History of the CGL Policy
January 19, 2016
The "History of the CGL Policy" section of FC&S Umbrella begins with a discussion of the evolution of modern commercial general liability (CGL) coverage. Following that discussion, the coverage provided by each ISO-CGL policy form revision from 1986 to 2007 is compared with the coverage provided by the previous version of the form. The major coverage changes that were incorporated in each revision and the resulting implications for the insured are summarized and discussed.
Origins of Modern CGL Coverage
Prior to 1940, insurance companies writing general liability insurance coverage did so using their own unique policy language and forms. The resulting plethora of policy forms created much confusion among insurance agents and brokers, claims administrators, insureds and the courts. Agents, brokers and insureds found it difficult to compare coverage and cost between competing insurers. Differences in policy language between forms also made it difficult for claims administrators and the courts to interpret coverage consistently.
The confusion led to the development and introduction of the first standardized general liability insurance policy form in 1940. The standardized form was requested by the New York insurance department and developed by the National Bureau of Casualty and Surety Underwriters in conjunction with the Mutual Casualty Insurance Rating Bureau. Revisions to this standardized policy form were subsequently made in 1943, 1955, 1966 and 1973. With each revision, the scope of coverage provided by the policy was clarified and usually narrowed, often as the result of adverse court decisions that tended to interpret policy language in favor insureds.
Despite the revisions made between 1940 and 1966, the standardized general liability policy form remained complex and contained ambiguous wording. To satisfy the needs of insureds in different industry classifications, the policies included a wide array of optional coverages. This sometimes resulted in insureds purchasing policies that contained numerous terms, conditions and exclusions that did not pertain to them.
Many of the standard general liability policy's prior format problems were corrected with the 1966 form revision. The new form was titled "Comprehensive General Liability" (CGL) and was comprised of a separate policy jacket that contained provisions common to all coverages provided by the policy. Various coverage parts could then be added to the policy jacket to specify only those coverage provisions that applied to the policyholder.
In 1973, a new version of the standard CGL policy was introduced. This new form provided extremely broad coverage and remained in use longer than any previous version. Designed by the Insurance Services Office (formerly the National Bureau of Casualty and Surety Underwriters) and the Mutual Insurance Rating Bureau, the new policy form was intended to clarify coverage in a number of areas and was the true inception of modern CGL coverage. However, while the 1973 CGL policy provided a standardized coverage that was appropriate for many insureds, it did not provide the broad scope of coverage needed by all businesses. For this reason, the ISO also introduced a number of optional coverage endorsements so that the policy could be tailored to the needs of each insured.
One of the most significant features of the 1973 CGL policy form was a broadening of the definition of occurrence to include bodily injury or property damage that takes place over an extended period of time. The form also contained a newly-introduced and controversial pollution exclusion that eliminated coverage for bodily injury or property damage caused by the release of pollutants unless the release was "sudden and accidental." What constitutes a "sudden and accidental" release of pollutants has been the subject of much litigation. Other major coverage changes resulting from the 1973 CGL revision included an occurrence (rather than a per-person) limit for bodily injury claims, a narrowing of the scope of the business risk exclusion, and the addition of coverage for loss of use of tangible property that has not been physically damaged or destroyed.
By the mid-1980s, insurance regulators were demanding still more simplified language in insurance contracts. At the same time, insurers were beginning to question whether certain exposures, such as injury resulting from long-term exposure to silicosis or asbestos, could be profitably underwritten using an occurrence-based policy. The ISO responded to these concerns by introducing a new, revised CGL policy format in 1986.
The 1986 ISO Commercial General Liability Policy
Of all the CGL policy form revisions, the 1986 revision was one of the most broad and controversial. It was at this time that two alternative general liability coverage forms were proposed. One of the new 1986 ISO-CGL policy forms, like its predecessor, provided coverage on an occurrence basis. The other form provided coverage on a claims-made basis. A brief discussion of differences between the occurrence and claims-made ISO-CGL coverage forms is found under the caption "Coverage Features Unique To Claims-Made Policy Forms" later in this section. Another change that occurred in 1986 was the renaming of the policy form from "Comprehensive General Liability" to "Commercial General Liability."
Implementation of the 1986 ISO-CGL forms was in doubt in many states and among many insurers for some time. Each proposed revision had to be submitted to, and evaluated by, state insurance regulators. Insurance companies also delayed implementation of the new forms, partly because no one fully understood all of the implications of the new forms. Further, insurers needed considerable time to revise administrative procedures and computer programs to accommodate the new forms.
The various CGL form revision and implementation dates from 1973 through 2013 are illustrated by the following chart:
Form Edition Date | Form Imple-mentation Date | Form Number (Occurrence) | Form Number (Claims-Made) | FC&S Umbrella Reference |
1973 | 1973 | N/A | N/A | 1973 CGL |
1985 | 1986 | CG 00 01 11 85 | CG 00 02 11 86 | 1986 ISO-CGL |
1988 | 1989/90 | CG 00 01 11 88 | CG 00 02 11 88 | 1989/90 ISO-CGL |
1993 | 1993/94 | CG 00 01 10 93 | CG 00 02 10 93 | 1993 ISO-CGL |
1996 | 1996 | CG 00 01 01 96 | CG 00 02 01 96 | 1996 ISO-CGL |
1997 | 1998 | CG 00 01 07 98 | CG 00 02 07 98 | 1998 ISO-CGL |
2001 | 2001 | CG 00 01 10 01 | CG 00 02 10 01 | 2001 ISO-CGL |
2004 | 2004 | CG 00 01 12 04 | CG 00 02 12 04 | 2004 ISO-CGL |
2007 | 2007 | CG 00 01 12 07 | CG 00 02 12 07 | 2007 ISO-CGL |
2013 | 2013 | CG OO 01 04 13 | CG 00 02 04 13 | 2013 ISO CGL |
Three ISO coverage forms were the basis of coverage provided by the new 1986 ISO-CGL forms: the 1973 Comprehensive General Liability policy, the Personal Injury Coverage form and the Broad Form Comprehensive General Liability (BFCGL) endorsement. The coverage provided by each of these forms is discussed. Because the forms are no longer used, the following discussion is limited to a summary of the coverages provided.
1973 Comprehensive General Liability Policy
|Coverage Format
The 1973 ISO Comprehensive General Liability (CGL) policy consisted of a policy jacket, declarations page and a coverage form containing the insuring agreement. For most commercial insureds, the Broad Form Comprehensive General Liability (BFCGL) endorsement was also attached and which provided many coverage enhancements. The policy jacket contained a description of "Supplementary Payments" coverage provided by the policy, as well as policy conditions and the definitions of key policy terms.
