Study 8: Standard CGL Policy - Summary

Question 1

Five distinct sections of the CGL policy

Answer 1

1. Coverages
2. Who is insured
3. Limits of insurance
4. Conditions
5. Definitions

Question 2

CGL Policy - Section I (4 coverages)

Answer 2

• Coverage A. Bodily Injury and Property Damage Liability
• Coverage B. Personal and Advertising Injury Liability
• Coverage C. Medical Payments
• Coverage D: Tenants and Legal Liability

Question 3

Coverage A. Bodily Injury and Property Damage Liability

Answer 3

The insurer agrees to pay those sums that the insured becomes legally obligated to pay as compensatory damages because of bodily injury or property damage to a third party. The insurer has a duty to defend the insured only if a claim falls within the terms of coverage:

• Must occur during the policy period
• Must be caused by an occurrence
• Must take place in the coverage territory

Question 4

Exclusions specific to Coverage A - Bodily Injury and Property Damage (some examples)

Answer 4

• Expected or intended injury from the standpoint of the insured
• Contractual liability except for compensatory damages the insured would have had whether or not a contract was in place
• Obligations of the insured under worker’s compensation legislation
• Aircraft and watercraft
• Automobile use, ownership or maintenance
• Property owned, rented, or occupied by the insured

Question 5

Coverage B. Personal and Advertising Injury Liability

Answer 5

Covers the following circumstances:

• False arrest, detention or imprisonment
• Malicious prosecution
• Wrongful eviction, entry, or invasion of privacy
• Slander or libel
• Publication of material that violates one’s right to privacy
• Use of another’s advertising idea
• Infringing upon copyright, trade dress, or slogan

Personal and advertising injury liability arises for the most part out of the intentional conduct of the insured. It means an injury other than bodily injury as is defined in the policy. Outside the context of the CGL wording, when the term personal injury is used by lawyers and others, it means what the CGL policy terms bodily injury.

Question 6

Exclusions to personal and advertising injuries

Answer 6

• Knowing violation of rights of another
• Material published with knowledge of its falsity
• Material published prior to the policy period
• Criminal acts committed by or at the direction of the insured
• Quality or performance of goods when the insured’s work fails to conform to advertising statements

Question 7

Coverage C. Medical Payments

Answer 7

Covers reasonable medical expenses incurred by a third party regardless of fault. There is no need to prove negligence or establish any other legal obligation on the part of the insured. The bodily injury must occur accidentally on premises the insured owns or rents; on the way next to such premises; or as a result of the insured’s operations.

Question 8

Medical payments exclusions

Answer 8

• Any insured under the policy except volunteers
• A person hired to work for the insured or a tenant of the insured (i.e. a person brought on to the premises to do casual labour)
• Any person injured on premises normally occupied by the injured party
• Anyone who is entitled to compensation from a provincial workers’ compensation plan
• Persons taking part in athletics

Question 9

Coverage D: Tenants Legal Liability

Answer 9

Tenants legal liability coverage pays for property rented to or occupied by the insured, which is excluded under Coverage A. The property damage must be caused by an occurrence, take place in the coverage territory, and occur during the policy period.

Question 10

Tenants legal liability exclusions

Answer 10

• Property damage expected or intended from the standpoint of the insured
• Contractual liability except that which
  
  • The insured would have had in the absence of a contract, and
  • Is assumed in an insured contract

Question 11

CGL Policy Section II—Who Is Insured

Answer 11

The policy automatically extends to cover other persons not named in a particular policy under certain conditions.

• The wording extends to cover the spouse of the insured with respect to the conduct of the business when the insured is an individual, a partnership, or a joint venture.
• When the insured is a limited liability company, coverage extends to company members, executive officers, directors, and shareholders with respect to their liability pertaining to their business duties.
• Volunteer workers or employees are covered while performing duties related to the conduct of the insured’s business
• Trustees and real estate managers, and if the named insured dies, their legal representative and those having temporary custody of the property are covered
• Any newly acquired or formed organization is covered until the 90th day after its acquisition or the end of the policy period, whichever comes first.

Question 12

CGL Policy Section III—Limits of Insurance

Answer 12

The declarations page specifies the limits of insurance for the various coverages purchased. The policy wording describes how the limits of insurance are applied.

• A general aggregate limit is the total amount payable in any one policy period and it applies collectively to A. Bodily Injury and Property Damage, B. Personal and Advertising Injury, and C. Medical Payments.
• However, there is an exception to the general aggregate: products-completed operations hazard (an additional aggregate limit applies to this exposure).
• Market conditions influence whether or not an insurer will agree to waive or modify aggregate limits.
• There is an each occurrence limit, which is the maximum amount payable for any one occurrence for A. Bodily Injury and Property Damage and C. Medical Payments.
• There is no automatic reinstatement of limits of insurance under CGL.

Question 13

CGL Policy Section IV—Conditions

Answer 13

The CGL policy is not subject to the statutory conditions applicable to the common law provinces and territories. It contains conditions similar to most insurance forms.

• Some conditions are merely general statements that describe how the policy works and others specifically describe what steps the insurer or insured must take should a certain event occur.

Question 14

Conditions found in a standard CGL policy (some examples)

Answer 14

1. Insurer is obliged to perform duties described in policy even if insured becomes bankrupt
2. All premiums, payments, deductibles, and limits are expressed in Canadian currency
3. First named insured is authorized to change the terms of the policy with the insurer’s consent
4. Insurer has the right to examine the insured’s financial books and records as they relate to the policy at any time during the policy period and succeeding three-year period.
5. Insurer has a right to determine the physical characteristics of the risk.

Question 15

CGL Policy Section V—Definitions

Answer 15

In the standard CGL policy wording, terms that are assigned a special meaning are in quotation marks.

• To properly evaluate coverage under the policy, people seeking insurance must refer to the definitions to understand the coverage.

Question 16

Definition of “insured contract”

Answer 16

• lease of premises;
• sidetrack agreement;
• an easement with railroad crossings;
• any other easement agreement;
• an obligation as required by ordinance to indemnify a municipality;
• elevator maintenance agreement; or
• hold-harmless agreement.

Question 17

Wording for Common Exclusions

Answer 17

The commercial general liability (CGL) policy has common exclusions that apply overall as follows:

• Any claim caused by asbestos is excluded. Asbestos is now treated as a separate common exclusion.
• Fungi or spores are excluded as well as anything related to its spread, reproduction, and clean-up costs; and supervision, instructions, and giving advice.
• Excluded are bodily injury and property damage resulting from the hazardous properties of nuclear material.
• Part 1 of the pollution exclusion removes coverage for bodily injury and property damage arising from an escape of pollutants
• Part 2 is concerned with legislation and government authority, and removes coverage for costs of testing or monitoring a spill of pollutants or claims made by governmental authorities for damages caused by pollutants
• Property damage or bodily injury arising directly or indirectly out of terrorism or an activity to prevent terrorism
• Bodily injury or property damage due to war, invasion, act of foreign enemy, civil war, rebellion etc.

Question 18

Supplementary Payments

Answer 18

Apply to Coverage A. Bodily Injury and Property Damage, Coverage B. Personal and Advertising Injury, and Coverage D. Tenants Legal Liability.

• Expenses incurred by the insurer
• Cost of a bond to release seized property for bond amounts within the limit of insurance
• Reasonable expenses incurred by the insured at the insurer’s request, including loss of earnings up to $250 per day
• All costs assessed against the insured (ex. court costs)
• Interest accruing after entry of judgment will be paid by the insurer

Question 19

Additional supplementary payments

Answer 19

• 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.