Commercial Casualty I - National Alliancemagma.magma.scic.com/Elearning/1IC/2013/1IC_Course_Print.pdfCompany or State Specific Forms Insurance companies often use policy forms other

Commercial Casualty I – CGL & AI Course Print 11.22.2013 1

Commercial Casualty I

Course Introduction p1

Welcome

Insurance and risk professionals today need learning choices from many sources. As time and economic pressures bear down on everyone, The National Alliance continues to push forward with excellent online programs, carefully designed to fulfill your professional development needs. In the pages that follow, be sure to read and understand the requirements for completing your course. If you have any questions, you may contact us via the link on the bottom navigation bar. I hope you enjoy your journey into online learning. Thank you for choosing a National Alliance online course!

William T. Hold, Ph.D., CIC, CPCU, CLU President






Certified Insurance Service Representatives (CISR) Most students who select this course have already made the decision to achieve the Certified Insurance Service Representatives (CISR) Designation - the best recognized credential for insurance service representatives and other insurance professionals in the industry today. The National Alliance for Insurance Education & Research gave recognition to the first CISR designee in 1987. Today, over 28,000 insurance professionals proudly wear the CISR pin. You can learn more about it by using the link provided below – maybe it’s right for you!

https://www.scic.com/courses/CISR

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Course Introduction Page 4

Course Home Page

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REQUIRED READING FOR FLORIDA RESIDENTS ONLY:

An entity that is required to be licensed or registered with the Florida Office of Insurance Regulation but is operating without the proper authorization is identified as an unauthorized insurer. All persons have the responsibility of conducting reasonable research to ensure they are not writing policies or placing business with an unauthorized insurer. Any person who, directly or indirectly, aid or represent an unauthorized insurer can lose their licenses or face other disciplinary sanctions. Please see section 626.901, Florida Statutes, to read the laws. Lack of careful screening can result in significant financial loss to Florida consumers due to unpaid claims and/or theft of premiums. Under Florida law, a person can be charged with a third-degree felony and also held liable for any unpaid claims and refund of premiums when representing an unauthorized insurer. It is the person’s responsibility to give fair and accurate information regarding the companies they represent.

Welcome to CISR Commercial Casualty I (1IC) p1

Welcome! CISR Commercial Casualty I - Legal Liability, CGL & Additional Insureds

Thank you for choosing the Certified Insurance Service Representatives (CISR) Commercial Casualty I - Legal Liability, Commercial General Liability (CGL) & Additional Insureds course. Insurance professionals working in commercial lines may find themselves:

describing a company product to a new producer, describing coverages to a customer, analyzing existing policies for a large commercial account that needs to increase coverage, handling claims and, pursuing sales leads.

More than ever, they need to increase their technical knowledge of commercial casualty coverages. The

CISR Commercial Casualty I - Legal Liability, CGL & Additional Insureds Course offers an excellent overview

of the CGL Policy.


Course Study and Exam Preparation

Have you ever thought about how you learn? The study aids listed below will help you determine your

progress and test your understanding of concepts and examples presented in the course.

Learning Objectives:

Learning Objectives are designed for managing your own learning. The learning objectives for the

course are listed at the beginning of each topic. The learning objectives are indicated throughout

the course pages as well.

At the end of the course, you will have the opportunity to read the learning objectives again, and

see how confident you feel about each one.

Self Quizzes

Self quizzes are another learning management tool. You are required to pass each self-quiz with a

score of 70 or above before moving forward in the course, and you can launch a self-quiz as many

times as needed.

To print the score page of your self- quiz, click on Assessment Results, then right click on the page.

The Assessment Results page makes an excellent study aid.

Glossary

Glossary terms and definitions are critical to insurance professionals, and a key study aid for your

online course. To define a term, click on the Glossary link above. Definitions of newly introduced

terms will also be included on the course pages.

Knowledge Checks

Knowledge Checks are application level questions.

By attempting to apply the concepts of the course, you will better prepare yourself for the final

exam. Make sure you attempt each knowledge check in the course.

Course Mentor

And don't forget to email the Course Mentor with your questions about the curriculum.

Our faculty members are distinguished producers and risk managers who currently work in the

insurance industry. The mentors are happy to explain and clarify the concepts in the course.


They will return your email on or before the next business day.

Be sure to use the Frequently Asked Questions (FAQ) Page to review guides for commonly asked questions.

ISO Forms v. Company or State Specific Forms

Insurance companies often use policy forms other than the ISO Commercial Casualty Exposure forms. These

policies may incorporate language similar to the ISO Forms in their contract and endorsement language. You

must also be aware that state specific forms often contain different provisions than the ISO Standard Forms.

Be sure to look for differences between the ISO Forms which we study in this course, and the company

specific or state specific forms that you use in your job.

Forms used in this course are located by clicking on the Forms Library link. We also present a link to the

forms used at the beginning of each lesson.

Course Objectives Overview

This course consists of five lessons:

1. Essentials of Legal Liability 2. CGL Introduction 3. Commercial General Liability Coverage Parts 4. CGL Other Provisions 5. Additional Insureds

Each lesson is further broken down into topics. In each topic, you will have content to read, graphical

material to view, and self-quizzes to test your comprehension of important points. You may link to the final

exam after completing all of self quizzes in the course with a score of 70 or above.


Lesson 1 Essentials of Legal Liability

Lesson 1 Legal Liability Intro p1 (1IC)

In the CGL Policy we will cover later in this course, the greatest majority of coverage arises from an insured

person's legal liability. Legal liability is a responsibility or obligation to others, which the courts recognize

and enforce. Legal liability is the event that triggers (initiates) coverage in most of the policies we will

discuss.

Legal liability can come from many exposures. There are also several types of legal liability to which an

insured person can be exposed to. In addition, different types of damages (amounts of money) may be

assessed when legal liability exists.


Lesson 1

Topics of Discussion

In this lesson we will focus on liability exposures. It is important to learn what they are, before learning if

and how they are covered by an insurance policy.

Some exposures are covered by the CGL Policy, and some are not. As you go through the lessons, make sure

you remind yourself about the difference between "exposures" and "coverages".

In Lessons 2 through 5, we will study how the Commercial General Liability (CGL) provides coverages for

many of the exposures we are about to study.

This lesson will consist of four topics:

1. Types of Liability

2. Direct and Vicarious Liability

3. Types of Damages

4. Liability Exposures


Lesson 1: Learning Objectives

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After completing this lesson, you will be able to:

1. Define three categories of legal liability: tort, statutory and contractual.

2. Explain four types of tort liability and give an example of each.

3. Name the four requirements of a negligent tort.

4. Explain the concept of direct liability.

5. Define vicarious liability, and give examples of relationships where vicarious liability may be

created.

6. Name and describe the types of damages that may be awarded in a civil court case.

7. Identify and explain the sources of legal liability exposures.

Forms Used In This Lesson:

None


Lesson 1 Topic A - Types of Liability

Lesson 1 Topic A Types of Liability p1 (1IC)

Learning Objective: Define three categories of legal liability: tort, statutory and contractual.

Legal liability is "a responsibility or obligation to others, which courts recognize and enforce." In general,

failure to meet this duty often results in the imposition of monetary damages.

The three types of legal liability that we will cover in this lesson are:

Tort Liability

Statutory Liability

Contractual Liability


Tort Liability

Learning Objective: Explain four types of tort liability and give an example of each.

Many insurance policies that provide insurance protection for the legal liability of insureds refer to tort

liability. A basic definition of tort is a civil legal wrong against another for which the courts often assess

monetary damages against the wrongdoer. Tort liability is imposed by common law, that is, law that has

been developed through the application of court decisions over time.

You need to be familiar with four types of torts:

1. Negligence

2. Intentional Torts

3. Strict Liability

4. Absolute Liability

We will go into more detail of the four types of tort liability on the pages that follow.


1. Negligence

Learning Objective: Name the four requirements of a negligent tort.


A basic definition of negligence is the failure to act as a reasonable person would under the same or similar

circumstances. Failure to do so can result in a negligent tort. You need to remember that four elements or

components are required for a negligent tort:

1. There must be a duty owed by the negligent party to another party.

2. There must be a breach of that duty.

3. An actual injury or loss must occur.

4. There has to be a close cause and effect (proximate cause) relationship between the breach of

that duty and the injury or loss.


Learning Objective: Name the four requirements of a negligent tort.

Four Elements of Negligence

1. A duty owed: A Person has a duty to operate an automobile safely.

2. Breach of Duty: The person runs a red light.

3. Proximate Cause: His/her action causes a collision.

4. Damages: The result is property damage to the other car and bodily injury to the other driver.


2. Intentional Tort


An intentional or voluntary act where the person or organization committing the act is expressly or

implicitly deemed to have possessed intent or purpose to injure. The person or organization committing the

act can be held legally liable for that injury or loss. Examples include:

1. Libel

2. Slander

3. Wrongful entry or wrongful eviction

4. Assault and/or battery

5. Wrongful detention

6. False arrest

7. Copyright infringement, trademark infringement, etc.



3. Strict Liability


Strict liability is a concept applied by the courts in product liability suits in which a manufacturer, distributor

or seller is liable for any and all defective or hazardous products that unduly threaten a consumer's health

and safety. Unlike the case of negligence previously discussed, the element or component of proximate

cause is not applied. All that has to be proved is that the product that caused the damage was defective and

the defect rendered that product unreasonably dangerous.

A product may be defective because of a defect in manufacture, design or failure to adequately warn of a

hazard involved in the foreseeable use of the product. The manufacturer, distributer or seller may have

exercised reasonable care in the manufacture, distribution or sale of the product.


Examples of Strict Liability Losses


Example 1:

A football player was injured while wearing a football helmet. The fact that the helmet did not do what it

was intended to do (protect from head injury) was cause for strict liability. A product is defective in design if

it fails to perform as safely as an ordinary consumer would expect when it is used in an intended or

reasonably foreseeable manner.

Example 2:

A 300 pound man was injured when a ladder he was using collapsed. The ladder was manufactured for

maximum capacity of 250 pounds. The court found strict liability on the part of the manufacturer for failure

to place a warning on the ladder for use by individuals over 250 pounds.

A product is defective if the use of a product in a manner that is reasonably foreseeable by the

manufacturer involves a substantial danger that would not be recognized by the user and the manufacturer

knew of the danger but failed to provide an adequate warning.



4. Absolute Liability


Absolute liability is liability without regard to fault. Absolute liability applies where certain activities create

such a serious risk of harm that it is justifiable to place liability for any injury or damage on the person or

organization engaging in the activity, even when the person or organization has taken every precaution to

prevent or reduce any type of injury or damage. All that has to be proved is that an injury or damage occurs

because of the activities.

Examples of absolute liability include:

Explosive or blasting operations

Dangerous animals

Hazardous material operations


Tort Liability Continued


Click on Start to review our study of Tort Liability.

Types of Tort Liability

Negligence

Intentional Torts

Strict Liability

Absolute Liability

Negligence

Example: If a driver runs a stop sign, the driver breached a duty owed. But unless they cause injury or

property damage, there is no negligent tort.

Intentional Torts


Examples include:

• Libel

• Slander

• Wrongful entry or wrongful eviction

• Wrongful detention

• False arrest

• Copyright infringement, trademark infringement

Strict Liability

Example: Product liability - A container advertised to hold toxic chemicals leaks when the consumer puts the

chemical in the container.

Absolute Liability

Examples:

• Explosive or blasting operations

• Dangerous animals (whether known to be dangerous or not)

• Hazardous material operations

Please complete the knowledge check found at Lesson 1 Topic A Types of Liability p10 (1IC).


Statutory Liability


Statutory liability is liability arising out of specific rules or laws (statutes) enacted by a legislative body

providing direction or prohibition. The existence of these statutes subjects a business owner to liabilities

imposed by the provisions of the laws. Statutes override common law.

Examples of Statutory Liability

• Workers Compensation Statutes

• Dram Shop or Liquor Liability Statutes

• Environmental Protection Statutes

• Americans With Disabilities Act, related rulings and state statutes


• Employment Liability through statutes and EEOC rulings




A contract is an agreement between two or more parties, which creates an obligation to do or not to do a

particular thing. Often in contracts, one party assumes the financial consequences of certain liabilities of

another.

Later in this course, we will see that not all contractual assumptions of liability will be covered by insurance

policies. The policies will grant coverage for "insured contracts" only.

Assumption of responsibility for liability of another

Assumption of responsibility for the liability of another is commonly referred to as hold harmless and/or

indemnity agreements.

Parties commonly involved in a hold harmless and/or indemnity agreement:

1. Lessor-Lessee

2. Owner-Contractor

3. Contractor-Subcontractor

4. Manufacturer-Distributor

Breach of Contract

A breach of warranty claim is one example of a breach of contract action that affects the exposures of many

types of businesses.

A warranty is an assurance made by the seller of goods or provider of services, either express or implied

that references the quality or fitness of the goods or services and is relied upon by the buyer of the goods or

services.

Breach of warranty claims are claims for breach of contract.


Contractual Liability Continued



Contractual Liability Examples

When a tenant signs a lease, he or she may agree to pay for any judgment assessed against the landlord

because of activities at the rented premises.

Another common example can be found in an equipment lease. When you sign a lease for a phone system

or computer equipment, you agree to assume the costs of any judgment assessed against the owner of the

equipment for losses arising out of your use of the equipment.

When an individual buys a hammer, there is an implied warranty that the hammer is fit for the ordinary

purpose for which a hammer is used. If the first time the individual uses the hammer, a part of the hammer

breaks off and injures the individual's eye, and action for breach of warranty could result.

In this example, the party may be liable for breach of warranty, a breach of contract. However, not all

breach of contract claims are provided insurance protection by most liability policies.


This chart is another way to illustrate the types of legal liability. Click on each of the bolded terms for a

review.

Tort

Negligence: There are four requirements of a negligent tort. There must be:

1. A duty owed

2. A breach of duty

3. Proximate cause

4. Damages

Intentional Torts:

An intentional tort is an intentional or voluntary act that can result in injury or loss to another party.

Examples of intentional torts include: libel, slander, wrongful entry or wrongful eviction, assault and/or

battery, wrongful detention, false arrest, copyright infringement and trademark infringement.

Strict Liability: For strict liability, all that has to be proved is that a defective product injured someone or

caused some damage. Examples of strict liability include: defect in design, defect in manufacturer and

failure to warn.


Absolute Liability: Absolute Liability applies when conditions or activities are inherently dangerous.

Examples of absolute liability include: explosive or blasting operations, dangerous animals and hazardous

material operations.

Statutory

Imposed by Statutes and Regulations:

Examples: Workers Compensation Statutes and Americans with Disability Act (statutes and regulations and

related rulings).

Contractual

Assumption of Liability:

Example: A common contractual assumption of the liability of another would be renting equipment and the

contract states you agree to assume the costs of any judgment assessed against the owner of the

equipment for losses occurring while you are using the equipment.

Some liability insurance policies may provide insurance protection for the assumption of responsibility of

another. Often, the coverage provided is limited to "insured contracts", as defined.

Breach of Contract: Insurance protection for breach of contract under liability insurance policies is typically

limited to breach of warranty type claims.


Lesson 1 Topic B - Direct and Vicarious Liability

Lesson 1 Topic B Direct & Vicarious Liability p1 (1IC)

Learning Objective: Explain the concept of direct liability.

The majority of liability claims involve the tort liability of the person or organization. In general, tort liability

can be triggered from two types of actions. They are:

1. Direct Liability results from your own conduct.

2. Vicarious Liability results from the conduct of others.


Direct Liability

Learning Objective: Explain the concept of direct liability.

Direct liability results from the conduct of a person or organization that is responsible for injury or property

damage to another.

Example:

Deem's Market, Inc. fails to clean up a food spill in one of its grocery aisles, and a patron slips on the food,

falls and breaks several bones. The claimant sues Deem's Market, Inc. because it directly caused the injury.


Vicarious Liability

Learning Objective: Define vicarious liability, and give examples of relationships where vicarious liability

may be created.

Vicarious liability is the liability of one party based upon the liability of another. It is said that liability is

imputed (transferred from one party to the other).

Many times the person or organization is not actively involved in the conduct that causes injury or damage,

and, in fact, may have actually discouraged it or tried to prevent it. However, because of the nature of

certain relationships, the conduct of others can create vicarious liability for the person or organization.


Example:

While delivering groceries, an employee of Deem's Market, Inc. causes an auto accident in which three

people are injured.

The injured parties bring a claim against the employee who directly caused the accident, but they also bring

a claim against Deem's Market, Inc., because Deem's Market, Inc. can be held vicariously liable for the

actions of its employees done within the scope of their employment.


Vicarious Liability continued

Learning Objective: Define vicarious liability and give examples of relationships where vicarious liability

may be created.

Employer/Employee: Legal doctrine has held that the employer is responsible for injury or damage to

another resulting from the acts of an employee committed within the scope of their employment. The

employee can be held individually liable for his/her acts, however, in the real world it is the employer, more

times than not, who has the assets and who will bear the financial burden of the employee's acts.

Principal/Agent: This is similar to the employer/employee relationship. However, the principal is liable only

for acts of the agent while the agent is performing acts directly related to the relationship. A real estate

company could be legally liable for acts or omissions of its independent realtors while acting on behalf of

the company.

Owner/Manager: A property owner could be legally liable for the acts or omissions of its management

company. Like the principal/agent relationship, the owner can be liable only for acts performed by the

manager directly related to the relationship.

Owner/Contractor – Contractor/Subcontractor: An owner/contractor may be held liable for the acts of its

contractor/subcontractor. However, generally the owner/contractor is not held legally liable for the conduct

of a subcontractor unless the subcontractor is performing inherently dangerous acts or the

owner/contractor was negligent in choosing them. This is not as automatic as the employer/employee

relationship.

Please refer to the end of Lesson 1 Topic B to complete Self Quiz 1 at this time.


Lesson 1 Topic C - Types of Damages

Lesson 1 Topic C Types of Damages p1 (1IC)

Learning Objective: Name and describe the types of damages that may be awarded in a civil court case.

In liability, we refer to the money awarded in a suit or claim as damages. There are two basic types of

damages that are awarded in liability claims. They are:

• Compensatory damages

• Punitive or exemplary damages


Compensatory Damages


Compensatory damages are sums of money that will, as far as possible, compensate for the loss. There are

two types of compensatory damages:

Special Damages: Specific dollar amounts that cover specific costs.

Examples: Medical bills, lost income, rehabilitation expenses, repair or replacement of property, loss of use

of property, etc.

General Damages: Subjective dollar amounts that cover intangible losses.

Examples: Pain and suffering, disfigurement, loss of consortium, etc.


Punitive or Exemplary Damages


Punitive or exemplary damages are sums of money, more than are required to compensate for loss, which

are imposed in order to punish wrongdoer conduct now and deter such conduct in the future.

Statutes may restrict the amount of exemplary or punitive damages that can be recovered. State law may

also restrict liability policies from paying for exemplary or punitive damages. In addition, some liability


policies have exclusions that prohibit paying for exemplary or punitive damages.

Example: In addition to compensatory damages, the defendant is ordered to pay $100,000 in punitive

damages for texting while driving.

Please complete the knowledge check found at Lesson 1 Topic C Types of Damages p4 (1IC).


Lesson 1 Topic D - Legal Liability Exposures

Lesson 1 Topic D Legal Liability p1 (1IC)

Learning Objective: Identify and explain the sources of legal liability exposures.

Our commercial insureds face various types of risks every day. Business entities - whether individuals,

partnerships, or corporations, are subject to many exposures that can create legal liability. The owners or

individuals responsible for the operation of the business do not always recognize every exposure. You can

help your client to identify some of these exposures.

Common business exposures that can lead to legal liability are:

• Premises

• Operations

• Products

• Completed Operations

• Ownership, Maintenance, or Use of Autos

• Ownership, Maintenance, or Use of Other Conveyances

• Employing Workers

• Liquor

• Environmental Impairment

• Professional Activities

• Bailee Liability


Premises Liability


Legal liability results out of an injury and/or damage due to the ownership, maintenance or use of a

location. The exposure applies to owners, landlords and tenants and is generally confined to a specific

location(s), like the address of the business.

Examples:

• A customer slips and falls in a store due to water on the floor.

• A fire accidentally started by an employee damages property belonging to the business next

door.



Liability Arising from Operations


Legal liability results when injury and/or damages arises out of business activities (such as construction,

processing, manufacturing, repairing, or loading and unloading goods, etc.) which are necessary and

incidental for conducting business.

The exposure can be at the premises or at other locations where the business activity occurs.

Examples:

• A tree-removal contractor causes damage to power lines when removing tree limbs.

• During the loading process, a load of boxes falls off a conveyer belt injuring a customer.


Products Liability


Legal liability results when injury and/or damage arises out of defects in product design, manufacture, or

the failure to warn.

The exposure applies to the use of a product made or sold by the business. This exposure begins after the

sale and as soon as the product has left the premises.

Examples:

• A table collapses because improperly sized screws were used in construction, causing damage

to a customer's computer.

• A manufacturer fails to warn of choking danger associated with small parts on a toy, and a child

chokes on a part when given the toy.


Liability Arising from Completed Operations



Legal liability results when injury and/or damage arises out of defective or improper workmanship. The

exposure applies to the insured's work. This exposure begins once the operations have been completed and

the insured leaves the work site.

Examples:

• Several weeks after an electrician uses the wrong size wire for a repair, a resulting fire damages

the customer's building.

• An employee improperly installs a hot water heater. Three days later the building is flooded

with gallons of water.


Liability due to Ownership, Maintenance or Use of Automobiles


Legal liability results when injury and/or damage arises out of the ownership, maintenance or use of an

auto, including entrustment and/or supervision. Almost every commercial client has this exposure.

Examples:

• While making deliveries in a company auto, an employee runs a red light and causes an

accident.

• A poor maintenance program causes the improper braking ability of a company vehicle, which

results in an accident.


Liability Due to the Ownership, Maintenance or Use of Other Conveyances


Legal liability results when injury and/or damage arises out of the ownership, operation, maintenance or

use of conveyances other than an "auto". The exposure will vary from business to business.

Examples:


• Injury or damage is caused by the use of mobile equipment, such as a forklift.

• The use of watercraft, aircraft or recreational vehicles causes harm or injury.


Liability due to Employing Workers


Legal liability arises from the statutory obligations employers have to employees regarding work-related

injuries or occupational disease. This liability may also cover various consequential injuries to others caused

by the employee's injury or disease. The exposure is subject to the laws and regulations governing workers

compensation, employers liability and other employment-related issues in each state.

Examples:

• An employee ruptures a disc while lifting a box of paper.

• An employee develops chemical pneumonia from inhaling acidic fumes while cleaning

machinery.


Liquor Liability


Legal liability is imposed in most states when injury and/or damage arises from manufacturing, distributing,

selling, serving or furnishing of alcoholic beverages. The exposure will vary and is subject to statutes and

case law in each state.

Examples:

• An employee becomes intoxicated at a company-sponsored picnic, where the company

provided alcoholic beverages, and injures someone while driving home.

• A bar customer becomes intoxicated after consuming alcoholic beverages and injures someone

while driving home.



