Coverages provided under the 2007 ISO-CGL policy forms (both occurrence and claims-made versions) are briefly discussed in this article.

Coverage Format

The 2007 ISO-CGL policy consists of a declarations page, a coverage form (occurrence or claims-made version), and a “common policy conditions” form (IL 00 17) that contains conditions common to all forms comprising the policy. The occurrence coverage form contains five sections:

•    Section I—Coverages

•    Section II—Who Is An Insured

•    Section III—Limits of Insurance

•    Section IV—Commercial General Liability Conditions

•    Section V—Definitions

In the claims-made policy form, Section V is captioned Extended Reporting Periods and the Definitions are contained in Section VI.

With the exception of some features unique to the claims-made policy format, coverage provided by both the occurrence and claims-made versions of the 2007 ISO-CGL policy are identical. Coverages common to both policy formats are discussed below. Following that discussion, the differences between the occurrence and claims-made policy formats are explained.

Although coverage provided by the AAIS commercial liability coverage (broad form coverage) form GL-200 (Ed. 1.0) is similar to coverage provided by the ISO-CGL form, the policy form is structured somewhat differently than the ISO-CGL forms. The AAIS form is divided into nine sections:

•    A general insuring “Agreement” that applies to all of the coverages provided by the policy;

•    A “Definitions” section that contains the definition of certain policy terms;

•    A “Principal Coverages” section that contains the specific coverage insuring agreements;

•    A “Supplemental Coverages” section that describes the contractual liability, medical malpractice and mobile equipment coverages provided;

•    A “Defense Coverage” section that applies to all coverages under the policy;

•    An “Exclusions” section that contains the exclusions applicable to bodily injury, property damage, personal injury, advertising injury and medical payments coverages;

•    A “What Must Be Done in Case of Loss” section that describes the insured's duties in the event of a claim or suit;

•    A “How Much We Pay” section that describes the application of policy coverage limits; and

•    A “Conditions” section that describes the conditions applicable to the policy.

In addition to the above, a complete GL-200 policy contains a declarations page, a separate common policy conditions and one or more attached endorsements.

Because coverage provided under both the 2007 ISO-CGL (occurrence version) and the AAIS GL-200 form is similar, only the differences between these two forms are discussed in the following text.

Coverage Trigger

Coverage trigger generally refers to the events or circumstances that actuate policy coverage. The trigger requirements for each coverage are stated in the Insuring Agreement sections of the policy.

Coverage A (Bodily Injury and Property Damage Liability) in the occurrence version of the 2007 ISO-CGL policy applies to bodily injury or property damage that occurs during the policy period and within the policy's coverage territory, provided that the insured was unaware of the actual or potential injury or damage at the time of policy inception. Such bodily injury or property damage must arise from an occurrence, which is defined in the policy to mean an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Once the policy trigger conditions are met, the policy will respond, even if the claim involves a continuation, change or resumption of bodily injury or property damage that occurs during or after the policy period, or if the claim is presented months or even years after the policy has expired.

Coverage A

Precisely when an occurrence takes place is sometimes unclear and has been the subject of much litigation over the years. In many instances, an occurrence and the resulting injury or damage occur at the same time and are immediately known by the insured to have taken place. More problematic, however, are occurrences that are not immediately known to have taken place and which happen over long periods of time, or which result in a delayed manifestation of the injury or damage.

Under the so-called “exposure theory,” if a claimant sustains bodily injury or property damage over a period of many years, all of the general liability policies in effect during the period of exposure may be required to participate in the defense and settlement of the claim or suit. Under the so-called “manifestation theory,” only the policy in effect at the time the injury was discovered (i.e., symptoms of injury or damage became manifested) may be required to defend or pay the claim or suit.

The 2007 ISO-CGL revision attempts to clarify coverage in situations where the occurrence may be deemed to have taken place prior to inception of the policy and when resulting bodily injury or property damage occurs, continues, changes or resumes during the policy period. Such injury or damage is covered, but only if the insured was unaware of the original occurrence at the start of the policy period.

Once notice of a claim has been received by the insured, the notice must be given to the insurer in writing as soon as practicable thereafter.

Coverage B

The trigger for Coverage B (Personal and Advertising Injury Liability) claims is a claim for personal injury or advertising injury caused by an offense committed during the policy period and within the policy's coverage territory. The listed covered offenses are the same under both the occurrence and claims-made policy forms. Coverage C (medical payments) is triggered by an accident that takes place during the policy period, whether the policy is on an occurrence or a claims-made basis.

Section I—Coverages

Coverage A—Bodily Injury and Property Damage Liability

The Coverage A Insuring Agreement is composed of two coverage grants: bodily injury liability and property damage liability.

Under Coverage A, the insurer promises to pay sums the insured is legally obligated to pay as damages because of bodily injury or property damage covered by the policy. The bodily injury or property damage must be caused by an occurrence that takes place in the coverage territory. The bodily injury or property damage also must occur during the policy period. If the bodily injury or property damage is the result of an occurrence that took place prior to the policy period, the policy will provide coverage, but only if the insured was unaware of the occurrence at the start of the policy period. The terms bodily injury, property damage, occurrence, coverage territory and policy period are defined in the “Definitions” section of the policy. The term damages, while not specifically defined in the ISO-CGL policy, is described in the Insuring Agreement and includes claimed damages for care, loss of services or death resulting from the bodily injury.

The coverage L (Bodily Injury Liability, Property Damage Liability) insuring agreement in the AAIS GL-200 form is very similar to the corresponding ISO-CGL wording, although there is no “known loss” provision. The term damages is, however, a defined term in the AAIS policy. Under that definition, “damages” means compensation in the form of money for a person who claims to have suffered an injury. By virtue of the form's “bodily injury” definition, damages includes care, loss of services and death resulting from the bodily injury. Inclusion of the term “compensation” within the damages definition may give the insurer a greater ability to deny coverage for punitive damage awards even in jurisdictions where such awards are insurable. Absent a similar definition, the ISO-CGL forms may be interpreted by the courts as providing coverage for punitive damages in such jurisdictions.

While the ISO-CGL includes coverage for bodily injury and property damage arising out of the insured's products and completed operations under Coverage A, the AAIS GL-200 form provides such coverage under a separate insuring agreement (coverage N Products/Completed Work). In the AAIS form, a separate coverage limit applies to this coverage N. Although the ISO-CGL and AAIS forms address the bodily injury and property damage exposure differently, coverage is similar.

Duty to Defend

Under the ISO-CGL policy forms, the insurer specifically assumes the right and duty to defend any suit seeking damages for which the policy provides coverage. As stated in the “Supplementary Payments – Coverages A and B” section of the policy, the insurer promises to pay defense costs in addition to the policy's limit of liability. An exception, however, applies as respects contractually-assumed defense obligations. In some instances, these defense costs are included within the policy's limit of liability.

The insurer may, at its discretion, investigate any occurrence and settle any claim or suit seeking damages covered by the policy. The amounts that the insurer will pay are limited as described in the “Limits Of Insurance” section of the policy. The insurer's obligation to pay or defend a claim or suit ends when the policy's limit of liability has been exhausted by the payment of judgments or settlements.

The insurer usually has no obligation to defend claims that seek damages clearly not covered by the policy. However, in some instances, it may be unclear whether some or all of the allegations are actually covered by the terms of the policy. Where the insurer has promised to defend the insured, it must usually do so even when there exists only a remote possibility of coverage.

Under the AAIS form, the insurer's duty to defend is stated in the “Defense Coverage” section and applies to all coverages under the policy. While the defense provisions are similar to those in the ISO-CGL forms, the AAIS form states that the insurer will defend any suit seeking damages that “may be covered” under the policy. This is in contrast to the wording of the ISO-CGL, which provides that the insurer will defend all suits for which the policy provides coverage. The words “may be covered” make the insurer's obligation to defend clear as long there is a possibility the policy provides coverage for the suit. When coverage is questionable, insurers may have fewer grounds to deny defense under the AAIS form. As a practical matter, however, even under the ISO-CGL forms it is usually difficult for the insurer to refuse defense if at least some of the allegations are covered.

Coverage A Exclusions

The 2007 ISO-CGL policy form contains seventeen exclusions applicable to coverage A and which are described in the following sections.

Expected or Intended Injury

Coverage is excluded for bodily injury or property damage that is expected or intended by the insured. Specifically excepted from the exclusion, however, is bodily injury that results from the use of reasonable force to protect persons or property.

In addition to excluding bodily injury and property damage that is expected or intended, the AAIS GL-200 form specifically precludes coverage for bodily injury or property damage resulting from malicious acts of the insured. The AAIS exclusion applies even if the intentional or malicious act results in injury that is unintended. The AAIS exclusion is thus somewhat broader than the intentional acts exclusion in the ISO-CGL policy.

Contractual Liability

Coverage is excluded for liability assumed under any contract or agreement, except under an insured contract as that term is defined in the “Definitions” section of the policy. For the exception to apply, the bodily injury or property damage must occur subsequent to execution of an insured contract.

The exclusion also does not apply to liability the insured would have in the absence of a contract or agreement.

The wording of the exclusion specifically provides for defense expenses to be included within the policy's limit of liability where the insured has assumed a defense obligation under an insured contract. However, if certain conditions are met, these defense expenses may be paid in addition to the policy's limit of liability. These required conditions are stated in the “Supplementary Payments – Coverages A and B” section of the ISO-CGL. There is no similar provision in the AAIS GL-200 form.

With two major exceptions, contractual liability coverage provided by the two forms is similar As discussed above, the ISO-CGL provides coverage for the insured's contractually-assumed liability via an insured contract exception to the contractual liability exclusion. In the AAIS GL-200 form, coverage for the insured's contractual liability is the subject of a separate insuring agreement. The insuring agreement is found in the “Supplemental Coverages” section of the form.

. Unlike the ISO-CGL's insured contract definition, the AAIS form also does not include reference to the insured's assumption of the tort liability for injury or damage to a third person or organization. Coverage therefore may exist for injury or damage to the named insured, even if caused by an insured's indemnitee. To illustrate, assume a contractor is hired to perform work for a client and has contractually agreed to hold the client harmless for injury arising out of the contractor's work. Further assume the contractor is injured on the client's premises and sues the client. The client could then look to the contractor for indemnification under the contact's hold harmless provision. Under the AAIS form, the contractor would be entitled to coverage. However, under the ISO-CGL form, there would be no coverage for the contractor, since the business owner was a party to the contract, not a “third person or organization.”

