The question of the month deals with an exclusion on the CGL form that is known as the ″sistership″ exclusion. This is exclusion (n) on the current ISO CGL form and pertains to the damages claimed for the recall of products, work, or impaired property. It was in 1966 that insurance companies began to add this exclusion to the standard general liability policy, the purpose of which was to preclude coverage for the costs incurred because products have to be recalled or withdrawn from the market or from use because of a known or suspected defect or deficiency.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.

For help in understanding the sistership exclusion, for an analysis of the sistership exclusion and a discussion of court cases that help explain the exclusion, link onto the designated article in the Bulletins.

Court cases presented this month come from New York, Minnesota, Washington, Illinois, and New Hampshire . The New York case revolves around an intentional act (punching the victim) and whether the injury resulting from this act was intended; in other words, was the intentional act a covered occurrence? In the Minnesota case, the insurer brought an action against the insured seeking a declaratory judgment that the insurer had no duty to defend or indemnify the insured. The insurer wanted to deny coverage based on the faulty work exclusion in the liability policy. The Washington case discussed self-insured retentions (SIRs) and considered the question of whether SIRs are primary insurance. The subject matter in the Illinois case was whether the failure to construct a home pursuant to the plans was property damage caused by an occurrence; this is a case dealing with the meaning of both occurrence and property damage as these words are defined in the general liability policy. Finally, the New Hampshire case discusses the anti-concurrent causation exclusion and whether the clause is enforceable under New Hampshire law.

Questions and Answers

Under the plain, ordinary meaning of the word fixture, a gazebo may be covered as an outdoor fixture. See Gazeboe Covered as Outdoor Fixture. When property is found missing with no evidence of how it disappeared, it is generally not covered. See Missing Property with No Proof of How It Disappeared Excluded. When a tenant moves into a space where improvements or betterments were completed by the previous tenant, those improvements or betterments were not acquired or made at the new tenant's expense. See Tenants' Improvements Not Covered When Not Acquired or Made at Tenant's Expense.

When property is merely stolen but not accompanied by a malicious act of destruction, it is not considered vandalism. See Theft of Copper Not Vandalism. Equipment Breakdown coverage could cover damage to gas pump electrical lines. See Water Damage Exclusion Does Not Apply to Seepage into a Conduit.

Homeowners Pollution Exclusion

The homeowners pollution exclusion discussion has been updated this month. Both ISO and AAIS have issued new forms since the last discussion and there are changes in the exclusion language. See Homeowners Pollution Exclusion. The article is in the Dwellings tab M-30 pages.

Personal Liability Coverage (Farm)

The AAIS Form GL-2 Ed 2.0 is used to provide farm personal liability coverage for liability exposures that arise out of the insured premises and the insured's personal activities. This form also provides liability and medical payments to others as a result of injuries on the insured premises or in conjunction with the insured's personal activities. See Personal Liability Coverage (Farm).