Liability Arising from Environmental Impairment


Legal liability may be imposed by statute or because of injury and/or damage. The exposure may arise from

direct or indirect involvement with pollution and/or pollution-related situations.

Examples:

• Your negligent operation of a vehicle results in an accident, causing hazardous chemicals to leak

from the other vehicle, gasoline to leak from the gas tank of your vehicle, and your cargo of

toxic waste to spill.

• Your own commercial property contains leaking underground chemical tanks or lead-based

paint.


Liability Arising from Professional Activities


Legal liability results from injury and/or damage arising from the giving or failure to give professional advice

or service. The exposure will vary depending on the nature of the business and by state statute and case

law.

Examples:

• A CPA gives the wrong advice, resulting in IRS penalties and/or fines.

• An architect makes a design mistake, causing a load-bearing wall to collapse.


Bailee Liability


Legal liability results from injury and/or damage arising out of the insured's possession of other's property.

The exposure will vary on the nature of the business.



Summary of Common Business Liability Exposures


The next two pages list some sources of exposures. They are not all-inclusive. However, they do include

many of the sources that businesses encounter that can result in legal liability. Click on each bold item

below to review.

Premises: Legal liability results out of an injury and/or damage due to the ownership, maintenance or use of

a location.

Operations: Legal liability results when injury and/or damages arises out of business activities such as

construction, processing, manufacturing, repairing or loading and unloading of goods.

Products: Legal liability results when injury and/or damage arises out of defects in product design,

manufacture or the failure to warn.

Completed Operations: Legal liability results when injury and/or damage arises out of defective or

improper workmanship. The exposure applies to the insured's work.

The exposure begins once the operations have been completed and the insured leaves the work site.

Ownership, Maintenance or Use of Automobiles: Legal liability results when injury and/or damage arises

out of the ownership, maintenance or use of an auto.

Almost every commercial client has this exposure.

Ownership, Maintenance or Use of Other Conveyances: Legal liability results when injury and/or damage

arises out of the ownership, operation, maintenance or use of conveyances other than an auto. This

exposure will vary from business to business.


Summary of Common Business Liability Exposures continued


Employing Workers: Legal liability arises from the statutory obligations employers have to employees

regarding work-related injuries or occupational disease.

The exposure is subject to the laws and regulations governing workers compensation, employers liability,


and other employment-related issues in each state.

Liquor: Legal liability is imposed when injury and/or damage arises from the business of manufacturing,

distributing, selling, serving or furnishing of alcoholic beverages.

The exposure will vary and is subject to statutes and case law in each state.

Environmental Impairment: Legal liability exposure that may arise from direct or indirect involvement with

pollution and/or pollution-related situations.

Professional Activities: Legal liability results from injury and/or damage arising from the giving or failure to

give professional advice or service.

The exposure will vary depending on the nature of the business and by state statute and case law.

Bailee: Legal liability results from injury and/or damage arising out of the insured's possession of other's

property.

The exposure will vary on the nature of the business.

Please refer to the end of Lesson 1 Topic D to complete Self Quiz 2 at this time.

Lesson 1 Review Page (1IC)

Lesson 1: Learning Objectives Review

We suggest reviewing the Learning Objectives for this lesson to prepare for the final exam.

1. Define three categories of legal liability: tort, statutory and contractual.

2. Explain four types of tort liability and give an example of each.

3. Name the four requirements of a negligent tort.

4. Explain the concept of direct liability.

5. Define vicarious liability, and give examples of relationships where vicarious liability may be

created.

6. Name and describe the types of damages that may be awarded in a civil court case.

7. Identify and explain the sources of legal liability exposures.


Lesson 2 - Commercial General Liability

Lesson 2 CGL Intro p1 (1IC)

Introduction - Part 1

The Commercial General Liability (CGL) Policy forms a foundation for most business liability coverages. It is

designed to provide liability coverage for a variety of business liability exposures.

The structure of the Commercial General Liability Policy is typically composed of the following:

• Common Policy Declarations

• Common Policy Conditions

• Commercial General Liability Declarations

• Commercial General Liability Coverage Form

• Endorsements


Lesson 2: Topics of Discussion

Our purpose in this lesson is to lay the foundation for our discussion of the Commercial General Liability

Policy. By way of orientation to the CGL Policy.

This lesson consists of the following three topics:

1. Overview of Liability Exposures Covered by CGL Coverage Form

2. Definitions

3. Who Is An Insured




1. Identify the exposure areas that may be covered by the Commercial General Liability Coverage

Form.

2. Determine whether or not a given land vehicle is "mobile equipment" as defined in the CGL


Coverage Form.

3. Define the terms: “coverage territory”, "bodily injury" and "property damage".

4. Determine Who Is An Insured under the provisions of the CGL Coverage Form for specific situations.

Forms to print from the Forms Library:

CG 00 01 - Commercial General Liability Coverage Form

Note: The CGL Coverage Form is 16 pages long and may take a few minutes to print.

http://magma.magma.scic.com/Elearning/1IC/2013/CG00010413.pdf


Lesson 2 Topic A - Overview of Liability Exposures Covered

Lesson 2 Topic A CGL Overview of Coverages p1 (1IC)

Learning Objective: Identify the exposure areas that may be covered by the Commercial General Liability

Coverage Form.

In general, a policyholder can easily understand the exposure they have when they operate automobiles,

tractor-trailer trucks, watercraft or aircraft. They also understand the exposure they have from job-related

injuries or disease to their employees. When it comes to the exposures covered by the CGL Policy, most

understand the "slip and fall" type of exposure from a customer in their building, office, or store. They may,

however, be unaware of other exposures they may have.

As a customer service representative, you may have more communication with the policyholder than any

other individual in the agency. For that reason, you should be familiar with the various types of exposures

covered by the CGL Policy. In this topic we review:

• Exposures Covered by the CGL Policy

• Vicarious Liability


Exposures Covered by the Commercial General Liability (CGL) Coverage Form


Coverage Form.

Some exposures discussed in Lesson 1 Topic D - Liability Exposures, are covered by the CGL Policy. The

following is a summary of exposures covered by the CGL:

• Premises

• Operations

• Products

• Completed Operations

• Contractual

• Contingent

• Personal Injury

• Advertising Injury



Vicarious Liability


Coverage Form.

As stated, the CGL Policy will afford coverage to the named insured for vicarious liability imposed because

of those who may be acting on behalf of the named insured.

Example:

The named insured's subcontractor causes an injury to a third party, who then brings a claim against the

named insured. The CGL Policy can cover the named insured. We will see how the CGL Policy covers these

exposures for your insureds. Remember that not every exposure will be covered - either in whole or in part

- by the CGL Policy.

Note: If you would like to review our previous discussion regarding vicarious liability, please

navigate back to Lesson 1, Topic B.


Lesson 2 Topic B – Definitions

Lesson 2 Topic B CGL Definitions p1 (1IC)

Refer to SECTION V - DEFINITIONS on page 12 of the CGL Coverage Form.

Throughout the CGL Coverage Form, defined words or terms are set apart by quotation marks. Before

beginning a discussion of the CGL Coverage Form insuring agreements, exclusions, limits and conditions,

you need to understand these defined words or terms.

SECTION V – DEFINITIONS

1. "Advertisement" means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:

a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and

b. Regarding web sites, only that part of a web site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.

2. "Auto" means:

a. A land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment; or

b. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

However, "auto" does not include "mobile equipment".

3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

4. "Coverage territory" means:

a. The United States of America (including its territories and possessions), Puerto Rico and Canada;

b. International waters or airspace, but only if the injury or damage occurs in the course of travel or transportation between any places included in Paragraph a. above; or

c. All other parts of the world if the injury or damage arises out of:

(1) Goods or products made or sold by you in the territory described in Paragraph a. above;

(2) The activities of a person whose home is in the territory described in Paragraph a. above, but is away for a short time on your business; or

(3) "Personal and advertising injury" offenses that take place through the Internet or similar electronic means of communication;

provided the insured's responsibility to pay damages is determined in a "suit" on the merits, in the territory described in Paragraph a. above or in a settlement we agree to.

5. "Employee" includes a "leased worker". "Employee" does not include a "temporary worker".

6. "Executive officer" means a person holding any of the officer positions created by your charter, constitution, bylaws or any other similar governing document.

7. "Hostile fire" means one which becomes uncontrollable or breaks out from where it was intended to be.

8. "Impaired property" means tangible property, other than "your product" or "your work", that cannot be used or is less useful because:


a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous; or

b. You have failed to fulfill the terms of a contract or agreement;

if such property can be restored to use by the repair, replacement, adjustment or removal of "your product" or "your work" or your fulfilling the terms of the contract or agreement.

9. "Insured contract" means:

a. A contract for a lease of premises. However, that portion of the contract for a lease of premises that indemnifies any person or organization for damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner is not an "insured contract";

b. A sidetrack agreement;

c. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;

d. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;

e. An elevator maintenance agreement;

f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

Paragraph f. does not include that part of any contract or agreement:

(1) That indemnifies a railroad for "bodily injury" or "property damage" arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, road-beds, tunnel, underpass or crossing;

(2) That indemnifies an architect, engineer or surveyor for injury or damage arising out of:

(a) Preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings and specifications; or

(b) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage; or

(3) Under which the insured, if an architect, engineer or surveyor, assumes liability for an injury or damage arising out of the insured's rendering or failure to render professional services, including those listed in (2) above and supervisory, inspection, architectural or engineering activities.

10. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker".

11. "Loading or unloading" means the handling of property:

a. After it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft or "auto";

b. While it is in or on an aircraft, watercraft or "auto"; or

c. While it is being moved from an aircraft, watercraft or "auto" to the place where it is finally delivered;

but "loading or unloading" does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft or "auto".

12. "Mobile equipment" means any of the following types of land vehicles, including any attached machinery or equipment:

a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;


b. Vehicles maintained for use solely on or next to premises you own or rent;

c. Vehicles that travel on crawler treads;

d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted:

(1) Power cranes, shovels, loaders, diggers or drills; or

(2) Road construction or resurfacing equipment such as graders, scrapers or rollers;

e. Vehicles not described in Paragraph a., b., c. or d. above that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:

(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or

(2) Cherry pickers and similar devices used to raise or lower workers;

f. Vehicles not described in Paragraph a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo.

However, self-propelled vehicles with the following types of permanently attached equipment are not "mobile equipment" but will be considered "autos":

(1) Equipment designed primarily for:

(a) Snow removal;

(b) Road maintenance, but not construction or resurfacing; or

(c) Street cleaning;

(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and

(3) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.

However, "mobile equipment" does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered "autos".

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

14. "Personal and advertising injury" means injury, including consequential "bodily injury", arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral or written publication, in any manner, of material that violates a person's right of privacy;

f. The use of another's advertising idea in your "advertisement"; or

g. Infringing upon another's copyright, trade dress or slogan in your "advertisement".

15. "Pollutants" mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.


16. "Products-completed operations hazard":

a. Includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, "your work" will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

b. Does not include "bodily injury" or "property damage" arising out of:

(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the "loading or unloading" of that vehicle by any insured;

(2) The existence of tools, uninstalled equipment or abandoned or unused materials; or

(3) Products or operations for which the classification, listed in the Declarations or in a policy Schedule, states that products-completed operations are subject to the General Aggregate Limit.

17. "Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

For the purposes of this insurance, electronic data is not tangible property.

As used in this definition, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.

18. "Suit" means a civil proceeding in which damages because of "bodily injury", "property damage" or "personal and advertising injury" to which this insurance applies are alleged. "Suit" includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

19. "Temporary worker" means a person who is furnished to you to substitute for a permanent "employee" on leave or to meet seasonal or short-term workload conditions.

20. "Volunteer worker" means a person who is not your "employee", and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary or other compensation by you or anyone else for their work performed for you.

21. "Your product":

a. Means:

(1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(a) You;


(b) Others trading under your name; or

(c) A person or organization whose business or assets you have acquired; and

(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product"; and

(2) The providing of or failure to provide warnings or instructions.

c. Does not include vending machines or other property rented to or located for the use of others but not sold.

22. "Your work":

a. Means:

(1) Work or operations performed by you or on your behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work"; and

(2) The providing of or failure to provide warnings or instructions.

The definition section of the CGL Coverage Form, which begins on page 12 of the Coverage Form, defines 22

words or terms as they apply in the Coverage Form. Refer to this section when the meaning of a defined

word is unclear.

We will not review all of the definitions in this topic. Some will be discussed at the point of their application

to the CGL Coverage Form. One example is "insured contract", which we will discuss later in Lesson 3: CGL

Coverages and Exclusions. Definitions included in this topic were selected because they are used in more

than one section of the Coverage Form. They include:

Auto

Mobile Equipment

Property Damage

Coverage Territory

Employee

Bodily Injury


Auto

Learning Objective: Determine whether or not a given land vehicle is "mobile equipment" as defined in


the CGL Coverage Form.

Refer to SECTION V - DEFINITIONS 2. "Auto" on page 12 of the CGL Coverage Form

"Auto" is defined as a land motor vehicle, trailer, or semi-trailer designed for travel on public roads,

including any attached machinery or equipment. (In most cases, the CGL Policy does not provide coverage

for "autos". The definition of "mobile equipment" is important and will be discussed shortly.)

"Auto" is also defined as any other land vehicle that is subject to a compulsory or financial responsibility law

or other motor vehicle insurance law where it is licensed or principally garaged. (For example, a golf cart

may be required to be licensed and have minimum insurance requirements applicable when it is operated

on a public road.)


Mobile Equipment

There are six types of land vehicles that are considered "mobile equipment". Any machinery or equipment

attached to any of these vehicles is also considered "mobile equipment".

We have summarized the six categories on the next pages. Please refer to definitions 12. a. through 12. f. on

page 14 of the Coverage Form as you study this material.

Take note of the descriptive phrases that will be key to understanding "mobile equipment".

"designed for use off public roads"

"used primarily to service premises you own or rent"

"moves on crawler treads"

"self propelled or not self propelled"

"provides mobility to permanently mounted specific equipment"

"not otherwise described ... maintained for purposes other than transport of persons or cargo"



Mobile Equipment continued



Refer to 12. "Mobile Equipment" a through f on page 14 of the CGL Coverage Form.

We will look at each individually, but first consider all six categories of "mobile equipment" identified by the

CGL Coverage Form.

1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads.

2. Vehicles maintained for use solely on or next to premises you own or rent. (The key words are

“maintained for use solely on premises you own or rent”.)

3. Vehicles that travel on crawler treads.

4. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently

mounted specified equipment. (This wording includes trailers.)

5. Other vehicles that are not self-propelled and are maintained primarily to provide mobility to

specific types of permanently attached equipment.

6. Vehicles not otherwise described maintained primarily for purposes other than the transportation

of persons or cargo.






CGL definition of Mobile Equipment lists six types of land vehicles which meet the definition of "mobile

equipment":

1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public

roads

Example:

Think of the forklifts you see in a large lumberyard or the bulldozers you see on a construction site. If these


are occasionally on a public road, they still may be considered “mobile equipment”.

2. Vehicles maintained for use solely on or next to premises you own or rent

Example:

A golf cart is used by apartment managers to drive around a large apartment complex. The key words are

“maintained for use solely on premises you own or rent”.






3. Vehicles that travel on crawler treads

Example:

Construction equipment and other commonly seen types of contractor's equipment

4. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently

mounted specified equipment

Examples

Vehicles with attached power cranes, shovels, loaders, diggers or drills OR road construction or resurfacing

equipment







There are two final types of land vehicles which meet the definition of "mobile equipment" under the CGL:

5. Other vehicles that are not self-propelled and are maintained primarily to provide mobility to

specific types of permanently attached equipment:

air compressors

pumps and generators

spraying, welding, building cleaning, geophysical explorations, lighting and well servicing

equipment

The key words here are “not self-propelled, primarily provide mobility to the specified types of equipment”.

Generally, these vehicles will be a trailer-type of vehicle with the specified equipment attached.

6. Vehicles not otherwise described maintained primarily for purposes other than the

transportation of persons or cargo.

Part f. of the definition of mobile equipment includes vehicles not described in a. through d. which are

maintained primarily for purposes other than transporting people or cargo.






"Autos" Not "Mobile Equipment"

The Coverage Form then goes on to define specific self-propelled vehicles as "autos" and not "mobile

equipment".

The Coverage Form language says:

However, self-propelled vehicles with the following types of permanently attached equipment are not

"mobile equipment" but will be considered "autos".

There are three categories of vehicles that are considered "autos" and not "mobile equipment". We will list

them all here, then look at all three individually.

1. Equipment designed primarily for snow removal, road maintenance, (but not construction or


resurfacing) or street cleaning;

2. Cherry pickers and similar devices mounted on an automobile or truck chassis and used to raise

or lower workers; and

3. Air compressors, pumps and generators, including spraying, welding, building cleaning,

geophysical exploration, lighting and well servicing equipment.






Self Propelled:

Self-Propelled vehicles designed for:

• Snow Removal

• Road Maintenance (not road building or repaving)

• Street cleaning

Examples: snowplow, paint striping, street sweeper

Mounted Devices:

Devices Mounted on an auto or truck chassis and used to raise and lower workers

Example: cherry pickers

Self-Propelled with Permanently Attached Equipment

Self-propelled vehicles with the following types of permanently attached equipment:

• Air Compressors

• Pumps and generators

• Spraying, welding, building, cleaning, geophysical explorations, lighting and well

servicing equipment

• Example: well drilling truck

Note: Caution: Even though the CGL Coverage Form defines item 2 and 3 above as "autos", the

Coverage Form gives back coverage to these while the attached equipment is being operated. We


will discuss this later under Lesson 3 Topic C.






However, “mobile equipment” does not include any land vehicles that are subject to a compulsory or

financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law

are considered “autos”.

Please complete the knowledge check found at Lesson 2 Topic B CGL Definitions p11 (1IC).


Coverage Territory

Learning Objective: Define the terms: “coverage territory”, "bodily injury" and "property damage".

Refer to 4. "Coverage Territory" on page 13 of the CGL Coverage Form.

Because our economy has become global, "Coverage Territory" is a most important concept and is defined

by three categories:

1. US, Puerto Rico & Canada

Part a. of the definition lists specific geographic locations that make up the "coverage territory": the United

States of America (including its territories and possessions), Puerto Rico, and Canada.

Tip: Because of its proximity and because of the North American Free Trade Agreement, some individuals

think Mexico would be included in the “coverage territory”. Mexico is not automatically included in the

“coverage territory”.

2. International Waters or Airspace


The "coverage territory" also includes international waters or airspace during the course of

transportation, provided there is no transportation between points outside the listed geographic

locations in part a. of the definition.

A plane going from New Orleans, Louisiana to San Juan, Puerto Rico is considered to be in the

"coverage territory". However the same plane flying between New Orleans and Mexico City would

not be in the "coverage territory".


Coverage Territory continued

3. All Parts of the World Under Certain Circumstances

All parts of the world are considered as being in the "covered territory" if the injury or damage arises out of

goods or products made or sold by the named insured in the territory described in the first part of this

definition.

Example:

The named insured makes a product in St. Louis and ships it directly to their customer in Europe. The

product was made in the "coverage territory".

Business activities of persons whose home is located in the geographic location listed in part a. of the

definition but are away from home for a short time (not defined) on the named insured's business.

Example:

A factory representative who lives in Boston causes a covered loss while attending a 10 day business show

in Paris, France.


Coverage Territory continued


Refer to 4. "Coverage Territory" on page 13 of the CGL Coverage Form.


Worldwide Coverage

The concept of worldwide coverage requires further explanation.

Due to the Internet's ability to cross all national boundaries, ISO has found it appropriate to expand the

worldwide section in the "coverage territory" to include many Internet activities such as Personal and

Advertising Injury offenses that occur through the Internet or other electronic means of communication.

However, a second condition that must be met in order for the limited worldwide coverage to apply is that

the insured's responsibility must be determined in a "suit" filed and decided in the geographic location

listed in part a. of the definition or determined in a settlement the insurance company agrees to.

Requirements that must be met before worldwide coverage applies:

Goods must be made or sold in part a. of the definition or caused by a covered person residing in part a. of

the definition while traveling on business or be a Personal and Advertising Injury offense that occurs

through the internet or other electronic means of communication.

and

Legal action brought in part a. of the definition or in a settlement agreed to by the insurance company.


Coverage Territory


4a. The first part of the definition lists specific geographic locations:

The United States of America, (including its territories and possessions), Puerto Rico and Canada.

4b. The "coverage territory" also includes international waters or airspace during the course of

transportation, provided there is no transportation between points outside the listed geographic locations

in part a. of the definition.

4c. All parts of the world are considered as being in the "coverage territory" if two conditions are met.

1) The first condition is that the injury or damage arises out of either of:

Goods or products made or sold by the named insured in the territory described in the first part of this


definition.

OR

Business activities of persons whose home is located in the geographic location listed in part a. of the

definition, but are away from home for a short time on the named insured's business.

OR

Personal and advertising offenses that take place through the Internet or similar electronic means of

communication.

AND

2) The second condition that must be met is that the insured's responsibility must be determined in a "suit"

filed and decided in the geographic location listed in part a. of the definition or in a settlement the

insurance company agrees to.

Please complete the knowledge check found at Lesson 2 Topic B CGL Definitions p16 (1IC).


Bodily Injury


Refer to 3. "Bodily Injury" on page 13 of the CGL Coverage Form.

Bodily injury means bodily injury, sickness, or disease, including resulting death. The intent of the CGL

Coverage Form is that "bodily injury" is defined as some type of physical manifestation that must be

sustained by an injured person.

However, "bodily injury" has been expanded by case law in some states to include things such as mental

anguish, emotional trauma, loss of companionship, and other claims where there is no actual physical harm

to the body.


Property Damage



Refer to 17. "Property Damage" on page 15 of the CGL Coverage Form.

This definition includes damage to tangible property as well as the loss of use of that damaged property. It

also includes the loss of use to tangible property that does not suffer actual damage.

Example:

While digging, an insured accidentally cuts an electrical cable. The cost to repair and/or replace the

damaged cable is covered as damage to tangible property. The power company loses income because it

could not sell electricity while the cable is being repaired and/or replaced. This loss of income is covered as

loss of use of that damaged property.

Business owners in the area suffered loss of income because they were without power. Although their

property did not suffer direct loss to tangible property, the loss of income because they were without

electricity is an example of loss of use of tangible property that does not suffer actual damage.


Employee

Refer to the CGL Coverage Form 5. "Employee" on page 13, 10. "Leased Worker" on page 14, 19. "Temporary

Worker" on page 15.

The CGL Coverage Form does not actually define employee. The definition only tells us that employee does

include a "leased worker" (one leased by a labor leasing firm), but does not include a "temporary worker" (a

substitute for a permanent employee).

If we looked at the dictionary definition of employee, we find that employee is a person hired to work for

wages or a salary.



Lesson 2 Topic C - Who Is An Insured

Lesson 2 Topic C Who Is An Insured p1 (1IC)

Before we proceed further, please read the first three paragraphs of the CGL Coverage Form.

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties

and what is and is not covered.

Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations,

and any other person or organization qualifying as a Named Insured under this policy. The words "we", "us"

and "our" refer to the company providing this insurance.

