Loading or Unloading Coverage
Gap Under the CGL Form

Q

It has come to our attention that many of our clients may have less coverage than they think with respect to loading or unloading of nonowned watercraft. We think that when the owner or operator of a watercraft is named an additional insured on a CGL form, this eliminates coverage for the first named insured (our client) with respect to loading or unloading of the additional insured's watercraft.

For example, ABC Company delivers cases of its product to Paddlewheels-R-Us, which is an additional insured on ABC's general liability policy. While delivering the product to the boat, ABC's employee damages something or injures someone. There is no coverage for this under ABC's liability policy since the occurrence arose out of the loading or unloading of watercraft owned or operated by “any” insured.

We see this as a potential problem for our clients and an inadvertent reduction in coverage. What is your opinion?

Louisiana Subscriber

A

We agree. You are correct in that there can be a gap in coverage under the terms of the CGL form due to an additional insured owning watercraft. There are two exceptions to the exclusion to note: the exclusion does not apply if the watercraft is less than 26 feet long and not being used to carry persons or property for a charge; and, the exclusion does not apply to liability assumed under an insured contract. If your insureds meet either of these two exceptions, the exclusion will not apply. If the exceptions are not met, there is a gap in coverage.

We do not know of any standard endorsements that would fill this gap. You could try to get a manuscripted endorsement, but that may prove too expensive. Or, if the insured has to sign a contract with an additional insured requirement, why not make it an “insured contract” as defined under the CGL form and have the exception to the watercraft exclusion take effect?

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