AAIS COVERAGE FORM
Summary: In 2011, the American Association of Insurance Services (AAIS) released a revised commercial excess and umbrella policy, CU 0001 (09 10 edition) that replaced the previous excess and umbrella policy form (UM 0200 04 00). Like the previous form, the new policy form provides excess coverage for damage and injuries covered by underlying insurance, as well as umbrella coverage that applies in excess of a retained limit for a limited range of exposures that may not be covered by underlying insurance.
While CU 0001 essentially provides the same coverage as UM 200, the new form contains language that specifically addresses how coverage applies if underlying insurance is written on a claims-made basis or other than a claims-made basis. Presumably, this clarification was meant to address any potential ambiguities that might have existed with the prior form's language.
Another feature of the new form is that the policy's exclusions are no longer automatically subject to the so-called "following form" exceptions. This change allows the tailoring of coverage to be guided by the underwriter rather than the terms of the underlying policies.
The following discussion and analysis reviews the revised form's insuring agreements, exclusions, conditions, and definitions.
Some parts of CU 0001 are similar to the Insurance Services Office (ISO) umbrella policy (see [IDL:Commercial Liability Umbrella Policy.xml^"Commercial Liability Umbrella Policy," Companies & Coverages, Specialty Lines section^Commercial Liability Umbrella Policy]), and these similarities will be noted but not reproduced in this discussion. Other parts are similar to the ISO CGL policy. Those similarities will also be noted but are not reproduced.
Topics covered:
1. Insuring Agreement "We" will pay on behalf of the "insured" those sums in excess of "underlying insurance" for which an "insured" becomes legally obligated to pay as "damages" to which this insurance applies.
"We" have the right and duty to defend the "insured" against a "suit seeing "damages" which may be covered under Coverage E – Excess Liability, when the "limits" of "underlying insurance" are exhausted by the payment of claims, settlements, judgments, and/or defense costs if the applicable "limit" of "underlying insurance" is reduced by the payment of defense costs.
If "we" have no duty to defend, "we" have the right to defend or the right to participate with the "insured" in the defense, investigation, and settlement of "suits" against the "insured" seeking "damages" to which this insurance may apply. However, "we" have no duty to defend the "insured" against a suit seeking "damages" to which this policy does not apply. At "our" option, "we" may investigate any "occurrence" or offense to which this insurance applies and settle the resulting claims or "suits" for which "we" have the duty to defend.
a. The amount "we" will pay for "damages" and/or defense costs is limited as described under How Much We Pay. b. "We" do not have to provide a defense after "we" have paid an amount equal to the applicable "limit" as the result of:
1) Judgments or written settlements agreed to by "us"; and/or 2) Defense costs, but only if the applicable "limit" of "underlying insurance" is reduced by the payment of defense costs. "We" have no other liability or obligation to pay sums or to provide assistance or support unless specifically provided for under Supplementary Payments.
a. This insurance applies only to: "bodily injury" or "property damage" that:
a) is caused by an "occurrence" that takes place in the "coverage territory"; b) occurs during the policy period of this policy; and c) is covered by "underlying insurance" or that would have been covered by "underlying insurance" but for the exhaustion of "underlying insurance" "limits" by the payment of claims, settlements, judgments, and/or defense costs;
2) "personal and advertising injury" that: arises out of an offense committed in the course of "your" business if the offense is committed:
(1) within the "coverage territory"; and (2) during the policy period of this policy; and
b) is covered by "underlying insurance" or that would have been covered by "underlying insurance" but for the exhaustion of "underlying insurance" "limits" by the payment of claims, settlements, judgments; and
1) any other injury or damage that: arises out of a negligent act, error, omission, injury, event, incident or offense; and is covered by "underlying insurance" or that would have been covered by "underlying insurance" but for the exhaustion of "underlying insurance" "limits" by the payment of claims, settlements, judgments, and/or defense costs. subject to the following additional requirements:
a) if the "underlying insurance" applies on other than a "claims-made" basis, the negligent act, error, omission, injury, event, incident or offense must take place:
(1) within the "coverage territory"; and (2) during the policy period of this policy.
b) if the "underlying insurance" applies on a "claims-made" basis, the negligent act, error, omission, injury, event, incident or offense must take place:
(1) within the coverage territory; and (2) on or after the Retroactive Date, if any, shown on the "declarations" of this policy and prior to the end of the policy period of this policy; and
c) with respect to "underlying insurance" that applies on a "claims-made" basis, the claim must be first made against an "insured" within the policy period of this policy or within an Extended Reporting Period provided by this policy as described under 1.e. below. A claim will be deemed to have been first made when one of the following occurs:
(1) notice of such claim is received and recorded by an "insured", by an "underlying insurer", or by "us" if the "limits" of "underlying insurance" have been exhausted, whichever occurs first, if the "underlying insurance" is written on a "claims-made" and recorded basis; or
(2) notice of such claim is received by any "insured" and is reported to "us" in writing, if the "underlying insurance" is written on any other "claims-made" basis.
All claims for "damages" because of injury to the same person or organization will be treated as if they were made at the time the first claim is made against any "insured", regardless of the number of claims submitted.
Analysis
The first part of form CU 0001 is the excess liability insuring agreement. The policy provides coverage for damages due to bodily injury, property damage, personal injury and advertising injury to which the insurance applies on an excess basis. The insured is expected to have underlying liability insurance for these same exposures. Coverage is triggered if the limits of the underlying insurance policy are exhausted by payment of claims, settlements, judgments or defense costs.
The insurer has a duty to defend any suit filed against the insured once the underlying insurance is exhausted. Unlike the ISO form, however, CU 1000's use of the phrase "to which this insurance may apply" or "may be covered" allows the insurer to defend, or participate in the defense, even if it is unclear whether the policy covers the loss. If defense is still being provided by underlying insurance, the excess insurer has the right to participate with the insured or the underlying insurer in the investigation and settlement of any claim or suit that seeks damages that are covered by the policy. Once the insurer has assumed the duty to defend, the insurer also has the right to settle the claim or suit. There is no duty to defend any suit seeking damages to which the insurance does not apply.
The amount the policy will pay is limited by the provision of the "How Much We Pay" section of the policy. Once these limits are exhausted, whether by payment of judgments, agreed settlements or defense costs, the insurer no longer has an obligation to provide defense.
Coverage E applies to occurrences and offenses that happen during the policy period, within the coverage territory, and that are covered by underlying insurance. If underlying coverage is written on a "claims-made" basis, the occurrence or offense that resulted in the claim or suit must take place on or after any Retroactive Date specified on the policy and be reported during the policy period or any applicable extended reporting period in order for CU 0001 to respond. For more information on claims-made policies, see [IDL:Claims-Made CGL Form.xml^"Claims-Made CGL Form," Casualty & Surety, Public Liability section^Claims-Made CGL Form].
a. Extended Reporting Periods
1) If "underlying insurance" written on a "claims-made" basis, as described under 1.2.3)b) and 1.d.3)c) above, provides one or more Extended Reporting Periods without additional premium charge, then Coverage E—Excess Liability will also provide corresponding Extended Reporting Periods that are subject to the same terms as such Extended Reporting Periods of the "underlying insurance". The coverage provided by the Extended Reporting Periods of Coverage E—Excess Liability will be excess over the coverage provided by such extended reporting periods of the "underlying insurance".