The word "insured" means any person or organization qualifying as such under Section II - Who Is An

Insured.

Other words and phrases that appear in quotation marks have special meaning. Refer to Section V -

Definitions.

The CGL Policy provides coverage for a number of different persons or entities. There are three main types

of insureds that may be provided under a Commercial General Liability Policy.

1. Named Insureds

2. Automatic Insureds

3. Additional Insureds

This lesson will focus on the named insured and automatic insureds as described in the Who Is An Insured

provision of the CGL Coverage Form. In this section of the Coverage Form, you will learn whom the CGL

protects (covers) in the event of a lawsuit or claim. Remember that these are the persons and entities that

the CGL Policy will defend if a claim occurs.

Coverage for Additional Insureds will be discussed in Lesson 5.

Named Insured

The individual or entity shown on the CGL Policy Declarations. Typically, referred to as the "you" in the

Policy. The named insured is provided the broadest coverage.

Automatic Insureds

Any person or organizations who qualify for automatic coverage as an insured as described in Section II -

Who Is An Insured in the CGL Coverage Form.

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Additional Insureds

Coverage for these individuals or organizations can only be added by endorsement.


Named Insureds

Learning Objective: Determine Who Is An Insured under the provisions of the CGL Coverage Form for

specific situations.

Refer to SECTION II - WHO IS INSURED on pp. 9 - 10 of the CGL Coverage Form.

The CGL Coverage Form gives coverage to the named insured shown in the Declarations. The named insured

is defined as "you" or "your". The Named Insured has the broadest coverage of any insured under the

Policy.

Examples of named insureds include:

• Individual

• Partnership or Joint Venture

• Limited Liability Company (LLC)

• Organization

• Trust


Named Insureds continued



Now let's learn about automatic insureds.

SECTION II – WHO IS AN INSURED

1. If you are designated in the Declarations as:

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.

b. A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business.


c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.

d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.

e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

The following named insureds provide automatic coverage for those who are down line. Those down line

are considered as automatic insureds.


Individuals




Many businesses consist of one person who owns the operation. When these businesses are not

incorporated, they are known as sole proprietorships.

You will often see them named on an insurance policy this way: Margie Marvelous d/b/a Margie's Insurance

Training Service. The acronym d/b/a stands for doing business as and merely tells us what Margie does.

The sole proprietor listed as a named insured is considered an individual. When the named insured is an

individual, both the named insured and a spouse (if one exists) are considered insureds, but only with

respect to the conduct of a business which is solely owned by the named insured.


Please complete the knowledge check found at Lesson 2 Topic C Who Is An Insured p5 (1IC).


Partnership or Joint Venture




A partnership is an agreement between two or more individuals to combine capital, labor, skill, and effort,

in whole or part, for the operation of a business. A partnership is designed to continue for the life of the

partners. A rule of general partnership law is that partners share profits and are responsible to pay losses.

Partners are individually liable for debts, including those arising from liability losses of the partnership.

A joint venture operates like a partnership, with the exception that it has a limited purpose and operates for

a limited time. Parties of a joint venture are commonly referred to as members. One example of a joint

venture is when two entities go together to build a strip shopping center with the intent of selling it at a

specified time.

When a partnership or joint venture is the named insured in the Declarations, then the individual partners

or members are automatically considered insureds. Spouses, if any, of each partner or member are also

automatic insureds with respect to the conduct of that partnership or joint venture.



Limited Liability Company (LLC)




A Limited Liability Company is a type of business ownership that combines the attributes of a partnership

and a corporation. Members and managers control its operation. Like a partnership, the members share in


the profits and are taxed as individuals.

Like a corporation, the members are not at risk for corporate debt, including liability losses of the company.

Even though members cannot be held individually liable for liability losses suffered by the LLC, they can be

named individually as a defendant in any law suit seeking such damages, as can managers, the individuals

who "run the business".

When the Limited Liability Company is the named insured in the Declarations, the members and managers

are automatically considered insureds. Automatic coverage for members and managers applies to their

duties as a manager and their liability as a member. There is no automatic coverage for spouses of members

or managers of a Limited Liability Company.



Organizations (corporations, municipalities, etc.)




When the named insured is a business organization, other than a partnership, joint venture, or LLC, it is

categorized under Other Organizations. Examples include corporations, associations, and municipalities.

When the business falls into this category, the following are automatic insureds under the CGL Coverage

Form:

• Executive officers and directors, but only with respect to their duties as officers or directors

of the named organization.

• Stockholders, but only with respect to their liability as stockholders.




Trusts




In a Trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as

trustees.


Other Insureds with Respect to Business Operations




Before we continue our discussion on automatic insureds, please read paragraphs 2 and 3 of the Who Is an

Insured provision.

2.Each of the following is also an insured:

a. Your "volunteer workers" only while performing duties related to the conduct of your business, or your "employees", other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these "employees" or "volunteer workers" are insureds for:

(1) "Bodily injury" or "personal and advertising injury":

(a) To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), to a co-"employee" while in the course of his or her employment or performing duties related to the conduct of your business, or to your other "volunteer workers" while performing duties related to the conduct of your business;

(b) To the spouse, child, parent, brother or sister of that co-"employee" or "volunteer worker" as a consequence of Paragraph (1)(a) above;

(c) For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in Paragraph (1)(a) or (b) above; or

(d) Arising out of his or her providing or failing to provide professional health care services.

(2) "Property damage" to property:

(a) Owned, occupied or used by;

(b) Rented to, in the care, custody or control of, or over which physical control is being exercised for any purpose by;


you, any of your "employees", "volunteer workers", any partner or member (if you are a partnership or joint venture), or any member (if you are a limited liability company).

b. Any person (other than your "employee" or "volunteer worker"), or any organization while acting as your real estate manager.

c. Any person or organization having proper temporary custody of your property if you die, but only:

(1) With respect to liability arising out of the maintenance or use of that property; and

(2) Until your legal representative has been appointed.

d. Your legal representative if you die, but only with respect to duties as such. That representative will have all your rights and duties under this Coverage Part.

3. Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization. However:

a. Coverage under this provision is afforded only until the 90th day after you acquire or form the organization or the end of the policy period, whichever is earlier;

b. Coverage A does not apply to "bodily injury" or "property damage" that occurred before you acquired or formed the organization; and

c. Coverage B does not apply to "personal and advertising injury" arising out of an offense committed before you acquired or formed the organization.

In addition to the named insured, other people or entities are considered to be insureds under the CGL

Coverage Form. Each of the following five groups is also an insured under the Coverage Form. These five

groups include:

1. Employees

2. Volunteer Workers

3. Real Estate Managers

4. Temporary Custodian of a Deceased Named Insured's Business

5. Legal Representative if the named insured dies


1. Employees




"Employees" of the named insured are insureds while working for the named insured, but only for acts

related to the conduct of the named insured's business.

Example:


If a passerby is injured at the named insured's construction site, he or she could sue the named insured and

the individual "employee" who caused the injury. The CGL Policy will provide coverage for the "employee"

in this situation.

There are certain times when an "employee" will not be considered an insured for "bodily injury", "personal

and advertising injury", or "property damage".


Employee continued




Coverage is not provided for an "employee" who causes:

• "Bodily injury" or "personal and advertising injury" to the named insured, partners of a

partnership, any member of a joint venture, members of a limited liability company, or co-

employees while doing their job.

• "Bodily injury" or "personal and advertising injury" to the spouse, child, parent, brother or sister

of that co-employee as a consequence of the "bodily injury" or "personal and advertising injury"

in the previous paragraph.

• "Bodily injury" or "personal and advertising injury" for which there is an obligation to share

damages with or repay someone else who must pay damages because the "bodily injury" or

"personal and advertising injury" in the previous two paragraphs.

• "Bodily injury" or "personal and advertising injury" arising out of the employee's providing or

failing to provide professional health care services.

• "Property damage" to property owned, occupied, or used by the named insured, any

"employees", or any partner of a partnership, or any member of a joint venture, or any member

of a LLC.

• "Property damage" to property rented to, in the care, custody or control of, or over which the

named insured, its "employees", any partner of a partnership, any member of a joint venture,

or any member of a LLC are exercising physical control for any purpose.



2. Volunteer Worker




Volunteer worker means a person who is not the named insured's employee, and who donates his or her

work and acts at the direction of and within the scope of duties determined by the named insured, and is

not paid a fee, salary or other compensation by the named insured or anyone else for their work performed

for the named insured.

The same limitations that apply to employees as insureds apply to volunteer workers.


3. Real Estate Managers




Persons (other than "employees" or "volunteers" of the named insured) or organizations such as a

management company acting as a real estate manager for the named insured are considered insureds

under the CGL Coverage Form.



4. Temporary Custodians of a Deceased Named Insured's Business




When the person who serves as a sole proprietor dies, so does the business. The CGL Coverage Form allows


for a temporary custodian of the deceased’s property to be treated as an insured with respect to liability

arising out of the maintenance or use of that property and until the named insured's legal representative is

appointed.


5. Legal Representative




Once a legal administrator or executor is appointed, then they become an insured as respects to their duties

and they have all the rights and duties of the named insured under the CGL Coverage Form.

Tip: It is advisable to inform the company underwriter if an individual dies and that a temporary custodian

or permanent administrator/executor is responsible for running the business. The CGL Coverage Form will

only provide liability coverage to the legal representative for acts that arise out of the administration of the

deceased's business.


Newly Acquired or Newly Formed Organizations

Learning Objective: Determine who is an insured under the provisions of the CGL Coverage Form for



If the named insured acquires or forms a new organization over which it maintains ownership or majority

interest, that acquired or formed organization may automatically become a named insured under the CGL

Coverage Form, provided there is no other similar insurance available to it. This coverage is provided until

the 90th day after the acquisition or formation OR until the end of the policy period - whichever is earlier.

Tip: If the Policy renews before the 90th day after acquisition or formation, the new organization must be a

named insured on the renewal policy for coverage to apply.

There is no coverage for "bodily injury" or "property damage" that occurs prior to the acquisition or

formation of the new organization. There is no coverage for "personal and advertising injury" arising out of


an offense committed prior to acquisition or formation of the new organization.

This extension of coverage does not apply to newly acquired or formed partnerships, joint ventures or

limited liability companies.


Newly Acquired Organizations continued

The last paragraph of this section is one of the most important parts of the Who Is An Insured provision.

No person or organization is an insured with respect to the conduct of any current or past partnership, joint

venture or limited liability company that is not shown as a Named Insured in the Declarations.

There is no insured status for any person or organization with respect to the conduct of any current or

past:

• Partnership

• Joint Venture OR

• Limited Liability Company

that is not shown as a named insured in the Declarations.

Therefore newly acquired or formed partnerships, joint ventures, and/or limited liability companies must be

reported and added as a named insured in the Declarations before coverage applies.


Who Is An Insured

Named Insureds

The Commercial General Liability Coverage Form gives coverage to the named insured shown in the

Declarations. The named insured is defined as "you" or "your" depending on the nature of your

organization. Named insureds have the broadest coverage of any under the Policy.

But current and/or past partnerships, joint ventures and limited liability companies must be listed. For

example, a partnership builds houses. The two partners then form a corporation that builds houses. Both

the corporation and the partnership need to be named insureds.


Examples of common Named Insureds include:

• Individuals

• Partnerships or Joint Ventures

• Limited Liability Companies (LLC)

• Other Organizations

• Trusts


Who Is An Insured

Automatic Insureds

Insured status is extended to those who are closely associated with the named insured.

Examples of individuals who are closely associated with named insureds that are extended insured status

include:

• Spouses of Individuals

• Partners and their spouses of Partnerships

• Members and their spouses of Joint Ventures

• Members and managers of LLCs

• Executive officers, directors and stockholders of other organizations

• Trustees of trusts


Who Is An Insured

Others with Respect to Business Operations

In addition to the named insured, other people or entities are considered to be insureds under the CGL

Policy. Each of the following four groups is also an insured under the Commercial General Liability Coverage

Form. These four groups include:

• Employees

• Volunteer Workers

• Real Estate Managers

• Temporary Custodian of a Deceased Named Insured's Business


• Legal Representative of a Deceased Named Insured's Business


Who Is An Insured

Newly Acquired or Formed Organization

If the named insured acquires or forms a new organization, over which it maintains ownership or majority

interest, that acquired or formed organization may automatically become a named insured under the CGL

Coverage Form, provided there is no other similar insurance available to it. This coverage is provided until

the 90th day after the acquisition or formation OR until the end of the policy period —whichever is earlier.

This does not apply to newly acquired or formed partnerships, joint ventures or limited liability companies.


Coverage Tip – DBAs

You have probably seen some policies where part of the name insured is written with a "DBA" and

wondered what it meant. The acronym "DBA" stands for doing business as. Sometimes the use of DBAs as

part of the name insured can create a gap in coverage. Let's read a coverage tip regarding DBAs to

understand how to avoid a potential gap in coverage.

COVERAGE TIP – DBAs

Do you have insured’s who operate under assumed names? If so, do you include the assumed named as

part of the named insured? For example, Sam Thehardwareman DBA Sam’s Hardware is the named insured.

If so, you may have created a potential gap in coverage under the Commercial General Liability Policy.

Before we examine the potential coverage gap, let’s further explore the use of a DBA.

DBA stands for doing business as. It indicates that the business is operating under a “trade name” or

“assumed name” that is different from the actual legal name of the business.

If you insured a legal entity doing business under an assumed name, that entity may need to file a “fictitious

name statement”. This filing is required by law in many jurisdictions in order to connect the name of a

business as it operates with the actual business owner. This requirement is intended to protect consumers

because it allows the consumer to get information about the true owner of a business if the consumer has

problems with products or services received or needs to file a lawsuit.


In the example above, Sam Thehardwareman is operating his business under the name Sam’s Hardware. It

allows him to operate using a typical business name without forming a separate legal entity. The business

name, Sam’s Hardware, is fictitious because he is doing business under an assumed name that does not

identify him as the owner.

Check with the county clerk, the city where the business license may be obtained, or the Secretary of State

in which the business operates to determine the requirements for using and filing a fictitious name.

The filing fees vary from jurisdiction to jurisdiction. There may also be a requirement to post a statement of

intent to use a fictitious name in a local newspaper before the fictitious name statement can be formally

filed. (I encountered this requirement involving my own use of a fictitious name.) It is a good idea to check

with the county clerk before running an ad. There may be restrictions on what publications can be used as

well as requirements as to specific information that must be included in the ad. Once the statement of

intent has been published in the newspaper (usually for several consecutive weeks), proof of the publication

may need to be provided to the county clerk or other filing agency.

Only businesses that have registered with the Secretary of State as a corporation can use the terms

“corporation”, “incorporated” or any abbreviations for these terms in a business name. Most states do not

require a separate fictitious name filing for corporations, unless the name under which the corporation

operates is different from the name under which the corporation is registered. But corporations can, and

sometimes do, operate under fictitious names.

Now that we have an understanding of the reasons for a DBA, let’s examine how using this as part of the

named insured can create a coverage gap. When Sam Thehardwareman DBA Sam’s Hardware is the named

insured, coverage is limited to that particular operation of the sole proprietor. If Sam Thehardwareman has

in place at inception, creates or purchases any other type of business during the policy period, there is no

coverage under the Commercial General Liability Policy for these other types of business operations. One of

the features of a CGL Policy is that it provides coverage for many of the exposures that develop during the

policy period (subject to policy terms and conditions). Therefore, the use of the DBA has restricted this

feature to those additional exposures that can be directly associated with the DBA.

The suggestion is that the name of the legal entity (sole proprietor, partnership, corporation, etc.) be the

named insured, unencumbered by a DBA.

Oftentimes, however, the insured and/or the insurance agent want(s) the DBA on the Policy for ease in

issuing Certificates of Insurance. If this is the desire, place the name of the business entity, unencumbered

by a DBA, as the first named insured. Then place the same name followed by the DBA as a second named

insured. While, in this example, the second named insured is redundant and not necessary, it does easily

allow for showing this name on Certificates of Insurance.


Please refer to the end of Lesson 2 Topic C to complete Self Quiz 4 at this time.




1. Identify the exposure areas that may be covered by the Commercial General Liability Coverage

Form.

2. Determine whether or not a given land vehicle is "mobile equipment" as defined in the CGL

Coverage Form.

3. Define the terms: “coverage territory”, "bodily injury" and "property damage".

4. Determine Who Is An Insured under the provisions of the CGL Coverage Form for specific situations.


Lesson 3 - Commercial General Liability Coverages

Lesson 3 CGL Coverage Parts Intro p1 (1IC)

The Commercial General Liability (CGL) Policy comprises the bulk of this course. As stated in lesson 2, we

have split the discussion into three separate lessons for ease of study.

In this lesson, Commercial General Liability Coverages, we study the main coverages found in the CGL

Coverage Form and their corresponding exclusions. You will find that there are three coverage parts in the

CGL Coverage Form, each with its own insuring agreement and exclusions. These coverages are:

1. Coverage A - Bodily Injury and Property Damage Liability

2. Coverage B - Personal and Advertising Injury Liability

3. Coverage C - Medical Payments

We will study Supplementary Payments in Lesson 4.


Coverages continued

Each coverage includes the following:



This lesson consists of the following four topics:


1. Coverage A: Bodily Injury and Property Damage

2. Coverage A: Bodily Injury and Property Damage Exclusions (We will cover exclusions in two parts.)

3. Coverage B: Personal and Advertising Injury

4. Coverage C: Medical Payments




1. Give a brief description of the coverage found under Coverage A - Bodily Injury and Property

Damage Liability.

2. Recognize the exclusions for Bodily Injury (BI) and Property Damage (PD) under Coverage A of the

CGL Coverage Form.

3. Given a loss, determine whether or not the CGL Coverage Form provides liability coverage for an

insured.

4. Define "insured contract".

5. List the types of pollution coverage included in the CGL Coverage Form.

6. List and briefly describe the coverages found under Coverage B-Personal and Advertising Injury

Liability.

7. Define and give examples of the Personal and Advertising Injury offenses.

8. Recognize the exclusions for Personal and Advertising Injury Liability coverage under the CGL

Coverage Form.

9. List and briefly describe the coverages found under Coverage C-Medical Payments.

Forms to print from the Forms Library

CG 21 47 Employment Related Practices Exclusion

Forms you have printed that you will need for this lesson

CG 00 01 Commercial General Liability Coverage Form


Lesson 3 Topic A - Coverage A - Bodily Injury and Property Damage Liability

Lesson 3 Topic A CGL Coverage A p1 (1IC)

Learning Objective: Give a brief description of the coverage found under Coverage A - Bodily Injury and

Property Damage Liability.

Refer to (Coverage A ...) 1. Insuring Agreement on page 1 of the CGL Coverage Form.

There are three coverage parts contained in the CGL Coverage Form, the first of which we discuss in this

topic. Coverage A-Bodily Injury and Property Damage Liability gives the insured protection for injuries and

damage that arise out of the insured's legal liability to others. The very broad insuring agreement for

Coverage A includes two important coverages for the insured:

1. Liability Coverage

2. Defense Coverage

COVERAGE A – BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. But:

(1) The amount we will pay for damages is limited as described in Section III – Limits Of Insurance; and

(2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments – Coverages A and B.

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

(2) The "bodily injury" or "property damage" occurs during the policy period; and

(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II – Who Is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence" or claim, knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured or authorized "employee" knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.



Insuring Agreement - Payment for Covered Damages




The insuring agreement begins by stating that the company will pay for damages that the insured becomes

legally obligated to pay because of "bodily injury" or "property damage". The coverage is triggered by an

"occurrence" that occurs in the "coverage territory" resulting in "bodily injury" or "property damage" which

occurs during the policy period.

If the insured is legally obligated to pay for "bodily injury" and/or "property damage", this coverage part will

pay for the monetary damages due.

Note: Please navigate back to Lesson 2, Topic B if you need to review any of these defined terms.

Please complete the knowledge check found at Lesson 3 Topic A CGL Coverage A p3 (1IC).


Insuring Agreement – Defense




In addition to providing payment for damages, the company, at its own expense, will defend the insured

against any "suit" seeking damages. However, the company has no obligation to defend the insured for

damages that are not covered by the CGL Coverage Form.

The insurance company may investigate any "occurrence", and the company may settle any claim or "suit"

they choose.

The company will pay for covered damages limited to the amount as described in Limits of Insurance. Once

the company has paid the applicable limit of insurance, their right and duty to defend the insured ends. We

will discuss limits in Lesson 4, Topic B.

Let's look at a simple example of a claim that includes defense costs.


Example:

The insured has a Commercial General Liability Policy with an Each Occurrence Limit of $100,000. A claimant

is awarded $100,000 for "bodily injury" covered by the Policy. The cost of the named insured's defense was

$200,000. What is the total amount that will be paid by the insured's CGL Policy? (Ignore any deductible.)

The answer is $300,000, since defense costs for the insured are paid in addition to the Limits of Insurance of

a covered claim:

$100,000 for the "bodily injury"

$200,000 for the defense costs


Insuring Agreement Summary

The insuring agreement represents a very broad scope of coverage. In the next two topics, we will study

how the CGL Coverage Form's exclusions limit or eliminate this broad coverage.


Lesson 3 Topic B - Coverage A: BI and PD Exclusions I

Lesson 3 Topic B CGL Coverage A Exclusions I p1 (1IC)

Learning Objective: Recognize the exclusions for Bodily Injury (BI) and Property Damage (PD) under

Coverage A of the CGL Coverage Form.

Refer to 2. Exclusions on page 2 of the CGL Coverage Form.

It is not the intent of the CGL Policy to pay for all "bodily injury" and/or "property damage" losses for which

the insured is legally liable. As a rule, if the insured is legally liable, injury and damage are covered if not

excluded.

The exclusions in the CGL Coverage Form are specifically named. Some exclusions eliminate coverage, some

limit coverage, and some even give coverage by making exceptions to the exclusion. Because the list of

exclusions is long and sometimes complex, we will study them in two separate topics. The first set of

exclusions are:

Expected Or Intended Injury


Liquor Liability

Workers' Compensation And Similar Laws

Employer's Liability

Pollution

2. Exclusions

This insurance does not apply to:

a. Expected Or Intended Injury

"Bodily injury" or "property damage" expected or intended from the standpoint of the insured. This exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.

b. Contractual Liability

"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

(1) That the insured would have in the absence of the contract or agreement; or

(2) Assumed in a contract or agreement that is an "insured contract", provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an "insured contract", reasonable attorneys' fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of "bodily injury" or "property damage", provided:

(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same "insured contract"; and


(b) Such attorneys' fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.

c. Liquor Liability

"Bodily injury" or "property damage" for which any insured may be held liable by reason of:

(1) Causing or contributing to the intoxication of any person;

(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or

(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in:

(a) The supervision, hiring, employment, training or monitoring of others by that insured; or

(b) Providing or failing to provide transportation with respect to any person that may be under the influence of alcohol;

if the "occurrence" which caused the "bodily injury" or "property damage", involved that which is described in Paragraph (1), (2) or (3) above.

