies when the recall or withdrawal is due to a defect, deficiency, inadequacy, or 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. Access or Disclosure of Confidential or Personal Information and Data-Related Liability (05 14 edition)

Note: CG 21 06–Exclusion – Access or Disclosure of Confidential or Personal Information and Data-Related Liability – With Limited Bodily Injury Exception was introduced as a mandatory endorsement with a 05 14 edition date. Because it is mandatory and totally replaces Exclusion p. Electronic Data, as an editorial enhancement, we are removing the eliminated exclusion and replacing it with the wording from the CG 21 06 05 14 replacement.

Coverage does not apply when damages arise from either of the following:

(1) Disclosure of or access gained to confidential or personal nonpublic information belonging to any person or organization. Examples of such information are patents, trade secrets, customer lists, credit card information, health information, how to process, and financial information.

(2) The loss of, loss of use of, damage to, corruption of, inability to access or inability to manipulate electronic data.

There are many types of damages and this exclusion applies to all of them even when limited to notification costs, credit monitoring expenses, forensic expenses, public relations expenses, and similar expenses that are due to either (1) or (2) above.

The only exception is that bodily injury related damages that are not related to item (1) are covered.

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

q. Recording and Distribution of Material or Information in Violation of Law (04 13 change)

The 04 13 edition retitles this exclusion by adding the words “Recording and” preceding the rest of the title. The change in this exclusion incorporates CG 00 68–Recording and Distribution of Material or Information in Violation of Law Exclusion that was previously a mandatory endorsement.

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:

The Telephone Consumer Protection Act (TCPA), including its amendments or additions
The CAN-SPAM Act of 2003, including its amendments or additions
The Fair Credit Reporting Act (FRCA). This includes any and all its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA) (04 13 change)
Any other statute, ordinance, or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information. (04 13 change)

Note: This exclusion does not state that the named insured or even an insured must be the violator. As a result, situations could arise where an insured or the named insured is not aware that its computers have been hacked to violate the act, and coverage still does not apply.

Exceptions that apply to only Fire Damage to Premises the Named Insured Temporarily Rents or Occupies.

The following list of exclusions do not apply to fire damage to premises that the named insured rents temporarily or occupies with permission of the owner. Under Section III, Limits of Insurance, a separate limit called Damage to Premises Rented to You applies.

c. Liquor Liability

d. Workers Compensation and Similar Laws

e. Employers’ 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

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. The insurance company not only has the right, but it also has the duty to defend the insured against any suit that seeks those damages. However, this right and duty applies only for those suits seeking damages that this insurance covers. The company can investigate any loss or offense and settle any resulting claim or suit at its discretion. The amounts paid as damages is limited as described under Section III–Limits of Insurance.

The insurance company’s right and duty to defend ends when it uses up the limit of insurance that applies to pay judgments and settlements under Coverage A or Coverage B or medical expenses under Coverage C. The insurance company has no other obligation or liability to pay sums or perform acts or services other than those specifically listed and described under Supplementary Payments–Coverages A and B.

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.

Example: Happysmile Dentists are sued by BigPayne Dental Factory on June 6, 2021, for erecting a billboard ad that looks remarkably like a campaign used by BigPayne. Later, on July 2 and 19, 2021, BigPayne files two other suits upon discovering two other "copycat" billboard ads. Happysmile immediately sent all three notices to their insurer. Happysmile’s policy is effective from 7/1/2020 – 7/1/2021, and its renewal is 7/1/2021-2022. Only the initial policy will respond to the claims because all the offenses are against the same organization and the first offense was on June 6, 2021.

2. Exclusions

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

a. Knowing Violation of Rights of Another

Coverage does not apply 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.

Example: Mindy works for Best of the East, an interior design company. Best of the East is desperate to show its work in a major Holiday Home Show, so Mindy is charged with following various committee members to gain information that might help influence their accepting Best of the East in the show. Mindy places wiretaps on phones to help with her information gathering. Mindy is not covered when the wiretaps are discovered, and members of the committee sue Best of the East and Mindy for the wiretaps. However, if Best of the East was unaware of Mindy’s actions, they may be covered, but Mindy would not be.

b. Material Published with Knowledge of Falsity (04 13 change)

Coverage does not apply when personal and advertising injury is caused by material published by the insured or at its direction and the insured knew the information was false. The publication can be either oral or written. This exclusion applies regardless of the way the material is published. (04 13 addition)

Example: Archie blogs on his company’s website that Gracie’s Pub received a failing grade from the local health department. Archie knew this was not true, but he was angry at Gracie’s for asking him to leave the night before. When Gracie sues the company for Archie’s blog, there is no coverage.

c. Material Published Prior to Policy Period (04 13 change)

There is no coverage for personal and advertising injury when the material that caused the alleged injury was first published before the coverage inception date. The publication can be either oral or written. This exclusion applies regardless of the way the material is published. (04 13 addition)

Note: This exclusion does not specify the party that does the initial publication. The insured may publish the material during the policy period, but there is no coverage if the insurance company discovers that the material was published elsewhere prior to the policy period.

Example: CGL coverage is effective 01/01/2021. The official date of a publication is 01/02/2021, but an advance copy was released on 12/28/2020. Because the first publication took place before the 01/01/2021 effective date, there is no coverage if a suit is filed that seeks damages for personal and advertising injury. This applies even if the publication was a reading the author provided on a radio talk show on a publicity tour prior to the actual publication.

d. Criminal Acts

Insurance does not apply to personal and advertising injury when it arises out of a criminal act committed by the insured or at its direction.