Liquor Liability

Coverage is excluded for bodily injury or property damage for which any insured under the policy may be held liable under liquor liability laws. Such laws generally include causing or contributing to the intoxication of any person, the furnishing of alcoholic beverages to a person under the drinking age or under the influence of alcohol, or any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages. However, this exclusion applies only if the insured is manufacturing, distributing, selling, serving or furnishing alcoholic beverages as part of its business operations. Coverage is therefore implied for host liquor liability the insured may have because of the furnishing of alcoholic beverages under circumstances unrelated to conduct of the insured's business, such as at a company-sponsored function or outing.

If the insured owns or leases property where alcoholic beverages are manufactured, distributed, sold or served, and the law imposes liability on the insured if such operations are conducted illegally, the liquor liability exclusion may not apply. Coverage may depend on the circumstances and the insured's role in such unlawful operation. Special endorsements that provide coverage for liquor liability are available for insureds in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

Application of the liquor liability exclusion in the AAIS GL-200 form is similar.

Workers' Compensation and Similar Laws

Coverage is excluded for any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law. Workers' compensation benefits are established by state law and usually insured through commercial insurers or state funds by issuance of a policy designed specifically to respond to the law. Disability or unemployment benefits, in states where such benefits are required by law, may also be covered by state funds or insurance policies designed specifically to provide the necessary or required coverage. The exclusion applies even if the insured has not purchased the statutorily required coverage.

The AAIS GL-200 form contains a similar exclusion. However, the “Workers' Compensation and Related Laws” exclusion in the AAIS forms also includes benefits owing under occupational disease laws. Since such benefits are usually statutory and similar to workers' compensation, the ISO-CGL and AAIS exclusions are similar.

Employers' Liability

Coverage is precluded for bodily injury to an employee that arises out of employment or while he is performing duties related to the conduct of the insured's business. The exclusion extends to relatives of the employee who may allege injury or damages as a consequence of the employee's employment.

The employers' liability exclusion applies whether the insured is liable as an employer or in any other capacity. Under what is known as the dual capacity doctrine, an employer may not only be liable for an employee's injury under workers' compensation statutes, but also may be liable under tort liability arising from the employer's activities other than as an employer. For example, an employee who uses the employer's products may allege injury arising out of those products. Such claims would likely be covered under the employers' liability section of a WC/EL insurance policy, regardless of whether the injury was treated as a workers' compensation or product liability (tort) claim. The exclusion also applies to any obligation the insured may have to share damages with or repay someone else who must pay damages to an employee because of injury.

The employers' liability exclusion does not apply to liability assumed by the insured under an insured contract as that term is defined in the “Definitions” section of the policy.

The employers' liability exclusion in the 2007 ISO-CGL forms only applies to bodily injury sustained by employees. It does not apply as respects personal injury offenses such as libel and slander, whether or not employment-related, and which are covered under Coverage B of the ISO-CGL policy. However, in the AAIS form, the employers' liability exclusion applies to both bodily injury and personal injury. The AAIS form thus precludes coverage for employment-related libel, slander or other personal injury offenses to which the exclusion does not apply under the ISO-CGL forms.

Pollution

The 2007 ISO-CGL policy excludes bodily injury or property damage arising from the actual, alleged or threatened discharge of pollutants. The term pollutants is defined in the “Definitions” section of the policy as including solids, liquids, gases and thermal irritants or contaminants. Included within the definition are smoke, soot, fumes, vapor, acids, alkalis, chemicals and waste. Waste includes materials to be reconditioned, recycled, or reclaimed.

The exclusion applies whether the pollution occurs at or from any location that is or was the insured's premises. Excepted from this portion of the exclusion is bodily injury occurring inside a building if caused by smoke, fumes, vapor or soot produced by or originating from equipment used to heat, cool or dehumidify a building, or equipment that is used to heat water for personal use by the building's occupants or their guests. If the insured is a contractor performing services at a customer's premises, site or location, the exclusion does not apply if the customer is added as an additional insured to the policy. A third exception to the exclusion applies to bodily injury or property damage resulting from a hostile fire. A hostile fire is defined in the “Definitions” section of the policy to mean a fire that is uncontrollable or that breaks out from its intended location.

Coverage is excluded if the premises is or was used for the handling, storage, disposal, processing or treatment of waste. The exclusion also extends to the transport and handling of pollutants by or for the insured or anyone on behalf of the insured, including pollutants brought to the work site in conjunction with work being performed at the site by the insured, contractors or subcontractors. An exception applies as respects the escape of pollutants that are brought to the site and are considered necessary for the operation of mobile equipment. However, the exclusion still applies if the pollutants are intentionally discharged from the mobile equipment. Also, the exclusion still applies as respects pollutants brought to a jobsite with the intent to discharge, disperse or release them as part of the insured's operations or the operations of a contractor or subcontractor.

Other exceptions to the exclusion as respects operations performed by the insured, contractors or subcontractors are (1) bodily injury or property damage sustained within a building and which results from the release of gases, fumes or vapors from materials brought into the building, and (2) bodily injury or property damage arising out of a hostile fire.

Under the pollution exclusion, coverage for costs related to the testing or cleanup of pollutants is also precluded, even if the insured is requested to take such action by or on behalf of a governmental authority. Coverage for claims or suits by governmental authorities for damages resulting from the testing, assessment or cleanup of pollutants is excluded unless the insured has a legal liability for property damage resulting from such activities.

The AAIS GL-200 form contains a similar pollution exclusion. However, the AAIS version does not contain an exception that applies as respects the discharge of pollutants from mobile equipment brought to the job site in connection of work performed for the insured. Also unlike the 2007 ISO-CGL forms, the AAIS form does not contain an exception for injury resulting from fumes caused by a faulty heating, cooling or dehumdifying systems or equipment within a building. In addition, the AAIS exclusion contains a definition of the term pollutants. In the 2007 ISO-CGL forms the term pollutants is defined in the policy's “Definitions” section.

Unlike the definition in the ISO-CGL forms, the pollution definition in the AAIS form includes electromagnetic and sound emissions. Whether electromagnetic and sound emissions are injury-producing pollutants has been the subject of much litigation, and in this regard the AAIS exclusion is broader in scope.

Aircraft, Auto or Watercraft

Coverage is excluded for bodily injury or property damage arising out of the ownership, maintenance, use or entrustment to others of aircraft, auto or watercraft owned, operated by, rented or loaned to any insured. The term “use” means both operation and loading or unloading.

In the 2007 ISO-CGL, wording was added to this exclusion to clarify that it applies even in situations where an insured is allegedly negligent in the hiring, employment, supervision, training or monitoring of others to whom the aircraft, autos or watercraft is entrusted.

Separate business auto, aircraft and watercraft liability policies are all designed to provide this coverage. Auto is defined in the “Definitions” section of the policy to mean a land motor vehicle, trailer or semi-trailer (including any attached machinery or equipment) designed for travel on public roads. However, as stated within the definition, an auto does not include “mobile equipment.”

An exception to the aircraft, auto or watercraft exclusion applies with respect to watercraft while ashore on premises owned or rented by the insured. The exclusion also does not apply to any nonowned watercraft that is less than 26 feet long, provided it is not used to carry persons or property for a charge. Autos that are not owned or rented by, or loaned to the insured that are parked on premises owned or rented to the insured are exempted from the exclusion.

Liability assumed under any insured contract for the ownership, maintenance or use of aircraft or watercraft is also excepted from the exclusion. Still another exception to the exclusion provides coverage with respect to bodily injury or property damage arising out of the operation of machinery or equipment that is attached to, or part of, a land vehicle that would qualify under the definition of “mobile equipment” if it were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.

The AAIS GL-200 form also contains an “auto, aircraft, watercraft, mobile equipment” exclusion. However, the AAIS form grants coverage for certain mobile equipment exposures under in the “Supplementary Coverages” section of the form. While coverage under both the ISO-CGL and AAIS forms is similar, there are some minor differences. By virtue of the “mobile equipment” definition, the ISO-CGL coverage applies to self-propelled or non-self-propelled vehicles used to provide mobility to heavy equipment, such as equipment used in road construction. The AAIS form covers such vehicles only if they are self-propelled. Also, the AAIS form does not include other vehicles maintained for purposes other than the transportation of persons or cargo as a category of covered mobile equipment. A third difference involves compliance with motor vehicle financial responsibility laws. The AAIS form specifically provides coverage to comply with such laws in whatever limit is required. The ISO-CGL forms contain no such provision unless the coverage is specifically added by endorsement.

Mobile Equipment

Coverage is excluded for bodily injury or property damage arising out of the transportation of mobile equipment by an auto owned, operated by, rented or loaned to any insured. Liability arising out of mobile equipment in transit by an auto owned or operated by an insured would normally be covered under a business auto policy. The mobile equipment exclusion also applies to bodily injury or property damage resulting from mobile equipment used in prearranged activities such as racing, speed or demolition contests or stunting.

Unlike the ISO-CGL's mobile equipment exclusion, the AAIS exclusion includes pushing or pulling contests, such as a tractor-pull. In addition, the ISO-CGL refers to prearranged activity, while the AAIS form does not contain this limitation. But the AAIS exclusion is unclear as to whether coverage applies when mobile equipment is used to prepare for events in which the equipment does not participate. In contrast, the ISO-CGL's mobile equipment exclusion clearly excludes this activity.

War

Coverage is excluded for bodily injury or property damage directly or indirectly caused by war, whether or not war is actually declared, and includes any act or condition incident to war including warlike action by a military force, by any government, or by other authority using military personnel or other agents. The term “war” is defined within the exclusion to include civil war, insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against such actions. The war exclusion in the AAIS form applies to all liability arising out of war or warlike conditions, regardless of whether such liability is contractually-assumed.

Damage to Property

There are six circumstances under which coverage is excluded for property damage:

•    Damage to property owned, rented to or occupied by the insured, including the cost of replacing, restoring, repairing or otherwise maintaining the property. Also excluded are costs related to preventing injury to persons or damage to another's property. Coverage for such property is more appropriately provided by a property insurance policy. However, this element of the overall exclusion does not apply if the premises (including contents) are rented to the insured for a period of seven consecutive days or less.