Coverage Trigger
Coverage under the 1973 CGL policy is provided on an occurrence basis. An occurrence is defined in the policy jacket to mean an accident, and includes continuous and repeated exposure to conditions that result in bodily injury or property damage. For coverage to apply, such injury or damage must be neither expected nor intended by the insured. The bodily injury or property damage must occur during the term of the policy and within the policy's coverage territory. When these and other coverage conditions are met, the policy will respond, regardless of when the claim for bodily injury or property damage is made against the insured.
Section I—Coverages
Coverages A and B—Bodily Injury and Property Damage Liability
Insuring Agreement
The insuring agreement is composed of two coverage grants: bodily injury liability coverage under Coverage A and property damage liability coverage under Coverage B. The insurer promises to pay damages the insured is legally liable to pay because of bodily injury or property damage caused by an occurrence. The terms bodily injury, property damage and occurrence are each defined in the policy jacket. The term damages, while not a defined term in the policy jacket, is described in the "Limits of Liability" section, Coverage A, to specifically include damages for care and loss of services.
|Duty to Defend
The insurer specifically agrees to defend any suit filed against the insured which seeks damages that are covered by the policy. Such duty to defend exists even if the allegations contained in the suit are groundless, false or fraudulent. As stated in the "Supplementary Payments" section of the policy jacket, the insurer promises to pay defense costs in addition to the policy's limit of liability. The obligation to pay or defend a claim or suit ends when the policy's limit of liability is exhausted by the payment of judgments or settlements.
|Exclusions
The 1973 CGL policy form contains 17 exclusions which are briefly described. Some of these exclusions are removed or modified by attachment of the Broad Form Comprehensive General Liability (BFCGL) endorsement.
|Contractual Liability
Coverage is excluded for liability assumed under any contract or agreement, except a contract or agreement that is an "incidental contract" as that term is defined in the "Definitions" section of the policy jacket. The exclusion does not apply to warranties regarding the fitness or quality of the insured's products or work performed by or on behalf of the insured.
The exception dealing with the warranty of fitness or quality of the named insured's products or work clarifies the fact that, while warranties of products and work may be contractual in nature, they are not within the intended scope of the contractual liability exclusion. This exception, in some instances, created an ambiguity regarding whether there was coverage for damage to the product or work itself. Providing such coverage was not usually the intent of liability insurers.
|Automobiles and Aircraft
Coverage is excluded for bodily injury or property damage arising out of any automobile or aircraft that is owned, maintained, operated, used, rented by or loaned to any insured or any of the insured's employees. Such use includes the loading or unloading of the auto or aircraft. Business auto liability and aircraft liability policies are designed to provide this type of coverage. The exclusion does not apply, however, to non-owned automobiles parked on property owned, rented to, or controlled by the named insured. The term automobile is defined in the "Definitions" section of the policy jacket.
|Mobile Equipment
Coverage is excluded for bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of any "mobile equipment" while such equipment is used in practice or preparation for any activities related to racing or demolition contests or stunting. Snowmobiles and trailers designed to be used with mobile equipment also are specifically excluded from coverage.
|Transportation of Mobile Equipment
Coverage is excluded for bodily injury or property damage resulting from transportation of mobile equipment by an automobile that is owned, operated by, rented to, or loaned to an insured. Such coverage is normally provided under a business auto liability policy.
|Watercraft
Coverage is excluded for bodily injury or property damage arising out of the ownership, operation, maintenance, use, loading or unloading of any watercraft that is owned, operated by, rented to, or loaned to an insured. The exclusion extends to watercraft operated by the insured's employees, but does not apply to watercraft while such watercraft is on premises owned, rented to or controlled by the named insured.
|Pollution
There is no coverage for bodily injury or property damage that results from the discharge of pollutants into the atmosphere, land or water unless the discharge is sudden and accidental. The term pollutants is described within the exclusion as including smoke, fumes, acids, alkalis, liquids, gasses, waste materials or other toxic materials or irritants."
Introduction of a pollution exclusion with the 1973 CGL policy form was a significant restriction of coverage. The new exclusion still allowed coverage for pollution resulting from the sudden and accidental discharge of pollutants, but injury or damage resulting from the gradual release of pollutants now appeared to be precluded from coverage. However, what constitutes a "sudden and accidental" release of pollutants has been the subject of much litigation. Many insureds have argued that even pollution that occurs over time (such as a leaking underground oil tank) has a sudden onset and causes unintended (and therefore "accidental") injury or damage. Court interpretations of the language of the exclusion have varied widely, depending on the specific jurisdiction and circumstances involved in a particular case.
|War
Coverage is excluded for bodily injury or property damage arising out of declared or undeclared war, rebellion, revolution, civil war or any act incident thereto. The exclusion only applies, however, with respect to liability assumed by the insured under an incidental contract. First aid expenses covered by the "Supplementary Payments" provisions of the policy are also excluded.
|Liquor Liability
Coverage is excluded for bodily injury or property damage for which the insured or the insured's indemnitee is held liable under liquor liability laws. However, the exclusion applies only if the insured is in the business of manufacturing, selling, distributing, or serving alcoholic beverages. By inference, coverage is not excluded where the insured, for example, furnishes alcoholic beverages to guests during a company-sponsored social function.
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 or may not apply, depending on the circumstances and the insured's role in the unlawful operation.
|Workers Compensation and Similar Laws
Coverage is excluded for any obligation the insured has under a workers compensation, disability benefits, unemployment compensation or similar law. Coverage for these obligations is normally provided by a workers' compensation or other policy or state fund designed specifically to respond to the law.
|Employers' Liability
This exclusion precludes coverage for bodily injury to an insured's employee if such injury occurs within the course and scope of employment. Coverage for such injury is normally provided under the employer's liability coverage section of a workers' compensation and employers' liability (WC/EL) insurance policy.
The exclusion does not apply if liability for such injury is assumed by the insured under an incidental contract, but does apply to any obligation of the insured to indemnify another party for damages arising out of the employee's injury.
|Damage to Property
There are three circumstances where coverage is excluded for property damage liability:
1.When the damage occurs to property that is owned, occupied by or rented to the insured. This exposure is more appropriately protected by the purchase of a property insurance policy.
2.When the damage occurs to property used by the insured. This portion of the exclusion, however, does not apply with respect to liability assumed under a written sidetrack agreement.
