4/B - Commercial General Liability Flashcards
What a Commercial General Liability Insurance (CGL) Covers
Covers liability for:
- bodily injury/property damage resulting from a business premises and its operations
- damage to a premises used or rented by the insured
- products and completed operations
- acts of others: employees, agents, contractors acting on behalf of business
- contracted responsibilities: insured agreed to take on liability
- personal and advertising injury: injury other than bodily injury resulting from actions of the insured
Chapter Outline
- Two different forms of CGL
a. Occurrence
b. Claims-made - Structure of CGL
a. Declarations and Definitions
b. Insuring Agreements or Coverages and their Exclusions
Coverage A: Bodily Injury and Property Damage
Coverage B: Personal and Advertising Injury Liability
Coverage C: Medical Payments to Others
Damage to Premises Rented by You
c. Conditions
d. Endorsements
Occurrence vs. Claims-made
Two forms of CGL policies:
- Occurrence: triggered by occurrence or accident
- Claims-made: triggered by claim
Trigger: what initiates coverage
Occurrence Form CGL
Occurrence Form:
- Triggered by when the actual injury or damage occurred
- Covers events that happened during policy period, no matter when claim is made
Claims-Made
- Triggered by when the claim is filed
- Covers any claim filed during the policy period, no matter when the damage or injury occurred (within certain limits, which we’ll go over soon)
- Insurers can price premiums to reflect current risks of lawsuit awards
Claims-Made & Reported vs. Pure Claims Made
Pure Claims-Made:
- Claim must be made within the policy period
- Insured must report claim to insurer ASAP
Claims-Made & Reported:
- Claim must be made within the policy period
- Insured must report claim to insurer within the policy period
Claims-Made Form CGL: Retroactive Date
- Determines how far back an occurrence will be covered
- Helps reduce premiums by defining a start date for coverage eligibility
Claims-Made Form CGL: Extended Reporting Periods
CGL Tails:
- Cover claims filed after the policy period
- Do not cover incidents which occurred after the policy period
- Apply to policies which have been
- cancelled
- not renewed
- replaced with more recent retroactive date or occurrence form
- Cannot be cancelled
- Come in 2 kinds:
- basic
- supplemental
Claims-Made Form CGL: Basic Tail
The Basic Extended Reporting Period:
- Adds extra 60 days to report incidents
- Adds extra 60 days for claims to be made on non reported incidents (mini tail)
- Adds extra 5 years for claims to be made on reported incidents (midi tail)
- Applies automatically, for no extra cost
- Starts when policy period ends
- Does not reset policy limits
- Will not cover any claim that is covered by other insurance
Claims-Made Form CGL: Supplemental Tail
The Supplemental Extended Reporting Period (Maxi Tail):
- Extends the window for making a claim (on a reported incident) forever
- Insured must request coverage and pay the extra premium within 60 days of the policy period
- Added via endorsement
- Starts when basic tail ends
- Resets policy limits
- Will act as secondary insurance to other insurance
Pros and Cons of each Coverage Form
Occurrence Form:
- Lower risk for businesses
- Higher risk for insurer
- Higher premiums
Claims-made Form:
- Higher risk for businesses
- Lower risk for insurer
Declarations
CGL Declarations Page lists:
- Named insured
- Address of every premises the insured owns, rents, or occupies
- Policy period
- Policy premium
- Limits of insurance
- Retroactive date (if policy is a claims-made form)
Who is Covered?
Declarations page specifies who is covered.
CGL will usually cover:
- Executives
- Partners
- Employees
- Managers
- Volunteers
- Agents
- Representatives
But only if they are engaged in business activities of the insured.
Definitions Part 1
CGL does not cover “autos”:
- Vehicles designed for travel on public roads
- These require a Business Auto Policy
CGL does cover “mobile equipment”:
- Designed for use principally off public roads
- Primary purpose is the machinery attached, not transportation
- Examples include bulldozers and forklifts
If a small truck is used exclusively within warehouse or factory premises, it may qualify as mobile equipment.
Definitions Part 2
“Your Product”: what the insured makes, sells, handles, distributes
“Your Work”: operations done by insured, includes:
- Parts, materials, and equipment used in work
- Warranties and instructions (or the lack thereof)
“Advertisement”: Anything shown or said to the public to attract new customers
“Occurrence”: a sudden accident, or the repeated exposure to something that causes injury or damage
“Impaired property”: items that can’t be used because of defects in insured’s product or work
Definitions Part 3
“Leased Worker”: worker hired through a labor leasing firm
“Temporary Worker”: donates labor without compensation from insured
“Employee”: works for insured under contract
- Includes leased workers
- Does not include temporary workers
CGL Coverage Forms: A, B, & C
- Coverage A -
a. Bodily Injury and Property Damage
b. Premises and Operations Liability
c. Products and Completed Operations Liability
d. Contractual Liability for Insured Contracts - Coverage B - Personal and Advertising Injury Liability
- Coverage C - Medical Payments to Others
- Damage to Premises Rented By You
Coverage A: 3 Kinds of Hazards
Protects the insured from liability to bodily injury and property damage.
Covers 3 Kinds of Hazard:
- Premises and Operations
- Products and Completed Operations
- Contractual Liability for Insured Contracts
Premises Liability
Premises and Operations
Premises liability covers bodily injury and property damage on:
- premises owned, rented or leased by insured
- ways immediately adjoining, i.e. sidewalks, etc
Operations Liability
- Covers bodily injury and property damage when working outside premises
- Important for companies like plumbers, contractors, etc.
Product Liability
Products and Completed Operations
Product Liability: the insured’s liability for bodily injury (BI) and property damage (PD) caused by the use of products made or sold by insured
3 Types of Product Liability Claim:
- Strict Liability: any defect in safety is manufacturer’s fault
- Negligence: manufacturer did not exercise a reasonable amount of caution
- Breach of warranty: insured failed to notify public of a known safety hazard, or failed to deliver the quality of item advertised
Completed Operations Liability
The insured’s liability for work completed away from the insured premises
Work is “complete” the moment that:
- the insured has fulfilled the terms of an agreement OR
- any portion of the work is used for its intended purpose
- whichever is earlier
Insured Contracts
Include:
- Lease of premises
- Sidetrack agreements
- Easement or license agreements
- An obligation to indemnify a municipality
- Elevator maintenance contracts
- Any contract in which the policyholder assumes the tort liability of another party for bodily injury or property damage
Exclusions to Coverage A Liability
- Expected or intentional injury by the insured, unless in self-defense or protection of property
- Injuries to employees (covered by worker’s compensation)
- Automobiles, aircraft or watercraft (unless parked on the insured premises)
- Contractual Liability (except for “insured contracts”)
- Liquor Liability
- Transportation of mobile equipment
- Pollutants
- War and terrorist attacks
- Property of the insured, property in the care, custody and control of the insured and property loaned to the insured
- Property damage to insured’s work or products
- Electronic data
- Recall of products or work
Libel & Slander
Coverage B protects insured against claims of Personal Injury in the form of:
- Libel: false written words that damage another’s reputation
- Slander: false spoken words that damage another’s reputation
False Arrest
Coverage B “Personal Injury”:
- False arrest, detention, or imprisonment: e.g., a store detaining someone unjustly because of suspected shoplifting
- Malicious Prosecution: Suing someone without profitable cause. Such a claim can only be filled after the insured loses the original lawsuit
Wrongful Entry
Coverage B “Personal Injury”:
- Wrongful Entry: when a landlord uses improper means to repossess real estate or rented space. This may also involve invasion of privacy
- Wrongful Eviction: when a landlord or shop-owner evicts a person from public space without cause
Advertising Injury
Coverage B: protects insured from claims of advertising injury
An “Advertising Injury” means a third party suffered damages as the result of the insured party advertising their goods and/or services in a public arena.
Advertising injury may take the form of:
- Libel and slander
- Copyright Infringement
- Stealing advertising ideas
Exclusions to Coverage B Liability
- Knowingly publishing, disseminating, or spreading false information to the public
- Knowingly violating the copyrights of another
- Infringing on copyright, patent, trademark, or intellectual property rights outside of advertisements, whether criminally or not
- Failing to adhere to price, quality, and performance claims
- Acts committed prior to the current policy period (or retroactive date)
- Advertising liability by contract, or assumed liability
- All claims if the insured is in an advertising, broadcasting, or publishing business, or involved in the design of websites or operation of internet search services
- Electronic chat rooms or bulletin boards
Supplementary Payments - Coverages A and B
- Assist policyholder with a variety of claim or lawsuit expenses
- Not subject to liability limits
May include:
- Lost wages: up to $250/day
- Expenses due to insurer’s request such as retrieving official reports or records, copy fees
- Bail bonds: up to $250
- Accrued interest after a judgment is entered
- Premiums on appeal bonds and attachment bonds
Supplementary Payments - Coverages A and B
cont.
- Covers litigation expenses for a third party named in the same suit as the insured
Conditions
- Insured must have assumed liability for the other party through an insured contract
- That liability is covered under the policy
- There is no conflict of interest
- The third party must agree in writing to cooperate with the insurer
Coverages C: Medical Payments
Is no-fault coverage that pays:
- Medical
- Dental
- Hospital
- Nursing
- Funeral costs
resulting from an occurrence on insured’s premises, or from its business operation
Coverage C Liability Exclusions
- Any “insured”
- Employees of the insured (covered by worker’s compensation)
- Tenants of the insured
- Athletic contests, games, physical challenges, or sporting events
- Injuries resulting from completed operations
Insurer can require the insured party to see a physician chosen and paid for by the insurer.
Damage to Premises Rented by You
- Coverage A usually excludes loaned or rented properties.
- Damage to Premises Rented by You lifts this exclusion (i.e. it adds coverage)
- It applies to properties that the insured rents for 7 or fewer consecutive days.
Look closely! This form covers fire differently than other perils.
Fire: damage to rented premises only
Other perils: damage to rented premises and contents
CGL Conditions Page
- Contains provisions the policyholder must meet as a condition of coverage
- Highlights the rights and duties of insured and insurer
- States the rights of each re: cancellation, changes, lawsuits, etc.
Policy Territory
- CGL policies cover occurrences in US, Puerto Rico, and Canada, their airspace, and territorial waters
- Products Liability is worldwide, as long as the product was made or sold in US, Puerto Rico or Canada
Duties of Insured in the Event of an Occurrence
- Reporting details to the insurer promptly, including:
a. who was hurt, when, and how
b. names of relevant witnesses - Notifying insurer promptly of lawsuits filed against insured
- Cooperating with the insurer in any matter involving a claim, including:
a. forwarding legal papers
b. authorizing the insurer to obtain all relevant materials - Assisting the insurer in enforcing subrogation rights
- Not making voluntary payments upon a claim on behalf of the insurer without the insurer’s authorization
Other Insurance
- Divides responsibility for claims among all applicable policies
- Claims-made form pays after any non-claims-made form
Limits of Insurance
The maximum amount the insurer will pay during policy period to satisfy claims
Aggregate Limits
The maximum amount a policy will pay per policy period
- Products-Completed Operations Aggregate Limit: the maximum amount the policy will pay out over the policy period to satisfy claims regarding Products and Completed Operations
- General Aggregate Limit: the maximum amount the policy will pay out over the policy period to satisfy claims for all coverages except for Products and Completed Operations
General Aggregate Limit
Products and Completed Operations has a separate aggregate limit from all other coverages.
General Aggregate Limit: payments under these coverages are all under one aggregate:
- Coverage A: Premises and Operations Liability and Contractual Liability
- Coverage B: Personal and Advertising Injury Liability
- Coverage C: Medical Payments to Others
- Damage to Premises Rented by You
Per Occurrence Limit
The maximum amount the insurer will pay for any one occurrence
Subject to aggregate limit that precedes it
Per Occurrence Sub-Limits
General Aggregate Limit
- Per Occurrence Limit
- Medical Payments Sub-Limit: the maximum amount the insurer will pay for bodily injury sustained by any one person
- Damages to Premises Rented by You Sub-Limit: the maximum amount the insurer will pay for damages to any one premises
Personal and Advertising Injury Sub-Limit
General Aggregate Limit
- Personal and Advertising Injury Sub-Limit: the maximum amount the insurer will pay for personal and advertising injury to any one person or organization
No Limit on Legal Defense
CGL covers all legal expenses, without limit, up until judgment or settlement
Owners & Contractors Protective Liability
Responds to all liability claims filed against the hiring business arising out of work performed by the independent contractor
- Protects the hiring business from losses due to contractor’s work
- Vicarious liability means a company can be held responsible for the actions of a hired contractor
- Is purchased by contractor, but hiring business is named as insured
- Is specific to a single project and place
- Expires when project is completed
- Only uses the “occurrence” form
Advantages of Owners and Contractors Protective Liability
- Contractor cannot cancel coverage without knowledge of hiring business
- Hiring business’ policy limits are not affected by claims against work of contractor
- Provides primary coverage for all claims related to work of contractor
- Can be used on projects likely to produce claims
- Protects named insured from negligent acts of incompetent contractors
Exclusions to the Owners and Contractors Protective Liability
This form includes:
- auto/watercraft
- contractual liability
- war and terrorist acts
- liquor liability
- workers compensation
- property in the care, custody and control of the insured
- products
- completed operations
Laser Beam Endorsement
Allows an insurer to exclude specific types of accidents, products, work, or locations from CGL coverage.
Liquor Liability Coverage Form
- Alcohol-related occurrences are excluded in the regular CGL policy
- An added Liquor Liability Coverage Endorsement fills this gap
- Includes cases involving over-service or illegal service to minors
Who Needs It?
Some establishments that may require Liquor Liability include:
- grocery stores
- hotels
- casinos
- golf courses
- department stores
- inns and motels
- comedy clubs
- bars
- breweries
- wineries
- restaurants
- liquor stores
- taverns
- caterers
- nightclubs
- convenience stores
Pollution Liability Coverage
- Responds when pollution causes bodily injury or property damage when released into air, water, or land
- Covers pollution excluded by CGL
- Claims-made coverage
- “Pollution incidents” include pollution releases:
a. at insured site
b. off-site due to pollutants emanating from site
c. during transportation
d. at non-owned disposal sites
Pollution-Liability Coverage Broad Form:
- Bodily injury and property damage
- Clean-up costs
Pollution Liability Limited Coverage Form:
- Bodily injury and property damage only