•Limited coverage for fire damage to premises rented to the insured or temporarily occupied by the insured with permission of the owner is provided vis-à-vis exception wording at the end of the “Exclusions” section. However, such coverage only applies if the insured is legally liable for the damage under common or statutory law and not merely because of an assumption of liability in a contract or agreement.

•    Damage to premises sold, given away or abandoned by the insured. The exclusion only applies if the property damage arises out of part of the premises. For example, there is no coverage under the policy for a building seller's cost to correct a construction defect prior to sale of the building. However, the policy would provide coverage if the building was the insured's work and was never occupied, rented or held for rental by the insured (for example, a house built for sale by a construction contractor.)

•    Property loaned to the insured. However, coverage is provided for liability ­assumed under a sidetrack agreement. Also, this portion of the exclusion does not apply if the property is a premises (including contents) rented to the insured for a period of seven days or less.

•    Damage to personal property of others that is in the care, custody or control of the insured. This portion of the exclusion also does not apply to liability assumed under a sidetrack agreement, and also does not apply if the property is a premises (including contents) rented to the insured for a period of seven days or less.

•    Damage to that particular part of real property on which the insured or contractors or subcontractors are working on behalf of the insured, but only if the damage results from that work. This portion of the exclusion also does not apply to liability assumed under a sidetrack agreement.

•    Property that must be restored, repaired or replaced because the insured's work on such property was incorrectly performed. This portion of the exclusion does not apply to property damage that falls under the products-completed operations hazard or to liability assumed under a sidetrack agreement.

•    The property damage exclusions that relate to the above six instances are similar in the AAIS form with two exceptions. The AAIS form's damage to loaned property exclusion is slightly broader because it includes property loaned to or used by the insured.

•    The second exception relates to damage resulting from the insured's faulty workmanship. The ISO-CGL forms exclude damage to property on which the insured's work is being performed. The AAIS form, however, excludes all property damage resulting from the insured's work, regardless of whether the insured was working on the damaged property. By expanding the exclusion to include any resulting damage, the AAIS form's exclusion is significantly broadened in scope. To illustrate, assume the insured was painting a room and accidentally knocked over a can of paint that damaged the customer's carpet. The ISO-CGL policy would cover the resulting carpet damage while the AAIS form would not. The AAIS form is silent as respects the cost of replacing, restoring, repairing or maintaining the property and costs related to preventing injury to persons or damage to another's property. Hence, coverage for these costs under the AAIS form may be broader than coverage under the 2001 ISO-CGL forms.

Damage to Insured's Products

Coverage under both the ISO-CGL and AAIS forms is excluded for property damage to the insured's products if such damage arises out of the product or any part of the product.

Damage to Insured's Work

Both the ISO-CGL and the AAIS forms exclude property damage to the insured's work if the damage arises out of the work or any part of it and falls within the products-completed operations hazard. The exclusion does not apply if the damaged work or the work out of which the damage arises was performed by a subcontractor on the insured's behalf.

Damage to Impaired Property or Property Not Physically Injured

Under both the ISO-CGL and AAIS forms, coverage is excluded for damage to property which has been impaired, though not physically injured, because of (1) a defect, deficiency, inadequacy or dangerous condition in the insured's product or work, or (2) a delay or failure by or on behalf of the insured to perform a contract or agreement. This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to the insured's product. The exclusion also does not apply to the insured's product or work after the product or work has been put to its intended use.

Impaired property is defined in the ISO-CGL policy to be tangible property other than the insured's product or work that cannot be used or is less useful because it incorporates the insured's defective, inadequate or dangerous product or work. To be considered impaired, property must be restorable by repair, replacement, adjustment or removal of the insured's product or work or by the insured's fulfilling the terms of the contract or agreement.

Although worded differently, the AAIS form's impaired property definition is similar in scope.

Recall of Products, Work or Impaired Property

There is no coverage for costs or expenses incurred by the insured in recalling, replacing, removing or disposing of the insured's product, work or impaired property. The exclusion applies if there is a known or suspected defect, deficiency, inadequacy or dangerous condition in the product or work.

The AAIS GL-200 policy form's “Recall of Products or Your Work” exclusion is somewhat broader in scope. The exclusion applies to any loss of use of impaired property because of a defect, regardless of whether the impaired property has actually been recalled.

Personal and Advertising Injury

Coverage is excluded for bodily injury resulting from personal and advertising injury. This exclusion avoids a potential duplication of coverage for non-physical bodily injury that can result from personal or advertising injury offenses.

There is no comparable exclusion in the AAIS GL-200 policy form.

Electronic Data

Coverage is excluded for damages arising out of the loss, loss of use, damage to, corruption of, or inability to access or manipulate electronic data. “Electronic data” is then defined within the exclusion to include information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.

Distribution of Material in Violation of Statutes

Coverage is excluded for bodily injury or property damage arising directly or indirectly our of any act or omission that violates or is alleged to violate the following: (1) the Telephone Consumer Protection Act, including amendments thereto, (2) the CAN-SPAM Act of 2003, including amendments thereto, or (3) any other statute, ordinance or regulation that prohibits or limits the sending, transmitting, communicating or distributing of material or information.

There is no comparable exclusion in the AAIS GL-200 policy form.

End of Exclusions Section

Exclusions c. through n. above do not apply to fire damage to premises rented to the insured or temporarily occupied by the insured with permission of the premises' owner. A separate fire damage liability coverage limit applies to losses resulting from such circumstances.

The AAIS GL-200 form contains a separate coverage N (fire legal liability) insuring agreement. Coverage provided is essentially the same as the coverage provided under the ISO-CGL forms.

Additional Exclusion in the AAIS Form

In addition to the exclusions discussed above, the AAIS GL-200 form contains an “Employment Practices” exclusion. The exclusion precludes coverage for bodily injury or personal injury arising out of specified employment practices, including wrongful termination and discrimination. The exclusion applies if the insured is liable as an employer or in any other capacity, and even if the insured has an obligation to reimburse a third party for damages the third party has paid.

An employment practices liability exclusion is frequently added to the ISO-CGL policy by endorsement.

Coverage B—Personal and Advertising Injury Liability

The 2007 ISO-CGL Coverage B Insuring Agreement grants coverage for personal injury and advertising injury liability of the insured.

Under Coverage B, the insurer promises to pay sums the insured is legally obligated to pay as damages because of personal or advertising injury covered by the policy. The personal or advertising injury must be caused by an offense arising out of the insured's business and must take place in the coverage territory and during the policy period. The term personal and advertising injury is defined in the “Definitions” section of the policy.

The wording of the Coverage P (personal injury liability, advertising injury liability) insuring agreement in the AAIS GL-200 form is very similar to the ISO wording.

Duty to Defend

As is the case under Coverage A (Bodily Injury and Property Damage Liability, the insurer specifically assumes the right and duty to defend any suit seeking damages to which the insurance applies. As stated in the “Supplementary Payments – Coverages A And B” section of the policy, the insurer promises to pay defense costs in addition to the policy's limit of liability. However, the obligation to pay or defend a claim or suit ends once the policy's limit of liability has been exhausted by the payment of judgments or settlements.

Also as with claims or suits under Coverage A, the insurer may, at its discretion, investigate any occurrence or offense and settle any claim or suit seeking damages covered by the policy. The amounts, which the insurer will pay, are limited as described in Section III – Limits of Insurance.

When the insurer has promised to defend the insured, it must usually do so even when there is only a remote possibility of coverage under the policy. However, the insurer has a stated obligation only to defend an insured against any cause of action where, if the insured were found liable, there would be coverage under the policy. The insurer usually has no obligation to defend claims, which seek damages clearly not covered by the policy.

In the AAIS form, the defense provisions appear under the caption “Defense Coverage” and apply to all coverages under the policy.

Coverage B Exclusions

The 2007 ISO-CGL contains sixteen Coverage B exclusions, each of which is described below. Fourteen of the exclusions apply to specific types of injury or injury occurring under specified conditions, including two exclusions that encompass Internet activity. The exclusions apply as respects personal injury or advertising injury that arises out of:

a.  Acts caused or directed by the insured with knowledge that the act would violate another's rights and would inflict personal and advertising injury. There is no corresponding exclusion in the AAIS policy form.

b.  Oral or written publication of material done with the insured's knowledge of its falsity. The AAIS form contains a similar exclusion.

c.  Oral or written publication of material first published prior to inception of the policy. The AAIS form contains a similar exclusion.

d.  Criminal acts committed by or at the direction of the insured. The exclusion only applies to the insured involved in the criminal act. Other insureds, even if found vicariously liable for the criminal act, would still have coverage. A similar exclusion is found in the AAIS form.

e.  Offenses for which the insured has assumed liability in a contract or agreement. The exclusion does not apply, however, to liability the insured would have in the absence of the contract or agreement. There is no counterpart to this exclusion in the AAIS form

f.   Breach of contract, except an implied contract to use the advertising ideas of another in the insured's advertisement. The AAIS form contains a similar exclusion.

g.  Failure of the insured's goods, products or services to conform with advertised quality or performance. The AAIS form contains a similar exclusion.

h.  An incorrect description of the advertised price of goods, products or services. The AAIS GL-200 form contains a similar exclusion, but limits the scope of the exclusion to errors involving the insured's goods, products or services.

i.   Offenses arising out of infringement of copyright, patent, trade secret, trademark or other intellectual property rights. Such other intellectual property rights do not include the use of another's advertising idea in the insured's advertisement. An exception to the exclusion applies as respects such offenses in the insured's advertisement. Advertisement is defined in the “Definitions” section of the policy as being a broadcast or published notice to the general public or a specific market segment concerning the insured's products or services for the purpose of attracting customers or supporters.

While this exclusion applies as respects material placed on the Internet or similar means of communication, it applies only to that part of a website that is considered to be the insured's advertisement.

There is no comparable exclusion in the AAIS GL-200 policy form.

j.   Personal and advertising injury committed by insureds in media and Internet-type businesses such as those who design websites or who are search, access, content or service providers. An exception to the exclusion applies as respects false arrest or imprisonment, malicious prosecution and wrongful eviction.

The AAIS GL-200 policy form contains a similar exclusion that applies with respect to insureds in the business of advertising, broadcasting, publishing or telecasting. Reference to Internet or other electronic-type businesses is omitted in the AAIS form.

k.  Offenses arising out of an electronic chatroom or bulletin board hosted, owned or controlled by the insured.