Example: Mindy, from our prior example, was able to prove that she was not aware she was violating the committee members privacy, but she is still not covered because placing wiretaps is a criminal act in her state.

e. Contractual Liability

There is no coverage for liability the insured assumes in a contract or agreement. There is one exception. This exclusion does not apply to liability the insured has without a contract or agreement.

Example: A celebrity agrees to an interview that The Tattler Tabloid will publish. However, the celebrity insists on a written agreement that states 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 that arises out of breach of contract. There is an exception. Coverage applies if the contract was an implied contact and the injury is related to an advertising idea of another used in the named insured's advertisement.

Note: An implied contract is much different than a written one. As a result, it is more difficult to prove that a breach occurred in an implied contract.

Example: Johns’ Inc. is sued because its ad is very similar to one that was developed for it but not paid for.

Scenario 1: The ad was one of many developed under a contract with an ad agency. It was rejected, and the relationship ended. When it was later used as a part of an in house developed ad campaign, the agency sued because John’s had rejected the idea and the terms of its contract prevents John’s from using such rejected ideas. No coverage applies.

Scenario 2: At a party, an ad agency representative is talking to the president of John’s and throwing out spontaneous ideas to get an appointment. The president declines to pursue the appointment but uses one of the ideas in an in-house ad campaign. The ad agency sues because its ideas were stolen, and that breached an implied contract. Coverage does apply.

g. Quality or Performance of Goods–Failure to Conform to Statements

Personal and advertising injury that arises when goods, products, or services fail to meet the named insured's advertised statements of quality or performance is excluded.

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 when the named insured’s advertisement states the incorrect price for goods, products, or services.

Example: Paula makes up flyers for her new business. She states that her specialty cherry pies cost $2.50 instead of $25.00. Customers come to her store expecting to receive the $2.50 pies and are disappointed when her employees explain that the price was in error. One customer decides to sue Paula for this offense. There is no coverage.

i. Infringement of Copyright, Patent, Trademark, or Trade Secret

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:

When the named insured's advertisement infringes on copyright, trade dress, or slogan
When use of another’s advertising idea in the named insured’s advertisement is considered infringement of intellectual property rights

Related Court Cases:

Insurer Is Obligated to Defend Copyright Infringement Claim

Hijacking the Hobbit

Joint Owner Alleges Misappropriation Of Work

Insurer and Manufacturer Dispute Meaning Of "Advertising Injury"

j. Insureds in Media and Internet Type Businesses

There is no coverage for personal and advertising injury committed by an insured that is 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.

This coverage form explains that placing frames, borders or links, or advertising on the Internet is not considered being in the business of advertising, broadcasting, publishing, or telecasting, even if the placement is provided to others.

RetailApartAbove

Example: Poe's Publishing owns the building it occupies and rents one floor of it as apartments.

Scenario 1: Poe’s is sued for wrongfully evicting a tenant from the building. Coverage applies.

Scenario 2: Poe’s is sued for libel in one of its publications. Coverage does not apply.

k. Electronic Chatrooms or Bulletin Boards

Personal and advertising injury that arises out of an electronic chatroom or bulletin board the insured owns, hosts, or controls is excluded.

Note: It is important to note that coverage applies for personal and advertising injury related to posting on chatrooms and bulletin boards if the insured did not control, host, or own them.

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 uses the Internet to try to mislead another’s customers or potential customers. This exclusion applies when the misleading is caused by unauthorized use of the name or product of another party in the named insured's email address, domain or metatag.

m. Pollution

Coverage does not apply to personal and advertising injury that arises out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at any time.

Note: This is an absolute exclusion. It does not have any exceptions.

n. Pollution Related

Coverage does not apply to any loss, cost, or expense that arises out of:

Any request, demand, order, or statutory or regulatory requirement that any insured or others test for, clean up, treat, respond to, or assess the effects of pollutants in any way
Any claim or suit by or on behalf of a governmental authority because of testing for, cleaning up, treating, responding to, or assessing the effects of pollutants in any way

Note: There have been numerous attempts to cover various types of pollution losses because of the personal injury liability coverage wording in older editions. 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 this coverage form’s personal and advertising injury wording.

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. Recording and Distribution of Material or Information in Violation of Law (04 13 change)

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:

The Telephone Consumer Protection Act (TCPA), including its amendments or additions
The CAN-SPAM Act of 2003, including its amendments or additions
The Fair Credit Reporting Act (FRCA). This includes any and all of its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA) (04 13 change).
Any other statute, ordinance or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information. (04 13 change)

Not lettered. Access or Disclosure of Confidential or Personal Information and Data-Related Liability (05 14 edition)

Coverage does not apply when personal and advertising injury arise from the disclosure of or access gained to confidential or personal nonpublic information belonging to any person or organization. Examples of such information are patents, trade secrets, customer lists, credit card information, health information, how to process, and financial information.

There are many types of damages, and this exclusion applies to all of them even when limited to notification costs, credit monitoring expenses, forensic expenses, public relations expenses, and similar expenses.

Coverage C–Medical Payments

1. Insuring Agreement

a. The insurance company pays certain medical expenses for bodily injury that an accident causes. 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. The expenses are paid only if the injured person submits to examinations as often as the insurance company reasonably requires. The insurance company pays for the examinations and uses physicians it chooses.

Example: Medical expenses incurred by a jogger who was struck by a brick dropped by Mitchell's Masonry Service's apprentice bricklayer from the second floor of a jobsite are covered but only if he submits to an examination by a physician of the insurance company’s choosing.

