Fire Legal Liability under the CGL Form
Our insured employs medical personnel on a temporary traveling basis; that is, if a nurse or other medical professional were needed by a hospital in a certain state or locality, our insured would send the employee to that location on a temporary basis. The insured rents an apartment or house for the employee for the time the employee is at the temporary location and pays all the expenses. One of the insured's employees was staying at one of the rented apartments in another state; her boyfriend was visiting her. The boyfriend was smoking one night and put the cigarette out in a plastic cup near some window curtains—or so he thought. The couple woke up to find the house on fire and the resultant fire damage cost over $200,000.
The insurer for the apartment owner paid for the fire damage and is now seeking subrogation against our insured. Where would the coverage come from on the part of our insured's CGL form to pay for the claim? If our insured is sued, would the liability policy provide defense costs? It seems to us that the fire legal liability coverage is the way to go, but we would appreciate your opinion.
Massachusetts Subscriber
The fire legal liability coverage under the CGL form would apply in this instance. If the named insured rents a premises and a fire damages the premises (and if the insured has purchased fire legal coverage), the CGL form will respond to a claim. Of course, the insured has to be legally obligated to pay the damages before the CGL form will pay, but if that is the situation, there is no exclusion on the CGL form that would prevent coverage. It should be noted that the employee herself is not considered an insured under these circumstances since the “who is an insured” clause states that no employee is an insured for property damage to property rented to or in the care, custody, or control of the named insured or any employee. This does not affect the named insured's status.
The most that the insured's CGL form will pay is the amount listed in the “rented to you” section of the declarations page.
As for the duty to defend, that is broader than the duty to pay. Since there is no definite exclusion on the CGL form to prevent coverage, the insurance company will have to defend the insured until it can be proven that there is no liability on the part of the named insured.
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