There is no comparable exclusion in the AAIS GL-200 form.

l.   Unauthorized use of another's name or product in the insured's e-mail address, domain name or metatag, or any other similar tactic designed to mislead potential customers.

There is no comparable exclusion in the AAIS GL-200 form. The actual, alleged or threatened discharge, dispersal, migration, seepage, release or escape of pollutants. The AAIS form contains a similar exclusion.

n.  Pollution cleanup activities (including government-ordered cleanup), including costs and expenses related thereto.

The AAIS form contains a similar exclusion.

o. War. This exclusion precludes coverage for personal and advertising injury arising directly or indirectly out of war or warlike action.

The exclusion parallels the war exclusion under Coverage A.

There is no comparable exclusion in the AAIS GL-200 form.

p. Distribution of material in violation of statutes.

This exclusion parallels the distribution of materials exclusion under Coverage A.

There is no comparable exclusion in the AAIS GL-200 form.

Coverage C—Medical Payments

The insurer will pay medical expenses for bodily injury caused by an accident that occurs on or next to premises the insured owns or rents or is caused by the insured's operations. Covered medical payments include first aid administered at the time of the accident and necessary medical, surgical, X-ray and dental services. Also covered is the cost of prosthetic devices and necessary ambulance, hospital, nursing and funeral services. The medical expenses must be incurred and reported to the insurer within one year of the accident. In addition, the injured person must agree to be examined by physicians chosen by the insurer and as often as the insurer reasonably requires, at the insurer's expense. For coverage to apply, the accident must take place in the coverage territory and during the policy period. Claims under Coverage C are paid without regard to fault or liability and will not exceed the limit of insurance as usually stated in the policy declarations.

The coverage M (medical payments)insuring agreement in the AAIS form is similar to the coverage C insuring agreement in the ISO-CGL forms. However, coverage applies to accidents “arising out of” the insured's operations. In the ISO-CGL forms, coverage applies to accidents “caused by” the insured's operations. Use of the “arising out of” wording may provide somewhat broader medical payments coverage under the AAIS form, because coverage is not limited to accidents directly caused by the insured's operations.

Duty to Defend

There are no defense provisions that apply under Coverage C of the 2007 ISO-CGL policy. Medical payments coverage is intended to avoid the expense of litigation by providing prompt payment for bodily injury claims without regard to fault. Should a claim that would otherwise be resolved by payments under Coverage C result in litigation, the insurer will typically treat such a claim as a bodily injury claim under Coverage A.

Under the AAIS GL-200 forms, the insurer's defense obligations apply as respects all coverages under the policy. However, for the reasons stated above, it is unlikely any litigated claims would be handled by the insurer as a medical payments claim.

Coverage C Exclusions

There are seven exclusions that apply to Coverage C. These include expenses for bodily injury:

1.  To any insured. An exception is made as respects volunteer workers.

2.  To any person hired to perform work for the insured or to an insured's tenant.

3.  To any person injured on that part of premises owned or rented by the insured that the person normally occupies.

4.  To any person, whether or not an employee, if benefits for the bodily injury are payable or must be provided under workers' compensation, disability benefits or similar laws.

5.  To any person injured while practicing, instructing, or participating in any physical exercises or games, sports or athletic contests.

6.  That is included within the products-completed operations hazard.

7.  That is excluded under Coverage A.

Exclusions similar to 1. through 6. above are also included in the AAIS GL-200 form, although there is no exception as respects volunteers as stated in the 2007 ISO-CGL. However, the AAIS form contains three additional exclusions that apply to medical payments coverage and for which there are no counterparts in the ISO-CGL forms. These additional AAIS form exclusions preclude coverage for (1) members of the insured if the insured is a club, (2) hotel or motel guests if the insured is the owner or operator of a hotel, motel or tourist court, and (3) students, campers, patients or inmates if the insured is owner or operator of a facility in which these persons are enrolled, treated or detained. Exclusions (2) and (3) extended to facilities operated on the insured's behalf.

Supplementary Payments—Coverages A and B

Coverage under the Supplementary Payments section of the2007 ISO-CGL policy applies to costs incurred by the insurer in the defense of claims or suits. Covered costs include pre- and post-judgment interest, premiums for attachment and bail bonds, and reasonable expenses incurred by or taxed against the insured (including loss of earnings up to $250 per day) in assisting the insurer in the investigation and defense of any claim or suit. With the 2007 CGL form revision, the phrase “taxed against the insured” was clarified to mean that court costs taxed against the insured are covered, but not attorneys' fees or attorneys' expenses taxed against the insured. In most cases, supplementary payments are paid by the insurer in addition to the policy's limit of liability.

However, the insurer will pay contractually-assumed defense costs in addition to policy limits only if certain conditions are met. The conditions are enumerated in the policy, and include, but are not limited to, (1) the insured's stated obligation to defend an indemnity is stated in an insured contract, (2) there is no conflict of interests between the insured and its indemnitee, (3) a joint agreement by the insured and its indemnity that the insurer will defend both parties, and (4) the indemnitee agrees in writing that it will cooperate with the insurer in defense of the suit. The insurer's obligation to defend the indemnitee ends when the policy's limit of liability has been exhausted by payment of judgments and settlements, or when compliance with the required conditions ceases.

Supplementary payments do not apply when the insured's indemnitee is named as the sole defendant in a lawsuit. However, it is unclear how the provisions apply if both the insured and the indemnitee are named in a lawsuit and the insurer is only able to affect a settlement on behalf of the insured (and not the indemnitee).

The Duty To Defend section of the AAIS GL-200 form contains supplementary payments provisions that are similar, though not identical, to those in the ISO-CGL forms. The AAIS form pays only $100 per day for an insured's loss of earnings, but pays up to $500 for bail bonds. In addition, appeal bonds are specifically covered under the AAIS form. The subject of post-judgment interest is not addressed in the AAIS form, but would likely be interpreted by the courts as being covered as it has been in the ISO-CGL forms.

Another difference between the ISO-CGL and AAIS forms is coverage for defense costs incurred by the insured in defending an indemnitee. Unlike the ISO-CGL which pays such costs in addition to policy limits when certain specified conditions are met, the AAIS form is silent on the issue. Absent language to the contrary, insureds may be able to successfully argue that costs the insurer incurs in defending an insured's indemnitee should be paid in addition to policy limits in any circumstances.

Section II—Who Is An Insured

The following persons or entities are considered to be insureds under the 2007 ISO-CGL policy:

•    Individuals, as sole proprietors of a business. Coverage extends to the individual's spouse with regard to conduct of the business.

•    Partners or members of a partnership or joint venture, providing the partnership or joint venture is specifically named in the policy.

•    If the named insured is other than an individual, partnership or joint venture, the organization and any of its executive officers, directors, or stockholders are insureds with respect to conduct of the business. Executive officer means a person holding any of the officer positions created by the insured's charter, constitution, by-laws or similar governing document. Limited liability companies and their members and managers are also insureds with respect to conduct of business and their duties for the limited liability companies. Coverage also extends to trustees, but only with respect to their duties as such.

•    Any person (other than an employee of the named insured or a volunteer worker) or organization acting as the insured's real estate manager. Reference to volunteer workers was added with the 2001 ISO-CGL revision.

•    Any person or organization having temporary custody of a deceased insured's property, but only for liability arising out of maintenance or use of the property and only until a legal representative is appointed.

•    A deceased insured's legal representative with regard to his or her duties as such.

•    Employees (including managers of limited liability companies and volunteer workers) other than executive officers for acts within the scope of their employment or while performing duties related to conduct of the insured's business. However, employees (including managers of limited liability companies) are not insureds with respect to bodily injury or personal injury to partners, members of joint ventures, co-employees or volunteer workers that occurs in the course of employment or while performing duties related to the insured's business.

Consequential injury to a co-employee's or volunteer worker's relatives is excluded from coverage. Also excluded is any obligation to share damages with or to repay someone else who must pay for such damages. Employees are not considered insureds for bodily injury or personal injury resulting from failure to provide professional health care services, or with respect to damage to property that is (1) owned, occupied or used, (2) rented to, in the care, custody or control, or (3) over which physical control is exercised by the insured, its employees, volunteer workers, partners or members (if the insured is a joint venture or limited liability company).

•    Any organization newly formed or acquired by the named insured (other than a partnership, joint venture or limited liability company) and over which the named insured maintains ownership or a majority interest, providing there is no similar insurance available to that organization. Coverage is provided for 90 days after the organization is acquired or formed, or until the end of the policy period, whichever occurs first. Coverage does not apply to bodily injury and property damage which occurred prior to acquisition or formation of the organization, or to personal injury or advertising injury which arises out of an offense committed before the organization was acquired or formed.

Coverage was specifically extended to limited liability companies (LLCs) with the 1996 ISO-CGL form revision. Previously, it was unclear if coverage would be afforded such entities, since LLCs do not have shareholders or directors. The new wording, however, falls short of affording the LLC the same status as a corporation. There is no automatic coverage for newly formed or acquired LLCs as there is for corporations. Also, no person or organization is an insured with respect to conduct of any past or present LLC unless that person or organization is specifically listed as an insured in the policy declarations.

As respects acquisitions or past conduct, the LLC is given the same status as that of a partnership or joint venture. However, the ISO-CGL policy's definition of executive officer may make coverage unclear for members of LLCs, since many LLCs are governed by articles of organization that do not use traditional officer titles.

Unlike the ISO-CGL forms, the AAIS GL-200 form does not contain a “Who Is Insured” section. Rather, a definition of insured is placed within the “Definitions” section of the AAIS form. Like the ISO-CGL, however, the definition sets forth those entities that are granted insured status under the form.

In terms of entities qualifying as insureds, the ISO-CGL and AAIS forms use a similar, though not identical approach. The AAIS form is silent regarding trustees, limited liability companies and volunteer workers. Coverage for LLCs and volunteers must be added by endorsement. Another difference between the ISO-CGL and AAIS forms relates to mobile equipment. The AAIS form provides coverage for anyone using mobile equipment with the named insured's permission, regardless of where the equipment is used.

Under the AAIS form, employees are not insureds with respect to injury to the named insured or to a fellow employee. The ISO-CGL form contains a broader restriction not found in the AAIS form; also, employees are not covered for injury to partners and joint ventures of the named insured, as well as for consequential injury to relatives of a fellow employee who is injured.