If "underlying insurance" requires a written request from "you" for an Extended Reporting Period to be provided by endorsement and for an additional charge, then for a corresponding Extended Reporting Period to apply under this policy, "we must also receive a written request from "you" within the same period of time as specified by "underlying insurance", and "you" must pay any additional premium to "us" when due.
2) If "underlying insurance" written on a "claims-made" basis, as described under 1.2.3)b) and 1.d.3)c) above, does not provide an Extended Reporting Period, "you" may purchase an Extended Reporting Period of Coverage E – Excess Liability if:
a) "you" elect to cancel or not renew this Commercial Excess/Umbrella Liability Coverage; b) "we" cancel this Commercial Excess/Umbrella Liability Coverage for any reason other than nonpayment of premium; c) "we" elect not to renew this Commercial Excess/Umbrella Liability Coverage; d) "we" renew or replace this Commercial Excess/Umbrella Liability Coverage with other excess coverage that:
(1) Provides "claims-made" coverage; and (2) Has a Retroactive Date later than the one shown on the "declarations" of this Commercial Excess/Umbrella Liability policy; or
e) "we" renew or replace this Commercial Excess/Umbrella Liability Coverage with other excess insurance that does not provide coverage on a "claims-made" basis.
3) The following additional provisions apply with respect to any Extended Reporting Periods provided under Coverage E – Excess Liability:
a) The Extended Reporting Period applies to claims for injury that take place on the after the Retroactive Date, if any, shown on the "declarations" of this policy and before the end of this policy period. b) The Extended Reporting Period of this policy does not change the policy period of this policy or alter the scope of coverage. c) Extended Reporting Periods may not be cancelled once in effect. d) Except with respect to an Extended Reporting Period provided by endorsement for an additional premium charge, Extended Reporting Periods will not reinstate or increase the "limits" of insurance applicable to any claim to which this Commercial Excess/Umbrella Liability Coverage applies.
4) The Extended Reporting Period described under 1.e.2) above is available by endorsement for an additional charge. The charge for the Extended Reporting Period will not exceed 200% of the annual premium charge for the "claims-made" coverage provided by this Commercial Excess/Umbrella Liability Coverage. In order to purchase the Extended Reporting Period, "you" must send "us" a written request for this coverage option not later than 30 days after the end of the policy period, or not later than 30 days after the effective date of cancellation, whichever comes first. The Extended Reporting Period will not go into effect unless the additional premium is paid by the due date. Once the additional premium due for the Extended Reporting Period has been paid, the premium will be considered to be fully earned. 5) The Extended Reporting Period described under 1.e.2) above starts at the end of the policy period and lasts for three years, unless a different number of years is indicated on the Extended Reporting Period Endorsement Schedule. It applies only to claims subject to the following requirements: a) the act, error, omission, injury, event, incident, or offense took place in the "coverage territory"; b) the act, error, omission, injury, event, incident, or offense began on or after any Retroactive Date shown in the "declarations" and before the end of the policy period that applies to this coverage; and c) a claim is first made against an "insured" during the Extended Reporting Period. 1) The Extended Reporting Period described under 1.e.2) above is subject to a separate aggregate "limit" of insurance, equal in amount to the General Aggregate Limit dollar amount shown in the "declarations". The Extended Reporting Period Aggregate Limit applies to the entire term of the Extended Reporting Period, regardless of the number of years the Extended Reporting Period is in effect. a. "Damages" due to "bodily injury" include "damages" claimed by any person or organization for care, loss of services, or death that may result at any time from such "bodily injury". b. If a contract or agreement requires that coverage be provided to an "insured" that is an additional insured covered by "underlying insurance", the most "we" will pay on behalf of the additional insured is the "limit" required by the contract or agreement, less any amounts payable by any "underlying insurance". a. When injury or damage arising out of an exposure covered by "underlying insurance" is subject to a separate "limit" under the terms of that coverage, this Commercial Excess/Umbrella Liability Coverage will apply to injury or damage arising out of that exposure only if the separate "limit" is shown in the Schedule of Underlying Insurance.
Analysis
If the underlying insurance provides an extended reporting period for the claims-made coverage, then CU 0001 will do the same; the terms of the extended reporting period are the same for CU 0001 as for the underlying insurance. And, if the underlying insurance requires a written request for an extended reporting period, CU 0001 also requires one, with any additional premium paid to the insurer when it is due.
However, when the underlying "claims-made" insurance does not provide an extended reporting period, the insured may still obtain one for CU 0001 by submitting a request and paying the premium when it is due.
CU 0001 also adds wording to clarify how the extended reporting period applies, its maximum cost and term. For example, the coverage provided by the extended reporting period of CU 0001 is clearly stated to apply to claims that take place between the retroactive date and the expiration date of the extended reporting period as specified in the endorsement. If underlying "claims-made" coverage does not provide an extended reporting period, CU 0001 provides a separate aggregate coverage limit that applies to its extended reporting period.
For more information on extended reporting periods, see [IDL:Claims-Made CGL Form.xml^"Claims-Made CGL Form," Casualty & Surety, Public Liability section^Claims-Made CGL Form].
a. The terms, definitions, conditions, and exclusions of the policies of "underlying insurance" govern the coverage provided under Coverage E – Excess Liability, except for provisions pertaining to premium, right of recovery, cancellation or nonrenewal, insurance under more than one policy, defense, "limits", any agreement to renew, and the "terms" of this coverage.
Analysis
This clause attempts to make CU 0001 a follow-form type of excess policy in which the underlying insurance policy governs coverage. However, an exception in this clause could result in much confusion for the insured.
The exception states that certain terms of coverage are not subject to the governance of the underlying insurance. "Terms" is defined in the policy as meaning all provisions, limitations, exclusions, conditions, and definitions that apply to the coverage form. In other words, the provisions, limitations, exclusions, conditions, and definitions of CU 0001 are not subject to and do not follow the underlying insurance policy provisions.
The bottom line is that the insured should know that CU 0001 will follow form unless the provisions of underlying insurance conflict with those of CU 0001. Should that be the case, CU 0001 is meant to prevail.
Form CU 0001 contains 17 exclusions, labeled a. through m. Many of these exclusions are similar to those found in the ISO-CGL umbrella form.