3.When the damage occurs to property of others that is in the care, custody or control of the insured. This portion of the exclusion also does not apply if liability is assumed by the insured under a written sidetrack agreement. The exclusion also does not apply to property damage resulting from the use of elevators at premises owned by, rented to or controlled by the named insured.
|Alienated Premises
There is no coverage for property damage arising out of any premises alienated (e.g., vacated) by the named insured.
|Impaired Property
Coverage is excluded for loss of use of tangible property not damaged or destroyed, but is unusable because of (1) a delay or lack of performance by or on behalf of the named insured under a contract or agreement, or (2) failure of the named insured's products or work to meet the quality represented or warranted. This exclusion does not apply as respects loss to other property if the loss results from sudden and accidental physical injury to, or destruction of, the named insured's products. The exclusion also does not apply to work performed by or on behalf of the named insured after the insured's products or work have been put to use by someone else.
Because this exclusion applies in part when there is an absence of physical injury to tangible property, coverage disputes may arise when the only damage to tangible property is the presence of a defective component.
|Insured's Products
Coverage is excluded for property damage to the named insured's products if the damage arises out of the product or any part of the product.
|Insured's Work
There is no coverage for property damage to work performed by or on behalf of the named insured if the damage arises out of that work. The exclusion also applies to damage arising out of materials, parts or equipment furnished in connection with the work.
|Product Recall
There is no coverage for costs incurred in recalling, repairing or replacing the named insured's products or work that has been completed by or for the named insured if the recall results from a known or suspected defect or dangerous condition in the product or work. This exclusion is sometimes referred to as the "sistership" exclusion.
The "sistership" name was coined following the grounding of a single aircraft suspected of having a serious defect. The incident caused a number of the plane's "sister" aircraft to also be grounded, thereby resulting in a large number of loss-of-use claims. The purpose of the product recall, or "sistership," exclusion is to preclude coverage for loss incurred due to other similar or "sister" products being recalled.
|Explosion, Collapse, and Underground Hazards
Coverage is excluded for property damage resulting from the hazards of "explosion" (code "x"), "collapse" (code "c") or damage to "underground property" (code "u") as those terms are defined in the policy jacket. For the exclusion to apply, the property damage must be the result of grading, filling or other construction-related activities. The exclusion of coverage for each of these hazards only applies if the codes "x," "c" and/or "u" appear in the classification code for the insured and are entered on the declarations page of the policy.
Coverage for explosion, collapse and underground property hazards may sometimes be available by endorsement for an additional premium.
|Section II—Persons Insured
The policy provides coverage for each of the following:
1.If the named insured is an individual, coverage extends to the individual as sole proprietor of a business, as well as to his or her spouse with regard to conduct of the business.
2.If the named insured is a partnership or joint venture, coverage applies to the liability of any partner or member thereof, but only if the partnership or joint venture is specifically named in the policy.
3.If the named insured is other than an individual, partnership or joint venture, coverage applies to the organization and any of its executive officers, directors, or stockholders with respect to their duties as such.
4.Any person (other than an employee of the named insured) or organization while acting as named insured's real estate manager.
5.With respect to mobile equipment registered and operated on public highways, coverage is extended to:
(a)employees of the named insured while operating such equipment during the course of their employment, and
(b)other persons operating the mobile equipment with the named insured's permission and any person or organization legally responsible for such operation. However, the policy provides coverage only for amounts excess of other insurance available to that person or organization.
As respects the operation of mobile equipment, coverage does not apply to bodily injury to any fellow-employee injured in the course of employment or damage to property owned or occupied by the named insured. Coverage is also precluded as respects the employer of any person operating the mobile equipment.
|Section III—Limits Of Liability
Under Coverage A, an "each occurrence" limit of liability is stipulated in the policy declarations. This limit applies to any and all claims for bodily injury that result from a single occurrence. In addition to the each-occurrence limit, a total policy "aggregate" limit of liability applies to all damages resulting from bodily injury that occurs during the policy period and that arises out of the insured's products or completed operations.
Under Coverage B, an "each occurrence" limit of liability for property damage claims is also stipulated in the policy declarations. This limit applies to any and all claims resulting from a single occurrence. In addition to the each-occurrence limit, a total policy "aggregate" limit of liability applies to all property damage claims under the policy that involve:
(1)Property damage arising out of the insured's premises or operations or out of contractors' equipment, including that for which liability is assumed under an incidental contract relating to the premises and operations.
(2)Property damage arising out of work performed for the named insured by independent contractors, and general supervision of independent contractors by the named insured, including damage for which the insured has assumed liability under an incidental contract. Coverage is excluded, however, for:
(a)property damage resulting from maintenance or repairs at any premises owned by or rented to the named insured;
(b)structural alterations at such premises that do not involve changing the size of or moving buildings or other structures;
(3)Property damage included within the products and completed operations hazard.
The Coverage B aggregate limit applies to all property damage claims included in classes (1), (2) and (3) and, separately to classes (1) and (2) with respect to each project away from premises owned by or rented to the named insured.
All claims arising from a continuous and repeated exposure to substantially the same conditions are considered to arise out of one occurrence.
|Section IV—Policy Territory
Coverage applies only to claims for bodily injury and property damage which occur within the "policy territory," as that term is defined in the "Definitions" section of the policy jacket.
|Definitions
The 1973 CGL policy jacket contains definitions of 16 terms that are used in the CGL coverage form. The definitions are summarized as follows:
|Automobile
Automobile means a land motor vehicle, trailer or semi-trailer designed for travel on public roads and includes machinery or apparatus attached thereto. Automobile does not include mobile equipment.
Machinery or other apparatus attached to an automobile is considered by the insurer to be a part of the automobile. Coverage is therefore precluded under the policy for liability arising out of the transport of such machinery or apparatus as that exposure is more properly insured under an automobile liability policy. However, liability resulting from the operation of the machinery or apparatus, whether or not it is attached to the vehicle, is covered under the CGL policy.
|Bodily Injury
The definition of bodily injury describes those physical injuries that are covered under Coverage A of the policy. Injuries included within the definition of bodily injury are:
·Bodily injury;
·Sickness;
·Disease; and
·Death resulting at any time from the above.
There is no requirement that bodily injury be sudden, only that it occurs during the policy period. Depending on the specific circumstances, damages for sickness resulting from short- or long-term exposure to harmful conditions may be covered under the 1973 CGL policy.
|Collapse Hazard
Collapse hazard includes structural property damage and damage to any other property. "Structural property damage" means collapse of, or structural injury to any building or structure that results from grading, excavating, filling, demolition or other construction-related operations. Collapse hazard does not include damage that results from work performed for the named insured by independent contractors, work that is included within the completed operations or underground property damage hazards, or liability assumed by an insured under an incidental contract.
|Completed Operations Hazard
The completed operations hazard definition includes bodily injury and property damage arising out of operations (including materials, parts or equipment furnished therewith) away from the insured's premises. Also encompassed by the definition is the reliance upon representations or warranties made with respect to those operations. The definition applies only if the bodily injury or property damage occurs after the operations have been completed or put to their intended use. Operations requiring further service, maintenance, repair or replacement, but which are otherwise complete, are considered to be "completed."
