March 2, 2016

We are looking at the following risk. Mr. and Mrs. Smith own a building individually which they lease entirely to their business, ABC Corporation. Currently the general liability for Mr. and Mrs. Smith is provided on a separate general liability policy. We would like to include them on a BOP policy for their building ownership: building and general liability.

My question is how to best provide their (Mr. and Mrs.) general liability coverage. CG 20 11 seems to have some flaws and we wonder is leased premises JUST the building and not the surrounding land and parking area? The endorsement excludes structural additions, etc. and the limits are shared. CG 20 24 states LAND being leased. CG 20 26 speaks to liability arising out of the operations of the named insured or premises owned or rented to the named insured. I like 20 26. What am I missing? Any other options?

Connecticut Subscriber

CG 20 24 is not the one you need due to the "land" part. The difference between CG 20 11 and 20 26 depends on whether you want AI coverage for just the premises or the premises and operations of the named insured. CG 20 26 would give both options and CG 20 11 would be limited to coverage arising out of the ownership of the premises.

As for the scope of "premises", the endorsement does not define the word so you have to look at the standard dictionary. Premises includes the land and the buildings on it. What you have to check in this case is what is actually leased to the named insured since CG 20 11 applies to "that part of the premises leased to" the named insured. Does the lease include the building and the land and the surrounding land and parking area?

You might want to consider CG 20 05, AI—controlling interest. This gives AI coverage for liability arising out of premises owned by the AI while the named insured leases or occupies those premises, and liability arising out of the financial control of the named insured.

There is also CG 20 26, sort of a catch-all AI endorsement. It provides AI coverage to a person or organization whose status may not otherwise qualify for some other AI endorsement.

So, the bottom line when it comes to an AI endorsement is the extent of coverage the named insured and the AI want. You should check with them to see about this point.

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis