8.2 - Common Exclusions of the CGL Policy Flashcards
Describe the common exclusions in the commercial general liability (CGL) policy
Exclusions
-an exclusions is a policy provision that eliminates coverage for the risk itself
-exclusions narrow the scope of coverage provided under the insuring agreement and must be brought to the insured’s attention in the event that a claim does not fall within coverage
Definition - “pollution exclusion”
Standard general liability policies include an exclusion for loss arising out of pollution. For certain exposures, this exclusion may be modified; for example, “sudden and accidental” pollution arising from a fire
Definition - “Terrorism”
An ideologically motivated unlawful act or acts, including but not limited to the use of violence or force or the threat of violence or force, committed by or on behalf of any group(s), organization(s), or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public
Wording for Common Exclusions - 1.
- Any claim caused by asbestos is excluded
-whether asbestos should be considered a pollutant has been argued. To respond to the debate, asbestos is now treated as a separate common exclusion
Wording for Common Exclusions - 2.
- Fungi or spores are excluded as well as anything related to its spread, reproductions, and clean-up costs; and supervision, instructions, and giving advice
Wording for Common Exclusions - 3.
- Excluded are bodily injury and property damage resulting from the hazardous properties of nuclear material arising from the
i. ownership, maintenance, operation, or use by or on behalf of the insured of a nuclear facility;
ii. transportation, consumption, disposal, and dispersal of radioactive material; and
iii. furnishing by an insured of services, materials, parts, or equipment in connection with the planning, construction, maintenance, operation, or use of any nuclear facility
-the problems associated with nuclear energy are highly technical and require special attention
-the seriousness of the potential loss exposures is another factor that sets nuclear energy liability apart
-insurers have formed a pool, the Nuclear Association of Canada (NIAC), where insurance may be obtained to cover nuclear incident liability exposures under such policies as an operator’s form, a facility form, or a shipper’s and transporter’s form
-nuclear facilities and firms supplying technical services for them are a modestly sized group
-most insurers will cover radioactive material such as isotopes, which are commonly used in industry, hospitals, and universities. To decide whether to accept a risk or not, insurers seek detailed information on the type and use of such isotopes
Wording for Common Exclusions - 4.
- Part 1 of the pollution exclusion removes coverage for bodily injury, property damage, or personal and advertising injury arising out of an actual, alleged, or threatened spill, discharge, emission, dispersal, seepage, leakage, migration, release, or escape of pollutants
a. at or from and premises of the insured whether it was at any time owned, occupied, rented to, or loaned to the insured; for example, fuel in the insured’s tank escapes to a neighbour’s premises and causes damage and clean-up expenses. The CGL policy excludes the occurrence
-*The exceptions to pollution exclusion a. include the following:
> The exclusion does not apply to bodily injury resulting from smoke, fumes, vapour, or soot from the building’s heating, cooling, dehumidifying equipment; for example, a TP is injured by inhaling carbon monoxide escaping from the insured’s furnace
> The exclusion does not apply to pollution from premises of an additional insured named in a contractors liability policy; for example, pollution coverage is afforded to a contractor and the owner for work done on the premises owned by the project owner as an additional insured
> The exclusion does not apply to claims arising out of heat, smoke, or fumes from a hostile fire. For example, the insured’s building is on fire and causes smoke damage to a TP neighbour. This would be covered for a bodily injury or property damage loss
b. at or from any waste disposal or treatment site used by or for any insured. For example, the insured uses a TP’s disposal site for its industrial by-products. The by-products escape into a river and pollute it. The CGL excludes the occurrence
c. which were at any time transported, handled, stored, treated, disposed of, or processed as waste by the insured or anyone else for whom the insured is legally responsible. In most Prov. and Terr., even if a company hires an independent waste hauler to dispose of its industrial waste, until such time as it is fully disposed of in a safe manner, the insured can be held liable for any pollution damage. The company, as the owner of the waste, can be sued, as well as the waste hauler
d. at of from any premises, site, or location on which any insured or their contractors or subcontractors are performing operations if the pollutants are brought on or to the premises, site, or location by such insured, contractor, or subcontractor.