Employees are also not insureds with respect to damage to property owned by, rented to or loaned to another employee, a partner of the insured, or to a joint venturer of the insured. This exclusion is broader in the ISO-CGL form, which also excludes coverage for damage to property used by or in the care, custody or control of any employee.

Another difference between the ISO-CGL and AAIS forms relates to coverage for the rendering of non-professional medical services. The ISO-CGL forms exclude coverage bodily injury or personal injury arising from an employee's failure to provide professional health care services. The “professional” limitation allows coverage for non-professional services, or what is commonly called “incidental medical malpractice.” In contrast, the AAIS form specifically grants coverage for the rendering (or failure to render) incidental health care services in the “Supplementary Coverages” section of the policy. Coverage does not apply to first aid expenses (considered “Medical Payments” under the policy) or to an employee who is a health care professional (such as a company nurse), even if the insured assumes the liability for these professionals under contract.

Section III—Limits Of Insurance

The 2007 ISO-CGL policy form provides specified limits of liability regardless of the number of insureds, claims made, suits brought or persons or organizations making claims or suits. The limits are usually shown on the declarations page of the policy, but may appear in a policy endorsement if the limit originally shown on the declarations has been changed.

There are six important limits on the amount payable under the policy. These limits are:

1.  General Aggregate Limit,

2.  Products-Completed Operations Aggregate Limit,

3.  Personal and Advertising Injury Limit,

4.  Each Occurrence Limit,

5.  Fire Damage Limit and

6.  Medical Expense Limit.

Policy limits apply separately to each consecutive annual period and to any remaining period of less than 12 months from the beginning of the policy period as shown in the declarations. If the policy period is extended after issuance for a period of less than 12 months, the additional period is considered part of the last preceding period for purpose of determining the limits of insurance.

In the AAIS GL-200 form, how coverage limits apply is stated in the “How Much We Pay” section of the policy.

The General Aggregate Limit

The ISO-CGL's general aggregate limit is the maximum amount payable for all damages under Coverage A (Bodily Injury and Property Damage Liability), Coverage B (Personal and Advertising Injury Liability) and Coverage C (Medical Payments), other than claims for bodily injury and property damage that arise out of the products-completed operations hazard.

The “General Aggregate Limit” in the AAIS form applies to all damages under coverage L (bodily injury liability and property damage liability), coverage M (medical payments), coverage O (fire legal liability) and coverage P (personal injury liability and advertising injury liability). Damages included under coverage N (products/completed work) are subject to a separate aggregate limit.

To avoid a situation where a large loss at one location severely reduces the coverage limits available to pay losses at other locations, insureds with multiple locations sometimes seek to endorse the policy so that it provides for the general aggregate limit to apply on a per location basis.

The Products-Completed-Operations Aggregate Limit

The products-completed operations aggregate limit is the maximum amount payable under Coverage A for damages because of bodily injury and property damage claims included in the products-completed operations hazard.

In the AAIS form, the coverage N aggregate limit applies in a similar manner.

The Personal and Advertising Injury Limit

The personal and advertising injury limit is the maximum amount payable under Coverage B for all damages because of all personal injury and all advertising injury sustained by any one person or organization. Personal injury and advertising injury claims are subject to the general aggregate limit described above.

The coverage P limit in the AAIS form applies in a similar manner.

The “one person or organization” limitation in both the ISO-CGL and AAIS forms can create a problem for insureds. To illustrate, assume there is a $1 million personal and advertising injury limit of liability stated in the policy declarations. If an insured's utterance slanders two persons and each person makes a claim, the per-person limit would apply to each person (subject to the policy's general aggregate limit.) However, if one of the claimants was slandered a second time during the same policy period, the policy would not pay more than the per-person limit, less the amount of the claimant's earlier recovery. If the “per-person” coverage limit or general aggregate limit was exhausted by the claimant's first claim, the insured would have no remaining coverage to pay the subsequent claim.

The Each Occurrence Limit

Also subject to the policy general aggregate and the products-completed operations aggregate limit (whichever applies), the each occurrence limit is the maximum amount payable for the sum of damages for bodily injury and property damage under Coverage A and medical expenses under Coverage C arising out of any one occurrence.

In the AAIS GL-200 form, the “Each Occurrence Limit” applies in a similar manner to damages under coverages L (bodily injury liability and property damage liability), N (products/completed work), O (fire legal liability) and M (medical payments), and is subject to the general aggregate and products/completed work aggregate.

The Fire Damage Limit

Fire damage liability coverage applies to the insured's legal liability for damage by fire to premises the insured rents or temporarily occupies with the owner's permission. The fire damage limit specified in the declarations is the maximum amount payable under coverage A for property damage to the premises resulting out of any one fire. The total amount payable for all fire damage claims under the policy is subject to the each occurrence and general or products-completed operations aggregate limits discussed above.

The AAIS GL-200 form contains a similar provision applicable to coverage O. However, unlike the

ISO-CGL forms, the AAIS form contains a specified limit ($50,000) for fire damage liability that is also subject to the general aggregate and each occurrence limits.

The Medical Expense Limit

The medical expense limit is the maximum amount payable for medical expenses under Coverage C because of bodily injury sustained by any one person. Total amounts payable for all medical expense claims under the policy are subject to the each occurrence and general and products-completed operations aggregate limits previously discussed.

The AAIS GL-200 form contains a similar provision, although the coverage M limit is only subject to the general aggregate and each occurrence limits.

Section IV—Commercial General Liability Conditions

The 2007 ISO-CGL policy contains nine conditions that are in addition to the conditions stated in the “Common Policy Conditions” endorsement (IL 00 17). Each of these ISO-CGL form conditions is described later.

Bankruptcy

This condition affirms that neither bankruptcy nor insolvency of the insured, of the insured's estate, will relieve the insurer of its obligations under the policy. The insurer cannot avoid payment simply because the insured (or the insured's estate) is unable to satisfy a judgment.

The AAIS form's bankruptcy condition is similarly worded. However, there is no reference to the insured's estate.

Duties in the Event of Occurrence, Offense, Claim, or Suit

The insured must notify the insurer of any occurrence or offense as soon as practicable. To the extent possible, such notice should include how, when and where the occurrence or offense took place, the names and addresses of injured persons and witnesses, and the nature of any resulting injury or damage.

If a claim is made or a suit is brought, the insured must record the specifics of the claim or suit (including date received) and notify the insurer of receipt of the claim or suit in writing as soon as practicable. The insured must then immediately send the insurer copies of any demands, notices, summonses or legal papers received in connection with the suit and authorize the insurer to obtain records and other information. The insured must also cooperate with the insurer in the investigation, settlement or defense of the claim or suit and, upon request, assist the insurer in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which the insurance applies.

In order to protect the rights of the insurer, the condition requires the insured to not make any payment, assume any obligation nor incur any expense (other than for first aid) without first getting the insurer's consent, unless at the insured's own cost.

The notice provisions in the AAIS form are contained in a separate section captioned “What Must Be Done in Case of Loss.” While worded differently from the ISO-CGL notice provisions, the duties imposed on the insured are similar. Notice to the insurer is required if the insured becomes aware of anything that indicates a claim under the policy may be forthcoming. Also, the insured is required to give prompt notice under the AAIS form as opposed to notice as soon as practicable under the ISO-CGL form.

Another difference between the ISO-CGL and AAIS forms relates to duties of injured persons under medical payments coverage. The notice section of the AAIS form requires the injured person to submit to exams by doctors chosen by the insurer as often as the insurer reasonably requires. There is no counterpart to this requirement in the notice condition of the ISO-CGL forms.

However, the ISO-CGL contains a similar provision as a prerequisite of coverage under coverage C (medical payments coverage). Because the injured person is not a party to the insurance contract, the enforceability of this requirement in the AAIS form may be questionable.

Legal Action Against Us

No person or organization can bring the insurer into any suit seeking damages from an insured or to sue the insurer unless all terms of the policy have been complied with. The condition also provides that a person or organization may sue the insurer to recover on an agreed settlement or on a final judgment; however, the insurer is not liable for damages not covered under the policy or that are excess of the applicable limit of insurance. Agreed settlement means a settlement and release of liability signed by the insurer, the insured and the claimant or his/her legal representative.

The Suits Against Us condition in the AAIS form contains similar provisions. However, the AAIS form omits the ISO-CGL's reference to damages not covered under the policy or excess of policy limits. A definition of “agreed settlement” is also omitted in the AAIS form.

Other Insurance

This condition describes how the policy will respond if other insurance is available to the insured for a loss covered under Coverage A or B of the policy. Coverage under the ISO-CGL policy is primary unless specifically written as excess over any other insurance. If the other insurance is also primary, the ISO-CGL will share the loss on an equal share basis if the other policy contains a similar provision. If the other insurance does not permit contribution by equal shares, the ISO-CGL policy will pay its pro-rata share based on the ratio of its coverage limit to the total limits of all other insurance.

Coverage under the ISO-CGL policy applies excess over other specified types of insurance, such as builder's risk, installation risk or similar coverage for the insured's work. Coverage is also excess of insurance that covers fire on the insured's premises (including separate fire legal liability coverage purchased by the insured) or coverage for losses involving aircraft, autos or watercraft that are not subject to the policy's auto, aircraft or watercraft exclusion. Coverage is also excess of any other primary liability insurance covering the insured's premises and operations to which the insured has been added as an additional insured.

Whenever the policy applies on an excess basis, the insurer has no duty to defend any claim or suit that another insurer has a duty to defend. If the other insurer does not undertake the defense, the ISO-CGL will defend and is entitled to the insured's rights against the other insurer(s).

The counterpart to the ISO-CGL's “Other Insurance” condition in the AAIS form is captioned “Insurance Under More Than One Policy.” While worded differently, the provisions of the two forms are similar. However, under the AAIS form, coverage is not excess over any other coverage to which the insured is entitled by virtue of being added as an “additional insured.”

Premium Audit

This condition stipulates that policy premiums will be computed in accordance with the insurer's rules and rates. In addition, any advance premium shown on the declarations is a deposit only, the final earned premium will be computed at the close of each audit period, and is payable by or refundable to the first named insured. The due date for audit and retrospective premiums is the due date shown on the premium billing. The first named insured is required keep records of the information needed for premium computation and copies of such records must be provided to the insurer upon request.

In the AAIS form, the “Premium Audit” condition is similarly worded, although there is no reference to how premiums are calculated.