However, this exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. For the purposes of this exclusion, permitting a person to bring alcoholic beverages on your premises, for consumption on your premises, whether or not a fee is charged or a license is required for such activity, is not by itself considered the business of selling, serving or furnishing alcoholic beverages.

d. Workers' Compensation And Similar Laws

Any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law.

e. Employer's Liability

"Bodily injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The spouse, child, parent, brother or sister of that "employee" as a consequence of Paragraph (1) above.

This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury.

This exclusion does not apply to liability assumed by the insured under an "insured contract".

f. Pollution

(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. However, this subparagraph does not apply to:

(i) "Bodily injury" if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for personal use, by the building's occupants or their guests;


(ii) "Bodily injury" or "property damage" for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured; or

(iii) "Bodily injury" or "property damage" arising out of heat, smoke or fumes from a "hostile fire";

(b) At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;

(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:

(i) Any insured; or

(ii) Any person or organization for whom you may be legally responsible; or

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the "pollutants" are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor. However, this subparagraph does not apply to:

(i) "Bodily injury" or "property damage" arising out of the escape of fuels, lubricants or other operating fluids which are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of "mobile equipment" or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold, store or receive them. This exception does not apply if the "bodily injury" or "property damage" arises out of the intentional discharge, dispersal or release of the fuels, lubricants or other operating fluids, or if such fuels, lubricants or other operating fluids are brought on or to the premises, site or location with the intent that they be discharged, dispersed or released as part of the operations being performed by such insured, contractor or subcontractor;

(ii) "Bodily injury" or "property damage" sustained within a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations being performed by you or on your behalf by a contractor or subcontractor; or

(iii) "Bodily injury" or "property damage" arising out of heat, smoke or fumes from a "hostile fire".

(e) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, "pollutants".

(2) Any loss, cost or expense arising out of any:

(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, "pollutants"; or

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

However, this paragraph does not apply to liability for damages because of "property damage" that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or "suit" by or on behalf of a governmental authority.



Expected or Intended Injury Exclusion

Learning Objective: Given a loss, determine whether or not the CGL Coverage Form provides liability

coverage for an insured.


The CGL Policy does not provide insurance for "bodily injury" or "property damage" that is expected or

intended from the standpoint of the insured.

Intentional acts are not excluded. If the insured did not expect or intend for the "bodily injury" or "property

damage" to occur, coverage is provided even if the insured intended to do the activity that led to the

"bodily injury" or "property damage".

Example 1:

An insured is burning scrap building materials and inadvertently burns good material belonging to another

subcontractor.

Example 2:

A clerk shoots an armed robber who threatened customers in the store. The clerk meant to shoot the

robber and intended to cause "bodily injury" to the robber.

If the robber sues, then the Policy will respond, provided it was deemed to be reasonable force for

protection of persons or property.

Note that the exclusion gives back coverage for "bodily injury" (that is intended) resulting from the use of

reasonable force to protect persons or property. The term reasonable force is not defined in the Coverage

Form.


Contractual Liability Exclusion





This exclusion takes away coverage for liability that the insured assumes in a contract, and then gives back

coverage for liability assumed in an "insured contract". An "insured contract" is defined on page 13 of your

CGL Coverage Form.

The definition actually describes six types of contracts or agreements where the insured can assume liability

for damages and the CGL Policy will pay. (We have a memory tool for these 6 categories, LEASE+.)

It is important to remember that the CGL Policy does not cover failure to perform according to a contract.

For example if a named insured is required by contract to name another party as an additional insured

under the CGL Policy but fails to do so, that failure is not provided insurance protection by the Policy.


Insured Contract

Learning Objective: Define "insured contract".

Refer to 9. "Insured contract" on page 13 of the CGL Coverage Form.

The following are considered to be

"insured contracts" by definition, and

therefore liability assumed under these

contracts will be covered.

Another way of thinking about these

types of contracts is that they represent

an exception to the exclusion.

We have given you an easy way to

remember them: LEASE "PLUS".


Insured Contract




Lease of Premises

Most building owners require tenants (the named insured) to hold them harmless for damage or injury,

when the tenant signs a lease.

Example:

Your agency is a tenant in an office building. A customer comes to the agency to make a payment, slips on a

wet floor in the building entryway, and is injured. The customer sues the building owner, and the building

owner looks to the agency for coverage, since the agency held the owner harmless when the lease was

signed. The agency's CGL Policy would provide coverage for this loss.

If the lease requires the insured to reimburse any person or organization for damage caused by fire to

premises rented to them or temporarily occupied by them, then that part of the contract is not considered

an "insured contract".

Example:

Your agency is a tenant in an office building. Your agency agrees to be responsible for fire damages to the

building regardless of cause. This is not an "insured contract".

Note: There is a difference between responsibility assumed by contract and legal liability based on tort.

Easement or License Agreement (other than construction or demolition operations on or within 50 feet of

a railroad)

An easement or license agreement involves the right to use land that belongs to others. These agreements

often contain assumptions of liability that will be covered by the CGL Policy.

Note: There is an exception in the definition. An "insured contract" does not mean an easement or license

agreement in connection with construction or demolition operations, on or within 50 feet of a railroad.

An Obligation as Required by Ordinance (other than doing work for the municipality)

Example:

A city may require by ordinance a shop owner to hold the city harmless for any incidents arising out of the

existence of a sign hanging over the sidewalk.

This type of contractual assumption will be covered by the CGL Policy.



Insured Contract continued



Sidetrack Agreement with a Railroad

Sidetracks are special railroad spurs branching from the main railroad line to provide access for rail cars to

specific locations.

Whenever an insured requests a sidetrack, the railroad owning the main line imposes certain requirements

before they allow the spur or sidetrack to be connected to their line.

Liability assumed under this sidetrack agreement is covered under the CGL Policy.

Elevator Maintenance Agreement

Public elevators must be inspected and maintained to minimum standards. Many building owners contract

for this service with an outside vendor.

The vendor may require the building owner to hold them harmless because of the agreement to perform

the service.

This contractual liability is covered by the CGL Policy.

Plus

"Plus" includes that part of any other business contract or agreement where the named insured assumes

the tort liability of another to pay for "bodily injury" or "property damage" to a third person or organization.

In business contracts, most insureds must assume the liability of others. The CGL Policy gives coverage for

the assumption of the tort liability that the other contracting party may have to a third person.

Caution: Not all contracts are "insured contracts".






Even though we just mentioned that "Plus" includes the assumption of tort liability of another, there are

certain parts of a contract or agreement that are not covered as an "insured contract".

Those not covered include that part of any contract or agreement:

That indemnifies a railroad for BI or PD arising out of construction or demolition operations within

50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, roadbeds,

tunnel, underpass or crossing.

That indemnities an architect, engineer or surveyor for injury or damage arising out of preparing or

approving or failing to prepare or approve certain items such as: maps, shop drawings, opinions,

reports, surveys, field orders, change orders or drawings, and specifications. It also does not include

injury or damage arising out of giving directions or instructions or failure to give them.

That an architect, engineer or surveyor, if they are the insured, assumes liability for injury or

damage for their rendering or failure to render professional services.





As you can see, many business contracts fit this definition of “insured contract”.

However, please note that coverage for liability assumed under an "insured contract" is still subject to all of

the terms, conditions and exclusions of the CGL Policy.

Remember, failure to perform is not covered by the CGL Policy.

Please complete the knowledge check found at Lesson 3 Topic B CGL Coverage A Exclusions I p9 (1IC).


Liquor Liability Exclusion





The CGL Coverage Form excludes coverage for liability imposed by reason of:

Contributing to the intoxication of any person

Furnishing alcoholic beverages to underage people, or those already under the influence

Statutes regulating the sale, distribution, etc. of alcoholic beverages

This exclusion even applies to any claims that allege negligence:

in the supervision, hiring, employment, training or monitoring of others, or

in providing or failing to provide transportation to any person that may be under the influence

of alcohol.

The exclusion applies only if the named insured is in the business of manufacturing, distributing, selling,

serving or furnishing alcoholic beverages to others.

A bring your own (BYO) establishment that permits a person to bring alcoholic beverages to consume on an

insured's premises, whether or not a fee is charged or a license required, is not considered in the business

of selling, serving or furnishing alcoholic beverages.

A named insured that serves complimentary wine at an open house for the business would probably not be

considered to be in the business of serving alcohol. This exposure is often referred to as host liquor and is

covered by the CGL Coverage Form.


Liquor Liability Exclusion continued




Example 1:

Deb's Nails hosts a Christmas party for her nail customers. One of her customers leaves the party in an

intoxicated state and has an accident.


Deb's unendorsed Commercial General Liability (CGL) Policy will respond if the injured customer sues Deb

because Deb is not in the "liquor business", this is considered a "host liquor" exposure.

Endorsements may be attached to the CGL Policy that limit or expand the coverage found in this exclusion.

If these endorsements are attached to a CGL Policy, they should be discussed with the named insured to be

sure they are understood.

Example 2:

A lodge sells food and soft drinks to its members. It also on occasion rents out its premise for weddings or

other events and sells soft drinks and ice (set-ups) to those guests. The lodge does not sell any alcoholic

beverages but does allow its members or event guests to bring their own alcoholic beverages for

consumption on their premises. This type of establishment is not considered in the "liquor business".


Workers' Compensation and Similar Laws




The CGL Coverage Form does not give coverage for obligations imposed by workers' compensation or

unemployment compensation law or any similar law. The named insured must buy Workers Compensation,

Disability Benefits, or similar policies to cover these exposures.






This exclusion applies to job-related bodily injury covered by the Employer's Liability Insurance of the

Workers Compensation and Employers Liability Insurance Policy. It requires the purchase of this policy.

The exclusion does have an exception that provides coverage for liability assumed by the insured under an


"insured contract".

Example:

A subcontractor signs a construction contract with a general contractor assuming the tort liability of the

general. An employee of the subcontractor who is injured on the job sues the general contractor. The

general contractor tenders the claim to the subcontractor. The subcontractor's CGL Policy will respond.


Pollution Exclusion




The CGL Coverage Form excludes almost all "bodily injury" and "property damage" arising out of the

pollution exposure, including the actual damage or harm caused by the pollutants and all costs to clean up

and/or test for pollutants.

By means of exceptions found in this exclusion, the CGL Coverage Form gives coverage for "bodily injury"

and "property damage" arising out of a pollution incident under four circumstances. In addition, there may

be coverage for some cleanup costs.

We'll look at those four exceptions now.


Pollution continued

Learning Objective: List the types of pollution coverage included in the CGL Coverage Form.

Note: Any greater in-depth discussion of this exclusion is beyond the scope of this course. This discussion is

a summary only.

The following is a brief summary of the four exceptions to the Pollution exclusion under Coverage A of the

CGL.


Exception 1: On Premises When

"Bodily Injury" is caused by smoke, fumes, vapor or soot produced by or originating from equipment

that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for

personal use, by the building's occupants or their guests.

"Bodily injury" or "property damage" is caused by a named insured that is a contractor performing

operations. The only reason that the exclusion does not apply is because the owner of the premises

site or location has been added as an additional insured on the named insured contractor's CGL

Policy.

Exception 2: Arising Out of the Insured’s Operations When:

Insured did not bring pollutants to the job site and is not there to "work on" the pollutants.

Fluids or fuels used to operate "mobile equipment" escape accidentally.

Materials brought into that building by a named insured or a contractor working for the named

insured, release gases, fumes, or vapors.

Exception 3: Arising Out of the Products - Completed Operations Hazard

The exclusion does not apply to the named insured's products - completed operations hazard.

Exception 4: Arising Out of a Hostile Fire for either Premises or Operations

The CGL Coverage Form defines a "hostile fire" as one that becomes uncontrollable or breaks out

from where it was intended to be.

Please complete the knowledge check found at Lesson 3 Topic B CGL Coverage A Exclusions I p16 (1IC).


Summary

Coverage A: BI and PD Exclusions I

Expected or Intended Injury Exclusion

No coverage for "bodily injury" or "property damage" that is expected or intended from the standpoint of

the insured.


There IS coverage for:

• "Bodily injury" or ''property damage" if the insured did not expect or intend for it to occur, even if the

insured intended to do the activity that led to the injury or damage

• "Bodily injury" resulting from the use of reasonable force to protect persons or property


This exclusion takes away coverage for liability the named insured assumes in a contract, and then gives

back coverage for liability assumed in an "insured contract". Remember LEASE+

There is NO coverage for:

• failure to perform under a contract

Liquor Liability

The exclusion applies only if the named insured is in the business of manufacturing, distributing, selling,

servicing or furnishing alcohol to others.

Endorsements may be attached to the CGL Policy that limit or expand the coverage found in this exclusion.


• Host liquor liability

Workers' Compensation and Similar Laws

The CGL Policy does not give coverage for obligations by the insured to provide workers compensation or

unemployment compensation law or any similar law.

The insured must buy other policies to cover these exposures.


This exclusion applies to job related "bodily injury" covered by the Employers Liability Insurance of the

Workers Compensation And Employers Liability Insurance Policy.

The insured must buy other policies to cover these exposures.

There is coverage for:

• Liability assumed by the insured under an "insured contract".


Pollution

The CGL Policy excludes almost all "bodily injury" and "property damage" arising out of the pollution

exposure, including the actual damage or harm caused by the pollutants and all costs to clean up and/or

test for pollutants.

Be sure to know the exceptions to the Pollution exclusion:

• Caused On Premises (under certain conditions)

• Arising Out of the Insured's Operations (under certain conditions)

• Arising Out of the Product - Completed Operations Hazard

• Arising Out of a Hostile Fire



Lesson 3 Topic C - Coverage A: BI and PD Exclusions II

Lesson 3 Topic C CGL Coverage A Exclusions II p1 (1IC)

Lesson 3 Topic C - Coverage A: BI and PD Exclusions II

Learning Objective: Recognize the exclusions for Bodily Injury (BI) and Property Damage (PD) under

Coverage A of the CGL Coverage Form.

Refer to pp. 2 through 6 of the CGL Policy.

In this topic, our study of CGL Coverage Form exclusions continue with the review of:

Aircraft, Auto or Watercraft

Mobile Equipment

War

Damage to Property

Damage to Your Product

Damage to Your Work

Damage to Impaired Property or Property not Physically Injured

Recall of Products, Work or Impaired Property

Personal and Advertising Injury

Electronic Data

Recording And Distribution of Material or Information In Violation of Law

Damage to Premises Liability

g.Aircraft, Auto Or Watercraft

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading".

This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the "bodily injury" or "property damage" involved the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft that is owned or operated by or rented or loaned to any insured.

This exclusion does not apply to:

(1) A watercraft while ashore on premises you own or rent;

(2) A watercraft you do not own that is:

(a) Less than 26 feet long; and

(b) Not being used to carry persons or property for a charge;

(3) Parking an "auto" on, or on the ways next to, premises you own or rent, provided the "auto" is not owned by or rented or loaned to you or the insured;

(4) Liability assumed under any "insured contract" for the ownership, maintenance or use of aircraft or watercraft; or


(5) "Bodily injury" or "property damage" arising out of:

(a) The operation of machinery or equipment that is attached to, or part of, a land vehicle that would qualify under the definition of "mobile equipment" if it were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged; or

(b) The operation of any of the machinery or equipment listed in Paragraph f.(2) or f.(3) of the definition of "mobile equipment".

h. Mobile Equipment

"Bodily injury" or "property damage" arising out of:

(1) The transportation of "mobile equipment" by an "auto" owned or operated by or rented or loaned to any insured; or

(2) The use of "mobile equipment" in, or while in practice for, or while being prepared for, any prearranged racing, speed, demolition, or stunting activity.

i. War

"Bodily injury" or "property damage", however caused, arising, directly or indirectly, out of:

(1) War, including undeclared or civil war;

(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or

(3) Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.

j. Damage To Property

"Property damage" to:

(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;

(2) Premises you sell, give away or abandon, if the "property damage" arises out of any part of those premises;

(3) Property loaned to you;

(4) Personal property in the care, custody or control of the insured;

(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or

(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.

Paragraphs (1), (3) and (4) of this exclusion do not apply to "property damage" (other than damage by fire) to premises, including the contents of such premises, rented to you for a period of seven or fewer consecutive days. A separate limit of insurance applies to Damage To Premises Rented To You as described in Section III – Limits Of Insurance.

Paragraph (2) of this exclusion does not apply if the premises are "your work" and were never occupied, rented or held for rental by you.

Paragraphs (3), (4), (5) and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.

Paragraph (6) of this exclusion does not apply to "property damage" included in the "products-completed operations hazard".


k. Damage To Your Product

"Property damage" to "your product" arising out of it or any part of it.

l. Damage To Your Work

"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard".

This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

m. Damage To Impaired Property Or Property Not Physically Injured

"Property damage" to "impaired property" or property that has not been physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work"; or

(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.

This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.

n. Recall Of Products, Work Or Impaired Property

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:

(1) "Your product";

(2) "Your work"; or

(3) "Impaired property";

if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.

o. Personal And Advertising Injury

"Bodily injury" arising out of "personal and advertising injury".

p. Electronic Data

Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data.

However, this exclusion does not apply to liability for damages because of "bodily injury".

As used in this exclusion, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.

q. Recording And Distribution Of Material Or Information In Violation Of Law

"Bodily injury" or "property damage" arising directly or indirectly out of any action or omission that violates or is alleged to violate:

(1) The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law;

(2) The CAN-SPAM Act of 2003, including any amendment of or addition to such law;

(3) The Fair Credit Reporting Act (FCRA), and any amendment of or addition to such law, including the Fair and Accurate Credit Transactions Act (FACTA); or


(4) Any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.


Aircraft, Auto Or Watercraft Exclusion




There is no coverage for "bodily injury" or "property damage" arising out of the ownership, maintenance,

use or entrustment to others of any aircraft, auto or watercraft.

This includes the loading and unloading of aircraft, auto or watercraft. It makes no difference if the aircraft,

auto or watercraft is owned by, rented to or loaned to any insured.

There are exceptions to this exclusion, which means coverage is provided for specific situations involving

the ownership, maintenance, use or entrustment of aircraft, auto or watercraft.

Tip: Notice the words "owned by, "rented to" or "loaned to" in the exclusion. How about non-owned

exposure?

COVERAGE TIP – THERE IS SOME NON-OWNED AUTO COVERAGE UNDER THE CGL

You have a client who has just been named in a suit as being responsible for the operation of an automobile

by someone she hired to transport her property from point A to point B. This is an accident where the driver

of the transporting “auto” is at fault and several people were killed. While she is an insured under the

independent contractor’s BAP, the limits are likely insufficient. Unfortunately, she did not purchase or you

did not sell her specific non-owned automobile coverage under a Business Auto Policy or as an

endorsement to the CGL Policy. Where might you find insurance protection for this suit?

We have been taught that the CGL Policy has an exclusion that pertains to automobiles. But, let’s peruse

this exclusion again.

The exclusion is very specific as to which automobiles are excluded. The exclusion says it applies to…any

“auto”… owned or operated by or rented or loaned to any insured. So if the automobile is owned by,

operated by, rented to or loaned to any insured, there is no coverage under the Policy for any other insured


in spite of the Condition - Separation of Insureds.

Under the CGL Policy, one could be a named insured and qualify as an insured. One could be an automatic

insured. Or, finally, one could be an additional insured. But if the automobile in question is not one of the

specific types of automobiles excluded, then coverage applies under the CGL Policy.

The terms owned, rented, loaned are fairly self-explanatory. But what does the phrase “operated by” mean.

The Policy does not define this phrase. So, where do we go for an explanation? I looked at my dictionary

and found the word operate means “to cause to function”. I take this to mean that I must be driving the

auto. This is reinforced when I look at Black’s Law Dictionary and find that its definition most closely

associated with what I am looking for is “operating a motor vehicle under the influence” or “operating a

motor vehicle while intoxicated”. Both of these phrases direct me to “DRIVING UNDER THE INFLUENCE”.

As mentioned above, you have to be concerned with whether or not the automobile in question is owned

or operated by or rented or loaned to any insured. Is the person or entity hired by your client an insured

under the CGL Policy. For example, if the person your client hired to transport the property from point A to

point B is an employee, then no coverage exists as employees are insureds (at least most of the time) under

the CGL Policy. If the person or entity that your client hired is an additional insured, then no coverage exists

either. But, if the person or entity is an independent contractor that has not been named as an additional

insured under your client’s CGL Policy, there is coverage for the vicarious liability allegations against your

client for the operation of the automobile by the independent contractor.

This is reinforced by the CGL Policy Condition – Other Insurance.

1. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B

of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our

obligations are not affected unless any of the other insurance is also primary. Then, we will share with all

that other insurance by the method described in Paragraph c. below.

b. Excess Insurance

(1) This insurance is excess over:

(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:

(i) That is Fire, Extended Coverage, Builder’s Risk, Installation Risk or similar coverage for “your work”;

(ii) That is Fire insurance for premises rented to you or temporarily occupied by


(iii) That is insurance purchased by you to cover your liability as a tenant for “property damage” to

premises rented to you or temporarily occupied by you with permission of the owner; or

(iv) If the loss arises out of the maintenance or use of aircraft, “autos” or watercraft to the extent not

subject to Exclusion g. of Section I – Coverage A – Bodily Injury And Property Damage Liability.

(b) Any other primary insurance available to you covering liability for damages arising out of the premises or

operations or products and completed operations for which you have been added as an additional insured

by attachment of an endorsement.

(2) When this insurance is excess, we will have no duty under Coverages A or B to defend the insured

against any “suit” if any other insurer has a duty to defend the insured against that “suit”. If no other

insurer defends, we will undertake to do so, but we will be entitled to the insured’s rights against all those

other insurers.

(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss,

if any, that exceeds the sum of:

(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance;

and

(b) The total of all deductible and self-insured amounts under all that other insurance.

(4) We will share the remaining loss, if any, with any other insurance that is not described in this Excess

Insurance provision and was not bought specifically to apply in excess of the Limits of Insurance shown in

the Declarations of this Coverage Part.

c. Method Of Sharing

If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this

approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none

of the loss remains, whichever comes first.

If any of the other insurance does not permit contribution by equal shares, we will contribute by limits.

Under this method, each insurer’s share is based on the ratio of its applicable limit of insurance to the total

applicable limits of insurance of all insurers.

Please direct your attention to Paragraph b.(1)(a)(iv). It indicates that any coverage provided for “autos” not

subject to the exclusion is excess insurance over other available insurance. This means the independent

contractor’s BAP provides the primary coverage for your client. But, if those limits are insufficient, the CGL

will respond.

Please remember to report the claim to the CGL insurer in accordance with Policy conditions.



Five exceptions to the Aircraft, Auto Or Watercraft Exclusion




The five exceptions to this exclusion are "bodily injury" or "property damage" that arise out of:

1. Any watercraft while it is ashore on premises that is owned or rented by the named insured.

2. Watercraft the named insured does not own that is less than 26 feet long and is not being used

to carry persons or property for a fee.

3. Parking an "auto" on, or next to, premises the named insured owns or rents, provided the

"auto" is not owned by, rented to, or loaned to any insured (the CGL Policy will give coverage for

"bodily injury" and "property damage" caused by the use of the "auto", but there will be no

coverage for damage to the "auto" itself).