Note: Medical payments coverage applies only to premises and operations exposures. It does not apply to the products-completed operations hazard.

Example: Mildred bites into her pizza and breaks her tooth.

Scenario 1: Mildred is on premises at the time, so the break is considered premises/operations and is covered.

Scenario 2: Mildred is at home at the time, so the break is considered products-completed operations and is not covered.

b. Payments are made without regard to fault. However, the amount paid is no more than the limit of insurance. The insurance company pays reasonable expenses for first aid rendered at the time of the accident. It also pays necessary medical, surgical, x-ray, dental, prosthetic devices, ambulance, hospital, professional nursing, and funeral services.

2. Exclusions

The insurance company does not pay in the following circumstances or for the following individuals:

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 the partnership owns and occupies. He needs x-rays to determine the extent of his injuries. His x-ray expenses are excluded 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 Franklin Building. Paul falls from a ladder and breaks his wrist. This medical payments loss is excluded under both the Olson Office Services medical payments coverage and the Franklin Building’s medical payments coverage.

c. Injury on Normally Occupied Premises

The insurance company does not pay medical expenses of a person who is injured on that part of the premises that the named insured owns or rents and that that the person normally occupies.

Example: Jerry is a tenant in the Bombs Away Apartment Building. He falls down the stairs in his own apartment unit and is injured. His medical expenses are excluded.

d. Workers Compensation and Similar Laws

Coverage does not apply to any person, whether or not employed by any insured, if benefits for bodily injury are payable or should be provided under workers compensation, disability benefits, or similar laws.

Example: A small fire burns Elmer's hand while he is working on the electrical at Millie’s Laundromat. Medical payments coverage does not apply to his medical expenses because he should receive coverage under Hester’s Electrical Service workers compensation coverage. If Hester’s does not carry the coverage but is required by law to carry the coverage, this exclusion continues to apply.

e. Athletic Activities

There is no coverage for any person injured while practicing for, 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 his leg sliding into home plate. Lou’s 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.

MajorAppliance

Example: Freddy purchases a stove manufactured by Hot StovesRUs. The stove ignites due to faulty wiring and burns Freddy's fingers. Hot StovesRUs’ 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 that Coverage A excludes.

Example: Brawlin' Bob's employee becomes angry, strikes a customer and breaks his nose. Brawlin’ Bob’s 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:

CG 21 35–Exclusion–Coverage C–Medical Payments totally excludes medical payments coverage
CG 22 39–Exclusion–Camps or Campgrounds excludes medical payments for campers
CG 22 40–Exclusion–Medical Payments to Children–Day Care Centers excludes medical payments coverage for children who attend day care centers
CG 22 52–Exclusion–Medical Payments Coverage (Inmates, Patients, or Prisoners) excludes medical payments coverage for inmates, patients, or prisoners
CG 22 71–Colleges or Schools (Limited Form) excludes medial payment for students

Supplementary Payments–Coverages A And B

1. The following are paid for any claims the insurance company investigates or settles. They are also paid when the insurance company incurs them in order to defend a suit.

None of these costs reduce the limits available to pay for settlements, claims, and judgments.

a. All costs the insurance company incurs

b. The cost of bail bonds. They are paid only when required because of the use of a vehicle that is covered for bodily injury under this coverage form. The bond must be due to that vehicle having violated a traffic law or because of an accident. The cost is limited to not more than $250. The insurance company is not required to furnish these bonds.

c. Cost of bonds to release attachments. However, the cost of only bond limits up to the available limit of insurance are covered. The cost of excess bond amounts is the insured’s responsibility. The insurance company is not required to furnish any bonds.

d. Reasonable expenses the insured incurs because the insurance company requests it to assist in the investigation or defense of a claim or suit. When the insured must be away from work, a maximum of $250 per day is paid for loss of earnings.

Note: The expenses must be reasonable and must be incurred based on the insurance company’s request. No expenses are paid for “freelance” investigating or assistance.

e. A suit's court costs that are the insured's responsibility. These court costs do not include attorney fees or expenses that are taxed by the court against the insured.

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

f. If the insurance company pays a judgment, it also pays the prejudgment interest charged against the insured for the amount of the judgment it pays. It does not pay any prejudgment interest that accrues on the part of the judgment for which the insurance company is not responsible. In addition, once the insurance company offers the full limits to settle, it will not pay any prejudgment interest that accrues after that offer.

g. Interest that accrues on the full amount (not just the amount within the available limits) of any judgment after it is entered. Once the insurance company pays, offers to pay, or deposits with the court the part of the judgment for which it is responsible no additional interest is paid.

2. Under the Contractual Liability exclusion, the cost of the defense of the indemnitee is part of the damages which means that defense costs reduce the amount of limits available to pay for the loss. However, if the insurance and the indemnitee are sued in the same suit and the insurance company defends the insured in that suit, it will also defend the indemnitee and pay under Supplementary Payments if all the following apply:

a. The damages the suit seeks must be for liability assumed in the insured contract between the insured and the indemnitee.

b. The insurance this coverage form provides must be for the liability described in a. above.

c. The insured contract described in a. above must include a provision that requires that the insured assume defense costs or be obligated to defend damages for liability assumed in the insured contract.

d. The interests of the insured and the interests of the indemnitees must not conflict with respect to the suit brought. This lack of conflict is based on both the suit’s allegations and the information the insurance company obtains with respect to the suit.

e. Both the insured and the indemnitee must ask the insurance company to handle the indemnitee's defense in the suit and agree to the same legal counsel handling the interests of both parties.

f. The indemnitee must agree in writing to actions the insured agrees to do in Section IV–Conditions. This is required because the indemnitee is not a party to the contract and is not subject to those conditions or to even know about them.