Excepted from the definition is bodily injury or property damage that results from operations in connection with the transport of property (unless caused by the loading or unloading of a vehicle), the existence of uninstalled or abandoned tools, equipment or materials and operations for which the classification stated in the policy or the insurer's rating manual specifies the inclusion of completed operations.
|Elevator
The definition of elevator clarifies what constitutes an elevator in the context of an elevator contract agreement that is an incidental contract. Excluded from the definition of elevator are automobile service hoists, inclined conveyors, dumbwaiters and other specified equipment.
|Explosion Hazard
The definition of explosion hazard includes property damage resulting from blasting or explosion. Excluded from the definition is damage arising out of the boiler and machinery exposure, work performed for the named insured by independent contractors, the completed operations or underground property damage hazard, and liability assumed by the insured under an incidental contract.
|Incidental Contract
Incidental contract means any written agreement for a lease of premises, an easement (except in connection with operations performed on or near railroads), indemnification of a municipality (except in connection with work performed for the municipality), a sidetrack agreement or an elevator maintenance agreement.
|Insured
The definition of insured affirms coverage for the entities qualifying as an insured in the "Persons Insured" section of the 1973 CGL coverage form. The definition also states that coverage applies separately to each insured against whom a claim or suit is brought and is subject to the policy's limit of liability.
|Mobile Equipment
The definition of mobile equipment describes those types of vehicles that are considered to be mobile equipment, rather than automobiles, and for which the policy therefore provides coverage. Under the definition, mobile equipment means any land vehicle (including attached machinery or apparatus), whether or not self-propelled, that is (1) not subject to motor vehicle registration, (2) maintained for use solely on or adjoining the insured's premises, (3) designed for use principally off public roads, or (4) designed or maintained solely to afford mobility to certain types of equipment.
When the 1973 CGL policy form was issued to municipalities, an endorsement was necessary to clarify that vehicles such as those used for snow removal, road maintenance and street sweeping were to be considered automobiles, rather than mobile equipment.
|Named Insured
Named insured means the person or organization named in Item 1 of the policy declarations.
|Named Insured's Products
Named insured's products includes goods or products manufactured, sold, handled or distributed by the named insured or others trading under the insured's name. Containers (other than vehicles) are also encompassed by the definition. Specifically excluded from the definition are vending machines or other property rented to or for the use of others but which are not sold.
|Occurrence
Occurrence means any accident that results in bodily injury or property damage that is neither expected nor intended by the insured. Occurrence also includes a continuous or repeated exposure to substantially the same general harmful conditions.
Expansion of the occurrence definition to include continuous or repeated exposure to harmful conditions was a significant broadening of coverage under the 1973 CGL form. In the 1966 CGL form, the definition of occurrence included "injurious exposure to conditions." It was unclear whether the 1966 CGL policy provided coverage for bodily injury or property damage that took months or even years to become manifest. Under the new definition wording, the 1973 CGL clearly includes such long-term injury or damage within the scope of coverage.
|Policy Territory
The policy territory is limited to:
1.The United States, United States territories and possessions, and Canada;
2.International waters or air space if 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 sold for use or consumption within the policy territory, provided the original suit for damages is first filed within the policy territory.
|Products Hazard Definition
Under the products hazard definition, coverage is provided for bodily injury and property damage that occurs away from the insured's premises and arises out of the named insured's products. Included within the scope of the definition is reliance upon representations or warranties made with respect to those products. Coverage applies only if the products are no longer in the insured's possession.
|Property Damage
Property damage means physical injury or damage to tangible property that takes place during the policy period, including loss of use of that property, regardless of when the loss of use occurs. Property damage also includes the loss of use of tangible property that is not damaged or destroyed to the extent that the loss results from an occurrence that takes place during the policy period.
|Underground Property Damage Hazard
The definition of underground property damage hazard specifies the types of property covered by the policy for damage that results from underground or underwater construction activities. These include but are not limited to the following:
·Underground wires and conduits;
·Pipes, sewers, mains, tanks;
·Similar property, including any apparatus in connection with such property.
Underground property damage hazard also includes resulting damage to any other property.
Specifically excepted from the definition of underground property damage hazard is property damage resulting from operations performed for the named insured by independent contractors, is included within the completed operations hazard, or for which the insured has assumed liability under an incidental contract.
|Supplementary Payments
As stated in the policy jacket, the insurer promises to pay all expenses incurred by the insurer or taxed against the insured in any suit the insurer defends. Such expenses include post-judgment interest, premiums for appeals, attachment and bail bonds, first aid rendered by the insured to others at the time of accident and reasonable expenses the insured incurs in assisting the insurer in the investigation and defense of any claim or suit. These supplementary payments will be paid in addition to the policy's limit of liability.
|Conditions
|Premium
This condition describes how policy premiums will be computed, states that "advance premiums" shown in the policy are a deposit and that the final premium will be determined by audit at the end of the policy period. Premiums are payable or refundable to the named insured and the named insured is required to keep records of the information needed for premium computation. Copies of such records must be provided to the insurer upon request.
|Inspection and Audit
This condition permits (but does not obligate) the insurer to inspect the named insured's property and operations at any time. However, such inspections are not an undertaking or warranty that such operations are safe or healthful, or that they are in compliance with any law, rule or regulation.
The insurer also reserves the right to audit the named insured's books and records at any time during the policy period (or up to three years thereafter) as respects any coverage under the policy.
|Financial Responsibility Laws
When certified as proof of financial responsibility under the provisions of any motor vehicle financial responsibility law, the policy will provide the coverage required by such law. The insured must reimburse the insurer for any payment the insurer would not have been required to make in the absence of the law.
|Insured's Duties in the Event of Occurrence, Claim, or Suit
This condition specifies the insured's duties as respects occurrences, claims and suits under the policy. The insured must notify the insurer in writing as soon as practicable of an occurrence which may result in a claim under the policy. In the event of an actual claim or suit the insured must immediately provide the insurer with all demands, notices, summons or process received.
The condition also specifies the information that must be provided to the insurer and requires the insured to authorize the insurer to obtain all necessary records and cooperate with the insurer in the investigation, defense or settlement of any claim or suit that seeks damages to which the insurance may apply.