"We" do not pay for: a. injury or damage that is not covered by "underlying insurance" for any reason other than exhaustion of its "limit". b. a "claim" based on violation of the responsibilities, obligations, or duties imposed on fiduciaries by the Employee Retirement Income Security Act of 1974 as amended and similar federal, state, or local laws, statues, or regulations. c. "bodily injury" if benefits are provided or are required to be provided by the "insured" under a workers compensation, disability benefits, occupational disease, unemployment compensation, or like law. d. "bodily injury" sustained by an "employee" of the "insured" arising out of and in the course of employment as a master or member of the crew of any vessel. e. liability imposed by automobile no-fault laws or any similar laws; uninsured motorist or underinsured motorist laws; first party physical damage coverage; personal injury protection; or automobile medical payments coverage. f. "bodily injury" or "property damage" arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, escape, or emission of "pollutants". However, this exclusion does not apply to "bodily injury" or "property damage" that is covered by "underlying insurance" or that would have been covered but for the exhaustion of the "limits" of the "underlying insurance". The coverage provided by this policy will be subject to the provisions, exclusions, and limitations of the "underlying insurance". g. "personal and advertising injury" arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, escape or emission of "pollutants" at any time. h. any loss, cost, or expense arising out of any: 1) request, demand, order, statute, or regulation requiring that any "insured" or others test for, abate, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of "pollutants"; or 2) claim or "suit" by or on behalf of any governmental authority relating to testing for, abating, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, or in any way responding to or assessing the effects of "pollutants". However, this exclusion does not apply to "bodily injury" or "property damage" that is covered by "underlying insurance" or that would have been covered but for the exhaustion of the "limits" of the "underlying insurance". The coverage provided by this policy will be subject to the provisions, exclusions, and limitations of the "underlying insurance". i. "bodily injury" or "property damage" arising out of the use of "autos", "mobile equipment", watercraft, aircraft, or "recreational vehicles" in, or in the practice for, or the preparation for, prearranged professional or organized racing, speed, pulling or pushing, demolition, or stunt activities or contests. j. "bodily injury", "property damage", "personal and advertising injury", or any other injury that is covered by "underlying insurance", including on a "claims-made" basis, arising directly or indirectly out of violations of or alleged violations of: 1) the Telephone Consumer Protection Act (TCPA), including any amendments thereto, and any similar federal, state, or local laws, ordinances, statutes, or regulations; 2) the CAN-SPAM Act of 2003, including any amendments thereto, and any similar federal, state, or local laws, ordinances, statutes, or regulations; 3) the Fair Credit Reporting Act (FCRA), including any amendments thereto, such as the Fair and Accurate Credit Transaction Act (FACTA) and any similar federal, state, or local laws, ordinances, statutes, or regulations; or 4) any other federal, state, or local law, regulation, statute, or ordinance that restricts, prohibits, or otherwise pertains to the collecting, communicating, recording, printing, transmitting, sending, disposal, or distribution of material or information. k. "bodily injury" or "personal and advertising injury": 1) to a person arising out of any: a) refusal to employ that person; b) termination of employment of that person; or c) coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, malicious prosecution, discrimination, sexual misconduct, or other employment-related practices, policies, acts, or missions directed towards that person; or 1) to a spouse, child, parent, brother, or sister of that person as a consequence of "bodily injury" or "personal and advertising injury" to that person as a result of employment-related practices described in 1)a), 1)b), 1)c), or 2) above. This exclusion applies whether the injury as a result of 1)a), 1)b), 1c), or 2) occurs before, during, or after employment of that person. This exclusion applies where the "insured" is liability either as an employer or in any other capacity or there is an obligation to fully or partially reimburse a third party for "damages" arising out of 1)a), 1)b), 1)c), or 2) above. a. "bodily injury", "property damage", or "personal and advertising injury" caused directly or indirectly by the following: 1) war, including undeclared or civil war; 2) warlike action by a military force, including action that is hindering or defending against an actual or expected attack, by any government, sovereign, or other authority using military personnel or other agents; or 3) insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these. b. any loss, cost, expense, or "damages" arising out of damage to, corruption of, loss of use or function of, or inability to access, change or manipulate "data records". However, this exclusion does not apply to "bodily injury" or "property damage" that is covered by "underlying insurance" or that would have been covered but for the exhaustion of the "limits" of the "underlying insurance". The coverage provided by this policy will be subject to the provisions, exclusions, and limitations of the "underlying insurance".
Analysis
Exclusion a. reinforces the point that Coverage E is excess coverage that sits above the coverage provided by the underlying, or primary, insurance. If that primary insurance does not cover an injury or damage, CU 0001 will follow form and also not provide coverage. The exception to this exclusion is if the underlying insurance has exhausted its limit of liability. In that case, CU 0001 will provide coverage as if the underlying insurance still had the limits available to pay for the covered injury or damage.
Exclusion b. notes that Coverage E is not meant to apply to fiduciary liability claims resulting from an ERISA violation. The coverage under CU 0001 is for bodily injury, property damage, personal injury, and advertising injury.
Exclusions c. and d. are similar to the workers' compensation and employers' liability exclusions of the ISO form; CU 0001 is a liability policy and not a workers' compensation policy. It is interesting to note however, that the employers' liability exclusion on CU 0001 is limited to employment as a master or member of the crew of a vessel, whereas the exclusion on the ISO form is not so limited.
Exclusion e. deals with restrictions of insurance coverage under state no-fault laws and uninsured or underinsured motorists laws. Also excluded are claims involving first-party auto physical damage, personal injury protection and auto medical payments. Even if the underlying insurance provides such coverage, CU 0001 will not provide excess insurance for these exposures.
Exclusions f. through h. are not reproduced above because they deal with pollution exposures and are similar to the standard pollution exclusion found on the ISO form; see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]. These exclusions apply unless underlying insurance provides coverage.
Exclusion i. excludes coverage for "bodily injury" or "property damage" which results from the use of "autos", "mobile equipment", watercraft, aircraft, or "recreational vehicles" in, or in the practice for, or the preparation for, prearranged professional or organized racing, speed, pulling or pushing, demolition, or stunt activities or contests. Such activities are out of the ordinary exposures and need specialty insurance coverage.
Exclusion j. is not discussed, as it is similar to the standard "Distribution of Material in Violation of Statutes" exclusion in the ISO form. The exclusion is meant to preclude coverage for claims and suits that allege violation of various federal and state statutes that have been passed to protect one's right to privacy. Such statutes include but are not limited to the Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003, and the Fair Credit Reporting Act (FCRA).
Exclusion k. excludes coverage for employment-related practices and is not discussed because it is similar to the exclusion in the ISO form.
Exclusion l. is the standard "war" exclusion and is identical to the "war" exclusion in the ISO form with the exception that it applies not only to bodily injury and property damage, but also to personal and advertising injury.
m. any loss, cost, expense, or "damages" arising out of damage to, corruption of, loss of use or function of, or inability to access, change, or manipulate "data records".
Analysis
Exclusion m. is the same as the "Electronic Data" exclusion in the ISO form. However, CU 0001 does provides coverage if this exposure is covered by underlying insurance.
Exclusions n., o., p. and q., not reproduced above, are extensive and apply to bodily injury, property damage, personal injury, or advertising injury arising out of lead, silica or asbestos, respectively. The exclusions extend to testing, monitoring and remediation of the pollutants. Unlike the pollution exclusion in the ISO policy form, CU 0001's exclusions apply even if underlying insurance provides coverage.