The indemnitee must cooperate with the insurance company in investigating, defending, or settling the suit. It must promptly send copies of any demands, notices, summonses, or legal documents it receives related to the suit to the insurance company. The indemnitee must also agree to notify any other insurance company with available coverage and assist all the insurance carriers to work together so that all coverage is coordinated.

The indemnitee must give the insurance company written authorization to obtain records and other information related to the suit. It must also provide written authorization for this insurance company to conduct and control the indemnitee's defense in the suit.

Attorney fees and all litigation expenses are paid without reducing the limits of insurance when all the above requirements are met.

There is no obligation for the insurance company to defend after the limit of insurance that applies is used up paying judgments or settlements.

In addition, if the indemnitee fails to meet the conditions in f. above, the insurance company is not obligated to pay the indemnitee’s attorney’s fees and other costs of litigation as part of Supplementary Payments.

Example: Let’s revisit the Happysmile Dentists vs. BigPayne Dental Factory suit. Happysmile’s CGL policy has an advertising and personal injury insurance limit of $1,000,000. Just prior to their court date, BigPayne gives them a chance to settle. The insurance company, already having spent nearly $300,000 on research costs and working with experts in copyright law decides that settling is a good idea.

Happysmile’s insurance company and BigPayne agree to settle for $850,000 which is within the personal and advertising liability limit. However, the actual cost of the case is much higher because the following Supplemental Payments are paid outside of the limits:

Research & Expert Witness Costs

Company Expenses

Attorney Fees

Total incurred Supplementary Payments

Settlement:

Total cost to the Insurance Company

$300,000

$36,000

$132,900

$468,900

$850,000

$1,318,900

SECTION II–WHO IS AN INSURED

1. The declarations lists different types of entities. Who is an insured is based on the type(s) of entities selected.

a. If the named insured is an individual, the named insured and his or her spouse are insureds. They are insureds only with respect to operations of the business the named insured solely owns.

RoadsideStand_3

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 named insured is an insured. The named insured's members and partners and their spouses are also 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 the conduct of the carpentry business. However, none of them are insureds under this coverage form for any personal exposures or any other business activities.

c. If the named insured is a limited liability company, the named insured is an insured. Members of the company are insureds but only when conducting the named insured's business. The named insured's managers are also insureds but only when performing specific duties as managers.

d. If the named insured is any other organization, the named insured is an insured. The executive officers and directors are insureds while performing their duties as such. Stockholders are insureds but only in their very limited capacity as stockholders.

e. If the named insured is a trust, the named insured is an insured. The trustees are insureds but only while performing duties the trust requires.

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 or corporations and managers of a Limited Liability Company (LLC), 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:

To the named insured, its partners, or members of an LLC
To other employees. This restriction applies only when, at the time of loss, those co-employees are acting within their employment boundaries or while they are conducting the named insured’s business.
To the named insured's volunteer workers. This restriction applies only when those workers are conducting the named insured's business.
To consequential loss a relative of any co-employee or volunteer sustains because of injuries to a co-employee or volunteer described in the prior two bulleted items
Where an obligation exists to share damages with or repay others for damages because of injury described in any of the preceding bullet items
When an employee or volunteer provides or fails to provide professional health care services

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 is a trained EMT, and he attempts the Heimlich Maneuver. Unfortunately, his 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, 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 maintaining or using that property. However, this status applies 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. The legal representative assumes all 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 to only named insureds.

3. Any newly formed or acquired organization qualifies as a named insured if no other similar coverage is available to it. This applies only if the named insured either owns or has a majority interest in the organization. The newly formed or acquired organization cannot be a partnership, joint venture, or limited liability company. This provision is limited to not more than 90 days after the organization is formed or acquired, or until the end of the policy period, whichever comes first. Coverage A does not apply to bodily injury or property damage that occurred before the organization was acquired or formed. 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 with respect to 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 developed several 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 other items in this section. This applies regardless of the number of insureds, claims made, suits brought, or number of parties that make claims or bring 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 suit against Ying and Yang Jewelry Mart and Ying and Yang separately. The three suits are sent 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. Because 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 both Marry and Tom 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 damages under Coverage B, and medical expenses under Coverage C. The only exception is that damages for bodily injury or property damage included in the products-completed operations hazard are not part of these aggregate because those damages are subject to a separate aggregate.

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 $2,000,000 general aggregate limit is the most paid 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.

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 in a single policy year from use of the named insured's products. All losses are covered, occur during the policy period, and total $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 that arise 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 for $2,000,000 arises. Coverage applies for only 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 is subject to the Each Occurrence Limit. It is the most paid under Coverage A for damages because of property damage to any one premises the named insured rents. This includes damage by fire involving premises the named insured rents or temporarily occupies 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.

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 has a $5,000 Medical Expense Limit per person, a $1,000,000 occurrence limit, and a $1,000,000 general aggregate. Two covered losses that total $900,000 were paid earlier in the policy year. An incident on Pinkie’s premises results in injuries to 100 persons. Each person could receive $5,000 for his or her medical bills for a total loss of $500,000. Although this amount is still less than 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 is responsible for all loss amounts that exceed the remaining $100,000.

Note: The limits of insurance can be amended by using either of two endorsements.