Representations

By accepting the policy, the insured agrees that the statements made in the policy declarations are accurate and complete, are based on representations made by the insured, and that the policy was issued based on those representations.

The AAIS GL-200 form contains a similar condition captioned “Misrepresentations, Concealment, Fraud.” However, the AAIS condition states that coverage is void as to the insured “and to any other insured” if any insured has committed a violation of the condition. In the ISO-CGL forms, the “Separation of Insureds” condition operates to preserve coverage for persons who did not commit any misrepresentation. The AAIS form does not contain a similar severability provision; hence, a material misrepresentation by one insured can void the policy's coverage for all insureds.

Separation of Insureds

With the exception of the limits of insurance and any rights or obligations of the first named insured, coverage applies separately to each named insured as if it were the only named insured. The policy therefore provides coverage for claims made or suits filed by one insured against another insured under the policy. By considering each insured as if it were the only insured, the policy also provides for a severability of interests so that the acts of one insured are not imputed to other insureds.

The AAIS GL-200 form contains a similar condition that states coverage applies separately to each insured. However, unlike the ISO-CGL forms, it does not contain the provision that coverage applies to each insured as if it were the only insured. False statements and misrepresentations made by one insured could therefore void coverage with respect to all insureds.

Transfer of Rights of Recovery Against Others to Us

Any rights the insured has to recover all or part of any payment the insurer makes are transferred to the insurer. The insured must not impair those rights following a loss and, if requested by the insurer, must either file suit or assign those rights to the insurer and help the insurer enforce them.

The AAIS GL-200 form contains a similar “Subrogation” provision. However, the AAIS form also affirms the insured's right to waive recovery against a third party in writing and before a loss occurs.

When We Do Not Renew

This condition requires that any written notice of policy nonrenewal by the insurer will be mailed or delivered to the first named insured shown in the declarations no later than 30 days prior to the expiration of the policy. If notice is mailed, proof of mailing will be considered sufficient proof of notice. In many states, cancellation and nonrenewal provisions in an attached policy endorsement supersede this condition.

There is no comparable condition in the AAIS GL-200 form.

Additional Condition in The AAIS Form

The AAIS form contains an additional condition captioned “Motor Vehicle Financial Responsibility Certification.” This condition affirms coverage will comply with motor vehicle financial responsibility laws. Where such laws apply to the use of certain mobile equipment, a similar coverage guarantee is accomplished under the ISO-CGL by endorsement.

Section V—Definitions

The 2007 ISO-CGL policy contains twenty two defined terms that are listed alphabetically. Each of these defined terms is briefly summarized below.

Advertisement

An advertisement is a broadcast or published notice to the general public or a specific market segment concerning the insured's products or services for the purpose of attracting customers or supporters. Such broadcast or published notices trigger the misappropriation of advertising ideas and copyright infringement coverages under Coverage B of the policy, which specifically apply to the insured's advertisements.

Under the definition, coverage is restricted to personal and advertising injury committed in the advertisement itself, not to injury that is committed prior to publication of the advertisement. In addition, coverage is restricted to advertisements directed to the general public or a specific market segment, rather than to more limited advertising such as a personal letter to a consumer or a sales presentation.

The advertisement definition encompasses exposures presented by Internet or other electronic means of communication. As respects Web sites, advertisement means only that portion of the web-site that describes the insured's goods, products or services for the purpose of attracting customers or supporters.

There is no advertisement definition in the AAIS form. Rather, the form contains an advertising injury definition which is similar to the advertising injury definition in the 1996 and prior ISO-CGL forms. Under the definition, advertising injury does not include bodily injury, property damage or personal injury, and coverage applies to injury arising out of specifically enumerated offenses. There is no reference to the insured's “advertisement” in the AAIS form. However, the policy's advertising injury coverage applies to offenses committed in the course of advertising the insured's products or services. Since there is no reference to advertising activities conducted over the Internet or other electronic communications, coverage for these exposures is uncertain.

Auto

Auto is defined in the 2007 ISO-CGL to include a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery and equipment. Auto also includes any other land vehicle that is subject to a compulsory or financial responsibility law or other motor insurance law in the state where the vehicle is licensed or principally garaged.

The purpose of the auto definition is to distinguish between liability arising from ownership or use of autos and liability arising out of the use of mobile equipment. Machinery or equipment that is attached to an auto is usually considered to be a part of the auto. As such, coverage for liability arising out of the transport of such machinery or equipment is more properly insured under an automobile liability policy. Liability resulting from the operation of the attached machinery or equipment itself, however, is covered under the CGL policy.

The types of permanently attached mobile equipment that are considered to be autos (and therefore excluded from CGL coverage) are described within the mobile equipment definition.

The auto definition in the AAIS form is similar to the ISO definition, but contains no reference to “mobile equipment.” Instead, the mobile equipment exposure is addressed under the AAIS policy's “Supplementary Coverages” section, which contains an exception to the policy's “Auto, Aircraft, Watercraft or Mobile Equipment” exclusion. Coverage under both the ISO-CGL and AAIS forms is similar.

Bodily Injury

Bodily injury in the ISO-CGL forms means bodily injury, sickness or disease sustained by a person. The term also includes resulting death, regardless of when death occurs.

Unlike the ISO-CGL forms, the AAIS form specifically exempts from the definition mental or emotional injury, suffering or distress that does not result from physical injury. By specifically excepting mental and emotional injuries that do not result from physical injury, the AAIS definition of “bodily injury” avoids the type of ambiguity that has resulted in some coverage disputes and litigation under the ISO-CGL forms. Also, included within the definition in the AAIS form is care and loss of services.

Coverage Territory

The 2007 ISO-CGL's Coverage territory includes:

1.  The United States, United States territories and possessions, and Canada;

2.  International waters or airspace, providing the bodily injury or property damage occurs during transportation or travel between the countries listed in 1. above; and

3.  Anywhere in the world, for bodily injury or property damage arising out of the insured's products made or sold for use or consumption within the policy territory described in 1. and 2. above. Coverage therefore follows the product worldwide, whether or not the product was intended for use in the coverage territory. Coverage also applies worldwide if the injury or damage arises out of the activities of a person whose home is in the coverage territory, but who is outside the coverage territory for a short time on the insured's business.

4.  Internet or electronic-based personal and advertising injury.

The coverage territory definition also covers the insured's responsibility to pay damages as determined in a suit on the merits filed in the United States, its territories and possessions, Puerto Rico and Canada or in any settlement agreed to by the insurer.

There are two definitions of territory in the AAIS GL-200 form. A basic territory includes the United States, its territories and possessions, Puerto Rico and Canada. The second definition, coverage territory, includes international waters or airspace if the injury or damage occurs in the course of travel to or from the basic territory. Coverage applies, therefore, in such waters or airspace as long as either the origin or destination of the trip was one of the countries listed. Under the ISO-CGL forms, travel over international waters or airspace is covered only if the travel is between the listed countries. The AAIS form is silent as respects Internet or electronic-based personal and advertising injury.

Employee

Employee includes a leased worker, but not a temporary worker. Leased worker and temporary worker are also defined terms in the policy.

The AAIS uses the same definition of employee as the ISO-CGL policy form.

Executive Officer

For named insured entities, executive officers are covered with respect to their duties as executive officers. Under the definition, however, the executive officer's position (title) must be created by the insured organization's by-laws, charter, constitution or other similar governing document.

Inclusion of an executive officer definition clarifies application of the policy's fellow-employee exclusion in the “Who Is An Insured” section of the policy. However, the definition results in a potentially significant restriction of coverage for insureds. Managers and supervisors who may have previously been considered to be executive officers are no longer able to claim coverage for bodily injury or personal injury to co-workers or for damage to property owned by or in the care of the named insured or a co-worker.

There is no executive officer definition in the AAIS GL-200 form.

Hostile Fire

The defined term hostile fire was means a fire that has become uncontrollable and has broken out from its intended location.

There is no separate hostile fire definition in the AAIS form. The definition instead appears within the wording of the policy's pollution exclusion.

Impaired Property

The definition of impaired property clarifies application of the damage- to-property and product recall exclusions in the 2007 ISO-CGL policy. Tangible property is “impaired” when it cannot be used, or is less useful, because:

1.  The property incorporates the insured's product or work that is or is thought to be defective, inadequate or dangerous and the property can be restored to use by repair, replacement or removal; or

2.  The insured has failed to fulfill the terms of a contract or agreement and the damaged property can be restored to use by fulfillment of the contract or agreement.

Most insurers have tended to view the above situations as a business risk of the insured and have generally treated such risks as uninsurable.

Wording of the impaired property definition in the AAIS form is similar to the ISO-CGL wording. However, in the AAIS form, impaired property includes property that has decreased in value. The AAIS form may provide somewhat broader coverage than the ISO-CGL because property can suffer a loss of value without being rendered less useful or useless. Whether any meaningful difference in coverage between the two forms exists because of the difference in wording may depend on how the property is used and interpretation of policy wording by the courts.

Insured Contract

The definition of insured contract clarifies those types of contracts or agreements for which the policy provides coverage for the insured's assumed liability. There is no requirement that covered contracts or agreements be written. Therefore, both oral and implied contracts are encompassed by the definition.

The types of contracts or agreements for which the policy provides coverage are:

•    Premises lease contracts, except indemnification of any person or organization for fire damage to premises that is rented to or temporarily occupied by the insured with permission of the owner. Coverage for fire damage liability is provided by virtue of the wording at the end of the Coverage A “Exclusions” section.

•    Sidetrack agreements. These types of agreements are usually entered into with railroads by firms who ship their product by rail. Often, the railroad will build a “spur” or “sidetrack” that runs from the main line to the insured's location. In such cases, the railroad typically requires the insured to hold it harmless from losses related to use of the sidetrack.

•    Easement or license agreements, except those in connection with demolition or construction operations on or within 50 feet of a railroad.

•    Ordinance-related obligations of the insured to indemnify a municipality. An exception applies if the insured is doing work for that municipality.

•    Elevator maintenance agreements.

•    Any other contract or agreement pertaining to the named insured's business (including an agreement to indemnify a municipality in connection with work performed for the municipality) and under which the insured assumes the tort liability of another party to pay for bodily injury or property damage to a third person or organization. Tort liability is stated within the definition as meaning a liability that would be imposed by law in the absence of any contract or agreement.