1. Insuring Agreement a. "We" will pay on behalf of the "insured" those sums in excess of: 1) the "self-insured retention"; or 2) other insurance, excluding insurance specifically purchased by the "insured" to apply in excess of the insurance afforded by this policy, which is available to the "insured" and provides coverage with respect to injury or damage to which this policy applies; which is applicable, for which an "insured" becomes legally obligated to pay as "damages" because of "bodily injury", "property damage", or "personal and advertising injury to which this insurance applies. "We" have the right and duty to defend the "insured" against a "suit" seeking damages for such "bodily injury", "property damage", or "personal and advertising injury" which may be covered under Coverage U –Umbrella Liability. If "we" have no duty to defend, "we" have the right to defend or the right to participate with the "insured" in the defense, investigation, and settlement of "suits" against the "insured" seeking "damages" to which this insurance may apply. However, "we" have no duty to defend the "insured" against a "suit" seeking "damages" to which this policy does not apply. At "our" option, "we" may investigate any "occurrence" or offense to which this insurance applies and settle the resulting claims or "suits" which "we" have the duty to defend. a. The amount "we" will pay for "damages" is limited as described under How Much We Pay. b. "We" do not have to provide a defense after "we" have paid an amount equal to the applicable "limit" as the result of: 1) Judgments; or 2) Written settlements agreed to by "us". We have no other liability or obligation to pay sums or to provide assistance or support unless specifically provided for under Supplementary Payments. a. This insurance applies only to "bodily injury" or "property damage" that: 1) is caused by an "occurrence" that takes place in the "coverage territory"; 2) occurs during the policy period of this policy; and 3) is not a continuation of, resumption of, or change in "bodily injury" or "property damage" that was known by a "designated insured" prior to the inception date of the policy period. If a "designated insured" knew, as stated under the Knowledge of Bodily Injury or Property Damage Condition, prior to the inception date of this policy period, that "bodily injury" or "property damage" had occurred, any continuation of, resumption of, or change in such "bodily injury" or "property damage" will be deemed to have been known by the "designated insured" prior to the inception date of this policy period. "Bodily injury" or "property damage" that occurs during this policy period and which is not a continuation of, resumption of, or change in "bodily injury" or "property damage" which was known by a "designated insured", as stated under the Knowledge of Bodily Injury or Property Damage Condition, to have occurred prior to the inception date of this policy period, will include any continuation of, resumption of, or change in such "bodily injury" or "property damage" after the end of this policy period. a. This insurance also applies to "personal and advertising injury" arising out of an offense committed in the course of "your" business, if the offense is committed: 1) within the "coverage territory"; and 2) during the policy period of this policy. a. "Damages" due to "bodily injury" include "damages" claimed by any person or organization for care, loss of services, or death that may result at any time from such "bodily injury". b. Coverage U does not apply to claims which are covered under Coverage E or would have been covered except for exhaustion of "underlying insurance" "limits".
Analysis
The language of the Coverage U insuring agreement is essentially the same as that of the Coverage E insuring agreement, with a few modifications in terms.
The insurer agrees to pay sums that the insured is legally obligated to pay, and which are in excess of the self-insured retention of other applicable insurance. "Self-insured retention" is a defined term in the policy and is a term unique to an umbrella policy. As is typical of umbrella policies, coverage applies to losses that are covered by the umbrella, but are not covered by underlying insurance.
As is the case under Coverage E, the insurer will assume the duty to defend any suit filed against the insured to which the insurance applies. Unlike the ISO form, however, CU 1000's use of the phrase "to which this insurance may apply" or "may be covered" allows the insurer to defend even if it is unclear whether the policy covers the loss. If there is no duty to defend, the insurer has the right to participate with the insured or any other insurer in the investigation and settlement of any claim or suit that seeks damages that are covered by the policy,. Once the insurer has assumed the duty to defend, however, the insurer then has the right to settle the claim or suit. There is no duty to defend any suit seeking damages to which the insurance does not apply.
Coverage U insurance applies to bodily injury or property damage caused by an occurrence that takes place in the defined coverage territory and that occurs during the policy period. However, there is no coverage for bodily injury or property damage that was known by a "designated insured" (a defined term) to have occurred prior to the policy period. For more information on the Montrose case and its impact on general liability policies, see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A,'' Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]. And see [IDL:Montrose Endorsement.xml^"Montrose Endorsement," Casualty and Surety, Public Liability section^Montrose Endorsement].
There are 39 Coverage U exclusions, labeled a. through nn. Most of these are reproduced below:
"We" do not pay for: a. "bodily injury" or "property damage": 1) that is expected by, directed by, or intended by the "insured"; or 2) which is the result of intentional and malicious acts of the "insured". However, this exclusion does not apply to "bodily injury" that arises out of the use of reasonable force to protect people or property. a. "bodily injury" or "property damage" liability which is assumed by the "insured" under a contract or an agreement. However, this exclusion does not apply to: 1) liability for "damages" that the "insured" would have had in the absence of the contract or agreement; or 2) liability for "damages" due to "bodily injury" or "property damage" assumed in a "covered contract", but only if such "bodily injury" or "property damage" occurs after the contract or agreement has been executed. Only with respect to liability assumed in a "covered contract", "damages" due to "bodily injury" or "property damage" include reasonable attorney fees and necessary litigation costs incurred by or for an "indemnitee", if: a) liability to that "indemnitee" for, or for the cost of, that "indemnitee's" defense has also been assumed under the same "covered contract"; and b) such attorney fees and litigation costs are for the defense of that "indemnitee" against a civil or administrative proceeding, alternative dispute resolution, or arbitration proceeding alleging "damages" to which this insurance applies. However, "damages" due to "bodily injury" or "property damage" do not include reasonable attorney fees and necessary litigation costs incurred by or for an "indemnitee" when all the requirements set forth under item 4.b. of Supplemental Payments are met.
Analysis
Exclusion a. is the typical expected or intended exclusion that is found in most general liability policies. CU 1000's exclusion does add a phrase pertaining to intentional and malicious acts to make a distinction between an intentional act and an intentional or expected result. For more information, see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A].
Exclusion b. precludes coverage for liability the insured assumes under a contract or agreement and is similar to the exclusion found on the CGL form. However, the exclusion does not apply where the insured would be liable in the absence of the contract or the agreement, or when the contract or agreement is a "covered contract" as that term is defined in the policy. Another exception to the exclusion applies when the insured has agreed to assume the defense of an indemnitee under a covered contract. The requirements for payment of an indemnitee's legal expenses are set forth in the policy's "Supplementary Payments" section discussed below. For more information on the contractual exclusion, see[IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]; and see [IDL:Contractual Liability Exposure.xml^"Contractual Liability Exposure," Casualty & Surety, Public Liability section^Contractual Liability Exposure].
Exclusions c. through g. are not reproduced above, as they are the same as those that are listed under Coverage E – Exclusions.
Exclusion h., also not reproduced, is basically the same as exclusion h. under Coverage E, although there is no reference to any potential coverage available in underlying insurance. In essence, this is a "total pollution exclusion" of coverage under Coverage U of CU 0001.
Exclusion i. and j. are not reproduced above, as they are the same as exclusions l. and j. under Coverage E.
k. "bodily injury or "property damage" for which any "insured" may be held liable by reason of: 1) causing or contributing to the intoxication of a person; 2) the furnishing of alcoholic beverages to a person under the influence of alcohol or under the legal drinking age; or 3) a law or regulation relating to the sale, gift, distribution, or use of alcoholic beverages. This exclusion applies only if "you" are in the business of manufacturing, distributing, furnishing, selling, or serving alcoholic beverages. k. "bodily injury": 1) to an "employee" of the "insured" if it arises out of and occurs in the course of employment by the "insured" or while performing duties related to the conduct of the "insured's" business; or 2) to a spouse, child, parent, brother, or sister as a consequence of "bodily injury" to such injured "employee". This exclusion applies where the "insured" is liable either as an employer or in any other capacity or there is an obligation to fully or partially reimburse a third party for "damages" arising out of l.1) or 1.2) above. However, this exclusion does not apply to liability assumed by the "insured" under a "covered contract". k. "bodily injury", "property damage", or "personal and advertising injury" arising out of the rendering of or failure to render a professional service.
Analysis
Exclusions k. and l. are similar to the liquor liability exclusion and employers liability exclusion found on the CGL form; see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]. Note that the liquor liability exclusion is applicable only if the named insured is in the business or manufacturing, distributing, selling, or serving alcoholic beverages. So, for example, if the named insured owns a building rented to a liquor retail store, and a liquor store employee sells alcohol to a minor who promptly drives off and crashes into somebody after consuming the alcohol, CU 1000 will respond to a claim made against the named insured based on his or her owning the building that housed the negligent liquor store operation. The employers liability exclusion makes the point that such coverage should be purchased as part of workers compensation coverage.
Exclusion m. precludes coverage for an exposure that requires specialty coverage. The policy would cover professional services liability if exclusions were not placed on the form by insurers. The exclusion is present because insurers know such liability is a special case and needs coverage forms that specifically address the particular exposures present in each professional service. Whereas the ISO form details the specific services that are encompassed by the exclusion, CU 0001's exclusion does not include the detail and may therefore be considered broader in scope.
Exclusion n. is not reproduced above, as it is the same as exclusion k. under Coverage E.
o. "Property damage" to property owned by, occupied by, or rented by "you", including any cost or expense incurred by "you" or another person or organization, to repair, retrofit, replace, or maintain such property for any reason, including for the purpose of avoiding injury to a person or damage to another's property. p. "property damage" to "products" if the damage arises out of the "products" or their parts. q. "property damage" to that specific part of real property on which work is being performed by: 1) "you"; or 2) A contractor or subcontractor working directly or indirectly on "your" behalf; if the "property damage" arises out of such work. However, this exclusion does not apply with respect to liability assumed under a sidetrack agreement. o. "Property damage" to that specific part of any property that must be restored, repaired, or replaced because "your work" that was performed on the property was faulty. However, this exclusion does not apply to: 1) "property damage" included with the "products/completed work hazard"; or 2) liability assumed under a sidetrack agreement. p. "property damage" to personal property in the care, custody, or control of an "insured". However, this does not apply with respect to liability assumed under a sidetrack agreement or written trailer interchange agreement. q. "property damage" to property that has not been physically injured or destroyed, or to "impaired property", arising out of: 1) a delay or failure to perform a contract or agreement as specified in its terms by "you" or one acting "your" behalf; or 2) a defect, deficiency, or inadequacy, or unsafe condition in "your work" or "products". However, this exclusion does not apply to the loss of use of other property resulting from sudden and accidental physical injury or destruction of your work" or "products" after having been put to its intended use. r. "property damage" to property loaned to "you". However, this does not apply with respect to liability assumed under a sidetrack agreement or written trailer interchange agreement. s. "property damage" to premises "you" abandon, sell, or give away, if such "property damage" originates from any part of the premises. However, this exclusion does not apply if the premises are "your work" and were never rented, held for rental, or occupied by "you". t. any loss, cost, or expense incurred by "you" or any other person or organization arising out of the loss of use, disposal, withdrawal, recall, inspection, repair, replacement, adjustment, or removal of "your work", "products", or "impaired property". This applies if "your work", "products", or "impaired property" is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, or unsafe condition in such work, "products", or "impaired property".
Analysis
Exclusions o. through w. deal with property damage to property owned by the insured or in the insurd's care, custody, or control, as well as damage to impaired property, products, the named insured's work, and the cost to recall work, products, and impaired property from the market. These exclusions are the damage to property exclusions and exclusions pertaining to the named insured's products and work that are usually found on a general liability policy. These exclusions are analyzed in the article on the CGL coverage A exclusions; see[IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A].
Exclusion x. is the same as exclusion m. under Coverage E.
y. "property damage" to "your work" if the "property damage" arises out of "your work" or any part of it and is included in the "products/completed work hazard". However, this exclusion does not apply if damage to the work or the part of the work out of which the damage arises was performed by a subcontractor on "your" behalf.
Analysis
Exclusion y. precludes coverage for damage to the insured's work and that falls within the scope of the policy's products/completed work hazard coverage. The exclusion does not apply if the damage was caused by a contractor working on the insured's behalf.
Exclusion z. is the same as exclusion j. under Coverage E.
aa. "personal and advertising injury" arising out of an act committed by or directed by the "insured" who knew that "personal and advertising injury" would occur as a result of the act. bb. "personal and advertising injury" arising out of a criminal act committed b or directed by the "insured". cc. "personal and advertising injury" arising out of: 1) oral or written publication of material done by or at the direction of the "insured" who knew it was false; or 2) oral or written publication of material that took place prior to the beginning of the policy period. dd. "personal and advertising injury" arising out of breach of contract, other than using the advertising ideas of another in "your" advertisement" under an implied contract. ee. "personal and advertising injury" arising out of the failure of goods, "products", or services to conform with quality or performance as stated in "your" "advertisement".
ff. "personal and advertising injury" arising out of an offense committed by an "insured" whose business is: 1) advertising, broadcasting, publishing, or telecasting; 2) designing, developing, or coordinating the content of websites for others; or 3) providing internet access, search service, or content capabilities. However, this exclusion does not apply to false arrest, detention, or imprisonment; malicious prosecution; and wrongful entry into, wrongful eviction from, or invasion of the right of private occupancy of a room, dwelling, or premises, that a person occupies and which is committed by or on behalf of the owner, landlord, or lessor of the room, dwelling or premises. The placement of advertising, including frames, borders, or links, on the Internet is not in and of itself considered being in the business of advertising, broadcasting, publishing, or telecasting. gg. "personal and advertising injury" liability arising out of wrong descriptions of the price of an "insured's" goods, "products", or services as stated in "your" advertisement. hh. "personal and advertising injury" liability which is assumed by the "insured" under a contract or an agreement. However, this exclusion does not apply to liability that the "insured" would have had in the absence of the contract or agreement. ii. "personal and advertising injury" arising out of any violation of intellectual property rights, including infringement of a trademark, trade-secret, or patent rights or copyright. With respect to this exclusion, intellectual property rights do not include using the advertising ideas of others in "your" advertisement. jj. "personal and advertising injury" arising out of electronic chat rooms, gripe sites, social networking sites, blogs, bulletin boards, or other forums which the "insured" hosts, owns, or has the control or authority to manage or update. kk. "personal and advertising injury" arising out of using, without permission, the name or product of others on "your" website or in "your" e-mail address, domain name, or metatags for the purpose of misleading the potential customers of another.
Analysis
Exclusions aa. Through kk. pertain to personal and advertising injuries and are similar to the ISO-CGL Coverage B exclusions. For an analysis of these exclusions, see [IDL:CGL Cvg Fm - Cvg B.xml^"CGL Coverage Form—Coverage B," Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage B].
Exclusions ll., mm., and nn., not reproduced above, are extensive and apply to bodily injury, property damage, personal injury, or advertising injury arising out of lead, silica or asbestos, respectively. The exclusions extend to the testing, monitoring and remediation of the pollutants.
