Bodily Injury Coverage in Relation to the Operations of the Insured

September 24, 2012

Our insured carries a commercial general liability policy with a $300,000 per occurrence limit. The declarations page states that the classification of the insured's business is a business office. The location is listed as a two-story concrete building, suite 218, occupied as an office.

Our insured decided to change the type of business. He decided to close the office and open a gymnasium. While one of the customers was doing some exercise in the gymnasium, the equipment broke down and the claimant suffer some injuries. The claimant submitted a formal claim to the insured but the insurer decided to deny the claim. The company argues that the bodily injury is not related to the operation for which the insured paid a premium.

The general liability policy insuring agreement reads as follows: (CG 00 01 01 96) SECTION I – COVERAGES COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.

We understand that the insurance will only apply when there is bodily injury and property damage as a result of the insured operations. The insured argues that the company should pay for the loss, even when the policy only carries a classification of an office operation instead of a gymnasium operation. He argues that the company only has the right to collect the difference in premium.

What is your opinion about this issue?

Florida Subscriber

The CGL form applies to damages for BI and PD for which the insured is legally obligated to pay. The BI has to be caused by an occurrence that happens during the policy period. There is no mention of limiting this coverage based on the insured's operations. There is nothing in the insuring agreement on this point and there is no exclusion on that point either.

So, the insured is correct. The insurer is obligated to pay the damages for which the insured is liable, absent any fraud or intentional misrepresentation on the part of the insured. At the end of the policy period, the insurer can collect the premium earned for the change in operations and then not renew the policy if desired. But, the claim should be paid.

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