In order to protect the rights of the insurer, the insured may not make any payment, assume any obligation or incur any expense (other than for first aid) without the insurer's consent, unless at the insured's own expense.
|Action against Company
No person or organization can join the insurer as a party in any suit or sue the insurer unless all of the policy terms have been complied with. Also, no such action can occur until the amount of the insured's obligation is determined by judgment, after a trial or by written agreement between the insured, the claimant and the insurer.
Action may be taken against the insurer to recover an agreed settlement or an obtained judgment, subject to the extent of insurance afforded by the policy. No one has the right under the policy to join the insurer as a party to any action against the insured to determine the insured's liability, nor can the insurer be sued by the insured or the insured's legal representative.
Lastly, neither bankruptcy nor insolvency of the insured or the insured's estate will relieve the insurer of any of its obligations under the policy.
|Other Insurance
This condition clarifies the application of coverage if there is other insurance available to the insured to pay for loss that is also covered by this policy.
If the 1973 CGL policy is written as excess over any other valid and collectible insurance, whether the other insurance is primary, excess or contingent, the insurer will either pay an equal share of the loss (subject to policy limits) or will pay on a pro-rata basis with the other insurer, based on the ratio of policy limits to all coverage limits available to pay for the loss. If the insurance afforded by this policy applies on a primary basis and other insurance applies on an excess basis, the insurer's liability will not be reduced by the existence of such other insurance.
|Subrogation
This condition states that the company is subrogated to the insured's right of recovery for any payments the company makes under the policy. The insured is required to preserve and protect such rights.
|Changes
Coverage under the policy can only be modified by endorsement. Mere notice to or knowledge of any agent with respect to any coverage changes is not sufficient to change the coverage provided under the policy.
|Assignment
Assignment of any interest under the policy will not be effective until the insurer consents to such assignment by endorsement. However, in the event of the named insured's death, the named insured's rights will automatically be assigned to its legal representative while such representative is acting within the scope of his or her duties. With respect to property of the named insured, the named insured's rights will be automatically assigned to the person having proper temporary custody of the property until a legal representative is appointed and qualified.
|Three-Year Policy
If the policy is issued as a three-year policy, the aggregate limits of liability stated in the policy declarations apply to each consecutive annual period.
|Cancellation
The named insured may cancel the policy by surrendering the policy to the insurer or its agent and by written notice to the insurer stating when such cancellation is to be effective. If the insurer cancels the policy, written notice must be mailed to the named insured not less than ten days prior to the effective date of such cancellation.
This condition also specifies how premiums that are due or refundable will be computed following cancellation. If the named insured cancels, premiums will be calculated on a "short-rate" basis. If the insurer cancels, premiums will be calculated on a "pro-rata" basis. Payment or tender of unearned premium is not required to effect cancellation.
|Declarations
By accepting the policy, the named insured agrees that the statements made in the policy declarations are the named insured's agreements and representations, the policy was issued based on those representations, and that the policy embodies all coverage agreements between the named insured and the insurer or its agents.
|Personal Injury Liability Coverage Form
Coverage for personal injuries such as libel, slander, invasion of privacy and other offenses were not covered by the standard 1973 CGL policy. However, coverage for such offenses could be:
·purchased as a stand-alone policy,
·added to the CGL policy as a separate coverage part, or
·included within the Broad Form Comprehensive General Liability endorsement along with other enhancements.
The following discussion is an overview of the coverage provided by the Personal Injury Liability coverage form.
|Insuring Agreement
The insurer agrees to pay on behalf of the insured all sums the insured becomes legally liable to pay to an individual or organization because of personal injury arising out of one or more listed offenses committed in the conduct of the named insured's business.
The insurer also agrees to defend any suit seeking damages covered by the policy, even if the allegations are groundless, false or fraudulent. The duty to pay or defend a claim or suit ends when the limit of insurance is exhausted by the payment of judgments and settlements.
Three types of personal injury offenses are listed:
Group A Offenses consist of false arrest, detention, imprisonment or malicious prosecution.
Group B Offenses consist of publications or utterances of libel or slander or of other defamatory or disparaging material, including publication or utterances that violate a person's right to privacy. Coverage is provided for these offenses unless the publication or utterance was in the course of, or related to, advertising, broadcasting or telecasting conducted by or on behalf of the named insured.
Group C Offenses consist of wrongful entry or eviction, or other invasion of the right of private occupancy.
Coverage may be purchased for one, two, or all three of the groups of offenses. Normally, the insured would have purchased coverage for all three groups, unless underwriters would not provide coverage for a particular group of offenses or if the insured had no need for one or more groups of coverage.
|Coverage Trigger
Coverage for personal injury liability is triggered by a listed offense which results in personal injury and which takes place both during the policy period and within the coverage territory. There is no stipulation as to when the claim must be made against the insured.
|Exclusions
The Personal Injury Liability coverage form contains five exclusions. These exclusions are:
1.Liability of the insured assumed under any contract or agreement;
2.Personal injury arising out of the willful violation of a law and which is committed by or with the knowledge or consent of the insured;
3.Personal injury sustained by a person because of an offense related to that person's employment by the insured;
4.Any Group B offense if the first publication or utterance was made by or on behalf of the insured prior to the coverage effective date; and
5.Any Group B offense against any organization or business or its products or services made with the insured's knowledge of the falsity of the offense.
|Persons Insured
The Personal Injury Liability coverage form provides coverage for the following entities:
1.If the named insured is an individual, coverage extends to the individual and his or her spouse.
2.If the named insured is a partnership or joint venture, coverage applies to any partner or member thereof with respect to his or her liability as such, but only if the partnership or joint venture is specifically named in the policy.
3.If the named insured is other than an individual, partnership or joint venture, coverage applies to the organization and any executive officer, director, or stockholder thereof with respect to his or her duties as such.
|Limit of Liability
The Personal Injury Liability coverage form limit of liability is subject to an aggregate limit that applies regardless of the number of insureds under the policy, the number of persons or organizations who sustain personal injury, or the number of claims or suits filed as a result of an offense occurring during the policy period. Coverage may also be on a percentage basis whereby the insured is responsible for paying a stated percentage of any claim. If coverage is on a percentage basis, the insurer has the right to pay the insured's obligation in order to effect settlement of the loss and to be promptly reimbursed by the insured. Primary and umbrella liability insurers rarely required the insured to pay a percentage of personal injury claims, however.
Several features of the Personal Injury Liability coverage form warrant comment. This is because it was often necessary to modify the wording of the form or broaden coverage to comply with minimum underlying coverage requirements of umbrella insurers.