1. "We" will pay the following for any claim "we' investigate or settle, or any "suit" "we" defend, if "we" have a duty to defend: a. the court costs taxed against the "insured" in the "suit". These costs do not include attorneys' fees or attorneys' expenses; b. the expenses incurred by "us"; c. the necessary and reasonable expenses incurred by the "insured" at "our" request to assist "us" in the defense or investigation of the claim or "suit", including up to $250 a day for actual loss of earnings for time spent away from work; d. pre-judgment interest awarded against the "insured" on that part of the judgment "we" pay. If "we" offer to pay the "limit", "we" will not pay any pre-judgment interest based on that period of time after the offer; e. The interest which accrues on the entire amount of a judgment beginning with the entry of a judgment and ending when "we" tender, deposit in court, or pay the portion of the judgment that is up to, but does not exceed, "our" "limit"; f. The cost of appeal bonds or bonds for the release of attachments up to "our" "limit"; g. The cost, up to $2,000, for bail bonds, whether or not due to an accident or traffic law violation, required of an "insured" because of an "occurrence" to which this policy applies. However, "we" are not required to apply for or furnish bonds. 2. With respect to Coverage E, if the "limits" of any "underlying insurance" are reduced by payment of defense costs, related supplemental payments under this policy will also reduce the applicable "limits" under this policy. Otherwise, supplemental payments are in addition to the "limits" for Commercial Excess/Umbrella Liability Coverage. 3. When "we" have the right but not the duty to defend the "insured" and choose to participate in the defense, "we" will pay "our" own expenses but will not contribute to the expenses of the "insured" or the "underlying insurer". 4. If "we" defend an "insured" against a "suit" and an "indemnitee" of the "insured" is also named as a party to the "suit": a. "we" will: 1) defend that "indemnitee"; 2) pay the attorneys' fees incurred by "us" in the defense of that "indemnitee"; 3) pay necessary litigation expenses incurred by "us"; and 4) pay necessary litigation expenses incurred by the "indemnitee" at "our" request. b. all of the following condition conditions must be met: 1) the "suit" seeks "damages against the "indemnitee" for which the "insured has assumed the liability of the "indemnitee" in a "covered contract"; 2) this insurance applies to such liability assumed by the "insured"; 3) the obligation to defend, or the cost of the defense of, that "indemnitee" has also been assumed by the "insured" in the same "covered contract"; 4) no conflict appears to exist between the interests of the "insured" and the interests of the "indemnitee" in the allegations in the "suit" and in the information "we" know about the "occurrence"; 5) the "indemnitee" and the "insured" as "us" to conduct and control the defense of that "indemnitee" against such "suit" and agree that "we" can assign the same counsel to defend the "insured" and the "indemnitee"; and 6) the "indemnitee" agrees to: a) cooperate with "us" in the investigation, settlement, or defense of the "suit"; b) immediately send "us" copies of any demands, notices, summonses, or legal papers received in connection with the "suit"; c) notify any other insurer whose coverage is available to the "indemnitee"; d) cooperate with "us" with respect to coordinating other applicable insurance available to the "indemnitee"; e) provide "us" with written authorization to obtain records regarding the "suit"; f) provide "us" other information related to the "suit"; and g) provide "us" with written authorization to conduct and control the defense of the "indemnitee" in such "suit". If the above conditions are met, such payments will not be deemed to be "damages" for "bodily injury" or "property damage" and will not reduce the "limits", regardless of the provisions of exclusion 2.b.2) of Coverage U. "Our" obligation to provide a defense for an "insured's" "indemnitee" and to pay for the "indemnitee's" defense and litigation costs as Supplemental Payments ceases when "we" have paid an amount equal to the applicable "limit" as the result of a judgment or settlement or when a requirement set forth under 4.b.1), 2) 3), 4), 5), and 6) above is no longer met.
Analysis
This section is similar to the Supplementary Payments section of the ISO policy. When the insurer assumes the duty to defend, it will pay the cost to investigate, defend and settle the suit. If the insurer elects to participate in the investigation, defense or settlement where another insurer or the insured is defending, it will pay its own expenses. It is interesting to note that under Coverage E, defense expenses incurred reduce the coverage limit if defenses expenses reduce the limits of underlying insurance.
CU 1000 will defend an indemnitee of the insured if that person is named as a party in a lawsuit against the insured, providing that all of the conditions listed must be met before that defense will take place. Like the ISO form, CU 1000 lists several explicit conditions that must be met, and these should be known by any insured who has contractually agreed to assume the defense of an indemnitee. Failure to comply with the conditions could result in the expenses incurred to defend an indemnitee reducing the policy's coverage limits.
This section of the policy lists the duties of the insured in the event of a loss. They are similar to the duties listed on the CGL form, such as notifying the insurer of a claim or lawsuit as soon as practicable, cooperating with the insurer in the investigation of a claim, and not making any payment or assuming any obligation without the insurer's consent. For information on the duties of the insured, see [IDL:General Provisions of CGL.xml^"General Provisions of the CGL," Casualty & Surety, Public Liability section^General Provisions of the CGL].
This section of CU 0001 begins by stating that the coverage limits are the most the policy will pay under Coverage E and Coverage U, regardless of the number of insureds, claims, or coverages. The policy's General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit are then discussed, again by stating that the limits are the most that will be paid by the insurer. These clauses are not reproduced here due to the similarity with the limit of insurance section of the CGL form. For an analysis of this information, see[IDL:General Provisions of CGL.xml^"General Provisions of the CGL", Casualty & Surety, Public Liability section^General Provisions of the CGL].
As respects Coverages E and U, the Each Occurrence Limit shown on the declarations page is the most the insurer will pay for the total of all damages (a defined term) arising out of a single occurrence. This Each Occurrence Limit is subject to the General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit, and includes all bodily injury, property damage and personal and advertising injury or offense sustained by one person or organization.
Of course, for Coverage E to apply, the damages and injury must be covered by underlying insurance. If the underlying insurance limits have been reduced or exhausted by payment of claims and/or defense costs, CU 0001 will drop down and continue to provide coverage excess of, or in place of, the underlying policy.
7. With respect to Coverage E, if "underlying insurance" is not concurrent with the policy period of this Commercial Excess/Umbrella Liability Coverage, only claims for "occurrences" due to "bodily injury" or "property damage", offenses due to "personal and advertising injury", and other negligent acts, errors, omissions, injuries, events, and incidents that are covered by "underlying insurance" and that take place during the policy period of this policy will be considered in determining the extent to which any aggregate "limit" in the "underlying insurance" has been reduced or exhausted. However, for any "underlying insurance" written on a "claims-made" basis, the available "limits" of "underlying insurance" will only be reduced or exhausted by payment of: a. claims that are made during the policy period, or any Extended Reporting Period, of this Commercial Excess/Umbrella Liability Coverage; or b. related defense costs, but only if the "limits " of "underlying insurance" are reduced by payment of defense costs. 8. The General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit apply separately to each consecutive 12 month period beginning with the inception date shown on the "declarations" for this Commercial Excess/Umbrella Liability Coverage. They also apply separately to any remaining policy period of less than 12 months, unless the Commercial Excess/Umbrella Liability Coverage was extended after it was written. In that case, the additional period will be considered part of the last preceding period for the purpose of determining "limits".
Analysis
Under the Coverage E insuring agreement, CU 1000's coverage applies once the aggregate coverage limit of the underlying insurance is exhausted. If the policy term of underlying insurance is not concurrent with the term of CU 1000, only losses that are covered by the underlying policy and which occur during the policy period of this policy will be considered by the insurer as reducing the aggregate coverage limit of the underlying insurance. However, if underlying insurance is written on a claims-made basis, underlying coverage limits will only be reduced by claims that are made during the term of this policy, or this policy's extended reporting period. Also, if underlying insurance is provided on a claims-made basis and defense costs reduce the coverage limits, CU 1000 will treat defense costs it pays in the same manner.