-*The exceptions to pollution exclusion d. include the following:
> The exclusion does not apply to bodily injury or property damage due to teh accidental escape of operational fluids that form part of a storage component to hold fluids. For example, the CGL policy covers a fuel tank in a drilling rig that is accidentally damaged while it is being used for drilling operations
> The exclusion does not apply to bodily injury or property damage caused by the release of gases, fumes, or vapours from materials brought into a building in connection with the insured’s operations. For example, while a contractor is painting, a TP has an allergic reaction to the paint fumes
> The exclusion does not apply to smoke and fumes from a hostile fire at premises where an insured performs operations, such as it the insured’s building is on fire and causes smoke damage to a TP neighbour. Any ensuing bodily injury and property damage claims are covered under the CGL policy.
e. while the insured, its contractor, or subcontractor are engaged in pollution clean-up. For example, the insured hires an environmental remediation firm to clean up a pollution spill. During the clean-up, additional damage is caused to a TP
-Part 2 of the pollution exclusion is concerned with legislation and government authority. Any loss, cost, or expense arising out of any
a. request, demand, order, or statutory or regulatory requirements that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any respond to or assess the effects of pollutants is not covered
b. claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, moving, containing, treating, detoxifying, neutralizing, or in any way responding to or assessing the effect of pollutants is not covered
Wording for Common Exclusions - 5.
- Property damage, bodily injury and personal and advertising injury arising directly or indirectly out of terrorism or any activity to prevent, respond to, or terminate terrorism are excluded
Wording for Common Exclusions - 6.
- Bodily injury or property damage due to war, invasion, act of foreign enemy, hostilities, (whether war be declared or not), civil war, rebellion, revolution, insurrection, or military power are excluded
Definition - “Supplementary Payments”
Various expenses the insurer agrees to pay under a liability insurance policy (in addition to the liability limits). Supplementary payments are normally defined to include such items as first aid expenses, premiums for appeal and bail bonds, pre- and post-judgement interest, and reasonable travel expenses incurred by the insured at the insurer’s request when assisting in the defence of a claim
Supplementary Payments
-the supplementary payments coverages apply to Coverage A. Bodily Injury and Property Damage, Coverage B. Personal and Advertising Injury, and Coverage D. Tenants Legal Liability
-the insurer agrees to pay the following types of expenses associated with the defence of an action in addition to the limits of insurance:
a. Expenses incurred by the insurer. For example, when an insurer hires an independent adjuster to investigate and negotiate the settlement of a claim, the fee charge by the adjuster is payable by the insurer and will not affect the limit of liability available on the policy
b. Cost of a bond to release seized property for bond amounts within the limit of insurance. The insurer is not required to issue the bond. For example, if certain property belonging to the insured is being held by customs, the property represents important evidence to the liability action in question. To have the goods released, the insured must provide a customs bond to the government. The CGL policy covers the cost of buying the customs bond
c. reasonable expenses incurred by the insured at the insurer’s request, including loss of earnings up to $250 per day. For example, the insurer requests the insured’s employee to attend a court hearing. The employee must take time off work. The employee’s wages are reimbursed to the insured up to $250/day
d. All costs assessed against the insured. For example, in addition to awarding compensatory damages against the insured, the court costs are charged to the insured. Compensatory damages up to the policy limit in addition to court costs are covered under the CGL policy
e. Interest accruing after entry of judgement will be paid by the insurer. Only that part of the judgement that falls within the limit of insurance will be considered. For example, a lower court awards $1 million on a claim and this judgement is appealed. 2 years later, a higher court upholds the judgement and awards an additional amount for the interest on the $1 million, which the insured is entitled to claim under supplementary payments coverage.
-additionally, the insurer will defend and pay defence costs of qualified indemnitees under the policy if they are named in a suit
-certain conditions would have to be met regarding the indemnitee’s cooperation, and the interests of the indemnitee must be the same as the insured’s
-certain liability policies include defence costs within the policy limits
in QC, under the CCQ, such a limitation would not be recognized and the insurer would have to pay for defence costs in addition to the limits of insurance paid for compensatory damages to the TP