CG 25 04–Designated Location(s) General Aggregate Limit is used to increase the aggregate limit that applies to each location.
CG 25 03–Designated Construction Project(s) General Aggregate Limit is used to increase the aggregate limit that applies to each construction project.

This section also clarifies how the limits of insurance apply. They apply separately to each consecutive annual period and to any remaining period of less than 12 months. This time period begins with the coverage inception date on the declarations, unless extended after issuance for any additional period of less than 12 months. If policy is extended 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 Chester asked to change the anniversary date to July 1 for concurrency reasons. This can be accomplished in two ways:

Scenario 1: The policy is extended within the policy term by endorsement. This means the available aggregates are as follows:

1/1/2021 - 1/1/2022 - $1,000,000 aggregate

1/1/2022 - 7/1/2023 - $1,000,000 aggregate

Scenario 2: The second policy period expires on 1/1/22, and a short-term policy is issued from 1/1/2022 - 7/1/2023. This means the available aggregates are as follows:

1/1/2021 - 1/1/2022 - $1,000,000 aggregate

1/1/2022 - 1/1/2023 - $1,000,000 aggregate

1/1/2022 - 7/1/2022 - $1,000,000 aggregate

The insurance company would have additional expenses in issuing the short-term policy; Chester would be better protected.

SECTION IV–COMMERCIAL GENERAL LIABILITY CONDITIONS

1. Bankruptcy

Bankruptcy or insolvency of the insured or the insured’s estate does not relieve the insurance company of its obligations.

2. Duties in The Event of Occurrence, Offense, Claim, or Suit

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

a. The named insured is responsible for seeing that the insurance company is informed about an occurrence or offense when there is a reasonable belief that a claim may result. The notification must be made as soon as practicable. This is different than as soon as possible. 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 then 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 do all the following:

Send copies of demands, notices, summonses, and legal documents it receives to the insurance company if they have a connection to the claim or suit. The copies must be sent immediately.
Because the insurance company will need to obtain records and other needed information to proceed, authorize the insurance company to do so.
Cooperate with the insurance company throughout the investigation, claim settlement and/or suit defense.
Only as requested by the insurance company, help in enforcing any right against any person or organization that may be liable to the insured for injury or damage that this insurance covers

Related Court Cases:

Ten Year Delay of Claim Relieved Insurer of Defense and Indemnification of Housing Authority

Insured's Two-Year Delay In Giving Notice Of Occurrence Did Not Preclude Coverage

Is Five Years “Timely Notice”?

Late Notice Exclusion Requires "Prejudice"

d. Insureds are permitted to make payments, assume any obligations, or incur any expenses, but if they do so without the insurance company's written consent, the insurance company is not required to make any agreed upon payment or to honor any obligation. The only exception is when the insured provides first aid.

3. Legal Action Against Us

No party has the right to join the insurance company in any way, bring it into a suit that claims damages from an insured, or to sue the insurance company unless all the coverage form’s terms and conditions are completely met and complied with.

The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured. However, its liability does not go beyond what is available in this coverage form's terms. That liability is also limited to this coverage form’s 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 signs.

4. Other Insurance (04 13 change)

The insurance company's obligations to pay are limited whenever other valid and collectible insurance also applies to a loss. The obligation the insurance company has is determined below.

a. Primary Insurance

This insurance is primary except when paragraph b. Excess Insurance applies. The term primary means that this insurance coverage responds first. When it is primary, the insurance company's obligations are not affected unless other available insurance is also considered primary. In such a case, this insurance shares with that insurance as described under c. Method of Sharing.

b. Excess Insurance

This insurance is not primary when any of the following coverages are available to cover the loss in any way. This policy will respond only after those other coverages respond:

Fire, Extended Coverage, Builder's Risk, Installation Risk, or similar coverage that is available for the named insured's work
Fire insurance for a premises the named insured rents.
Fire insurance for a premises that is only temporarily occupied by the named insured. This applies only if the owner had given permission for the named insured to occupy the premises.
Coverage that the named insured purchases to cover its liability as a tenant for property damage to premises it rents.
Coverage that the named insured purchases to cover its liability at a premises that is only temporarily occupied by the named insured. This applies only if the owner had given permission for the named insured to occupy the premises.
Coverage available for a loss due to aircraft, autos or watercraft. This applies only for the type of loss that would be covered under this policy because of an exception to the Exclusion G. Aircraft, Auto, or Watercraft under Section I, Coverage A–Bodily Injury and Property Damage.

When the named insured is an additional insured under another policy, that other policy providing the premises, operations, products and/or completed operations coverage is primary and this coverage is excess. The 04 13 edition removes the words “by attachment of an endorsement” from the end of this sentence.

Example: Polity, Inc. is an additional insured under three different policies but is never specifically named as an additional insured on any policy. Polity is an additional insured because its contract with any and all contractors requires it. All contractors that it works with have automatic additional insured coverage for all situations where contracts require it. Polity’s policy is excess in all those automatic situations because of the clarification in wording.

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, this insurance company will take over the defense according to this coverage form’s provisions if no other carrier does. The insurance company then becomes entitled to the insured's rights against the primary carrier and any other carrier that should assist in the defense.

When this insurance is excess, it is not responsible until the loss exceeds the sum of the following:

All available other insurance coverage limits
The named insureds deductible responsibility
The named insured’s self-insurance amounts

The insurance company shares any remaining loss with any other insurance that this Excess Insurance Condition does not include. The only exception to the sharing is any policy that was 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. A loss for which Jack is liable for damages occurs, and 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 judgment. Policy A's limits are now used up.
Policies B and C each contribute an additional $50,000, for a total contribution of $250,000. This uses up Policy B's limits.