Advertising: Under the insuring agreement, an exception precludes coverage for Group B offenses (libel, slander, invasion of the right to privacy) resulting from advertising, broadcasting or telecasting activities by or on behalf of the named insured. Specialty advertising coverages are available for insureds that are in the business of advertising, broadcasting or telecasting.
Contractual Liability: The contractual liability exclusion precludes coverage for personal injury liability assumed under a contract or agreement. This exclusion was often deleted to allow coverage for the insured's contractually assumed personal injury liability. Without deletion of the exclusion, the insured would only have bodily injury and property damage coverage as provided under the general liability policy form.
Employees: The employment exclusion precludes coverage for personal injury sustained by employees of the insured if the offense causing the injury is related to the person's employment. This exclusion also was frequently deleted so that employees named in personal injury lawsuits would have the same benefits of coverage as their employers. Also, removal of the exclusion may have allowed coverage for personal injury claims brought by employees against the insured.
When the Broad Form Comprehensive General Liability (BFCGL) endorsement was purchased, however, it was not necessary to delete this exclusion because the BFCGL provides coverage for employee-employer personal injury claims.
Territory: The coverage territory in the Personal Injury Liability coverage form is limited to the United States, its territories or possessions, or Canada. If the CGL policy is endorsed to provide a broader coverage territory, such as worldwide, the coverage territory of the Personal Injury Liability coverage form should be similarly broadened by endorsement.
Assault and Battery: The definition of personal injury should be broadened by endorsement to include assault and battery intentionally committed by any insured to protect persons or property (including aircraft). If the BFCGL endorsement is added to the CGL, it is not necessary to broaden the personal injury definition because the endorsement provides coverage for extended bodily injury, which includes assault and battery.
|Broad Form Comprehensive General Liability (BFCGL) Endorsement
The "Broad Form Comprehensive General Liability" (BFCGL) endorsement was first introduced by the Insurance Services Office (ISO) in 1976. The endorsement combined several coverages which were previously only available by attaching numerous separate endorsements to the ISO Comprehensive General Liability (CGL) coverage form. While some insurers issued their own version of the BFCGL endorsement, the coverage provided usually was comparable to that provided by the ISO form.
Endorsing the 1973 CGL policy form with the BFCGL endorsement was widely recommended by brokers and risk managers and often required by umbrella insurers. Most of the coverage provisions contained in the BFCGL were incorporated into the 1986 and subsequent revisions to the ISO-CGL policy forms, some in the form of exceptions to exclusions in the ISO-CGL policy. Hence, the BFCGL endorsement is no longer issued.
The BFCGL endorsement provided several extensions of coverages over and above that provided by the 1973 CGL policy form. These coverage extensions are summarized.
|Contractual Liability
The definition of incidental contract is expanded to include any oral or written contract or agreement relating to the conduct of the named insured's business. There are some exclusions that restate the contractual liability exclusion as contained in the 1973 CGL coverage form. However, the BFCGL endorsement also contains some additional exclusions that apply to the providing of architectural, engineering, surveying or other professional services.
|Personal and Advertising Injury Liability
The BFCGL endorsement broadens personal injury liability coverage beyond that provided under the ISO Personal Injury Liability coverage form and adds advertising injury liability coverage. Unlike the ISO Personal Injury Liability coverage form, the BFCGL contains no exclusion for employment-related personal injury claims.
|Premises Medical Payments
Coverage is provided for low-value bodily injury claims caused by an accident arising out of conditions on the insured's premises or from the insured's operations. The limit of liability is $1,000 per person, unless otherwise stated in the coverage schedule of the endorsement. The total coverage limit of liability is subject to the CGL policy's aggregate limit of liability for all bodily injury claims.
Premises medical payments coverage pays for bodily injury claims without it being necessary for the claimant to prove the insured's negligence or liability. Thus, it provides a means for claims involving minor injuries to be paid quickly and easily, and for the insured to possibly avoid a costly lawsuit.
|Host Liquor Law Liability
The 1973 CGL's liquor liability exclusion is modified to clearly provide the insured with coverage for liability arising out of the giving or serving of alcoholic beverages at incidental business activities, such as a company-sponsored social function. This "host liquor liability" coverage, however, does not apply to insureds that are in the business of manufacturing, distributing, selling or serving of alcoholic beverages.
|Fire Legal Liability—Real Property
The 1973 CGL excludes coverage for damage to property that is in the insured's care, custody or control, including real property occupied by or rented to the insured. The BFCGL endorsement specifically covers the insured's legal liability for fire damage to rented or leased premises, including permanently attached fixtures. The endorsement provides a $50,000 per-fire coverage limit unless a different limit is stated in the coverage schedule of the endorsement. Coverage applies excess of any other valid and collectible insurance.
|Broad Form Property Damage Liability (Including Completed Operations)
Under the 1973 CGL form, coverage is precluded for damage to property in the care, custody or control of the insured. In addition, the CGL form precludes coverage for property damage to work performed by or on behalf of the named insured which arises out of that work. The BFCGL modifies the wording of both these CGL exclusions so that coverage is excluded only for that part of the insured's work that causes damage, and only damage to the insured's work that results from the work itself. This modification is most useful for contractors, as it extends coverage to work performed on behalf of the insured.
|Incidental Medical Malpractice Liability
The BFCGL endorsement amends the CGL definition of bodily injury to include injury arising out of rendering or failure to render medical services. Coverage is therefore afforded to insureds that have only an incidental (i.e., not regular) medical malpractice exposure, such as an insured who might provide first aid to an injured customer.
|Non-Owned Watercraft Liability
The 1973 CGL's watercraft exclusion eliminates coverage for bodily injury or property damage arising out of the ownership, maintenance, use, etc. of watercraft. The BFCGL endorsement amends the CGL exclusion to provide coverage for non-owned watercraft if the watercraft is under 26 feet in length and not used to transport persons or property for a charge.
|Limited Worldwide Liability
This clause broadens the policy territory as defined in the CGL policy jacket to "worldwide," provided that the original suit for damages is filed within the United States, its territories, possessions or Canada. The extended territory definition does not apply, however, to bodily injury or property damage arising out of the products and completed operations hazards or to premises medical payments coverage.
|Additional Persons Insured
Coverage is extended to include employees and spouses of the insured's partners as insureds with respect to conduct of the named insured's business. This coverage for employees does not apply to injuries to fellow employees, cross suits (insured-versus-insured actions) for personal or advertising injury, or damage to property in the care, custody or control of other insureds under the policy. While the 1973 CGL policy's damage-to-property exclusion does not apply to liability for damage to property in the care, custody or control of the insured assumed under a sidetrack agreement, there is no such exception in the BFCGL endorsement. For this reason, the BFCGL endorsement could be interpreted as a restriction of coverage.
|Extended Bodily Injury
The 1973 CGL's definition of occurrence is modified to include intentional acts of bodily injury that are committed by the insured for the purpose of protecting persons or property. Assault and battery, if committed to protect persons or property, falls within the scope of the modified definition.
|Newly Acquired Organizations
Coverage is automatically extended for a period of 90 days to any organization (other than a joint venture) which is newly acquired or formed by the named insured and over which the named insured maintains ownership or majority interest. This coverage extension does not apply if the newly formed organization has other similar insurance, even if such other insurance is not available due to exhaustion of policy limits. After the 90-day period, coverage ceases unless the new organization is added as a named insured to the policy.
In many cases, the BFCGL endorsement provided broader coverage than provided by separate ISO insuring forms. However, in some cases, insureds preferred to purchase separate policy coverage parts instead of a BFCGL endorsement. For instance, the BFCGL's contractual liability coverage is subject to the same limit of liability as the other CGL bodily injury and property damage coverages. If an insured and the insured's indemnitee are jointly liable for a loss, loss payments under the BFCGL's contractual coverage for the indemnitee would reduce the limits available for the insured and vice versa. However, when contractual liability coverage is purchased separately, separate coverage limits apply to both the insured and the insured's indemnitee.
|Comparison of the 1973 CGL Form with the 1986 ISO-CGL Forms
|Introduction
In 1986, the Insurance Services Office (ISO) introduced two major revisions to the 1973 Comprehensive General Liability policy form. Renamed the "Commercial General Liability" policy forms, one revised version (CG 00 01 11 85) provided coverage on an occurrence basis. The second version (CG 00 02 02 86) provided coverage on a claims-made basis.
While many coverage provisions were identical in both of the new policy forms, the claims-made version of the 1986 ISO-CGL form contained several features that were not included in the occurrence version of the form. These features are briefly discussed under the caption "Coverage Features Unique To Claims-Made Policy Forms" later in this section of FC&S Umbrella.
|Summary of 1986 ISO CGL Coverage Form Changes
In addition to being more readable and understandable than the 1973 CGL coverage form, the 1986 ISO-CGL forms (both occurrence and claims-made versions) contain several significant changes in coverage. The most significant changes include the following:
·The new forms incorporate most of the coverage extensions and clarifications which were previously available only if the Broad Form Comprehensive General Liability (BFCGL) endorsement was purchased. Some of these extensions are in the form of exceptions to exclusions. As a result, the 1986 ISO-CGL forms include coverage for personal injury liability, advertising injury liability, premises medical payments, employees as insureds, broad form contractual liability, extended bodily injury liability, 90-day automatic coverage for newly-acquired organizations, fire legal liability, non-owned watercraft liability, broad form property damage (including completed operations), and limited foreign liability.
·The insurer's defense obligations have been modified and clarified.
·Coverage has been added for bodily injury or property damage resulting from the insured's products, even if the injury or damage occurs outside the policy coverage territory, as long as the product was purchased within the coverage territory.
·A new General Aggregate Limit of liability applicable to all bodily injury, property damage, personal injury, advertising injury and premises medical claims (other than those arising out of the insured's products/completed operations exposure) has been introduced.
·A single aggregate policy limit of liability as respects claims arising out of the products and completed operations exposure also has been introduced.
·Coverage has been specifically excluded for auto liability assumed under contract. In addition, coverage is excluded for the negligent entrustment of autos, aircraft or watercraft.
·Wording of the property damage exclusion has been revised to eliminate ambiguities regarding coverage for contractors and developers.
·The pollution exclusion has been broadened to exclude almost all pollution, even if the pollution is "sudden and accidental."
Coverage for liability arising from past partnerships and joint ventures is now excluded.
The business risk and product recall ("sistership") exclusions have been revised and clarified.
Other coverage changes incorporated in the 1986 ISO-CGL form include but are not limited to the following:
·The employment exclusion now extends to loss-of-services, consequential injury and dual-capacity claims.
·The liquor liability exclusion has been revised to clarify coverage for the insured's host liquor liability exposure. Coverage has been extended to owners or lessors of premises used for alcohol-related purposes.
·The employment exclusion has been expanded to include any obligation the insured may have to share damages with another party.
·The exclusion of coverage for fellow-employee actions now extends to suits by an employer against its employees.
·Coverage for the insured's medical malpractice exposure has been clarified.
·A limit of liability for premises medical expenses has been introduced. This Medical Expense Limit is subject to the policy's Each Occurrence and General Aggregate Limit.
·The definition of mobile equipment has been revised to reclassify as automobiles certain vehicles which may previously have been considered mobile equipment. Self-propelled vehicles with certain types of permanently attached equipment are now specifically excluded from coverage.
·The insured's product definition has been expanded to include goods or products disposed of by the named insured. Real property is specifically excepted from the definition.
· "Supplemental Payments" coverage has been expanded to include pre-judgment interest. The cost of appeal bonds is no longer covered.
·The policy's "Financial Responsibility" condition has been eliminated.
These coverage changes are discussed in detail in the following paragraphs.
|How to Use This Comparison
The following discussion provides the reader with a practical comparison of the differences between the 1973 CGL and the 1986 ISO-CGL policy forms. Coverage provided by the 1986 occurrence and claims-made ISO-CGL policy forms is similar in many respects. However, the claims-made version of the 1986 ISO-CGL policy form includes provisions that are unique to claims-made coverage, such as Extended Reporting Periods, Retroactive Dates, claim and occurrence information and additional cancellation wording. There are no counterparts to these provisions in the 1973 CGL policy form or in the occurrence version of the 1986 ISO-CGL form. The differences between the 1973 CGL and the claims-made version of the 1986 ISO-CGL policy form are discussed at the end of the following comparison under the caption "Differences In Coverage Under The Claims-Made Policy Form."
|Policy Structure
The 1986 ISO-CGL policy consists of a declarations page, the appropriate coverage form (i.e., the occurrence or claims-made form), and a "Common Policy Conditions" form (IL 00 17) which contains conditions applicable to all forms comprising the policy. The occurrence policy form contains five sections: (1) Coverages, (2) Who Is An Insured, (3) Limits of Insurance, (4) Conditions, and (5) Definitions. The claims-made policy form includes an additional section, "Extended Reporting Periods."
|Section I—Coverages
|Coverage Trigger
Coverage A under the occurrence version of the 1986 ISO-CGL policy forms applies to bodily injury or property damage resulting from an occurrence that takes place during the policy period and within the coverage territory. Written notice of a claim is not necessary to trigger coverage. Knowledge of the possibility of a forthcoming claim and any form of notice to the insurer is sufficient to trigger the policy. However, once notice of a claim has been received, the insured is obligated to give such notice to the insurer in writing as soon as practicable.
