CP 00 40–LEGAL LIABILITY COVERAGE FORM OVERVIEW

(June 2022)

INTRODUCTION

Legal Liability on specific property items can be provided using the Commercial General Liability or the Commercial Property forms. ISO designed the CG 00 01–Commercial General Liability Coverage Form to provide limited but “universal” coverage. It designed the Property Program CP 00 40–Legal Liability Coverage Form to provide broader but more “specific” coverage to meet contractually based property-related obligations.

LEGAL LIABILITY COVERAGE IN OTHER FORMS

It is important to examine different options to determine the best way to cover legal liability for real and personal property.

Commercial Property Option

CP 00 10–Building and Personal Property Coverage Form insures the named insured’s financial interest in buildings and business personal property. There is no coverage if there is no financial interest except for the following two Personal Property exceptions:

Business personal property of others is covered if there is a lease agreement that requires insurance coverage for it
If there is a limit for Property of Others on the declarations, business personal property of others in the named insured’s care, custody, and control is covered but only for the limit and the cause of loss form that applies.

When CP 00 10 is used to insure property of others coverage is approached as any other type of property. The CGL 00 01 type of coverage for defense and other related activities are not provided. The property loss settlement conditions and all other property conditions apply.

In addition, no coverage is available for the real property.

Inland Marine Option

Commercial Inland Marine Bailees Customers Coverage Forms are very attractive options to cover personal property in the named insured’s care, custody, or control. These coverage forms are not filed and can be modified to meet many of the named insured’s coverage requirements. However, they do not provide liability coverage and do not include defense outside of limits to respond to customer lawsuits. In addition, there is no option for real property.

AAIS Bailees Customers Floater Coverage–Dry Cleaners and Laundry Form

AAIS Miscellaneous Bailee–Processor Floater

ISO Bailees Customers Coverage Form

Commercial General Liability Option

CG 00 01–Commercial General Liability Coverage Form excludes property damage coverage for all personal property in the named insured’s care, custody, or control as well as for property the named insured rents. However, there is an exception. Property damage due to fire is covered up to the limit for Damage to Property Rented to You.

The limit for Damage to Property Rented to You is subject to the occurrence limit, which is subject to the aggregate limit. As a result, using this limit reduces the aggregate limit. If the limit for Damage to Property Rented to You is increased significantly, the named insured should consider raising both the occurrence limit and the aggregate limit.

A very important limitation is that fire is the only cause of loss.

LEGAL LIABILITY COVERAGE FORM CONSIDERATIONS

Advantages

CP 00 40–Legal Liability Coverage Form is the only way to completely cover significant real or personal property legal liability exposures. The highlights of CP 00 40 are as follows:

Coverage is available for building and/or business personal property.
The limit for this coverage does not affect any other limits.
The cause(s) of loss can be selected based on contractual obligations.
It includes supplementary payments that provide for defense expenses and other suit-related expenses outside the limit of insurance.

Disadvantage

CP 00 40 applies to only specific location(s), building(s), and coverage(s). This is why it is important to maintain
CG 00 01’s Damage to Property Rented to You coverage for temporary situations and other locations that are not listed as covered on the Declarations.

POLICY MAKE-UP

The Legal Liability Policy consists of seven basic forms or parts:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions.

This contains the conditions common to all commercial lines of insurance. It is a mandatory form for most monoline or multi-line policies.

Commercial Property Declarations

CP 00 90–Commercial Property Conditions

CP 00 40–Legal Liability Coverage Form

One or more of the Causes of Loss Forms

These forms describe the types of losses insured and the exclusions that apply.

Policy Cover or Policy Jacket developed by individual insurance companies

These forms may also include an index or a table of contents to meet requirements that some states impose.