The question of the month deals with exclusions on the CGL form that cause many coverage disputes. The “your product” and “your work” exclusions in the CGL form are meant to prevent the policy from covering business risk claims, which are claims that arise based on the warranty that a business gives to consumers that the material and products supplied by the business are fit for the stated purpose, and that the work performed by the business will be done in a workmanlike manner.

While insurers have generally been willing to insure the risk that faulty work or products of the insured will caused bodily injury or property damage to the property of others, they have not been willing to insure the business risks. Insurers do not wish to become the guarantors of the fitness, quality, or reliability of the insured's work or products. To that end, the CGL form contains exclusions aimed at preventing the form from covering business risk claims, and the question of the month article analyzes and interprets those exclusions. For answers to questions about the “your product” and “your work” exclusions, see the designated article in the Bulletins.

The court cases discussed in the Dec Page center on the duty to defend. One case deals with CERCLA action and the duty to defend. Does a CERCLA action seeking reimbursement for response costs in connection with a clean up at a Superfund site require the insurer to defend the insured? The United States District Court in Illinois addressed this question. In a case from New York, the issue was whether the insurer had a duty to defend an additional insured based on the wording of the additional insured endorsement which required coverage for claims that “arise out of or are connected with” the work of the named insured. The final case from a Kansas appellate court sets out an analysis for an insurer to undertake to determine its duty to defend. Kansas courts utilize the extrinsic evidence approach in evaluating whether the facts in a certain situation give rise to a potential for liability under the terms of an insurance policy, and thus trigger a duty to defend. This appeals court opinion explains the application of the approach.

The final piece of information in the Dec Page concerns recent actions by various states that pertain to the insurance industry. The states that are mentioned are Texas, Rhode Island, New York, Michigan, Minnesota, Maine, and Louisiana .

Questions and Answers

Is a swimming pool covered under the CP 00 10 06 07 if it is not scheduled? See Swimming Pool Not Described on Dec Page Not Covered. If a retaining wall is not damaged by a fire but is required to be repaired before a certificate of occupancy will be issued, is there coverage under an ordinance or law endorsement? See Ordinance or Law Coverage Depends on Covered Damage.

Is ordinance or law coverage used for items needed to add to the rebuild that the insured did not have before the loss? See Replacement Cost and Ordinance or Law Coverage. Would rain leaking through a worn out roof be covered under a BP 00 02 12 99? See Water Damage Claim Excluded by Wear and Tear Exclusion

Capital Assets Program

The Insurance Services Office (ISO) offers a capital assets program that enables insurers to provide large and medium commercial accounts coverage and pricing flexibility for commercial property exposures. The program is open to all classes of business—manufacturing, industrial, institutional, habitational, retail, wholesale, and service. The form used for this coverage is the Capital Assets Coverage Form (Output Policy), OP 00 01 10 10, which provides insurance for buildings, business personal property, accounts receivable, property in transit, crime exposures, business income, and other risks that face commercial insureds. The policy is a manufacturers output (MOP) type of policy and can be combined with other coverage parts, such as a CGL form or boiler and machinery policy.

This article presents a description of OP 00 01 with its coverages, exclusions, definitions, and conditions and reflects changes made with the introduction of the 2010 edition of the form. See Capital Assets Program.