We insure a manufacturer domiciled in the United States. The manufacturer is looking into forming a dealer relationship with a company in Japan so that our insured would sell its finished product to the dealer and the dealer would in turn sell that product to consumers in Japan. Our insured is questioning whether its CGL form would give it liability coverage due to the requirement in the CGL form that the occurrence must take place in the coverage territory; "coverage territory" is a defined term that does not include Japan. What do you think?

South Dakota Subscriber

With reference to the named insured's products, "coverage territory" under the CGL form means all parts of the world, under certain circumstances. First, the injury or damage has to arise out of goods or products made or sold by the named insured in the United States (including its territories and possessions), Puerto Rico, and Canada; second, the insured's responsibility to pay damages has to be determined in a lawsuit filed in these same territories. In the scenario you describe, your insured makes the product in the United States; therefore, as long as an injured party files a lawsuit in the United States, Puerto Rico, or Canada to determine your insured's responsibility for the injuries, the CGL form will respond to a claim. A lawsuit filed in Japan against your insured will not require a response by the insurer.