September 2008 Dec Page

Question of the Month

The bodily injury and property damage liability coverage offered by the CGL form is subject to an assortment of exclusions. One of these is exclusion (n), recall of products, work, or impaired property—also known as the sistership exclusion. It was in 1966 that insurance companies began to add to the standard general liability policy this exclusion, the purpose of which was to preclude coverage for the costs incurred because products have to be recalled or withdrawn from the market or from use because of a known or suspected defect or deficiency.

Since the addition of exclusion (n) to the CGL form, courts have been reluctant to apply it or have narrowly construed it to apply only to a limited number of situations. This judicial reluctance can be translated into a questioning on the part of insurers as to the usefulness of the exclusion. And, this insurer questioning is compounded by the lack of understanding of the exclusion by insureds.

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