Policy C then pays the remaining $250,000 to complete the total $500,000 payment.

Policy A paid $50,000, Policy B paid $100,000 and Policy C paid $350,000. The loss was paid in full, and not one of the policies paid 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. 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’s percentage is $50,000/$1,150,000 = 4.3%

Company B’s percentage is $100,000/$1,150,000 = 8.7%

Company C’ percentage is $1,000,000/$1,150,000 = 87%

The loss is $500,000 and payment is as following:

Company A pays $500,000 X .043 = $21,500

Company B pays $500,000 X .087 = $43,500

Company C pays $500,000 X .87 = $435,000

5. Premium Audit

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

b. The advance premium shown on the declaration is more correctly called a deposit because it is subject to audit. At the end of each audit period, the insurance company determines the actual earned premium for the period. That premium is compared to the deposit. If the audit premium is higher than the deposit premium, the insurance company mails a bill for the difference to the first named insured. The premium is required by the due date on the bill. If the audit premium is lower than the deposit, the insurance company will return the premium difference to the first named insured.

Note: The policy doesn’t state when the first named insured can expect to receive the refund.

c. An audit can be conducted only if accurate records are available. The first named insured is required to keep records of the information that is necessary for the insurance company to complete a calculation and to send copies of such records when requested.

Example: Jester and Friends’ advance premium is $2,669. The premium is based on two separate classification codes. The first code, XXXXX, has an estimated payroll of $45,000 and a rate of 15.25. The second code, YYYYY, has an estimated payroll of $65,000 and a rate of 30.50.
Scenario 1: Jester and Friends have a very good year. The payroll for code XXXXX is $75,000 and for code YYYYY is $90,000. The audit premium is developed as follows:
15.25 X $75,000 =	$1,144
30.50 X $90,000 =	$2,745.
Total Audit Premium =	$3,889
Minus Advance Premium	$2,669
Amount due =	$1,220
Scenario 2: Jester and Friends had a change in direction. They consolidated all activities into code XXXXX. It was a successful change, so the payroll increased to 165,000. The audit premium is developed as follows:
Total Audit Premium =	15.25 X $165,000 = $2,516
Minus Advance Premium =	$2,669
Amount to be returned =	$ 153

6. Representations

By accepting this coverage form as issued, the named insured agrees that the statements on the declarations are complete and accurate and are based on its own representations. It further agrees that coverage the insurance company issues is based on those representations.

Note: This is very important because these statements allow the insurance company to use inaccurate statements 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 is 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 the insurance company makes transfer to the insurance company. The insured must preserve those rights and not do anything after the loss occurs to impair them. The company can request that the insured bring suit or transfer those rights to it and help it enforce them.

Note: The only rights that can be transferred to the insurance company are those which exist at the time of the loss. This means that the insured can waive any or all its rights of recovery before a loss occurs. This condition applies only to rights that remain available at the time of loss.

Example: Jimmy is a retail baker. He sells his own product plus product from Adele’s Bakery. A customer purchases a pie from Jimmy. He becomes very ill and when the hospital identifies the pie as the source of the illness, he sues Jimmy. Jimmy’s insurance company settles with the customer. The insurance company then requires Jimmy to sue Adele’s Bakery in order to recover its loss. If Jimmy refuses to sue, Jimmy’s coverage will be void, and he will be required to compensate the insurance company for the loss settlement.

If Jimmy and Adele had a contract waiving liability prior to the loss, the insurance company would not be able to force Jimmy to sue Adele.

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. A minimum of 30 days before the expiration date is required. Proof of mailing is enough proof of notice if the notice is mailed.

Note: State amendatory endorsements may supersede this paragraph.

Example: Rough and Ready Insurance Company wrote a policy for Frequency and Severity Manufacturing for the period 01/01/2021 to 01/01/2022. Because of problems with the account, the Rough and Ready senior underwriter sends notice of non-renewal on 11/28/2021 that Frequency and Severity receives on 12/01/2021. The chief financial officer at Frequency and Severity sends a letter to Rough and Ready and demands that it issue the renewal policy for the period 01/01/2021 to 01/01/2022. The letter includes an excerpt from the MisState Insurance Code that clearly states that the named insured must receive at least 45 days advance notice of non-renewal. Rough and Ready immediately issues the renewal as demanded.

SECTION V–DEFINITIONS

Defined words are used throughout the coverage form. Some of the definitions expand coverage while others restrict coverage, but all are designed to provide a clearer understanding of the coverage intention. Twenty-two terms are defined.

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. The reason for the notice must be to attract customers or supporters. Material that is placed on or in the Internet and other electronic forms of communication are considered published notices. An entire website is not considered advertisement. However, notices on a website that provides information about the named insured's goods, products, or services to attract customers or supporters are advertisement.

2. Auto (04 13 change)

This is a land motor vehicle, trailer, or semi-trailer that is designed for travel on public roads. Machinery and equipment that is attached to the auto is also considered auto.

Other land vehicles that would not be considered autos are defined as auto if they are subject to compulsory or financial responsibility laws or motor vehicle laws wherever they are principally garaged or licensed.

Mobile equipment is not auto.

The 04 13 edition removes the words “in the state” after “motor vehicle laws” in the prior edition with respect to auto licensing or garaging locations.

3. Bodily Injury

This is bodily injury, disability, sickness, or disease a person sustains. Death that occurs as a result of bodily injury, sickness, or disease is also considered bodily injury regardless of when the death occurs.