4. Liability assumed in any "insured contract" for the ownership, maintenance, or use of aircraft or

watercraft.

5. "Bodily injury" or "property damage" arising out of the operation of machinery or equipment

that is attached to, or part of a land vehicle that would qualify under the definition of "mobile

equipment" if it were not subject to compulsory or financial responsibility law or other motor

vehicle insurance law where it is licensed or principally garaged; or arising out of the operation

of machinery or equipment listed in Paragraph f.(2) or f.(3) of the last part of definition of

"mobile equipment".


Five Exceptions to the Aircraft, Auto, Or Watercraft Exclusion - 4 Examples




Let's study 4 examples of these 5 exceptions. Remember, under the following circumstances, the CGL Policy

can provide coverage:

First Exception to Aircraft, Auto Or Watercraft Exclusion

Any watercraft while it is ashore on premises that is owned or rented by the named insured.


Example: Ted's Trimmings owns a boat that is at the business location. Some children play a jumping game

in the boat, and one child is injured. The CGL Policy can respond to a claim for that child's injury.


Five Exceptions to the Aircraft, Auto, Or Watercraft Exclusion - 4 Examples continued




Second Exception to Aircraft, Auto Or Watercraft Exclusion

Watercraft the named insured does not own that is less than 26 feet long and is not being used to carry

persons or property for a fee.

Example: Ted borrows an 18 foot boat to take some of his clients out on a nearby lake for a fishing trip. The

boat capsizes, and one of the clients drowns because he failed to wear a lifejacket. The CGL Policy can

respond to a bodily injury claim made on behalf of the client.


Five Exceptions to the Aircraft, Auto, Or Watercraft Exclusion - 4 Examples continued




Third Exception to Aircraft, Auto Or Watercraft Exclusion

Parking an "auto" on, or next to, premises the named insured owns or rents, provided the "auto" is not

owned by, rented to, or loaned to any insured (the CGL Policy will give coverage for "bodily injury" and

"property damage" caused by the use of the "auto", but there will be no coverage for damage to the "auto"

itself, as we will soon see).

Example: A restaurant has a valet service that parks customer's autos. The "autos" are parked by a

restaurant employee on the restaurant premises. The employee hits a pedestrian while parking a customer

auto. The restaurant's CGL Policy can respond to the "bodily injury" claim made on behalf of the pedestrian.


Tip: The Policy does not provide "property damage" coverage to the "auto" being parked.


Five Exceptions to the Aircraft, Auto Or Watercraft Exclusion - 4 Examples continued



Fourth Exception to Aircraft, Auto Or Watercraft Exclusion

Liability assumed in any "insured contract" for the ownership, maintenance, or use of aircraft or watercraft.

Example: Ted's Trimming signs a rental contract that includes a hold harmless agreement that he is

responsible for any liability caused by a pontoon boat that he is renting for a fishing trip for his employees.

One of the employees drove the pontoon boat into the dock, causing significant damage to the dock. The

"property damage" to the dock will be taken care of by the CGL Policy, because of the "insured contract"

signed by Ted.


Exception 5 - Aircraft, Auto, Or Watercraft Exclusion: Operation of Machinery or Equipment




First, let's address the operation of machinery or equipment that is attached to, or part of, a land vehicle

that would qualify under the definition of "mobile equipment" if it were not subject to a compulsory or

financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

For example, a golf cart is required to be licensed in a particular jurisdiction. While the golf cart is being

driven on a golf course, the CGL Policy applies.

Tip: The Policy does not provide coverage while the licensed golf cart is being driven on public roads.



Exception 5 - Aircraft, Auto, Or Watercraft Exclusion: Operation of Machinery or Equipment




Now, let's go back to the language of Paragraph f.(2) and (3) in the last part of the definition of mobile

equipment:

Cherry pickers and similar devices mounted on automobile or truck chassis and used to rise or lower

workers; and

Air compressors, pump and generators, including spraying, welding, building cleaning, geophysical

exploration, lighting and well servicing equipment.

Do you recall that these self-propelled vehicles with permanently attached equipment are to be considered

"Autos" and not "Mobile Equipment"? (You may review this information in Lesson 2 Topic B p8).

Exception 5 to the Aircraft, Auto Or Watercraft Exclusion states that the CGL Policy covers the operation of

the attached equipment.

This means that while this equipment is being used at the job site, the CGL Policy provides liability coverage.

The Business Auto Policy gives coverage while the auto with its attached equipment is being driven to,

between, and from job sites.

Tip: If an insured has this type of equipment, consider placing both the CGL Policy and the Business Auto

Policy with the same insurance company and for the same limits of liability.

Please complete the knowledge check found at Lesson 3 Topic C CGL Coverage A Exclusions II p10 (1IC).


Quick Summary - 5 Exceptions to the Aircraft, Auto, Or Watercraft Exclusion




1. Watercraft while it is ashore on premises, which is owned or rented by the named insured.


2. Watercraft the named insured does not own that is less than 26 feet long and is not being used to

carry persons or property for a fee.

3. Parking an "auto" on, or next to, premises the named insured owns or rents, provided the "auto" is

not owned by or rented to or loaned to any insured.

4. Liability assumed in any “insured contract” for the ownership, maintenance or use of aircraft or

watercraft.

5. Operation of machinery or equipment that is attached to or part of a land vehicle that would qualify

as “mobile equipment” if it was not subject to a compulsory or financial responsibility law or other

motor vehicle insurance law where it is licensed or principally garaged OR arising out of the

operations of machinery or equipment listed in the last part of the definition of "mobile

equipment".


Exclusions II Continued




Mobile Equipment Exclusion

There are two exclusions that apply to "bodily injury" or "property damage" arising from "mobile

equipment":

The transportation of the "mobile equipment" by an auto owned, operated, rented, or loaned to

any insured. This exposure would be covered by the named insured's Business Auto Policy.

The use of "mobile equipment" in, or while in practice for, or while being prepared for any pre-

arranged racing, speed, demolition, or stunting activity.





War Exclusion


This exclusion applies to "bodily injury" or "property damage" due to war including undeclared or civil war;

warlike action by a military force; insurrection, rebellion, revolution or action taken by governmental

authority in hindering or defending against any of these.


Exclusion for Damage To Property - Six Types of Property Damage




The CGL Policy will not provide coverage for six types of "property damage". This exclusion language has

generated extensive writings, explanations and debate. What you need to know for purposes of this course

is summarized on the next pages.

1. Property owned by, rented to or occupied by the named insured

Example: An employee of a named insured who rents a building, drives a forklift through the side of the

building.

2. Premises the named insured sells, gives away or abandons arising out of any part of those premises

Example: A named insured sells a building it has occupied to another company. After the sale, a faulty

plumbing connection results in water damage.

3. Property loaned to the named insured

Example: While using it on a construction site, a named insured overturns a bulldozer borrowed from

another contractor.


Exclusion for Damage To Property - Six Types of Property Damage continued





4. Personal properly in the care, custody or control of the insured

Example: A dry cleaner's building burns, causing damage to customers' property; a restaurant employee

damages a customer's auto while she is valet parking it.

5. That particular part of real property on which a named insured or any contractor or subcontractor

working for the named insured is performing operations, if the property damage arises out of those

operations

Example: Named insured is an electrical contractor working on an electrical box. This work causes damage

to the entire electrical system including the box. At most, only the damage to the electrical box is excluded.

6. That particular part of any property that must be restored, repaired, or replaced because "your work"

was incorrectly performed on it

Example: A named insured paints the room he should have wallpapered and wallpapered the room he

should have painted.


Exceptions to the Damage To Property Exclusion




There are several exceptions to parts of this exclusion, resulting in coverage for the named insured. Most of

them are beyond the scope of this course.

However, one exception gives "property damage" coverage from perils other than fire to premises

(including contents) which are rented to the named insured for seven consecutive days or less.

Example:

A named insured rents a hotel meeting room for five days to conduct demonstrations of a new product.

During one demonstration, an insured drops the product and damages the hotel's conference table, chairs,

and wood floor.

There is coverage because the rental is for fewer than seven consecutive days.


There is a separate limit of insurance that applies to these covered losses that will be discussed as part of

Damage to Premises Rented To You in Lesson 4 Topic B Limits of Insurance.


Damage To Your Product Exclusion




There is no "property damage" coverage to a named insured's "product" arising out of it or any part of it.

Damage done by "your product" would be covered, but not damage to the "product" itself.

Example:

A named insured sells commercial air conditioners. One of them shorts out, causing extensive fire damage.

There is no coverage for the air conditioner, but the other damage arising from the fire is covered.


Damage To Your Work Exclusion




There is no "property damage" to "your work". "Property damage" done by "your work" is covered, but not

damage to "your work". There is an exception if the damaged work or the work out of which the damage

arises is caused by a subcontractor.

Example:

While erecting an office building, a contractor improperly installs the framing. A month after completion,

due to this faulty installation, a ceiling collapses causing extensive damage to the tenant’s business

property.


The building is not covered because it is the contractor’s work, but the resulting damage to the occupant’s

business property is covered by the CGL Policy.


Exclusion for Damage To Impaired Property Or Property Not Physically Injured

There is no "property damage" to property that is impaired because of "your product" or "your work".

"Impaired property" means tangible property that cannot be used or is less useful because:

It incorporates "your product" or "your work", which is known or thought to be defective, deficient,

inadequate, or dangerous, or

You have failed to fulfill the terms of a contract or agreement.

Remember that the tangible property has not suffered any physical damage itself; it just cannot be used or

is less useful.

Example:

ABC is contracted to manufacture and install an air conditioning system in a high-rise hotel. ABC guarantees

that the system would maintain a temperature of 72 degrees at all times and that the job would be

completed in time for the Fourth of July holiday.

The system failed to cool the hotel below 87 degrees, and, as a result, the hotel lost income for the entire

holiday week. This is an "impaired property" loss, not covered by ABC's CGL Policy.





Recall Of Products, Work, Or Impaired Property

There is no coverage for any expenses the named insured incurs to recall defective products, work or

impaired property.

The newspapers are full of real world examples of product recalls. A named insured must purchase special


policies to cover these exposures.

Personal & Advertising Injury

"Bodily injury" arising out of "personal and advertising injury" is not covered under the Bodily Injury and

Property Damage Section of the CGL Policy. We will study this coverage in Topic D.

Coverage B is a separate coverage which addresses Personal And Advertising Injury and resulting "bodily

injury".

Electronic Data

This exclusion reinforces that it is not the intent of the CGL Coverage Form to provide coverage for loss of

use of electronic data.

However, this exclusion does not apply to liability for damages because of "bodily injury".

Recording And Distribution of Material or Information In Violation of Law

No coverage for liability resulting from violation of statutes that govern e-mails, faxes, phone calls, or other

methods of sending information.


Exception to Exclusions c. Through n.



Refer to the short paragraph in front of COVERAGE B PERSONAL AND ADVERTISING INJURY on page 6 of the

CGL Policy.

At the end of the Exclusions Section, there is a paragraph that applies to Exclusions c. through n.

Exclusions c. through n. do not apply to damage by fire to premises while rented to you or temporarily

occupied by you with permission of the owner. A separate limit of insurance applies to this coverage as

described in Section III – Limits Of Insurance.

Most of the CGL Coverage Form exclusions do not apply for damage to a premises (not personal property)

caused by a fire, if:


The premises is rented to a named insured, or the named insured is occupying the premises

with the owner's permission

The damage was not intended

Legal liability applies because the insured has negligently caused the damage

This is commonly called "fire legal liability".

Example:

The insured negligently starts a fire in the office she is renting.

Remember that exclusion j. (1) takes away coverage for damage to premises rented to the named insured.

Fire legal coverage gives back (to the named insured) the coverage for fire damage, subject to the sub-limit

we will discuss in Lesson 4 Topic B Limits of Insurance.


Employment Related Practices Exclusion



Endorsements can be added to the CGL Policy to further eliminate or limit coverage. An example of this is

the Employment Related Practices Exclusion.

It excludes coverage for such claims as wrongful termination, sexual harassment, and discrimination of all

types. A separate Employment Practices Liability Policy is needed to properly provide coverage for these

types of losses.

Refer to Lesson 3 Topic C CGL Coverage A Exclusions II p22 (1IC) to view a copy of the endorsement.


Lesson 3 Topic C - Summary of Group II Exclusions

Aircraft, Auto Or Watercraft

There is no coverage for "bodily injury" or "property damage" arising out of the ownership, maintenance,

use or entrustment to others of any aircraft, auto or watercraft including loading and unloading.



Five specific situations involving the ownership, maintenance, use, or entrustment of aircraft, auto or

watercraft.

Mobile Equipment

There is no coverage for "bodily injury" or "property damage" arising out of:

• The use of "mobile equipment" in, practicing for, or preparing for any pre-arranged racing, speed,

demolition, or stunting activity.

• The transportation of the "mobile equipment" by an auto owned, operated, rented, or loaned to

any insured.

This would be covered by the Business Auto Policy.

War

This exclusion applies to "bodily injury" or "property damage" due to war including:

• Undeclared or civil war

• Warlike action by a military force

• Insurrection, rebellion, revolution or action taken by govern authority in hindering or defending

against any of these.

Damage To Property

There is no coverage for six types of "property damage".

There IS coverage for several situations, including:

"property damage" from perils other than fire to premises (including contents) which are rented to the

named insured for seven consecutive days or less.

Damage To Your Product

There is no "property damage" coverage to "your product" arising out of it or any part of it.

Damage done by "your product" would be covered, but not damage to the product itself.

Damage To Your Work

There is no "property damage" to "your work".

"Property damage" done by "your work" is covered, but not damage to "your work".


There IS coverage if:

The damaged work or the work out of which the damage arises is caused by a sub-contractor.

Damage To Impaired Property Or Property Not Physically Injured

There is no "property damage" to property that is impaired because of "your product" or "your work".

"Impaired property" means tangible property that cannot be used or is less useful. Remember that the

tangible property has not suffered any physical damage itself.


Lesson 3 Topic C - Summary of Group II Exclusions

Recall Of Products, Work Or Impaired Property

There is no coverage for any expenses the named insured incurs to recall defective products, work or

impaired property.

A named insured must purchase special policies to cover these exposures.

Personal & Advertising Injury

"Personal and advertising injury" is not covered under Coverage A Bodily Injury and Property Damage

Liability section of the CGL Coverage Form.

Electronic Data

To reinforce that the CGL Policy is not intended to provide coverage for loss of electronic data, an electronic

data exclusion was introduced into the form.

Recording And Distribution Of Material Or Information In Violation Of Law

No coverage for liability resulting from violation of statutes that govern e-mails, faxes, phone calls, or other

methods of sending information.

Damage To Premises Liability

Read the short paragraph preceding Coverage B on page 6 of the Coverage Form.

Most of the CGL Policy exclusions do not apply for damage to a premises caused by a fire.

Be sure you know the exceptions to the Damage to Premises Liability exclusion.


Please complete the knowledge checks found on Lesson 3 Topic C CGL Coverage A Exclusions II p25 & 26

(1IC).



Lesson 3 Topic D - Coverage B - Personal and Advertising Injury

Lesson 3 Topic D CGL Coverage B: Personal & Advertising Injury p1 (1IC)

Learning Objective: List and briefly describe the coverages found under Coverage B: Personal and

Advertising Injury Liability.

Refer to pp. 6 through 7 of the CGL Coverage Form.

The business-insured has many exposures to loss other than "bodily injury" and "property damage". It may

be sued for libel, slander, wrongful eviction or other similar intentional torts. In addition to "bodily injury"

and "property damage", the CGL Policy includes coverage for Personal and Advertising Injury as defined.

This topic addresses Coverage B of the CGL Coverage Form for Personal and Advertising Injury Liability as

respects the:

• Insuring Agreement

• Exclusions

COVERAGE B – PERSONAL AND ADVERTISING INJURY LIABILITY


a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or "suit" that may result. But:

(1) The amount we will pay for damages is limited as described in Section III – Limits Of Insurance; and

(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments – Coverages A and B.

b. This insurance applies to "personal and advertising injury" caused by an offense arising out of your business but only if the offense was committed in the "coverage territory" during the policy period.


Insuring Agreement: Coverage B: Personal and Advertising Injury

Learning Objective: List and briefly describe the coverages found under Coverage B: Personal and

Advertising Injury Liability.



"Personal and advertising injury" has its own insuring agreement, which is triggered by a committed

offense. It requires that an insured be legally responsible for damages because of "personal and advertising

injury", and imposes a duty on the insurance company to defend the insured against any suit seeking those

damages.

As we studied in Coverage A, there is no duty to defend if there is no coverage. The company also has the

right to investigate and settle any claim or suit.

"Personal and advertising injury" has its own insuring agreement, which is triggered by a committed

offense. It requires that an insured be legally responsible for damages because of "personal and advertising

injury", and imposes a duty on the insurance company to defend the insured against any suit seeking those

damages.

As we studied in Coverage A, there is no duty to defend if there is no coverage. The company also has the

right to investigate and settle any claim or suit.



Learning Objectives: Define and give examples of the Personal and Advertising Injury offenses.

Refer to 14. "Personal and advertising injury" on page 14 of the CGL Coverage Form.

False arrest, detention or imprisonment:

Example: Wrongfully detaining a suspected shoplifter

Malicious prosecution:

Example: Filing charges and making false statements against someone without cause and with malice

Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room,

dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.

Example: A landlord wrongfully evicts a tenant from an apartment in order to lease out the premises at a

higher rental rate



Personal and Advertising Injury continued

Learning Objectives: Define and give examples of the Personal and Advertising Injury offenses.

Refer to 14. "Personal and advertising injury" on page 14 of the CGL Coverage Form.

Oral or written publication of material that slanders or libels a person or organization or disparages their

goods, products, or services. Slander is spoken; libel is printed.

Example: Making false statements about the quality of a competitor's workmanship to improve your

chances of getting a production contract.

Oral or written publication of material that violates a person's right of privacy.

Example: Releasing privileged and/or protected personal information such as a Social Security number or

medical condition.

The use of another's idea in your advertisement.

Example:

An individual opens a fast-food establishment, using similar building plans, color schemes, menu offerings

and layout of an established fast-food chain. Although the new establishment uses a different name and

logo, they used the ideas of the established chain.

Infringing upon another's copyright, trade dress, or slogan in your "advertisement".

Example: Using gold colored, arched Ms to advertise McCales Burgers and Fries.

Please complete the knowledge check found on Lesson 3 Topic D CGL Coverage B: Personal & Advertising

Injury p5 (1IC).


16 CGL Personal and Advertising Injury Exclusions

Learning Objective: Recognize the exclusions for Personal and Advertising Injury Liability coverage under



The CGL Policy will not cover "personal and advertising injury" when loss arises out of:


1. An offense made at the direction of the insured, with the knowledge that the committed act would

violate the rights of another and would inflict "personal and advertising injury".

2. The insured’s oral remarks or published written material that the insured knows are false.

3. The insured’s oral remarks or published written material that first took place before the beginning

of the policy period.

4. A criminal act committed by or at the direction of the insured.


16 CGL Personal and Advertising Injury Exclusions continued




5. Liability the insured assumed in a contract or agreement.

6. A breach of contract.

7. The products, goods, or services that don’t do what the named insured’s advertising says they will

do.

8. A misstated price of products, goods, or services in the named insured’s advertising.

9. The infringement of copyright, patent, trademark, trade secret or other intellectual property rights.

However, this does not apply to infringement in your "advertisement" of copyright, trade dress or

slogan.

10. An insured’s business if the business is advertising, broadcasting, publishing, or telecasting (with

limited exception). This also excludes website designers, Internet search, access, content or service

providers. There are special policies that must be purchased for these exposures.

11. Electronic chatrooms or bulletin boards the insured hosts, owns, or over which the insured

exercises control.

12. Unauthorized use of another’s name or product in "your" e-mail address, domain name or meta tag,

or any other similar tactics to mislead another's potential customers.

13. Actual, alleged, or threatened pollution caused by “pollutants” at any time; this exclusion became

necessary because pollution claims alleged that the pollution incident was wrongful invasion of the

right of private occupancy.



16 CGL Personal and Advertising Injury Exclusions continued




14. Pollution-related clean up coverage.

15. War - Applies to due to war including undeclared or civil war; warlike action by a military force;

insurrection, rebellion, revolution or action taken by government authority in hindering or

defending against any of these.

16. Recording And Distribution of Material or Information In Violation of Law - TCPA, CAN-SPAM Act of

2003, any statute, ordinance or regulation, other than the above, that prohibits or limits the

sending, transmitting, communicating or distribution of material or information.


Lesson 3 Topic E - Coverage C - Medical Payments

Lesson 3 Topic E CGL Coverage C: Medical Payments p1 (1IC)

Learning Objective: List and briefly describe the coverages found under Coverage C: Medical Payments.

Refer to pp. 7 and 8 of the CGL Coverage Form.

Medical Payments coverage, unlike Bodily Injury and Property Damage or Personal and Advertising

Injury, is a no fault coverage. An insured does not have to be legally responsible for the loss before

damages are paid. The primary purpose of this coverage is the reduction of bodily injury lawsuits,

reduction in the size of claims that are filed, and goodwill.

This topic will include a study of Medical Payments:

• Insuring Agreement

• Exclusions

COVERAGE C – MEDICAL PAYMENTS


a. We will pay medical expenses as described below for "bodily injury" caused by an accident:

(1) On premises you own or rent;

(2) On ways next to premises you own or rent; or

(3) Because of your operations;

provided that:

(a) The accident takes place in the "coverage territory" and during the policy period;

(b) The expenses are incurred and reported to us within one year of the date of the accident; and

(c) The injured person submits to examination, at our expense, by physicians of our choice as often as we reasonably require.

b. We will make these payments regardless of fault. These payments will not exceed the applicable limit of insurance. We will pay reasonable expenses for:

(1) First aid administered at the time of an accident;

(2) Necessary medical, surgical, X-ray and dental services, including prosthetic devices; and (3)Necessary ambulance, hospital, professional nursing and funeral services.


Insuring Agreement: Coverage C: Medical Payments




Like the previous two coverage parts, Coverage C has its own insuring agreement, which is triggered by an

accident. The CGL Policy will pay for medical expenses for "bodily injury" caused by an accident:

• On premises the named insured owns or rents, or on ways next to premises a named insured

owns or rents; and

• Because of a named insured's business operations

The accident must take place in the "coverage territory" and during the policy period. Additionally, the

medical expenses must be incurred and reported to the insurance company within one year of the accident

date.


Insuring Agreement: Coverage C: Medical Payments



Medical payments coverage will pay reasonable expenses for the following:

1. First aid administered at the time of an accident

2. Necessary medical, surgical, x-ray and dental services, including prosthetic devices; and

3. Necessary ambulance, hospital, professional nursing and funeral services.

Example:

Jill falls in her neighborhood grocery store and injures her hand. She does not want to file a lawsuit as her

injuries are minor. Jill just wants her doctor bill and x-rays paid. The grocery store has Coverage C: Medical

Payments under their CGL Policy that will provide coverage for these medical expenses.