The General Aggregate Limit and the Products/Completed Work Hazard Aggregate Limit both apply for a 12-month period beginning with the inception date of the policy, even if the policy is not in effect for that long a period of time. However, if the policy term is extended beyond the 12-month period after the policy was written, both of the aggregate limits as originally stated still apply and are not increased.
CU 0001 contains 20 conditions, many of which are similar or identical to those found in the ISO-CGL policy or Common Policy Conditions forms and which are referred to but not reproduced below.
1. Appeals – If an "underlying insurer" or the "insured" elects not to appeal a judgment in excess of the "limit" of any "underlying insurance" with respect to Coverage E, or in excess of the "self-insured retention" with respect to Coverage U, "we" may elect to make such appeal. If "we" so elect, "we" will be liable, in addition to the applicable "limit", for all expenses "we" incur that pertain to such appeal.
10. Knowledge of Bodily Injury or Property Damage – With respect to Coverage U, knowledge of "bodily injury" or "property damage" will be deemed to have occurred at the earliest of the following times: a. when a claim or demand for "damages" alleging "bodily injury" or "property damage" is received by any "designated insured"; b. when any "designated insured" reports the "bodily injury" or property damage" to "us" or any other insurer; or c. when any "designated insured" becomes aware of anything that indicates that "bodily injury" or "property damage" may have occurred or is occurring. 12. Maintenance of Underlying Insurance – With respect to Coverage E, "you" must maintain the "underlying insurance" in full force and effect during the term of this policy. If you fail to maintain "underlying insurance", the insurance provided by this policy will not replace such "underlying insurance", but will apply as if that "underlying insurance" were valid and collectible. If any "underlying insurance" is cancelled or not renewed and not replaced or there is an increase in the scope of coverage in any "underlying insurance", "you" must notify "us" at once. "We" will not be liable under this policy for more than "we" would have been liable if that "underlying insurance" had not been terminated or had been kept at its original "limits" or coverages. Reduction or exhaustion of any aggregate "limit" in any "underlying insurance" by payments for judgments, settlements, or expenses for "occurrences" or offenses to which this policy applies will not be a failure to maintain "underlying insurance" in full force and effect. No statement contained in this condition limits "our" right to cancel or not renew this policy. 13. Misrepresentation, Concealment, Or Fraud – This coverage is void as to "you" and any other "insured" if, before or after a loss: a. "you" have or any other "insured" has willfully concealed or misrepresented: 1) a material fact or circumstance that related to this insurance or the subject thereof; or 2) "your" interest or any other "insured's" interest herein; or b. there has been fraud or false swearing by "you" or any other "insured" with regard to a matter that relates to this insurance or the subject thereof.
Analysis
The "Appeals" condition is an attempt by the insurer to protect its financial interest in any claim against the insured. If the insured is successfully sued for an amount in excess of its underlying policy, CU 0001 wants to make sure such a judgment is appealed. This strategy might result in the judgment being reversed or having the amount of the judgment lowered, thereby saving the excess insurer from expending its policy limits. So, if the insured and its underlying insurer won't appeal the judgment, the "Appeals" condition allows the umbrella insurer to do it. As a matter of course then, the insurer agrees to pay for its appeal.
Conditions two through nine are similar to the conditions found on the ISO-CGL and Common Policy Conditions forms. The conditions deal with the issues of assignment, bankruptcy of an insured, bankruptcy of an underlying insurer cancellation, policy changes, conformity with state statutes, examination of the insured's records and the insurer's right to inspect the insured's property and operations. For information on these conditions, see [IDL:General Provisions of CGL.xml^"General Provisions of the CGL," Casualty & Surety, Public Liability section^General Provisions of the CGL]; and see [IDL:Common Policy Conditions.xml^"Common Policy Conditions," Fire & Marine, Commercial Property section^Common Policy Conditions].
The "Knowledge of Bodily Injury or Property Damage" condition clarifies the time at which the insurer recognizes that a claim has been made under Coverage U.
Condition 11 is similar to the "Legal Action Against Us" condition in the ISO-CGL policy, and is therefore not reproduced above.
The "Maintenance of Underlying Insurance" condition is an important part of the commercial umbrella/excess liability policy. Since the policy is, by its very nature, an excess insurance policy, it requires the insured to maintain underlying insurance to prevent the excess policy from becoming a primary insurance source of recovery. This is a contractual responsibility for the insured and complements the contractual promise of the insurer to pay "all sums in excess of underlying insurance for which an insured becomes legally obligated to pay." If the underlying insurance is cancelled or not renewed or even materially changed, the insured has to notify the excess insurer in order to allow the insurer to protect its financial interest. If the underlying insurance is used to pay a claim against the insured, that reduction (or even exhaustion) of the underlying insurance is not considered by the excess insurer to be a failure to maintain the underlying insurance.
Condition 13 explains how "Misrepresentation, Concealment Or Fraud" by the insured can void coverage.
Conditions 14 through 20 are the "Subrogation", "Transfer of Defense", "Separate Insureds", "Premium", "Insurance Under More Than One Policy", "Loss Payable" and "Extended Coverage Territory" conditions. These conditions are not reproduced above as they each have a counterpart in the ISO policy form.
Form CU 1000 has 37 definitions in a section that appears at the beginning of the policy form. While most of the definitions are similar to those found on the CGL form, the terms listed below are referred to frequently in the above discussion. For more information on the standard definitions—such as auto, bodily injury, employee, insured, (or covered) contract, loading or unloading, and mobile equipment—see [IDL:CGL Definitions.xml^"Commercial Liability Definitions", Casualty & Surety, Public Liability section^Commercial Liability Definitions].
1. "Claims-made" means liability insurance coverage provisions that apply to a claim for injury or damage if: a. the claim is first made against an "insured" during the policy period or an extended reporting period; and b. the injury or damage occurs on or after the retroactive date shown on the declarations of the "claims-made" policy and prior to the termination of the policy period of that insurance. 7. "Coverage territory – a. Under Coverage E – Excess Liability, "coverage territory" means those countries, territories, possessions, international waters, airspace, and other parts of the world that fall within the coverage territory recognized by the applicable "underlying insurance." b. Under Coverage U – Umbrella Liability, "coverage territory" means the world except for any foreign country, nation or jurisdiction upon which the United States of America has imposed an embargo or other economic sanctions. 10. "Damages" means compensation in the form of money for a person or organization who claims to have suffered an injury. 11. "Declarations" are all pages labeled "declarations", supplemental declarations, or schedules, which pertain to this policy. 19. "Limit" means the amount of coverage that applies. 29. "Self-insured retention" means the dollar amount shown on the "declarations" that be first paid by the "insured" before this insurance becomes applicable. 32. "Underlying insurance" means the liability insurance coverage provided under policies shown in the Schedule of Underlying Insurance on the "declarations" for the "limits" and policy periods indicated. This includes any policies issued to replace those policies during the term of this insurance that provide: a. at least the same "limits"; and b. the same hazards insured against, except as modified by general program revisions or as agreed to by "us" in writing. 33. "Underlying insurer" means any insurer who issues a policy of "underlying insurance".
Analysis
Unlike the ISO policy form, CU 1000 contains a definition of the term "claims-made". The definition follows the typical description of a claims-made policy as found in the insuring agreement of such a policy.