4. Coverage Territory

This is the United States of America, its territories and possessions, Puerto Rico, and Canada. It includes international waters or airspace but only for injury or damage that occurs during travel or transportation between points in 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:

Goods or products the named insured manufactures or sells in the territory described above

Activities of persons whose homes are in the territory described above but who are away on the named insured's business for short periods of time
Personal and advertising injury offenses that take place through the Internet and other forms of electronic communication

This expanded worldwide territory applies only when the insured's responsibility to pay damages is determined in a suit based on the merits in the territory described in the first paragraph above or because a settlement is reached to which the insurance company agrees.

5. Employee

The term employee is broadened to include leased workers. It does not include temporary workers.

6. Executive Officer

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

7. Hostile Fire

This is a fire that becomes uncontrollable or that burns beyond where it is intended to be.

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. The purpose of this statement is to alert the named insured to the fact that certain parts of this coverage form are different than the occurrence coverage form.

This analysis addresses only the parts of the claims-made coverage form that differ from the occurrence coverage form. Those differences are found in the following sections:

Section I–Coverage A–Bodily Injury and Property Damage Insuring Agreement
Section I–Coverage B–Personal and Advertising Injury Liability Insuring Agreement
Section IV–Commercial General Liability Conditions (Duties in The Event of Occurrence, Offense, Claim, or Suit)
Section IV–Commercial General Liability Conditions (Other Insurance–Excess Insurance)
Section IV–Commercial General Liability Conditions (Your Right to Claim and Occurrence Information)
Section V–Extended Reporting Periods

Note: The WHO, WHAT, WHERE, and HOW aspects of coverage are unchanged. The differences are based on 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:

An occurrence that takes place in the coverage territory causes it
It did not occur before any retroactive date on the declarations or after the end of the policy period
A claim for damages is first made against any insured during the policy period or any extended reporting period provided

c. Claims made by persons or organizations that seek 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.

Example: The policy period is 01/01/2021 to 01/01/2022, when coverage is written on a claims-made basis for the first time. It subsequently renews twice, each time on a claims-made coverage form. Three claims are reported during the time period. Claim #1 is a 12/01/2021 occurrence reported on 01/15/2022. Claim #2 is a 05/01/20201 occurrence reported on 12/01/2021. Claim #3 is a 02/01/2021 occurrence reported on 06/01/2021.

Scenario 1–The retroactive date changes to match the effective date of each policy term:

Claim #1 is denied because the occurrence date was before the retroactive date. Because the previous coverage was written on an occurrence basis, that coverage form should respond.
Claim #2 is considered because both the occurrence date and the date the claim was reported are in the same year.
Claim #3 is denied because the occurrence date was during the first policy term, but the claim was not reported until the second policy term.

Scenario 2–The retroactive date is the effective date of the first claims-made policy.

Claim #1 is denied because the occurrence date was before the retroactive date. Because the previous coverage was written on an occurrence basis, that coverage form should respond.
Claim #2 is considered because both the occurrence date and the date the claim was reported are in the same year.
Claim #3 is considered because the occurrence date is after the retroactive date of the second policy and the claim was reported during the second policy term.

Scenario 3–The retroactive date on the declarations is "None."

Claim #1 is considered because the claim is made in the first policy term. However, it is handled as excess over the occurrence coverage form in effect at the time of the occurrence.
Claim #2 is considered because there is no retroactive date and the date the claim was reported is in the first policy term.
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.

Example: Lois is crushed by some equipment that falls. A claim for her medical bills is presented on 07/01/2021. Lois’ husband sends notification of his claim for loss of consortium to the insurance company. Lois dies on 03/10/2022, and her family files a wrongful death claim against the insured. On 09/01/2022, 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 07/01/2021.

All claims for damages because of property damage that causes 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.

Example: Carl’s pontoon boat smashed into a dock. A claim was made on 09/01/2021 for the damage to the dock. 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 09/01/2021.

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 it refers to offense instead of occurrence and personal and advertising injury instead of bodily injury or property damage.

Coverage applies to personal and advertising injury only if:

An offense that takes place in the coverage territory causes it
The offense was not committed before any retroactive date on the declarations or after the end of the policy period
A claim for damages because of the personal and advertising injury is first made against any insured during the policy period or any extended reporting period provided

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.

Example: Dreamy Malts' claims-made CGL Coverage Form is written for the period 05/01/2021 to 05/01/2022. The retroactive date is 05/01/2018. Over the 2020 Thanksgiving holiday, Dreamy tells a newspaper reporter that it once received contaminated milk from Dalton’s Fine Foods and would never use them again. Dalton’s sues Dreamy on 06/01/2021. This coverage form responds because of the date the claim was made and 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 CONDITIONS

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 establishes the policy year under which the claim must be settled. Injured parties do not always make a claim immediately after a claim. They may think about it for a while before they pursue it. A claim is not considered made until the injured party notifies the insured or the insurance company.

Example: On 08/01/2020, 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 06/15/2021 Pamela receives suit papers from that customer's family because he died as a result of the fall in the store following a series of subsequent hospitalizations. If Pam had claims-made coverage in force during the time period, the claims-made date is 06/15/2021, not 08/01/2020, and the coverage in force as of 06/15/2021 responds provided the retroactive date is prior to 08/01/2020.

Subparagraph b. in the two coverage forms is identical except for the first sentence. In the claims-made coverage form, when a claim is received by an insured the rest of the paragraph applies. In the occurrence coverage form, when a claim or a suit is brought against an insured the rest of the paragraph applies.