Exclusions: Coverage C: Medical Payments




2.Exclusions

We will not pay expenses for "bodily injury":

a. Any Insured

To any insured, except "volunteer workers".

b. Hired Person

To a person hired to do work for or on behalf of any insured or a tenant of any insured.

c. Injury On Normally Occupied Premises

To a person injured on that part of premises you own or rent that the person normally occupies.

d. Workers' Compensation And Similar Laws

To a person, whether or not an "employee" of any insured, if benefits for the "bodily injury" are payable or must be provided under a workers' compensation or disability benefits law or a similar law.

e. Athletics Activities

To a person injured while practicing, instructing or participating in any physical exercises or games, sports, or athletic contests.

f. Products-Completed Operations Hazard

Included within the "products-completed operations hazard".

g. Coverage A Exclusions

Excluded under Coverage A.

Medical Payments coverage is intended to pay for injuries of the general public. Insureds, people working

for insureds, or normal occupants of a named insured's premises are not part of this general public; and

expenses for their injuries are not included in this coverage.

There will be no Medical Payments made for:

Any insured, except for "volunteer workers".

A person working for any insured or for a tenant of any insured.

Any person injured on that part of premises the named insured owns or rents that the person

normally occupies.

Any person if Workers Compensation benefits for bodily injury are payable or must be provided.

Any person who is injured while practicing, instructing, or participating in any physical exercises or

games, sports or athletic contests.

Injuries resulting from the "products-completed operations hazard".

Injuries excluded under Coverage A-Bodily Injury and Property Damage Liability.




Medical Payments – Limits

Learning Objective: List and briefly describe the coverages found under Coverage C-Medical Payments.

Medical Payments has a per person limit as shown in the CGL Declarations and is considered a sublimit of

the Each Occurrence Limit subject to the General Aggregate Limit.

We will study how limits of insurance are applied in Lesson 4.

Please refer to the end of Lesson 3 Topic E to complete Self Quiz 7 at this time.




1. Give a brief description of the coverage found under Coverage A - Bodily Injury and Property

Damage Liability.

2. Recognize the exclusions for Bodily Injury (BI) and Property Damage (PD) under Coverage A of the

CGL Coverage Form.

3. Given a loss, determine whether or not the CGL Coverage Form provides liability coverage for an

insured.

4. Define "insured contract".

5. List the types of pollution coverage included in the CGL Coverage Form.

6. List and briefly describe the coverages found under Coverage B-Personal and Advertising Injury

Liability.

7. Define and give examples of the Personal and Advertising Injury offenses.

8. Recognize the exclusions for Personal and Advertising Injury Liability coverage under the CGL

Coverage Form.

9. List and briefly describe the coverages found under Coverage C-Medical Payments.


Lesson 4 - CGL Other Provisions

Lesson 4 CGL Other Provisions Intro p1 (1IC)

This lesson on the CGL Policy provides an overview of additional provisions that apply to the Policy. The

provisions are important because they:

give additional coverage,

or they restrict coverage,

or they set forth the rules governing the insured and the insurer.

You will find similar provisions in most liability policies regardless of what type of liability coverage is

involved.



Our discussion of these provisions are centered around the following three topics:

1. Supplementary Payments-Coverages A and B

2. Limits of Insurance

3. Conditions


Lesson 4


1. Give examples of Supplementary Payments included in the CGL Coverage Form.

2. Identify the different limits of insurance of the CGL Coverage Form.

3. Determine the amount of limits available under a CGL Coverage Form for specific loss examples.

4. Briefly describe the provisions found in the CGL Coverage Form Conditions studied in this

course.


None


Lesson 4 Topic A - Supplementary Payments

Lesson 4 Topic A CGL Supplementary Payments p1 (1IC)

Learning Objective: Give examples of Supplementary Payments included in the CGL Coverage Form.

Refer to the bottom of page 8 of the CGL Coverage Form.

The CGL Coverage Form includes coverage for Supplementary Payments in addition to coverage for

damages assessed in a claim. Supplementary payments are related to the insurance company's expenses for

handling claims and for defending suits as well as some expenses that may be incurred by the insured.

The Policy provides this coverage as additional limits of insurance that is over and above the limits shown

on the Declaration Page and outlined Topic B-Limits of Insurance.

SUPPLEMENTARY PAYMENTS – COVERAGES A AND B

1. We will pay, with respect to any claim we investigate or settle, or any "suit" against an insured we defend:

a. All expenses we incur.

b. Up to $250 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which the Bodily Injury Liability Coverage applies. We do not have to furnish these bonds.

c. The cost of bonds to release attachments, but only for bond amounts within the applicable limit of insurance. We do not have to furnish these bonds.

d. All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or "suit", including actual loss of earnings up to $250 a day because of time off from work.

e. All court costs taxed against the insured in the "suit". However, these payments do not include attorneys' fees or attorneys' expenses taxed against the insured.

f. Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of insurance, we will not pay any prejudgment interest based on that period of time after the offer.

g. All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the applicable limit of insurance.

These payments will not reduce the limits of insurance.

2. If we defend an insured against a "suit" and an indemnitee of the insured is also named as a party to the "suit", we will defend that indemnitee if all of the following conditions are met:

a. The "suit" against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an "insured contract";

b. This insurance applies to such liability assumed by the insured;

c. The obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same "insured contract";

d. The allegations in the "suit" and the information we know about the "occurrence" are such that no conflict appears to exist between the interests of the insured and the interests of the indemnitee;


e. The indemnitee and the insured ask us to conduct and control the defense of that indemnitee against such "suit" and agree that we can assign the same counsel to defend the insured and the indemnitee; and

f. The indemnitee:

(1) Agrees in writing to:

(a) Cooperate with us in the investigation, settlement or defense of the "suit";

(b) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the "suit";

(c) Notify any other insurer whose coverage is available to the indemnitee; and

(d) Cooperate with us with respect to coordinating other applicable insurance available to the indemnitee; and

(2) Provides us with written authorization to:

(a) Obtain records and other information related to the "suit"; and

(b) Conduct and control the defense of the indemnitee in such "suit".

So long as the above conditions are met, attorneys' fees incurred by us in the defense of that indemnitee, necessary litigation expenses incurred by us and necessary litigation expenses incurred by the indemnitee at our request will be paid as Supplementary Payments. Notwithstanding the provisions of Paragraph 2.b.(2) of Section I – Coverage A – Bodily Injury And Property Damage Liability, such payments will not be deemed to be damages for "bodily injury" and "property damage" and will not reduce the limits of insurance.

Our obligation to defend an insured's indemnitee and to pay for attorneys' fees and necessary litigation expenses as Supplementary Payments ends when we have used up the applicable limit of insurance in the payment of judgments or settlements or the conditions set forth above, or the terms of the agreement described in Paragraph f. above, are no longer met.

Lesson 4 Topic A CGL Supplementary Payments p2 (1IC)

7 Types of Supplementary Payments

Learning Objective: Give examples of Supplementary Payments included in the CGL Coverage Form.

Refer to the bottom of page 8 of the CGL Coverage Form.

1. All expenses the insurance company incurs, such as investigation costs, legal costs, and court costs.

2. The costs of bail bonds up to $250 if the bonds are required because of accidents or traffic law

violations arising out of the use of covered vehicles.

3. The cost of bonds to release any attachments placed against the insured.

4. All reasonable expenses that the insured incurs at the insurance company's request when they

assist in the investigation or defense. There is a sublimit of $250 per day for actual loss of earnings

(including salary, commissions, and fees) if the insured misses work.

5. All court costs assessed against the insured because of a covered loss. This does not include


attorneys' fees or attorneys' expenses taxed against the insured.

6. Any prejudgment interest the court awards against the insured because of a judgment the insurer

pays. Prejudgment interest is the interest (usually set by the court) that the injured party is allowed

to collect from the day of the loss until the day of the judgment.

7. Any post-judgment interest the court awards is interest that accrues from the date of the judgment

until the date the judgment is paid.


Lesson 4 Topic B - Limits of Insurance

Lesson 4 Topic B CGL Limits p1 (1IC)

All policies set a maximum limit on the amount the insurer will pay in the event of a loss. The CGL Policy is

unique in that it sets forth several different limits depending on the type of loss.

The Limits of Insurance shown in the CGL Declarations and the rules described in this section set the

maximum amount of money payable, regardless of the number of insureds, claims, suits, or people making

claims or suits.

Six Limits of Insurance Found in the CGL Policy

1. Each Occurrence Limit

2. Damage to Premises Rented to You Limit

3. Medical Expense Limit

4. Personal and Advertising Injury Limit

5. General Aggregate Limit

6. Products/Completed Operations Aggregate Limit

SECTION III – LIMITS OF INSURANCE

1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:

a. Insureds;

b. Claims made or "suits" brought; or

c. Persons or organizations making claims or bringing "suits".

2. The General Aggregate Limit is the most we will pay for the sum of:

a. Medical expenses under Coverage C;

b. Damages under Coverage A, except damages because of "bodily injury" or "property damage" included in the "products-completed operations hazard"; and

c. Damages under Coverage B.

3. The Products-Completed Operations Aggregate Limit is the most we will pay under Coverage A for damages because of "bodily injury" and "property damage" included in the "products-completed operations hazard".

4. Subject to Paragraph 2. above, the Personal And Advertising Injury Limit is the most we will pay under Coverage B for the sum of all damages because of all "personal and advertising injury" sustained by any one person or organization.

5. Subject to Paragraph 2. or 3. above, whichever applies, the Each Occurrence Limit is the most we will pay for the sum of:

a. Damages under Coverage A; and

b. Medical expenses under Coverage C

because of all "bodily injury" and "property damage" arising out of any one "occurrence".


6. Subject to Paragraph 5. above, the Damage To Premises Rented To You Limit is the most we will pay under Coverage A for damages because of "property damage" to any one premises, while rented to you, or in the case of damage by fire, while rented to you or temporarily occupied by you with permission of the owner.

7. Subject to Paragraph 5. above, the Medical Expense Limit is the most we will pay under Coverage C for all medical expenses because of "bodily injury" sustained by any one person.

The Limits of Insurance of this Coverage Part apply separately to each consecutive annual period and to any

remaining period of less than 12 months, starting with the beginning of the policy period shown in the

Declarations, unless the policy period is extended after issuance for an additional period of less than 12

months. In that case, the additional period will be deemed part of the last preceding period for purposes of

determining the Limits of Insurance.


Limits continued

Learning Objective: Identify the different Limits of Insurance of the CGL Coverage Form.

Aggregate Limit vs. Occurrence Limit

The word aggregate means the total sum that will be paid during a policy period.

The occurrence limit is the most that will be paid for all "bodily injury", "property damage", and medical

payments arising from one "occurrence". It makes no difference how many people or organizations suffer a

loss under the occurrence.

Each limit is indicated on the Declarations of the CGL Policy. The picture to the right is that of the CGL

Declarations.

In order to understand how these limits are applied in the Policy, let's take a closer look at each one. Click

on the red arrows on the right to get a brief description of each limit.

Refer to the slide to view a sample Policy Declarations.


Limits continued



Each Occurrence Limit

This is the most that will be paid for all "bodily injury", "property damage", and medical payments arising

from ONE "occurrence". The limit applies regardless of the number of individuals or organizations who

suffered a loss due to that "occurrence".


Limits continued


Damage to Premises Rented to You:

This limit is the most that will be paid under Coverage A for all "property damage" to a premises rented to

or temporarily occupied by a named insured if covered by the CGL Policy. There are two instances where

this limit is applicable.

1. If it is "property damage" to premises, including the contents of such premises, rented to the

named insured for a period of 7 or fewer consecutive days.

2. Except for the Expected or Intended and Contractual Liability Exclusions, for "property damage" by


fire to premises while rented to the named insured or temporarily occupied by the named insured

with permission of the owner.

Medical Expense Limit:

This limit is the most that will be paid per person under Coverage C Medical Payments for all covered

medical expenses resulting from "bodily injury" to that person.


Limits continued


How is a Sublimit Applied?

Each of the limits, Damages to Premises Rented by You and Medical Payments, is considered a sublimit of

the Each Occurrence Limit.

The sum of payments made to all persons under, Medical Expenses, for example, for a particular loss would

be subtracted from the Each Occurrence Limit available for that loss.

Example:

A customer is injured when she slips and falls on the business premises. She is paid $5,000 for incurred

medical expenses. A lawsuit is filed and an award of $500,000 is granted. How much of the award will be

paid by the CGL Policy?

General Aggregate Limit $1,000,000

Personal & Advertising Injury Limit $500,000

Damage to Premises Rented to You $100,000

Completed Products Aggregate Limit $1,000,000

Each Occurrence Limit $500,000

Medical Expense Limit (Per Person) $5,000

Answer: The Each Occurrence Limit has already been reduced by $5,000 for the medical expenses paid. This

leaves for this occurrence, a balance of $495,000 that the CGL Policy will pay towards this award.



Limits continued


General Aggregate

A General Aggregate Limit is shown in the Declarations. Think of it as a bucket of dollars to pay for losses. All

losses during a policy period (other than Products-Completed Operations losses) are paid from this bucket.

Losses paid for an "occurrence" or to a person or organization are subtracted from the General Aggregate.

Once the money runs out, there are no more dollars to pay for any other losses during that policy period.

One large loss could deplete the total coverage available for any policy period.

The General Aggregate Limit is the most that will be paid for all of the following during a policy period:

• Coverage A-Bodily Injury and Property Damage Liability (Other than Products-Completed

Operations claims)

• Coverage B-Personal Injury and Advertising Liability

• Coverage C-Medical Payments

• Damage to Premises Rented to You


Limits continued




This limit is the most that will be paid for all damages to any one person or organization arising from one or

more "personal and advertising injury" offenses. Dollars paid for covered losses of this type are subtracted

from the General Aggregate Limit.

Note: This is not subject to the occurrence limit. It is a direct sublimit to the General Aggregate, and does

not apply per offense but rather, as stated, per person or organization.


Limits continued


Products-Completed Operations Aggregate Limit

This limit is the most that will be paid during a policy period for all "bodily injury" and "property damage"


arising from the "products/completed operations hazard".

These types of claims are also subject to the Each Occurrence Limit. Claims paid for each of these types of

occurrences are subtracted from the Products/Completed Operations Aggregate Limit.

Please complete the knowledge check found on Lesson 4 Topic B CGL Limits p9 (1IC).



Learning Objective: Determine the amount of limits available under a CGL Coverage Form for specific loss examples.

How are Limits Applied?

Imagine at policy inception the Occurrence, General Aggregate, and Product/Completed Operations Aggregate buckets are full of water representing their limits. As the claims are paid, the applicable bucket of water is reduced.

Each Occurrence Limit: The occurrence limit is the most that will be paid for all “bodily injury”, “property damage” and medical payments arising from one occurrence.

General Aggregate Limit: The maximum amount of money/damages that will be paid for all covered losses sustained during a specified policy period.

Products/Completed Operations Aggregate: The most that will be paid during the policy period for Products/Completed Operations claims.



Claims are paid on the Policy until the (Occurrence, Aggregate, or Product/Completed Operations Aggregate) bucket is empty — in which case the bucket is exhausted and nothing is left.

The Each Occurrence Limit is only reduced or exhausted for all claims resulting from that particular occurrence.


Please refer to Lesson 4 Topic B CGL Limits p12 (1IC) to complete the Knowledge Check at this time.


Learning Objective: Determine the amount of limits available under a CGL Policy for specific loss examples.

Example 1

In this exercise, we determine how three separate "occurrences" or offenses impact the limits available under a CGL Policy. First, let's assemble the facts for the exercise.

Limits of Insurance

Imagine a CGL Policy with the following limits:

Damage to Premises Rented to You Limit: $100,000 (Any One Premises)

Medical Expense Limit : $5,000 (Any One Person)

Personal & Advertising Injury Limit: $500,000 (Any One Person or Organization)

General Aggregate Limit: $1,000,000

Products/Completed Operations Aggregate Limit: $1,000,000

3 Claims (each a separate occurrence or offence) – Three separate occurrences or offenses result in the following claims during the policy year:

$125,000 “Property Damage” arising from the operation of mobile equipment

$500,000 “Bodily Injury” arising from a premises slip and fall

$400,000 “Personal and Advertising Injury arising from wrongful entry

None of these claims arise out of the products-completed operations hazard, so all three are subject to the General Aggregate Limit.



Example 1: Claim 1 - $125,000


“Property Damage” arising from the operation of mobile equipment.


Each Occurrence Limit: $500,000

Since the $125,000 claim amount does not exceed the $500,000 occurrence limit, the entire amount is paid.

What is the effect of Claim 1 on the Each Occurrence Limit for any additional claims resulting from this “occurrence”?

What is the effect of Claim 1 on the General Aggregate Limit?





“Bodily Injury arising from a premises slip and fall.

General Aggregate Limit (after Claim 1): $875,000

Each Occurrence Limit $500,000

Recall that this claim is a separate “occurrence”.

Since the $500,00 claim amount does not exceed the $500,000 occurrence limit, the entire amount is paid.

What is the Effect of Claim 2 on the Each Occurrence Limit?






Personal Injury arising from wrongful entry.

General Aggregate Limit (after Claim 1 and Claim 2): $375,000

Personal and Advertising Injury Limit: $500,000

Even though the Personal and Advertising Injury Limit is $500,000 per person or organization, there is not enough money left in the General Aggregate to pay all of this claim. The CGL Policy will pay $375,000 of this $400,000 claim.



What effect does Claim 3 have on the Products/Completed Operations Aggregate Limit since the General Aggregate Limit has been exhausted?

No effect. Remember: none of these claims involve the Products/Completed Operations hazard.



Summary of Example 1

None of these claims arise out of the "products completed operations hazard", so all will be paid under the General Aggregate Limit.

Claim Type Claim Amount

Amount Paid

Remaining General Aggregate Limit

1 “Property Damage” arising from the operation of mobile equipment

$125,000 $125,000 $875,000

2 “Bodily Injury” arising from a premises slip and fall

$500,000 $500,000 $375,000

3 Personal Injury arising from wrongful entry

$400,000 $375,000 $0




Example 2

In our second exercise, we will include a loss that involves the Products/Completed Operations Aggregate Limit. First let’s assemble the facts for the exercise.

Imagine a CGL Policy with the following limits:


Damages to Premises Rented to You Limit: $100,000 (Any One Premises)

Medical Expenses Limit: $5,000 (Any One Person)

Personal & Advertising Injury Limit: $500,000 (Any One Person or Organization)



3 Claims – Three separate “occurrence” result in the following claims during the policy year:

Claim 1: $110,000 Covered Property Damage to Rented Premises

Claim 2: $10,000 Medical Expenses for One Injured Person

Claim 3: $780,000 Bodily Injury Arising from a Defective Product




Damage to Premises Rented to You



Limit for Damage to Premises Rented to You: $100,000

What is the effect of Claim 1 on the Damage to Premises Rented to You Limit?


What is the effect of Claim 1 on the Each Occurrence Limit?






Medical Expenses for One Injured Person

General Aggregate Limit (After Claim 1): $900,000


Medical Expense Limit for One person: $5,000

The CGL Policy will pay the $5,000 from the Medical Expense Limit for the injured person for a claim made under Coverage C Medical Payments.

What is the effect of Example 2 Claim 2 on the Each Occurrence Limit for any additional claims resulting from this same “occurrence”?

What is the effect of Example 2 Claim 2 on the General Aggregate Limit?





“Bodily Injury” arising from a defective product

General Aggregate Limit (after Claim 1 and Claim 2): $895,000



What is effect of Example 2 Claim 3 on the Each Occurrence Limit?


What is the Effect of Example 2 Claim 3 on the General Aggregate limit?


Lesson 4 Topic C – Conditions

Lesson 4 Topic C CGL Conditions p1 (1IC)

Learning Objective: Briefly describe the provisions found in the CGL Coverage Form Conditions studied in

this course.


Like any other insurance policy, the CGL Coverage Form contains a number of policy conditions that govern

the responsibilities of the insured and the insurance company. Although we will not examine all the

conditions found in the CGL Coverage Form, we will study some of the more important provisions. They

include:

• Duties in the Event of Occurrence, Offense, Claim or Suit

• Other Insurance

• Premium Audit

• Separation of Insureds

• Transfer of Rights of Recovery Against Others to Us

SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS

1. Bankruptcy

Bankruptcy or insolvency of the insured or of the insured's estate will not relieve us of our obligations under this Coverage Part.

2. Duties In The Event Of Occurrence, Offense, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include:

(1) How, when and where the "occurrence" or offense took place;

(2) The names and addresses of any injured persons and witnesses; and

(3) The nature and location of any injury or damage arising out of the "occurrence" or offense.

b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation or settlement of the claim or defense against the "suit"; and

(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.


3. Legal Action Against Us

No person or organization has a right under this Coverage Part:

a. To join us as a party or otherwise bring us into a "suit" asking for damages from an insured; or

b. To sue us on this Coverage Part unless all of its terms have been fully complied with.

A person or organization may sue us to recover on an agreed settlement or on a final judgment against an insured; but we will not be liable for damages that are not payable under the terms of this Coverage Part or that are in excess of the applicable limit of insurance. An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative.

4. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.

b. Excess Insurance

(1) This insurance is excess over:

(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:

(i) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for "your work";

(ii) That is Fire insurance for premises rented to you or temporarily occupied by you with permission of the owner;

(iii) That is insurance purchased by you to cover your liability as a tenant for "property damage" to premises rented to you or temporarily occupied by you with permission of the owner; or

(iv) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion g. of Section I – Coverage A – Bodily Injury And Property Damage Liability.

(b) Any other primary insurance available to you covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured.

(2) When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit". If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.

(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:

(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and

(b) The total of all deductible and self-insured amounts under all that other insurance.

(4) We will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not bought specifically to apply in excess of the Limits of Insurance shown in the Declarations of this Coverage Part.

c. Method Of Sharing

If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.


If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

5. Premium Audit

a. We will compute all premiums for this Coverage Part in accordance with our rules and rates.

b. Premium shown in this Coverage Part as advance premium is a deposit premium only. At the close of each audit period we will compute the earned premium for that period and send notice to the first Named Insured. The due date for audit and retrospective premiums is the date shown as the due date on the bill. If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium, we will return the excess to the first Named Insured.

c. The first Named Insured must keep records of the information we need for premium computation, and send us copies at such times as we may request.

6. Representations

By accepting this policy, you agree:

a. The statements in the Declarations are accurate and complete;

b. Those statements are based upon representations you made to us; and

c. We have issued this policy in reliance upon your representations.

7. Separation Of Insureds

Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:

a. As if each Named Insured were the only Named Insured; and

b. Separately to each insured against whom claim is made or "suit" is brought.

8. Transfer Of Rights Of Recovery Against Others To Us

If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring "suit" or transfer those rights to us and help us enforce them.

9. When We Do Not Renew

If we decide not to renew this Coverage Part, we will mail or deliver to the first Named Insured shown in the Declarations written notice of the nonrenewal not less than 30 days before the expiration date.

If notice is mailed, proof of mailing will be sufficient proof of notice.


Duties In The Event Of An Occurrence, Offense, Claim Or Suit


this course.


Notification

The first duty is that of notification. The named insured must see to it that the insurer is notified as soon as

is practical of an "occurrence" or an offense which may result in a claim.