Specifically excluded from the definition, and therefore not considered an insured contract is that portion of any contract or agreement that indemnifies a railroad for bodily injury or property damage arising out of construction or demolition operations within 50 feet of any railroad property, if such operations affect any bridge, trestle, tracks, road-beds, tunnel, underpass or crossing. Insureds who are contractors that are required to indemnify railroads in connection with work performed near railroad property are better protected through purchase of a railroad protective liability policy obtained in the name of the railroad. Also excepted from the definition of insured contract is that portion of any contract or agreement that provides for indemnification of an architect, engineer or surveyor for injury or damage arising out of the provision of (or failure to provide) professional services. If the insured is an architect, engineer or surveyor, coverage is excluded for the insured's assumed liability for injury or damage arising out of the rendering (or failure to render) professional services, including supervisory, inspection, architectural or engineering activities, whether those activities are in the form of services or of any other nature.

There is no insured contract definition in the AAIS GL-200 form. However, the types of contracts for which the AAIS form provides contractual liability coverage are described in the “Supplemental Coverages” section of the form. The types of contracts qualifying for coverage in the AAIS form are virtually identical to the insured contracts in the ISO-CGL forms.

Leased Worker

A leased worker means a person leased to the insured by a labor leasing firm under an agreement to perform duties related to the conduct of the insured's business. Under the definition, a leased worker does not include a temporary worker.

Leased workers are granted the same coverage status as regular, permanent employees. Coverage is subject, however, to the limitations described in the “Who Is An Insured” section of the policy.

Because leased workers are considered to be employees, coverage is excluded for any work-related injury or illness sustained by those leased employees. This exclusion can present a problem if the insured's operations are located in a jurisdiction where workers' compensation benefits are not available to leased employees. In such instances, the insured may have no coverage under the CGL policy for work-related injuries sustained by leased employees, and the leased employees may not have the benefit of workers' compensation coverage. This situation could result in the insured having to defend an employers' liability suit without the benefit of insurance coverage.

To resolve this potential problem, the ISO developed a “Leased Workers as Insureds” endorsement (CG 04 24) which removes leased worker from the definition of employee. However, the endorsement modifies the definition of employee only as it applies to the policy's employers' liability exclusion. Other activities of leased workers that are within the scope of their work for the insured would still be covered under the ISO-CGL policy forms.

Because of the leased worker definition, the fellow-employee exclusion applies to those workers. Leased employees can not claim that they are not employees and that they are entitled to coverage under the policy if injured by a co-employee.

The AAIS form contains a similar definition of leased worker.

Loading or Unloading

Loading or unloading means the handling of property after it is moved from the place where it has been accepted for movement into or onto an aircraft, watercraft or auto, while it is in or on these vehicles, or while it is being moved from the vehicle to the place where it is finally delivered. The definition is intended to clarify application of the aircraft, watercraft and auto exclusion in the policy and only applies if the vehicle being loaded or unloaded is not owned or operated by the insured.

Under the definition, loading or unloading does not include the movement of property by mechanical device (other than a hand truck) that is not attached to the aircraft, watercraft or auto.

While the wording of the loading or unloading definition is similar in the AAIS form, there is a minor difference in coverage created by the use of the word “movement,” rather than “handling” of property. Property can be handled (touched, adjusted, etc.) without actually being moved. By wording the definition to apply to only the “movement” of property, the scope of the aircraft, watercraft and auto exclusion in the AAIS form is potentially more limited under the ISO-CGL forms.

Mobile Equipment

The definition of mobile equipment clarifies how policy coverage applies as respects equipment that is self-propelled or attached to self-propelled vehicles. Mobile equipment is covered under the 2007 ISO-CGL policy as long as the equipment is specifically listed in the definition, and is not otherwise excluded. If the equipment is not listed in the definition, or is specifically excluded, the CGL policy does not provide coverage.

Mobile equipment (whether or not self-propelled) means the following types of land vehicles, including attached machinery and equipment:

•    Vehicles designed primarily for use off public roads, such as bulldozers, farm machinery and forklifts;

•    Vehicles used exclusively on or next to premises the insured owns or rents;

•    Vehicles that move on crawler treads;

•    Vehicles, whether self-propelled or not, that are primarily used to provide mobility to permanently mounted equipment such as power cranes, loaders, diggers and road construction or resurfacing equipment;

•    Other vehicles that are not self-propelled and which provide mobility to certain types of permanently attached equipment, such as air compressors, pumps and generators, spraying, welding, building cleaning, lighting and well-servicing equipment, cherry pickers and similar devices; and

•    Other vehicles maintained primarily for purposes other than transportation of persons or cargo.

The definition of mobile equipment further provides that self-propelled vehicles with certain types of permanently attached equipment are considered autos rather than mobile equipment and as such are excluded from coverage under the 2007 ISO-CGL policy:

(1) Equipment designed primarily for snow removal, road maintenance (except for construction or resurfacing) and street cleaning;

(2) Cherry pickers or similar devices mounted on an automobile or truck chassis and used to raise or lower workers; and

(3) Air compressors, pumps and generators, including equipment used for spraying, welding, building cleaning, geophysical exploration, lighting or well servicing.

The definition goes on to state that mobile equipment does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor insurance law in the state where the vehicle is licensed or principally garaged. Such vehicles are considered autos for purposes of CGL coverage.

Use of the equipment described in items (2) and (3) above results in both an auto liability and a general liability exposure for the insured. While the vehicle on which the equipment is mounted may be considered an “auto,” the equipment itself is “mobile equipment.” For this reason, an automobile policy may be required to cover the equipment while the vehicle is in motion and a general liability policy may be required to cover the equipment while it is in operation. To illustrate, assume a cherry picker is being moved into position so that tree branches can be cut away from overhead power lines. If the vehicle on which the cherry picker is mounted inadvertently backs into a passerby, the proper source of coverage for any resulting bodily injury would be an auto liability policy. However, if the power lines were damaged while the cherry picker's platform was being moved into place, the resulting property damage would be the subject of the general liability policy.

There is no mobile equipment definition in the AAIS GL-200 form. The types of vehicles and mobile equipment that are afforded coverage are described in the “Supplemental Coverages” section of the policy.

Occurrence

Occurrence is defined as an accident, including continuous or repeated exposure to the same general harmful conditions.

The definition of occurrence only applies to Coverage A (Bodily Injury and Property Damage Liability). It does not apply to Coverage B (Personal and Advertising Injury Liability.) Personal and advertising injuries usually do not result from accidents. While the resulting injuries may be unintended, the acts that caused them usually are intentional.

The term offense more precisely describes the acts that result in personal injury or advertising injury. For this reason, the Coverage B insuring agreement includes the term offense in place of the term occurrence. However, the term offense is not a defined term in the policy.

The AAIS GL-200 form also defines occurrence as being an accident and applies the term to bodily injury and property damage. However, the occurrence definition in the AAIS form does not include the word continuous and uses the term similar conditions instead of the “same general harmful conditions.” Whether these differences in wording are substantive enough to affect coverage so far remains to be seen. The word offense does not appear in the coverage P (personal and advertising injury) insuring agreement, but is used in place of occurrence in the personal injury and advertising injury definitions.

Personal and Advertising Injury

The definition of personal and advertising injury lists the offenses insured under Coverage B (Personal and Advertising Injury Liability) of the 2007 ISO-CGL policy and for which the policy provides an each occurrence limit under Coverage B. Consequential bodily injury, such as mental anguish or emotional distress that may be an alleged as a result of one of the listed offenses is encompassed by the definition.

Offenses that trigger Coverage B include but are not limited to the following:

•    False arrest, detention or imprisonment and malicious prosecution;

•    Wrongful eviction and invasion of privacy. Coverage extends to the insured's liability arising out of the conduct of others acting on behalf of the insured;

•    The oral or written publication of material that slanders or libels a person's or organization's products or services;

•    The oral or written publication of material that violates a person's right of privacy;

•    Use of another's advertising idea in the insured's advertisement (as the term advertisement is defined above); and

•    Copyright, trade dress or slogan infringement.

The Personal Injury definition in the AAIS form contains a list of enumerated offenses that are considered personal injury. All of these offenses are included within the 2007 ISO-CGL's Personal and Advertising Injury definition.

Pollutants

Under the definition, pollutants means any solid, liquid, gaseous or thermal irritant or contaminant. Smoke, soot, vapor, fumes, acids, alkalis, chemicals and waste are also defined to be pollutants. The term waste includes any materials to be recycled, reclaimed or reconditioned.

Under the AAIS form, the pollutant definition is contained in the wording of the pollution exclusion and is similar the ISO-CGL definition. However, the AAIS definition also includes electromagnetic and sound emissions.

Products-Completed Operations Hazard

Products-completed operations hazard is defined to mean all bodily injury and property damage occurring away from the insured's premises and that arises out of the insured's products or work.

Products that are still in the insured's possession and work that has not yet been completed or abandoned are excepted from the definition. However, work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete is encompassed by the definition.

The insured's work is considered completed when all required work has been completed or the work at a site has been completed if the contract calls for work at more than one site. Any part of the insured's work is considered complete once it has been put to its intended use by a person or organization other than another contractor or subcontractor working on the same project.

Coverage is precluded for bodily injury or property damage that arises out of the transportation of the insured's property by the insured or if the insured is in the business of transporting property to others. Coverage only applies if the loss results from a condition in or on a vehicle that is created by the loading or unloading of the vehicle and if that vehicle is neither owned nor operated by the insured.

There is also no coverage for bodily injury or property damage that results from the existence of tools, uninstalled equipment or unused or abandoned materials. In addition, the products-completed operations hazard definition does not apply to those products and operations for which the policy classification or the insurer's manual of rules mandate that products-completed operations coverage is subject to the policy's General Aggregate Limit.

The wording of the products/completed work hazard definition in the AAIS GL-200 form is similar to the ISO-CGL wording. However, under the ISO-CGL form, coverage for transportation of the insured's property only applies if the loss results from a condition in or on a vehicle that is created by the loading or unloading of the vehicle and if that vehicle is neither owned nor operated by the insured. In effect, the ISO-CGL considers a loss resulting from the loading or unloading of a transporting vehicle as a completed operations loss rather than a premises and operations or products liability loss. This distinction is not addressed within the products/completed work hazard definition in the AAIS form. As a result, there could be some question as to how losses resulting from the loading or unloading of the insured's product in or from another company's vehicle would be categorized. There is also no reference within the AAIS definition to the insurer's classification or rules manual.