CU 1000 makes a distinction between the definition of "Coverage Territory" as it applies to Coverage E and Coverage U. The coverage territory under Coverage E is basically determined by underlying coverage. For Coverage U, the coverage territory is worldwide, with the exception of parts of the world where the U.S. has imposed an embargo or other economic sanctions.
The term "Damages" is not usually defined in an insurance policy, as the definition is usually determined by the courts. In this policy, the meaning is the same as in a legal dictionary and as accepted by courts around the country – monetary compensation for a person who suffers an injury. The term also applies as respects an organization that also suffers an injury.
"Declarations" is the policy page that lists the named insured, policy terms, and the limits of insurance—all vital parts of the insurance contract. The declarations of CU 1000 list not only the limits of liability for the policy itself, but also the limits of the underlying insurance coverages since such coverages are a vital ingredient in excess insurance.
CU 1000 defines the term "Insured" basically as the standard ISO form does, and is not reproduced above. CU 1000, however, defines an insured under Coverage E separately from an insured under Coverage U.
The definition of "Limit" is self-explanatory.
"Self-insured retention" is the amount that must be paid by the insured before Coverage U applies.
"Underlying insurance" is the springboard for Coverage E – Excess Liability coverage under CU 0001. The excess liability payments are made in excess of the underlying insurance (primary insurance) and such insurance has to be in force and cover the loss for coverage E to apply.
The "Underlying insurer" is the issuer of the primary insurance coverage.
The Nuclear Energy Liability exclusion in CU 1000 is not reproduced here, but deserves a separate mention. This exclusion is similar to the broad form nuclear energy exclusion ([IDL:IL 00 21 05 04.pdf^IL 00 21^IL 00 21]) that modifies several liability coverage forms. For a discussion of this exclusion, see[IDL:Nuclear Energy Liab Excls.xml^"Nuclear Energy Liability Exclusion," Casualty & Surety, Public Liability section^Nuclear Energy Liability Exclusion].
There are numerous endorsements that can be used to modify the coverage provided under CU 1000. The following information is a list of available optional endorsements that can be attached to form CU 1000:
Number Edition Endorsement CL 0605 01 15 Certified Terrorism Loss Disclosure Of Premium And Federal Share Of Insured Losses CL 1605 06 06 Certified Terrorism Loss Disclosure Of Premium And Federal Share Of Insured Losses CU 0701 09 10 Exclusion – Fungus Or Related Perils – Contracting Operations Coverages E And U CU 0702 09 10 Exclusion – Fungus Or Related Perils – Coverages E And U CU 0703 09 10 Exclusion – Damage To Work Performed By You Or On Your Behalf –Coverages E And U CU 0704 09 10 Exclusion – Damage To Work Performed By You Or On Your Behalf – Designated Locations Or Projects Coverages E And U CU 0705 09 10 Exclusion – Exterior Insulation And Finish Systems – Coverages E And U CU 0706 09 10 Exclusion – Auto Liability – Coverage E CU 0707 09 10 Exclusion – Designated Auto – Coverage E CU 0708 09 10 Exclusion – Non-Owned Auto Liability Coverage And Hired Auto Liability Coverage – Coverage E CU 0709 09 10 Exclusion – Contractual Liability – Coverage U CU 0710 09 10 Exclusion – Contractual Liability – Coverage E CU 0711 09 10 Exclusion – Products/Completed Work Hazard – Coverages E And U CU 0712 09 10 Exclusion – Products/Completed Work Hazard – Coverage U CU 0713 09 10 Exclusion – Designated Products – Coverages E And U CU 0714 09 10 Exclusion – Designated Work – Coverages E And U CU 0715 09 10 Exclusion – Designated Premises – Coverages E And U CU 0716 09 10 Exclusion – Designated Projects – Coverages E And U CU 0717 09 10 Exclusion – Personal And Advertising Injury Liability – Coverages E And U CU 0718 09 10 Exclusion – Real Property – Care, Custody, And Control Coverages E And U CU 0719 09 10 Exclusion – Professional Liability – Coverage E CU 0720 09 10 Exclusion – Employee Benefits Liability – Coverage E CU 0721 09 10 Exclusion – Liquor Liability – Coverage E CU 0722 09 10 Exclusion – Watercraft Liability – Coverage E CU 0723 09 10 Exclusion – Designated Watercraft – Coverage E CU 0724 09 10 Exclusion – Cross Liability – Coverages E And U CU 0725 09 10 Exclusion – Punitive Damages – Coverages E And U CU 0726 09 10 Exclusion – Employers Liability – Coverage E CU 0727 09 10 Exclusion – Directors And Officers Professional Liability – Coverage E CU 0728 09 10 Exclusion – Communicable Disease – Coverages E And U CU 0729 09 10 Exclusion – Communicable Disease – Limited Products Excepted Coverages E And U CU 0730 09 10 Exclusion – Umbrella Liability – Coverage U CU 0731 09 10 Exclusion – Designated Ongoing Operation – Coverages E And U CU 0732 09 10 Exclusion – Abuse Or Molestation – Coverages E and U CU 0733 09 10 Exclusion – Athletic Or Sports Participants – Coverages E And U CU 0734 09 10 Exclusion – Intercompany Products Suits – Coverages E And U CU 0735 09 10 Exclusion – Property In Your Custody – Coverages E And U CU 0736 09 10 Exclusion – Total Pollution – Coverage E CU 0737 09 10 Exclusion – Total Pollution With Hostile Fire Exception – Coverage E CU 0738 09 10 Exclusion – Total Pollution With Building Equipment And Hostile Fire Exceptions – Coverage E
CU 0739 09 10 Expanded Liquor Liability Exclusion – Coverage E CU 0740 09 10 Expanded Liquor Liability Exclusion – Exception For Scheduled Events Coverage E CU 1001 09 10 Change Endorsement CU 1002 09 10 Contractual Liability Limitation – Coverage U CU 1003 09 10 Amendment – Aggregate Limits Of Insurance (Per Location) – Coverages E And U CU 1004 09 10 Amendment – Aggregate Limits Of Insurance (Per Project) – Coverages E And U CU 1005 09 10 Professional Liability Limitation – Coverage E CU 1006 09 10 Coverage Territory Limitation – Coverage U CU 1007 09 10 Limited Data Records Coverage – Coverage E CU 1008 09 10 Insured – Amended Definition Employees And Volunteer Workers Are Not Insureds – Coverages E And U CU 1009 09 10 Deletion Of Employment – Related Practices Liability Exclusion – Coverage E CU 1010 09 10 Amended Definition New Entities Are Not Insureds – Coverages E And U CU 1011 09 10 Products/Completed Work Hazard Expanded Definition – Coverage E CU 1012 09 10 Waiver Of Subrogation CU 1013 09 10 Liability Coverage – Designated Premises – Coverage E CU 1014 09 10 Liability Coverage – Designated Projects – Coverage E CU 1028 09 10 Known Injury Or Damage Amendment – Coverage E CU 1301 01 15 Certified Terrorism Loss CU 1302 01 15 Certified Act Of Terrorism Exclusion CU 1303 09 10 Terrorism Exclusion For Auto Bodily Injury Or Property Damage CU 1307 08 13 Conditional Terrorism Exclusion CU 1309 08 13 Conditional Nuclear, Biological, And Chemical Terrorism Exclusion CU 1311 08 13 Terrorism Exclusion CU 1313 08 13 Nuclear, Biological, And Chemical Terrorism Exclusion
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Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.