A lack of timeliness can have an adverse effect on the insurer's ability to investigate and settle a claim. If the

named insured fails to provide notice on a timely basis and the insurer can show that the named insured's

lack of action prejudiced their settling of the claim, coverage may be denied.


Duties In The Event Of An Occurrence, Offense, Claim Or Suit continued


this course.


Cooperation

Another duty is cooperation. All insureds must cooperate with the insurer in the investigation, settlement of

a claim, or in the defense of any "suit" brought under the Policy.

Assist the Insurance Company

Another important duty is to assist in the enforcement of any rights against any person or organization that

may be liable to the insured because of injury or damage to which this insurance may also apply.

This provision and the subrogation provision grant the insurer the right to seek recovery from other

responsible parties.


Other Insurance


this course.


This condition states that if other valid and collectible insurance is available to the insured the insurance

coverage is primary, except in specified circumstances when it is excess. The CGL Policy is excess over:

Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for "your work".


Fire Insurance for premises rented to the named insured or temporarily occupied by the named

insured with permission of the owner.

Insurance purchased to cover the named insured's liability as a tenant for "property damage" to

premises rented to the named insured or temporarily occupied by the name insured with

permission of the owner.

If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent the

CGL Policy covers the loss.

Any other primary insurance available for premises or operations or products and completed

operations, for which the named insured has been added as an additional insured to another policy.

This condition also outlines the methods of sharing when there is other primary insurance applicable.


Premium Audit


this course.


In general, CGL Policies are written on an auditable basis: estimated payroll, gross sales, etc. The Premium

Audit condition states:

1. The insurer will base premiums on the company's rules and rates.

2. The Policy premium is a deposit premium only. The company will audit the name insured's books to

determine the true exposure for the audit period and then make a premium adjustment.

3. The first named insured must keep records and provide them to the insurer upon request.

4. The first named insured is responsible to pay any audit premiums due and will be the payee for any

return premium.


Separation Of Insureds & Transfer Of Rights



this course.


Separation Of Insureds

There are many persons and/or entities considered to be insureds under the CGL Coverage Form. This

provision deals with how the Policy will handle insureds except under the Limits of Insurance. Insurance

under the CGL Coverage Form applies to each covered person or entity as though each had its own separate

policy.

If one insured brings a covered claim against another insured under the same Policy, the Policy will respond.

However, the Limits of Insurance do not increase!

Transfer Of Rights Of Recovery Against Others To Us (Subrogation)

This provision is commonly referred to as the subrogation provision.

Once an insurer has paid for a loss, they are entitled to recover the money from any other party or entity

that might have caused the loss. The insured must do nothing after loss to impair these rights.

There is an endorsement that is used for the other insured to waive its right to recovery.


Subrogation


this course.

Basically, subrogation means the insurance company's right to recover all or parts of any amounts paid from

the party that caused an injury or damage.

A contract may require an organization to waive the insurance company’s right to subrogate against the

other party to the contract. In fact, many contracts include a mutual waiver of subrogation.

Example:

Smith Contracting, Inc. has entered into a contract with Jones, Inc. for a building project. The sample

http://onlinedev.scic.com/dev/NewLinx/RunThruCluster.php


contract language is available to the right.

Sample Language

SECTION 4.12.5 SUBROGATION

Smith Contracting, Inc. and Jones Inc. shall obtain waiver of subrogation from its insurers in favor of the

other, and subsidiary and affiliated companies, under all policies of insurance, including (without limitation

those referred to above maintained by or for the benefit of this project.

Each party waives its rights to recovery against the other subrogations.


Transfer Of Rights Of Recovery Against Us (CG 24 04)


this course.

To satisfy Smith’s contractual obligation to obtain a waiver of subrogation, the endorsement Waiver of

Transfer of Rights of Recovery Against Others to Us (CG 24 04) must be added to Smith’s CGL Policy.

Under this endorsement, the insurance company is verifying in writing what is otherwise implied, that it

waives its right to subrogate against Jones, Inc. for either:

• injury or damage arising out of Smith’s ongoing operations or

• Smith’s work done under a contract with Jones and included in the products-completed

operations hazard.

Unfortunately, while this endorsement is suitable for a contractor, it is not suitable for other types of risks.

This is the only standard waiver of subrogation endorsement that has been developed by ISO.

Refer to the slide online to view a copy of the endorsement.

This concludes our study of the CGL Coverage Form. After completing the next self-quiz, you will be ready to

begin your study of Additional Insureds.






1. Give examples of Supplementary Payments included in the CGL Coverage Form.

2. Identify the different limits of insurance of the CGL Coverage Form.

3. Determine the amount of limits available under a CGL Coverage Form for specific loss examples.

4. Briefly describe the provisions found in the CGL Coverage Form Conditions studied in this course.


Lesson 5 - Additional Insureds & the CGL Policy

Lesson 5 Intro p1 (1IC)

This lesson explains what an additional insured is, the reasons that a named insured is willing to add

another person or organization as an additional insured, the problems associated with doing so, and

commonly used endorsements to provide additional insured status.

Examples:

• Additional Insureds - Owners, Lessees or Contractors - Scheduled Person or

Organization CG 20 10

• Additional Insured - Managers or Lessors of Premises CG 20 11

• Additional Insured - Lessor of Leased Equipment CG 20 28

• Additional Insured - Club Members CG 20 02

• Additional Insured - Church Members and Officers CG 20 22


Lesson 5: Topic of Discussion

This lesson consists of the following six topics:

1. Why name an additional insured?

2. Reasons to request additional insured status

3. Problems with additional insureds

4. Common additional insured endorsements

5. Automatic Additional Insured endorsements

6. Endorsement Forms - Business Auto



1. Define what an additional insured is.

2. Give the reasons that a named insured is willing to add another person or organization as an

additional insured.

3. Provide examples of why another person or organization would want to be named as an

additional insured.


4. Explain problems associated with additional insured status for both the named insured and the

additional insured.

5. Explain the purpose and coverage provided for selected additional insured endorsements.

6. Understand why an insured would benefit from an automatic additional insured endorsement.


None


Lesson 5 Topic A - Why Name an Additional Insured

Lesson 5 Topic A Why Name an Additional Insured p1 (1IC)

Learning Objective: Define what an additional insured is.

Definition of Additional Insured

As we have seen in the CGL Policy, many liability policies provide insurance protection not only for the

named insured but also for automatic insureds. These individuals or organizations are made an insured by

the Policy language. These parties are typically identified in the Who Is An Insured section of the Policy.

Additional insured are those individuals or entities not normally provided insured status under the liability

coverage form but for which the named insured desires or is required to provide such coverage to those

individuals or entities.


Define Additional Insured

Learning Objective: Define what an additional insured is.

We are about to study additional insureds.

Named Insureds

This insured is any person or organization whose name appears on the Declarations of the insurance policy,

who has the broadest coverage available on the policy, and who may be responsible for premium.

Automatic Insureds

This is an insured by virtue of language which already exists in the policy (Who Is An Insured section) such as

employees of the named insured or the named insured's real estate manager.

Additional Insureds

This refers to one or more persons or organizations other than the person or organization named on the

Declarations of an insurance policy who are also covered for certain losses under the policy. These insureds

are added by endorsement.



Why Name an Additional Insured

Learning Objective: Give the reasons that a named insured is willing to add another person or

organization as an additional insured.

What creates the need to be named an additional insured; and, more importantly, why would the named

insured want to add someone as an additional insured?

There are two primary reasons. These are:

1. A close relationship between the named insured and the person or organization.

2. A contract requirement.


Close Relationships



It is common for your clients to want to add others as an additional insured on their policies because of a

close relationship.

United Church

United wants its clergy and church officers protected under the church's CGL Policy for liability arising from

performing their church duties. The church also wants to extend liability coverage to its church members for

liability arising out activities that the members perform on behalf of the church.

American Club

American has club members that perform activities on behalf of the club such as organizing club meetings

and charitable events sponsored by the club. American wants the club's CGL Policy to protect those club

members for liability that arise from performing those activities. American also wants to protect its club

members for liability, not just for the activities performed on their behalf, but also from liability that arises

from their members' participation in the club's activities, including social, service, recreational and sports

activities.

The Espanada Condominiums

Espanada wants its unit owners to be protected under the condominium association's CGL Policy for liability

arising out of the ownership, maintenance or repair of the common areas of the condominium.



Contract Requirement



It is common for individuals or entities to request additional insured status on your clients’ liability policies

for business purposes.


Contract Requirement continued



ABC Janitorial Services

Silver Creek Retirement Center has contracted with ABC Janitorial Services to maintain its premises. As

part of the contract, ABC is required to add Silver Creek as an additional insured on their CGL Policy. If ABC

negligently causes "bodily injury" or "property damage", Silver Creek wants to be covered by ABC's Policy.

Tadd’s Floors 4 You

Tadd is interested in providing carpet, tile and hardwood installation for Hillside Floor Coverings as an

independent contractor. Hillside Floor Coverings requires that it be added as an additional insured on each

independent contractor's CGL Policy. If Tadd negligently causes "bodily injury" or "property damage" while

working on behalf of Hillside, Hillside Floor Coverings wants to be covered by Tadd's Policy.

Association of Cars of Years Past

The Association is hosting a car show at the local fairgrounds. The fairground requires the association to add

it as an additional insured to its CGL Policy so that they will be covered by the Association's Policy in the

event of a "bodily injury" or "property damage" loss to a third party.


Contract Requirement continued




The Ram Restaurant

The Ram leases its space from Rainier Properties, Inc. Rainier is requiring it beadded as an additional insured

to The Ram's CGL Policy so that it will be covered by The Ram's Policy in the event of a "bodily injury" or

"property damage" loss.

Meyers Printing

Meyers Printing leases a $500,000 press from AJK Industries. The lease agreement requires that AJK be

added to Meyers' CGL Policy as an additional insured so that AJK will be covered by Meyers Policy in the

event of "bodily injury" or "property damage" arising from the printing press.

Easy Tools

Easy Tools is a tool manufacturer. Many of the large retail tool stores will not carry Easy Tools' products

unless Easy Tools names the retail stores as additional insureds on its CGL Policy.


Contract requirement continued



In each of the previous examples, your client needed to add the other party as an additional insured

because of a business relationship.

If your clients are unable or unwilling to provide the requested additional insured status, they may not be

given the work or the contract for the work. The Association will be unable to use the fairgrounds for the

car show. The restaurant may not get the lease it wants. The printer will not be able to lease needed

equipment. The tool manufacturer loses important distribution outlets.

You can see the importance of additional insureds as it impacts your clients’ business and business

decisions.


Lesson 5 Topic B - The Reasons Behind Additional Insured Requests

Lesson 5 Topic B Reasons to Request p1 (1IC)

Learning Objective: Provide examples of why another person or organization would want to be named as

an additional insured.

What creates the need to be named an additional insured?

While there are several reasons behind these requests, the primary reason is to provide additional insureds

coverage for losses for which they may be legally liable due to their business relationship with your client.

They want to protect themselves from liability that arises out of your client's activities.

The "upstream" party such as the building owner or business owner wants to be added as an additional

insured on the policies of the "downstream" party such as the tenant, service provider, contractor, or

subcontractor.

Service providers may be required to name customers as additional insureds while manufacturers,

wholesalers and distributors may be required to named retailers as additional insureds.


Reasons to Request continued



Others may wish to be named an additional insured because:

1. It may assure greater safety in a risk finance transfer.

2. It creates the potential for the availability of higher limits of coverage.

3. It can give them direct rights to your client's insurance.

4. It may protect them from the potential risk of subrogation.

5. It creates the potential to reduce the cost of their insurance.






Requesting Additional Insured Status may assure greater safety in a risk finance transfer.

In addition to the request for your client to hold the other party to the contract harmless, the contract may

also require your client to name the other party as an additional insured to your client's CGL Policy.

Why are both necessary?

There are situations when the courts may find a hold harmless agreement unenforceable. This usually takes

place after the loss. As a result, the party that relied upon the hold harmless agreement to pay for a loss

may now need to use its own funds. This isn’t a desired outcome.

By requiring additional insured status in conjunction with the hold harmless agreement, the other party can

rely on your client’s insurance coverage as an additional insured if the hold harmless isn’t enforceable.

Additional insured status for the other party assures it greater safety in a risk finance transfer – a “safety-

net”, if you will, for the hold harmless agreement. They can seek direct coverage as an insured under your

client’s insurance policy.





Example:

In a contract with Clark Construction, your client agreed to hold the construction company harmless for any

loss arising out of his or her work for it.

The hold harmless agreement requires your client to respond to certain legal liabilities for "bodily injury" or

"property damage" that arise out of the client’s work for Clark. It is important to Clark that your client be

financially able to pay for losses that are part of the hold harmless agreement. Otherwise, Clark could find

itself responsible for paying for a loss that it didn’t plan for.

As an additional insured on your client’s CGL Policy, Clark knows that there is insurance in place (this is a risk

finance technique) and that, if needed, the Policy will provide coverage for them as well as your client. Clark


Construction can present a claim as an indemnitee or as an insured.





2. Additional insured status can give another party direct rights to your client's insurance. As an

insured, additional insureds have direct rights to your clients’ CGL Policy.

They can make their own direct claim under the Policy. If circumstances warrant it, they can also

sue the insurance company to obtain the court’s assistance in establishing their rights under the

Policy, including the right to a defense.





3. Additional insured status may protect the other party from the potential risk of subrogation.

An insurance company cannot subrogate against the named insured after it pays a loss under the

CGL Policy.

As an insured under the Policy, the additional insured would enjoy this same benefit in most

jurisdictions; therefore, an additional insured would not be subject to subrogation.

Example:

Chef's Cuisine is one of the tenants renting space in a shopping center from Skylark Management Company.

Chef added the Additional Insured Managers or Lessors of Premises (CG 20 11) endorsement to Chef's CGL

Policy naming the landlord as an additional insured.

One of Chef's employees accidently started a fire in the restaurant kitchen. The building's fire suppression

system in the shopping center did not work properly so the fire was not contained immediately. The result


was fire damage to Chef's restaurant and to an adjacent dress shop.

Chef's insurance company paid the property damage claim to Chef and to the dress shop. Even though

Chef's employees started the fire, it was determined that Skylark was negligent in not properly maintaining

the fire suppression system. The insurance company cannot subrogate against Skylark because they are an

insured - an additional insured - on the Policy.





4. Additional insured status creates the potential for the availability of higher limits of coverage.

Additional insureds may not only have access to the Limits Of Insurance on your client’s CGL Policy

on a primary basis, but they may also have access to their own CGL Policy insurance limits on an

excess basis.

This creates the potential that the additional insured may be able to stack the limits from both

policies in the event these higher limits are needed.

Example:

Burnson Construction is named as an additional insured on one of its sub-contractor’s CGL Policy.

A large loss occurs and the limits on the sub-contractor’s Policy are not enough to pay the damages for

which Burnson was found responsible.

Burnson, after exhausting the limits available under its sub-contractor’s Policy, may have the limits on its

own CGL Policy available.






5. Additional insured status creates the potential to reduce the cost of the additional insured's

insurance.

Since your client’s insurance policy is providing primary coverage to additional insureds, the

additional insureds’ own insurance may not be needed in the event of a loss.

This results in better loss experience and possibly lower premiums for the additional insured’s own

insurance policy.

From an underwriting standpoint, some insurance companies may require its named insured to be

named as an additional insured on the policies of others.

It is also possible that named insureds requiring additional insured status on the policies of others

may see a reduction in their cost of insurance as their insurance company recognizes primary

coverage will be provided elsewhere.

Please complete the knowledge check found at Lesson 5 Topic B Reasons to Request p9 (1IC).


Lesson 5 Topic C - Potential Problems

Lesson 5 Topic C Potential Problems p1 (1IC)

Learning Objective: Explain problems associated with additional insured status for both the named

insured and the additional insured.

We have just seen examples of situations that support the need for your clients to add additional insureds

to their CGL Policy.

Before introducing and discussing various additional insured endorsements, it is important to understand

how additional insureds can create potential problems for both the named insured and the additional

insured.

The named insured may not have a choice in the matter; they must either add the additional insured or lose

the contract or lease.

Nevertheless, they should be made aware of the potential problems with adding additional insureds to their

insurance policy. Likewise, if your clients are added to policies of others as an additional insured, they

should know of the potential problems when relying on someone else’s insurance for protection.


Problems for the Named Insured



1. Diminution of Policy Limits

The number one problem for the named insured is the potential for diminution of policy limits.

Regardless of the number of insureds (named, automatic or additional), there is only one "pot of money"

per "occurrence". The more insureds, the more "fingers in the pot". Too many "fingers in thepot" increases

the chances of the named insured having fewer dollars to pay damages for which it is held responsible.

It makes sense that when more entities share the available limits, the limits may be used up more quickly

when claims occur.

2. Unintended Coverage Granted to the Additional Insured


It is possible to provide unintended coverage for the additional insured.

This does not usually happen on carefully constructed "standard" additional insured endorsements.

However, some manuscript endorsements are so broad they provide unintended coverage.

A manuscript endorsement is wording agreed to by the named insured and the insurance company when a

"standard" endorsement is not available.

3. Compliance Problems

Adding additional insureds places administrative burdens on the named insured as well as the insurance

agency and its insurers.

If your client does not meet the expectations of the additional insured, this could lead to compliance

problems.

Example: If the policy is cancelled or if the named insured reduces the level of coverage on the policy, the

additional insured expects to be notified.

Your client's administrative breakdowns may easily result in a breach of contract, which is not covered by

the named insured's insurance policy.


Problems for the Named Insured continued



Diminishing Limits of Insurance

Craig’s Construction Company, Inc., does concrete work all over town and for different builders. As a result,

six different entities have been added as additional insureds to Craig’s CGL Policy.

A large liability loss occurs, and now three of the additional insureds are each looking at Craig's $1M limit of

liability on its CGL Policy.

With four insureds, the Policy limits could quickly erode and potentially leave Craig's with an insufficient

amount of coverage to pay for its claim.

Unintended Coverage Provided to the Additional Insured


Rod, Inc. is a large-scale contractor building a condominium.

He is hiring all kinds of sub-contractors. His insurance company attached an endorsement to his CGL Policy

that states any and all “subs” are additional insureds under certain situations.

The wording is so inclusive that it could extend coverage to a subcontractor that Rod did not intend to

include.


Problems for the Named Insured continued



Compliance Problems

Tim’s Toys, LLC was required in a contract to name a major toy store as an additional insured before the

store would carry its products. The contract also required Tim's to carry $1M limits for bodily injury and

property damage. Tim's provided the store with a certificate of insurance reflecting the $1M coverage and

additional insured status.

Several months later and forgetting about the contractual requirement, Tim's changed its coverage to

$500,000 in an effort to reduce expenses.

A loss has now occurred, and the major toy store has just learned of Tim’s apparent breach of contract

when it failed to comply with the contractual requirement to carry $1M liability coverage.


Problems for the Additional Insured



1. May lose control of defense and investigation

The additional insured may lose control of his/her defense and investigation.


The insurance company, and not the additional insured, hires and directs the legal counsel.

The insurance company may, at its discretion, investigate any occurrence and settle any claim or suit that

may result.

The insurance company does not have to have the permission of the additional insured before it can settle a

claim or lawsuit.

2. "Other insurance" conflicts

There may be "Other Insurance" conflicts for the additional insured.

Insurance policies include "Other Insurance" provisions, which state that a particular policy is primary or

excess and contributing or non-contributing when there is other insurance in force.

Disputes between insurance companies over who pays first and how much can stall or limit claim payment.

We'll look at this a little more closely in this section.

3. Limited coverage for the additional insured

There may be limited coverage under current forms.

There have been significant changes made to additional insured endorsements over the years.

Each edition date may change the coverage provided for the additional insured.

4. Dependency on another party's Insurance

It is not a good idea to depend on someone else's insurance.

Limits, edition dates of the CGL Policy, exclusions and endorsements are outside of the additional insured's

control.


Problems for the Additional Insured continued



Loss of Control Over Defense and Investigation


Benum Construction was named as an additional insured on Charlie’s Construction’s CGL Policy.

A claim was made against both Benum and Charlie’s by someone injured at the construction site. Benum

told Charlie’s insurance company that they are not at fault for the injuries; in fact, it was the injured

person’s own fault. Benum does not want the insurance company to settle with the injured person because

Benum's reputation would be ruined.

Charlie’s insurance company, after investigating the loss, settles with the injured party.





Other Insurance Disputes

Disputes over the priority of coverage often arise when an entity purchases its own policy and also

intentionally obtains coverage as an additional insured on the CGL Policy of another.

It is generally understood that the intent of this arrangement is that the entity's own CGL Policy, the CGL on

which the entity is listed as a named insured, is to apply as excess and not share its limits with the CGL

Policy on which the entity is an additional insured.

Example:

The general contractor has his own CGL Policy and is also listed as an additional insured on the sub-

contractor’s CGL Policy.

If both policies are the 2013 ISO CGL Coverage Form, the sub-contractor’s CGL Policy will provide primary

coverage for the general contractor. The general contractor will have excess coverage provided by his own

CGL Policy.






More About Other Insurance Disputes

The April 2013 ISO CGL Coverage Form “other insurance” wording generally (with some notable exceptions)

complies with this intent when the additional insured has been listed by endorsement to the other party’s

CGL Policy.

Problems can arise when the CGL Policy is an earlier edition date or the CGL Policy is an insurance

company's proprietary form and not an ISO form. The “other insurance” language in either of these could

include very significant differences, which could take away primary coverage for an additional insured.

It should also be noted that the “other insurance” language in the ISO CGL 2013 edition applies to additional

insureds that have been added to the insurance policy of another.

Additional insureds added to the policy of another will have primary coverage under that policy and excess

under their own CGL Policy.

This wording does not provide the same coverage for “automatic insureds”. Automatic insureds, such as a

real estate manager, could find themselves with two policies providing coverage on a primary basis.

This will result in the policies sharing of limits, which might not have been the intent of either party.





Example of Other Insurance Dispute

Benum Construction was also named as an additional insured on the CGL Policy for Kitchens 4 You. Benum

required and understood Kitchens’ Policy to provide liability coverage on a primary, non-contributory basis.

A loss occurs at which time Benum discovers Kitchens' CGL Policy states that coverage available to any

additional insured applies only as excess to any insurance purchased by the additional insured.

While Benum expected Kitchens’ Policy to pay on a primary basis, it is now looking to its own insurance

policy for primary coverage.



CG 20 10 Endorsement Form Edition Dates



Limited Coverage for Additional Insured

As we will discuss shortly, the 11/85 edition of the CG 20 10 included additional insured status for liability

arising out of the insured’s work while the 04/13 edition provides coverage for liability caused in whole or in

part by the named insured’s acts or omissions or those acting on behalf of the named insured.

In other words, the latest edition requires at least partial responsibility for the damages to be the named

insured’s or those working on behalf of the named insured. This does not provide coverage if the loss is

solely caused by the additional insured.

The 11/85 edition also provided coverage for liability arising out of the named insured’s work, which

included Completed Operations. Subsequent editions provide coverage caused in whole or in part by the

ongoing operations for the Additional Insured of the named insured. Ongoing operations does not include

completed operations.