Property Damage

Property damage is defined as physical injury to tangible property. Loss of use of property is also considered to be property damage, whether or not the property is physically injured. The loss of use is deemed to have occurred at the time of the physical injury or occurrence that caused the loss of use. Under the definition, electronic data is not tangible property, regardless of the content of the data or the nature of the computer hardware or software in which the data is contained.

The property damage definition in the AAIS GL-200 form ties the loss of use to the time of the occurrence resulting in that loss of use, regardless of whether or not the property has been physically injured. There is no clarification in the AAIS form stating that electronic data is not tangible property.

Suit

Suit means any civil proceeding in which bodily injury, property damage, personal injury or advertising injury covered by the policy is alleged. Also included is arbitration or other alternative dispute resolution proceedings to which any insured must submit or submits with the insurer's consent.

The suit definition in the AAIS GL-200 form is similar and is found in the “Defense Coverage” section of the policy.

Temporary Worker

The purpose of a temporary worker definition is to distinguish temporary workers from regular and leased employees. A temporary worker is defined as a person who is furnished to the insured to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions.

Because temporary workers are not considered regular or leased employees, the ISO-CGL policy's fellow-employee exclusion does not apply to these workers.

The temporary worker definition in the AAIS form is limited to those workers furnished to the insured as a temporary substitute for an employee. Workers who are not replacements for employees and are hired only to meet seasonal or short-term needs are not encompassed by the definition. Hence these workers are considered employees and are subject to the policy's fellow-employee exclusion.

Volunteer Worker

Under the definition, volunteer worker means a person who is not the insured's employee, who donates his or her time, who works at the direction of and for the insured, and who receives no compensation from the insured or anyone else.

There is no volunteer worker definition in the AAIS form.

Your Product

The term your product is defined to mean goods or products (other than real property) that are manufactured, distributed, sold, handled, or disposed of by the named insured, others trading under the insured's name, or any person or organization whose business or assets the insured has acquired. Containers (other than vehicles), parts, materials, or equipment furnished in connection with such goods or products also fall within the scope of the definition.

Your product includes warranties or representations made at any time regarding the performance, fitness, use, durability and quality of the insured's products as well as the providing of or failure to provide warnings or instructions. The reference to warranties and representations in the definition is important because liability claims arising from use of the insured's products may allege a breach of expressed or implied warranties or may contain allegations that warnings or instructions were inadequate or absent.

The definition specifically excludes vending machines or other property rented to or located for the use of others but not sold.

The products definition wording in the AAIS form is similar to the your product definition in the ISO-CGL forms.

Your Work

Your work means work or operations performed by or on behalf of the insured, as well as materials, parts or equipment furnished in connection with such work or such operations. Also included within the definition are warranties and representations made as respects the fitness, durability, use, quality or performance of the insured's work and the providing of or failure to provide warnings or instructions.

The your work definition in the AAIS form is similar to the your work definition in the ISO-CGL forms. However, coverage for warranties is limited to written warranties in the AAIS form.

Additional Definitions in the AAIS Form

In addition to the above definitions, the AAIS GL-200 form contains seven definitions that do not appear in the ISO-CGL forms. These additional definitions are briefly summarized below:

You and Your. The terms you and your mean the person, persons or organization named as the insured on the declarations.

We, Us and Our. The terms we, us and our mean the company providing coverage.

Damages. Damages mean monetary compensation for a person who claims to have suffered an injury.

Declarations. Declarations is defined to include all pages labeled “Declarations,” “Supplemental Declarations,” or “Schedules” which pertain to the policy.

Insured. Insured means the persons and entities qualifying for coverage under the policy. The definition corresponds to the “Who Is An Insured” section in the ISO-CGL forms.

Limit. Limit is the amount of coverage that applies.

Terms. Terms are the policy's provisions, limitations, exclusions, conditions and definitions.

Differences in Claims-Made Policy Form

The following discussion explains only those coverage features that are unique to the claims-made version of 2007 ISO-CGL policy form. There is no claims-made version of the AAIS GL-200 form.

Coverage Trigger

Coverage A (Bodily Injury and Property Damage Liability) under the claims-made version of the 2007 ISO-CGL policy applies to bodily injury or property damage resulting from an occurrence that takes place (1) on or after the policy's retroactive date (if any is shown in the declarations), (2) within the policy period, and (3) within the policy's coverage territory. The claim must be made against the insured and reported to the insured or insurer (whichever comes first) during the policy period or any applicable extended reporting period. There is no “known loss” provision in the claims-made ISO-CGL form.

The trigger for coverage B (personal and advertising injury liability) is the same as under coverage A, but the term offense is used in place of occurrence.

The trigger for coverage C (medical payments) is an accident that takes place during the policy period and within the coverage territory, providing the expenses are incurred and reported to the insurer within one year from the accident.

Conditions

Insured's Duties. The 2007 ISO-CGL claims-made policy form requires the insured to notify the insurer of any occurrence or offense that may result in a claim under the policy. The form specifically states that notice of an occurrence or offense is not considered to be notice of a claim. As such, the insured must still notify the insurer if and when a claim arising out of the reported occurrence or offense is received.

Notice to the insurer of an occurrence or offense that may result in a claim establishes when the occurrence or offense took place. Coverage is not triggered, however, until the claim is actually received and reported to the insurer. Disputes sometimes arise between the insurer and insured over when an occurrence or offense takes place and when the insured first had knowledge of the occurrence or offense. The insurer could deny coverage for a claim if the insured had notice of the occurrence or offense that resulted in the claim and failed to report it to the insurer. Coverage may also be denied if the insured unreasonably delays the reporting of a claim, since such delay may impair the insurer's ability to investigate or defend the claim.

Other Insurance. If other insurance is also available to the insured to pay for a loss under Coverage A or B, the ISO-CGL policy applies excess of such insurance if the inception date of the other insurance is prior to inception of the ISO-CGL policy and if the other insurance is written on an occurrence basis. This qualification applies only if there is no retroactive date shown on the policy declarations or if the policy period of the other insurance continues after the policy's retroactive date. Apart from the foregoing, the method of sharing losses under the claims-made and occurrence versions of the 2007 ISO-CGL forms is the same.

Your Right To Claim And Occurrence Information. This condition is unique to the claims-made ISO-CGL forms. Its purpose is to describe the information the insurer is obligated to provide to the insured as respects occurrences not previously reported to any other insurer during the current policy period and for the previous three years. The information includes a summary, by policy year, of payments made and amounts reserved under any applicable general aggregate limit and any products-completed operations aggregate limit.

The condition further provides that the amounts reserved are to be based on the insurer's judgment, are subject to change, and should not be regarded as ultimate settlement values. The insured is not to disclose such information to any claimant or any claimant's representative without the insurer's consent. Such information is typically given to other prospective insurers in order to obtain coverage quotes.

If the insurer elects to cancel or nonrenew the policy, this claim and occurrence information will be provided to the insured no later than 30 days prior to policy termination. Otherwise, the information will only be provided upon written request by the first named insured within sixty days following expiration. The insurer then has 45 days to respond to the insured's request.

Section VI—Extended Reporting Periods

In the claims-made ISO-CGL policy form, Section V is captioned “Extended Reporting Periods,” rather than “Definitions.” In this form, the policy definitions are contained in Section VI. There is no Section VI in the occurrence version of the ISO-CGL form.

Damages that result from occurrences or offenses that take place during the policy period may not always be immediately known by the insured or reported to the insurer. In recognition of this fact, the claims-made policy form contains provisions allowing the insured additional time to notify the insurer of late-reported claims. The provisions are called extended reporting periods (ERPs). The ERPs are only available if the policy is canceled or nonrenewed, or if the insurer renews or replaces the policy with a policy that (1) has a retroactive date later than the date shown on the declarations, or (2) does not provide coverage on a claims-made basis.

A basic extended reporting period is automatically provided at no charge. The insured is also given the option to purchase a supplemental extended reporting period. ERPs do not extend the policy period or change the scope of coverage provided by the policy. Once in effect, extended reporting periods cannot be canceled either by the insurer or the insured.

Basic Extended Reporting Period

The claims-made ISO-CGL policy form contains a provision that allows the insured additional time to report claims that arise from an occurrence or offense that takes place during the policy period.

There is no additional premium charge for this basic extended reporting period.

Under the basic ERP, the policy will respond to claims reported after policy expiration as follows:

1.  If an occurrence or offense which later results in a claim is reported to the insurer no later than 60 days following policy expiration, coverage will apply if the claim is reported within five years of policy expiration.

2.  If an occurrence or offense is not previously reported to the insurer, a subsequent claim will be covered only if it is reported within 60 days of policy expiration.

Although the basic ERP gives the insured additional time to report claims, it does not reinstate the aggregate limits of liability of the policy. The aggregate coverage limits available for payment of claims reported during the basic ERP remain the same as the limits available as of the policy's normal expiration date. In addition, the basic ERP does not apply if there is other subsequently purchased insurance that provides coverage for the claim, even if the other insurance is not available due to exhaustion of policy limits.

Supplemental Extended Reporting Period

The insured also has the option to purchase a supplemental extended reporting period endorsement. When purchased, this endorsement extends the time period during which claims can be reported beyond the period provided by the basic ERP. The reporting period is extended indefinitely for claims resulting from occurrences or offenses that took place on or after the policy's retroactive date and prior to policy expiration or termination, whether or not the occurrence or offense was reported to the insurer. This optional endorsement must be specifically requested by the insured in writing and within sixty days of policy expiration. The insured must also promptly pay the required additional premium.

Supplemental ERP coverage applies excess of any other valid and collectible insurance available to the insured for claims reported after the effective date of the endorsement.

If the insured chooses to purchase the Supplemental ERP, new policy aggregate coverage limits are provided in an amount equal to those shown in the declarations of the policy to which the endorsement applies. The new aggregate limits apply only to claims reported during the supplemental ERP.

Because the insured may lose the right to purchase the supplemental extended reporting period if the endorsement is not requested within sixty days of the policy's termination or expiration, a careful review of known occurrences and their potential for claims is necessary. Insureds may be lulled into a false sense of security by the existence of the five-year basic extended reporting period, which may not allow sufficient time for claims to be reported.