Note: This difference is because under the claims-made coverage the timing of claim notice is what is important, not the type of claim.

4. Other Insurance

Subparagraph b. Excess Insurance has an additional provision that is not in the occurrence coverage form. It states that this insurance is excess over any other bodily injury or property damage insurance coverage if it is written on any other basis than claims-made and is effective before this coverage's effective date. However, this is only if either of the following applies:

There is no retroactive date on this insurance’s declarations
The other insurance has a policy period that continues after the retroactive date on this insurance’s declarations

This basically means that if claims-made coverage replaces occurrence coverage, the occurrence coverage form is primary, and the claims-made coverage form is excess in cases where coverage overlaps because of establishing the retroactive date.

Example: Continuing the grocery store example above, if occurrence coverage was in effect on 08/01/2020 and claims-made coverage was in effect on 06/15/2021 with a retroactive date prior to 08/01/2020, the occurrence coverage is primary, and the claims-made coverage is excess.

10. Your Right to Claim and Occurrence Information

Note: This condition in the claims-made coverage form is not in the occurrence coverage form. It details the claims-made claim information the insurance company releases for all periods that it provided coverage on that basis, the parties it releases information to, and the conditions related to releasing the information. The detailed analysis follows.

The insurance company provides the first named insured information that relates to any claims-made CGL coverage issued to it during the previous three years. The required information is:

A list or other record of each occurrence not previously reported to any other insurance company. However, the insurance company must have received notice of the occurrence according to the coverage form's conditions. The date of the occurrence and a brief description must be provided but only if that information was in the initial loss notice it received. The insurance company is essentially required to supply only the information it receives.

Payments made and reserves established for the General Aggregate and Products-Completed Operations Aggregate Limit in a policy year summary report. There is no requirement for specific occurrence-by-occurrence information. The only requirement is a summary, so the insured knows about the impact on the General Aggregate and the Products-Completed Operations Aggregate.

Reserve amounts are based on the insurance company's judgment. They 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 the first named insured requests it in writing. The insurance company must respond only if it receives the request no later than 60 days after the expiration date. It must then provide the information not more than 45 days after it receives the request.

The insurance company carefully develops and maintains claim and occurrence information for its own business purposes. It does not make any representations or warranties to any party with respect to its accuracy. Cancellation or non-renewal is still effective even if the information provided is not accurate.

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 will not renew coverage and provides Crane with two different reports. The first report reads as follows:

Date of loss	Loss description	Remarks
05/08/2018	Product ingestion claim	Five individuals
12/15/2018	Property damage claim	Fire–one business
08/19/2019	Product ingestion claim	Ten individuals
09/15/2020	Product ingestion claim	Two individuals

This report does not include ten other occurrences included on a similar report received from its previous carrier.

The second report reads as follows:

Policy period	Amounts paid	Amounts reserved
01/01/2018 - 01/01/2019	$50,000	$300,000
01/01/2019 - 01/01/2020	0	$400,000
01/01/2020 - 01/01/2021	0	$150,000

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 for the extended reporting period is charged. The detailed analysis follows.

1. The insurance company provides one or more described Extended Reporting Periods if any of the following applies:

Coverage is cancelled or not renewed.
The insurance company renews or replaces coverage with claims-made insurance, but the retroactive date is changed to a later date than the one on the declarations for this coverage.
The insurance company renews with coverage that does not apply on a claims-made basis.

Note: The extended reporting period does not apply if the named insured requests the change in the retroactive date or if coverage on a different basis replaces claims-made coverage.

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:

Bodily injury or property damage that occur before the end of the coverage period and after any retroactive date on the declarations
Personal and advertising injury caused by an offense committed before the end of the coverage period and after any retroactive date on the declarations

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:

Five years for claims because of bodily injury and property damage that arises out of an occurrence reported to the insurance company not later than 60 days after the end of the policy period. The claim must be reported based on the terms in Section IV–Duties in The Event of Occurrence, Offense, Claim, or Suit.
Five years for claims because of personal and advertising injury that arises out of an offense reported to the insurance company not later than 60 days after the end of the policy period. The claim must be reported based on the terms in Section IV–Duties in The Event of Occurrence, Offense, Claim, or Suit.
Sixty days for claims that arise out of occurrences or offenses not previously reported to the insurance company

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 that applies to such claims being used up.

4. The Basic Extended Reporting Period does not increase or reinstate the Limits of Insurance.

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 was on a claims-made basis for the past four years. The retroactive date was the date of the first claims-made policy and was never changed. The first claims-made coverage was effective 01/01/2019, and the last claims-made CGL coverage form expired 01/01/2023.

· A loss occurred on 05/06/2021, and the company was notified. The claim was made on 01/10/2023. Coverage could be available because the claim was made during the extended reporting period and was reported before coverage expired.

· A loss that occurred on 01/05/2020 was never reported to the insurance company. A claim was finally filed on 03/15/2023. Coverage does not apply because the claim was made more than 60 days after the coverage period ended, and no previous notice of an occurrence had been filed.

5. A Supplemental Extended Reporting Period is available by endorsement and for an additional premium charge. Its duration is unlimited and begins when the Basic Extended Reporting Period ends.

The named insured must request this endorsement in writing not 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 that remain to pay future 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. They 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:

General Aggregate Limit
Products-Completed Operations Aggregate Limit

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.

Note: Once the Supplemental Extended Reporting Period has been requested and the premium paid, it cannot be cancelled by either party.