You can see the importance of knowing the edition date of the additional insured endorsement being used.





Dependency on Another Person's Or Entity's Insurance

How does the additional insured know that the policy is still in effect, the required limits still carried, the

edition date of the CGL Policy, and the endorsements or exclusions that apply?

These factors are outside of the direct control of the additional insured; yet they potentially impact whether

or not coverage will be available at the time of a loss.


Please complete the knowledge check found at Lesson 5 Topic C Potential Problems p12 (1IC).


Lesson 5 Topic D - Additional Insured Endorsements

Lesson 5 Topic D Additional Insured Endorsements p1 (1IC)

Learning Objective: Explain the purpose and coverage provided for selected additional insured

endorsements.

Before selected additional insured endorsements are discussed, let’s first have an understanding of the

importance of the form number and edition date.

Some additional insured endorsement forms have more than one edition date.

Since coverage can vary greatly between or among edition dates, it is very important to know which edition

date has been requested and which edition date is being used.

Because the edition date is embedded in the additional insured endorsement’s form number, let’s review

the components of an ISO additional insured endorsement’s form number.


Anatomy of an Additional Insured Endorsement Form Number


endorsements.

The ISO Additional Insured endorsements to the ISO Commercial General Liability Coverage Form ALL begin

with CG 20.

The next two numbers are the specific form number for that specific endorsement.

The final four numbers indicate the month and year of the edition date.


Endorsement Forms


endorsements.


There are numerous additional insured endorsements designed to meet the specific needs of the various

types of additional insureds.

For this course, the additional insured endorsements listed below for attachment to the CGL Policy have

been selected for review and analysis.

Additional Insured – Owners, Lessees or Contractors – Scheduled Person or Organization CG 20 10

Additional Insured – Owners, Lessees or Contractors – Completed Operations CG 20 37

Additional Insured – Managers or Lessors of Premises CG 20 11

Additional Insured – Lessor of Leased Equipment CG 20 28

Additional Insured – Vendors CG 20 15

Refer to the slide to download these forms.


Common Coverage Limitations In Many Endorsement Forms


endorsements.

Even though there are various types of additional insured endorsements, recent editions of many additional

insured endorsements have the same coverage limitations in common. Most of these additional insured

endorsements only provide insurance protection for the additional insured for the sole negligence of the

named insured (caused in whole) or for the joint negligence of the named insured and the additional

insured (caused in part). However, this protection to the additional insured only applies to the extent

permitted by law.

If coverage provided to the additional insured is required by a contract or agreement, the insurance

afforded to such additional insured will not be broader than that which the named insured is required by

the contract or agreement to provide for such additional insured. Also, payment on behalf of the additional

insured is limited to the amount required by the contract or agreement; or what is available under the

applicable Limits of Insurance shown in the Declarations, whichever is less.



Common Additional Insured Endorsements - CG 20 10


endorsements.

We’ve selected CG 20 10 to discuss first for a good reason. There are several editions of this ISO

endorsement that offer increasingly restrictive coverage. To understand the distinctions between these

editions of the CG 20 10, you should understand:

Completed Operations Liability:

Legal liability results when injury to others or damage to property of others is caused by defective or

improper workmanship.

The exposure applies to the named insured's work. This exposure begins once the operations have been

completed and the named insured leaves the work site.

Negligence:

Failure to exercise care that an ordinary prudent person would exercise. Negligence requires the following:

• Duty owed to another

• Breach of that duty

• Actual injury

• Proximate cause

Sole negligence indicates negligence by a single party; contributory negligence indicates that more than one

party has met the requirements for negligence in a cause of action.


Additional Insured - Owners, Lessees or Contractors - Scheduled Person or Organization (CG 20 10)


endorsements.

This endorsement is used when owners, lessees, and contractors have required that they be added to a

contractor's or subcontractor’s CGL Policy.

This endorsement modifies the Who Is An Insured section of the CGL Coverage Form to include the person

or organization shown in the schedule, but only for "bodily injury", "property damage" or "personal and


advertising injury" caused in whole or in part by the named insured's act or omissions or the acts of

omissions of those acting on the named insured's behalf.

These acts or omissions must take place in the performance of the named insured's ongoing operations for

the additional insured at the locations designated in the endorsement.

However, the insurance afforded to the additional insured only applies to the extent permitted by law. Also,

if coverage is required by a contract or agreement, the insurance provided to the additional insured will not

be broader than that which is required by the contract or agreement.

This endorsement does not include any insurance protection for the completed operations exposure.

If coverage provided to the additional insured is required by a contract or agreement, the most that will be

paid on behalf of the additional insured is the amount required by the contract or agreement; or what is

available under the applicable Limits of Insurance shown in the Declarations, whichever is less.

Let's take a look at the endorsement verbiage to make sure you understand.


CG 2010 The 11/85 Edition


endorsements.

This additional insured endorsement has gone through several changes since the 11/85 edition. It is the

endorsement that generates the most discussion because there are additional insureds that specifically

request the 11/85 edition due to the broad protection it provides for the additional insured.

The 11/85 edition provided coverage for the additional insured for liability arising out of “your work” for

that additional insured by or for the named insured. By the CGL Coverage Form definition, “your work”

includes completed operations.

It is difficult to find insurance companies able and/or willing to provide the 11/85 edition.

Refer to the slide to view the 11/85 Edition.



This endorsement has several recent edition dates, each providing more limited coverage than the previous

edition. It is important to understand the coverage distinctions of each edition date.

11/1985

This edition date uses "your work" (instead of "your ongoing operations" as used in other editions). Since

the term "your work" is associated with "completed operations", this edition includes "completed

operations" for the additional insured. This edition date provides the broadest coverage for the additional

insured.

10/1993

This edition replaces "your work" with "your ongoing operations" performed for that additional insured.

Since the term "your work" is associated with "completed operations", its replacement with "ongoing

operations" attempts to eliminate completed operations coverage for those additional insureds covered by

this endorsement. After all, once work is completed it is no longer ongoing.

Who Is An Insured (Section II) is amended to include as an insured the person or organization shown in the

Schedule, but only with respect to liability arising out of your ongoing operations performed for that

insured.

03/1997

The endorsement name changes to:

ISO CG 20 10 - Additional Insured - Owners, Lessees or Contractors - Scheduled Person or Organization

Who Is An Insured language remains the same as in the 10/1993 edition.

10/2001

This version of the endorsement adds a specific exclusion for losses due to the completed operations of the

named insured.


With respect to the insurance afforded to these additional insureds, the following exclusion is added.

This insurance does not apply to "bodily injury" or "property damage" occurring after:

1. All work, including materials, parts or equipment furnished in connection with such work,

on the project (other than service, maintenance or repairs) to be performed by or on behalf

of the additional insured(s) at the site of the covered operations has been completed; or

2. That portion of "your work" out of which the injury or damage arises has been put to its


intended use by any person or organization other than another contractor or subcontractor

engaged in performing operations for a principal as a part of the same project.

07/2004

The 2004 version eliminates the "arising out of language of earlier versions. The revision is designed to

eliminate coverage for losses due to the sole negligence of the additional insured. It does contain the

specific exclusion for completed operations.


Section II. Who Is An Insured is amended to include as an additional insured the person(s) or

organization(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property

damage" or "personal and advertising injury" caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf; in the performance of your ongoing

operations for the additional insured(s) at the location(s) designed above.

04/2013

The 2013 version added wording to further limit the coverage to the Additional Insured to apply only to the

extent permitted by law. Also, if there is a contract or agreement, insurance afforded to such additional

insured will not be broader than that which is required by the contract of agreement and payment will be

limited to the amount required by the contract or agreement; or the available applicable Limit of Insurance.

However:

1. The insurance afforded to such additional insured only applies to the extent permitted by law; and

2. If coverage provided to the additional insured is required by a contract or agreement, the insurance

afforded to such additional insured will not be broader than that which you are required by the

contract or agreement; or the available applicable Limit of Insurance.

C. With respect to the insurance afforded to these additional insureds, the following is added to the Section

III -Limits Of Insurance:

If coverage provided to the addtional insured is required by a contract or agreement, the most we will pay

on behalf of the additional insured is the amount of insurance:

1. Required by the contract or agreement; or

2. Available under the applicable Limits of Insurance shown in the Declarations;

whichever is less.


This endorsement shall not increase the applicable Limits of Insurance shown in the Declarations.


Additional Insured – Owners, Lessees or Contractors – Completed Operations (CG 20 37)


endorsements.

What if your client is required to provide completed operations coverage for an additional insured and

the 11/85 edition is not available from your insurance companies?

This endorsement can be used to provide completed operations coverage for the additional insured. (This

endorsement is not necessary if the 11/85 edition of the CG 20 10 is used.)

In many situations, you may need to use both the CG 2010 and CG 20 37 to meet contract requirements.

Let's read the endorsement wording before proceeding.

This endorsement modifies the Who Is An Insured provision of the CGL Coverage Form to include the

person or organization shown in the schedule, but only for "bodily injury" or "property damage" caused in

whole or in part by the named insured’s work (“your work”) at the location designated and described in the

schedule performed for that additional insured and included in the “products-completed operations

hazard”.

However, coverage afforded to the Additional Insured only applies to the extent permitted by law. Also, if

coverage is required by a contract or agreement, the insurance afforded to such additional insured will not

be broader than that which is required by the contract or agreement and payment will be limited to the

amount required by the contract or agreement; or the available applicable Limit of Insurance, whichever is

less.


Additional Insured – Managers or Lessors of Premises (CG 20 11)

This endorsement is used to change the Who Is An Insured provision of the CGL Coverage Form to include

the real estate manager or owner of the premises that the named insured leases.

It extends liability coverage for the ownership, maintenance, or use of that part of the premises leased to


the named insured and shown on the schedule.

Let's take a look at the wording.


Additional Insured – Managers or Lessors of Premises (CG 20 11) continued


endorsements.

Example:

A tenant rents space from a building owner. The building owner requires the tenant, your client, to add the

building owner as an additional insured to the tenant's CGL Policy.

The language in the endorsement which makes this change is as follows:

Section II - Who Is An Insured is amended to include as an additional insured the person(s) or

organization(s) shown in the Schedule, but only with respect to liability arising out of the ownership,

maintenance or use of that part of the premises leased to you and shown in the Schedule and subject to the

following additional exclusions:

However the endorsement also includes language that excludes coverage under certain situations. The

exclusion applies as follows:

This insurance does not apply to:

1. Any “occurrence” which takes place after you cease to be a tenant in that premises.

2. Structural alterations, new construction or demolition operations performed by or on behalf of the

person(s) or organization(s) shown in the Schedule.

Example of Exclusion 1:

The tenant moves from the premises. The building owner is sued as a result of a slip and fall that occurs

after the tenant moves.

Although the building owner is still named as an additional insured on the tenant's policy, no insurance

protection will be provided.

Example of Exclusion 2:


The building owner hires a contractor to replace a wall at the premises. A passerby is injured.

Although the building owner is named as an additional insured on the tenant's policy, no insurance

protection will be provided.

Like the two previously discussed endorsements, coverage only applies to the extent permitted by law. Also,

if coverage is required by a contract or agreement, the insurance afforded to such additional insured will

not be broader than that which is required by the contract or agreement and payment will be limited to the

amount required by the contract or agreement; or the available applicable Limit of Insurance, whichever is

less.


Errors & Omissions Alert

There is a two part test for coverage to apply. The premises must be leased to the named insured and

shown in the Schedule.

The premises could be leased to the named insured but not shown in the Schedule. - No Coverage.

The premises could be shown in the Schedule but not leased to the named insured - No Coverage.

The best approach is to show "leased premises as described in the lease" as the Designation of Premises

(Part Leased to You) in the Schedule. This reduces the possibility for error.


Additional Insured – Lessor of Leased Equipment (CG 20 28)

This endorsement is designed to add a person or entity that leases equipment to the named insured and, as

a condition of the lease, requires to be added as an additional insured.

This endorsement modifies the Who Is An Insured provision of the CGL Coverage Form to include as an

additional insured the person or organization shown in the Schedule, but only for "bodily injury", "property

damage" or "personal and advertising injury" caused in whole or in part by the named insured's

maintenance, operation or use of the equipment. However, coverage only applies to the extent permitted

by law.


Also, if coverage is required by a contract or agreement, the insurance afforded to such additional insured

will not be broader than that which is required by the contract or agreement and payment will be limited to

the amount required by the contract or agreement; or the available applicable Limit of Insurance,

whichever is less.

There is no insurance protection for the additional insured for any "occurrence" that takes place after the

equipment lease expires.


Additional Insured – Lessor of Leased Equipment (CG 20 28) continued


endorsements.

Example:

Your client, who owns an office building, contracts with a company to provide coffee equipment and service

for the occupants of the building.

The coffee equipment service requires your client to add it as an additional insured to your client’s CGL

Policy for losses related to the leased equipment.

If the coffee equipment service is named in a claim because the coffee machine malfunctions and burns a

customer of your client, the coffee equipment service is provided protection as an additional insured to the

extent permitted by law and as long as the injury was not caused by the sole negligence of the coffee

equipment service.


Additional Insured – Vendors (CG 20 15)


endorsements.

This endorsement provides insured status under a manufacturer’s or distributor’s policy to named persons

or organizations with respect to their sale or distribution of the named insured’s products.

This endorsement modifies the Who Is An Insured section of the CGL Coverage Form to include as an


additional insured the person or organization (referred to as vendor) shown in the Schedule, but only for

"bodily injury" or "property damage" arising out of "your products" (as defined in the CGL Coverage Form)

shown in the Schedule. However, coverage only applies to the extent permitted by law.

Also, if coverage is required by a contract or agreement, the insurance afforded to such additional insured

will not be broader than that which is required by the contract or agreement and payment will be limited to

the amount required by the contract or agreement; or the available applicable Limit of Insurance,

whichever is less.

Coverage provided to the Additional Insured is subject to additional exclusions contained in the

endorsement.

Before continuing, let's read this endorsement.


Additional Insured – Vendors (CG 20 15) continued


endorsements.

Example:

Stella manufactures expensive statuary. She has asked JB’s Boutique to sell her product. JB’s agrees, but

requires Stella to carry limits of at least $1,000,000 each occurrence and name JB's Boutique as an

additional insured on Stella's CGL Policy for liability coverage in case the statutory products cause injury to a

third party.

If a bodily injury or property damage claim is made against JB's Boutique for a defective product

manufactured by Stella, Stella's CGL Policy would respond on JB's behalf but only to the extent permitted by

law and as long as no exclusions apply. The most that will be paid on JB's behalf is the limit required by the

contract or whatever applicable limit Stella has available on her CGL Policy, whichever is less.


Additional Insured – Vendors (CG 20 15) continued


endorsements.


As stated, the endorsement allows for liability coverage only and contains exclusions. There is no coverage

for the vendor due to:

1. assumption of liability in a contract or agreement; however, this exclusion does not apply to liability

the vendor would have had in absence of the contract or agreement;

2. any express warranty unauthorized by the named insured;

3. any physical or chemical change made intentionally by the vendor;

4. repackaging unless required by instructions from the manufacturer and repackaged in the original

container;

5. failure to make inspections, adjustments, tests or servicing as the vendor has agreed to make;

6. demonstration, etc., away from the vendor’s premises;

7. products which after distribution or sale by the additional insured have been labeled or relabeled,

used as a container, part or ingredient of any other thing or substance by or for the vendor;

8. the sole negligence of the vendor, its employees or anyone working on its behalf. However, this sole

negligence exclusion does not apply to (1) repackaging required by the manufacturer; (2)

demonstration, installation, servicing or repair operations performed at the vendor’s premises in

connection with the sale of the product; or (3) inspections, adjustments, tests or servicing the

vendor has agreed to make in the usual course of business or in connection with the distribution or

sale of the products.



Make sure each product for which coverage is desired is listed on the endorsement.

Please complete the knowledge check found at Lesson 5 Topic D Additional Insured Endorsements p19

(1IC).


Lesson 5 Topic E - Automatic Additional Insured Endorsements

Lesson 5 Topic E Automatic Additional Insured Endorsements p1 (1IC)

Learning Objective: Understand why a named insured would benefit from an automatic additional

insured endorsement.

Each of the additional insured endorsements introduced so far require the additional insured to be listed on

the additional insured endorsement. This requires named insureds to notify their agent about the need to

add another additional insured endorsement to their Policy. For the contractor, additional insured requests

can be numerous.

What happens if the named insured "forgets" to request the additional insured endorsement for a specific

individual or organization as required by contract?

Automatic additional insured endorsements were created as a way to reduce administrative errors and

oversights when providing additional insured status. They are used to automatically include persons or

entities who require additional insured status under the terms of a business contract with the named

insured. This reduces the need for the named insured to request these entities be individually added as

additional insureds.

Lesson 5 Topic E Automatic Additional Insured Endorsement p2 (1IC)

Additional Insured-Owners, Lessees Or Contractors-Automatic Status when Required In Construction

Agreement With You (CG 20 33)

For contractors, one solution is the use of the Additional Insured-Owners, Lessees Or Contractors-Automatic

Status when Required In Construction Agreement With You (CG 20 33) endorsement.

This endorsement automatically provides additional insured status to that entity when the named insured is

required to do so by a written construction agreement with that entity.

Coverage is provided with respect to liability for "bodily injury", property damage" or personal and

advertising injury" caused, in whole or in part, by the named insured's or those acting on the named

insured's behalf for ongoing operations for that additional insured. However, coverage is only provided to

the extent permitted by law and will not be broader than which is required by the contract or agreement

for such additional insured.

This endorsement does not include any insurance protection for the completed operations exposure. It also

limits the amount paid on behalf of the additional insured to the amount required by the contract or


agreement or the available applicable Limit of Insurance shown in the Declarations, whichever is less.

Tip: If completed operations coverage is required, the entity must be scheduled on the Additional Insured

– Owners, Lessees or Contractors – Completed Operations [CG 20 37] endorsement as previously

discussed. The automatic additional insured status does not apply to this endorsement.

Lesson 5 Topic E Automatic Additional Insured Endorsement p3 (1IC)


The CG 20 33 endorsement only gives automatic additional insured status for ongoing operations to the

person or organization who/which is a party to the contract with the named insured.

For example, the subcontractor signs a contract with the general contractor that requires the subcontractor

to name the general contractor and the owner as additional insureds. This endorsement will give additional

insured status to the general contractor, not the owner. (There is no written contact between the

subcontractor and owner.)

A solution for this problem is to attach CG 20 38 Additional Insured - Owners, Lessees or Contracts -

Automatic Status For Other Parties When Required in Written Construction Contract. This endorsement

includes any other person or organization the named insured is required to add as an additional insured

under the contract or agreement.

Refer to the slide to view the endorsement.

Lesson 5 Topic E Automatic Additional Insured Endorsements p4 (1IC)

Automatic Additional Insured Endorsements continued

Most automatic additional insured endorsements are non-standard forms; therefore, they vary from

insurance company to insurance company.

The language of each endorsement should be understood with regard to:

• The written contracts that are covered;

• The types of liability the endorsement applies to;

• The types of liability the endorsement does not apply to;

• And the persons or organizations which will be provided coverage.


To avoid an uncovered loss with regard to an additional insured, both the named insured and the insurance

professional should understand the coverage provided by the specific automatic additional insured

endorsement being used.

COVERAGE TIP – AUTOMATIC (“BLANKET”) ADDITIONAL INSURED ENDORSEMENTS

Unfortunately, we sometimes learn our best lessons from mistakes we make. This Coverage Tip is

intended to obviate this requirement as respects Automatic Additional Insured Endorsements. The

endorsement must be perused to determine what is required to “trigger” coverage for the additional

insured.

You receive a call from your client, Subcontractor, Inc., indicating she has just signed a contract with General

Contractor, Inc. that indicates she is required to name both General Contractor, Inc. and Owner, Inc. as

additional insureds on her CGL Policy. She also indicates a certificate of insurance is needed. You remember

that you attached an automatic additional insured endorsement to her Policy. So you issue the certificates

indicating both parties are additional insureds.

Several weeks later a claim is filed against Owner, Inc.; and Owner, Inc. tenders the claim as an additional

insured under Subcontractor, Inc.’s CGL Policy. The insurer denies the claim stating that the automatic

additional insured endorsement does not give additional insured status to Owner, Inc. as there was no

contract between Subcontractor, Inc. and Owner, Inc. – therefore, Owner, Inc. is not an insured. The insurer

files a declaratory judgment action to determine the correct interpretation of the wording. The court agrees

with the insurer.

A careful reading of the endorsement does indicate a contract directly between the named insured and the

party being required to be named as an additional insured is the “trigger” for coverage to apply. And, in this

example, there was no contract between Subcontractor, Inc. and Owner, Inc.

…when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy….

While not all automatic additional insured endorsements may have this specific “trigger”, it does show the

need to understand precisely when coverage will apply. Far too often, it is easy to assume something is true

without a careful reading of a policy provision.

Owner, Inc. could have been added as an additional insured by attachment of a specific endorsement. Who

will be blamed for Subcontractor Inc.’s material breach of the contract provision?

And, by the way, this particular automatic additional insured endorsement does not meet any contract

requirement to name anyone as an additional insured during any completed operations exposure period.

That too would require a specific endorsement(s).


Please refer to the end of Lesson 5 Topic E to complete Self Quiz 9 at this time.


Lesson 5 Topic F Endorsement Forms - Business Auto

Lesson 5 Topic F Endorsement Forms - Business Auto p1 (1IC)

While additional insured discussions most frequently revolve around the Commercial General Liability

Policy, the Business Auto Policy should not be ignored.

There are situations when named insureds will want or need to expand Who is an Insured on their Business

Auto Coverage Form to provide coverage to specific individuals or organizations.

Lesson 5 Topic F Endorsement Forms - Business Auto p2 (1IC)

Endorsement Forms - Business Auto

There are numerous additional insured endorsements designed to meet the specific needs of the various

types of additional insureds under the Business Auto Coverage Form. The following endorsements modify

the Who Is An Insured provision. This course does not analyze these endorsements. They are covered in

Insuring Commercial Casualty II - Business Auto, Workers Compensation & Excess Liability.

Commonly used endorsements that change the Who Is An Insured provision:

• Designated Insured - CA 20 48

• Lessor - Additional Insured and Loss Payee - CA 20 01

• Employees As Insureds - CA 99 33

• Employee As Lessor - CA 99 47

• Individual Named Insured - CA 99 17

• Drive Other Car Coverage - Broadened Coverage for Named Individuals - CA 99 10




1. Define what an additional insured is.

2. Give the reasons that a named insured is willing to add another person or organization as an

additional insured.

3. Provide examples of why another person or organization would want to be named as an

additional insured.


4. Explain problems associated with additional insured status for both the named insured and the

additional insured.

5. Explain the purpose and coverage provided for selected additional insured endorsements.

6. Understand why an insured would benefit from an automatic additional insured endorsement.

Documents

Commercial Casualty I - National Alliancemagma.magma.scic.com/Elearning/1IC/2013/1IC_Course_Print.pdfCompany or State Specific Forms Insurance companies often use policy forms other