The coverage trigger applies only to Coverage A. Coverage B under both the occurrence and claims-made policy forms applies to personal injury or advertising injury that results from an offense committed during the policy period and within the policy territory. 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.
|Insuring Agreement
The 1973 CGL form contains two coverage grants: bodily injury liability coverage under Coverage A and property damage liability coverage under Coverage B. The insurer promises to pay sums the insured is legally liable to pay as damages (including damages for care and loss of services) because of bodily injury or property damage caused by an occurrence. The insurer also has the right and duty to defend suits against the insured, even if the allegations in the suit are groundless, false or fraudulent.
In the 1986 ISO-CGL form, coverages A and B as described are incorporated into a single insuring agreement classified as "Coverage A— Bodily Injury and Property Damage Liability."
|Duty to Defend
Unlike the 1973 CGL form, the 1986 ISO-CGL forms does not contain an affirmative duty of the insurer to defend even if the allegations contained in a suit are "groundless, false or fraudulent." As a result of the new wording, insurers may argue that their duty to defend is limited to suits containing allegations pre-determined by the insurer to be legitimate and within the scope of policy coverage. In the past, if any portion of a lawsuit was within the scope of coverage, the insurer usually assumed the obligation to defend the entire action.
Allegations in a lawsuit that initially appear groundless often ripen into legitimate causes of action following lengthy and costly discovery procedures. If an allegation is proven to be based on fact and encompasses a covered risk, the insurer will likely pay for defense costs without question. However, it is not clear who will bear these costs under the 1986 ISO-CGL forms if certain allegations are not found to be covered by the policy or are later dropped from the lawsuit for lack of proof.
Under the 1986 ISO-CGL form, defense expenses relative to allegations not covered by the policy might be charged by the insurer to the insured, whereas under the 1973 CGL such expenses would have been paid by the insurer. This change has resulted in much litigation over the responsibility for payment of defense costs under the new policy forms. Such litigation has yielded varying results, depending on the jurisdiction and circumstances involved. Some state courts have required that the entire claim be defended if any portion of the claim is covered. In other states, the insurer has been obligated to defend only those allegations that are covered by the policy. Under the wording of the 1986 ISO-CGL form, however, the insurer's obligation to defend suits containing groundless, false or fraudulent allegations can no longer be taken for granted.
|Exclusions
Under Coverage A (Bodily Injury and Property Damage Liability), the 1986 ISO-CGL policy contains two more exclusions than are contained in the 1973 CGL form. In addition, several other exclusions have been modified by the ISO in an attempt to better express coverage intent.
|Intentional Injury
The first of the two new exclusions found in the 1986 ISO-CGL forms precludes coverage for bodily injury or property damage expected or intended by the insured. Specifically excepted from the exclusion, however, is bodily injury resulting from the use of reasonable force to protect persons or property.
|Employers' Liability
The second new exclusion expands the 1973 CGL's employment exclusion to encompass (1) claims for loss of services (e.g., consortium) by spouses and other family members of disabled employees, (2) consequential injury, such as an illness contracted by the spouse or family members of an employee who was exposed to hazardous substances and who, in turn, exposed his or her family members to the substance and (3) dual-capacity cases. These excluded exposures are usually covered under the employers' liability section of a standard workers' compensation and employers' liability (WC/EL) policy.
|Contractual Liability
In the 1973 CGL, coverage is excluded for liability assumed under any contract or agreement, except an incidental contract as that term is defined in the "Definitions" section of the policy jacket. The exclusion does not apply to warranties of the fitness or quality of the insured's products or work performed by or on behalf of the insured.
The contractual liability exclusion in the 1986 ISO-CGL policy form excludes coverage for liability assumed by the insured for bodily injury or property damage under any contract or agreement other than (1) an insured contract as that term is defined in the policy or (2) liability that would exist even in the absence of a contractual assumption of that liability.
The warranty of fitness or quality exception to the contractual liability exclusion in the 1973 CGL form is not included in the 1986 ISO-CGL form. The purpose of the exception in the 1973 CGL form was in part to clarify the fact that, while warranties of products and work are contractual in nature, they are not considered to be within the scope of the contractual liability exclusion. Providing such coverage is not generally the intent of liability insurers.
|Automobile/Aircraft
The 1973 CGL excludes coverage for bodily injury or property damage arising out of the ownership, operation, maintenance, use or loading or unloading of any automobile or aircraft that is owned, operated, rented or loaned to any insured or any of the insured's employees. Coverage is, however, provided for non-owned automobiles parked on property that is owned, rented to, or controlled by the insured. The term automobile is defined in the "Definitions" section of the policy jacket.
In the 1986 ISO-CGL form, the exclusion not only applies to the ownership, maintenance, use, etc. of automobiles, aircraft or watercraft, but also to the negligent entrustment of these vehicles to others. Also, the exclusion now extends to auto liability assumed under a contract or agreement.
|Mobile Equipment
One of the two mobile equipment exclusions in the 1973 CGL form precludes coverage for bodily injury or property damage arising out of the ownership, maintenance, operation, use or loading or unloading of mobile equipment. This exclusion extends to snowmobiles and trailers designed to be used with such equipment. The second exclusion precludes coverage for bodily injury or property damage resulting from transportation of mobile equipment by an automobile that is owned, operated by, rented to, or loaned to the insured.
The two 1973 CGL exclusions described have been consolidated into a single "mobile equipment" exclusion in the 1986 ISO-CGL forms. Also, the exclusion in the 1986 ISO-CGL does not apply to snowmobiles. The definition of mobile equipment was also changed to modify coverage.
|Watercraft
There is a separate exclusion in the 1973 CGL form that precludes coverage for bodily injury or property damage arising out of the ownership, operation, maintenance, etc. of watercraft. In the 1986 ISO-CGL, the wording of this exclusion is contained within the "Aircraft, Auto or Watercraft" exclusion.
|Pollution
The 1973 CGL form excludes coverage for bodily injury or property damage that results from the discharge, dispersal, release or escape of pollutants into or upon the atmosphere, land or water unless such pollution is sudden and accidental.
One of the more significant and controversial changes in the 1986 ISO-CGL form was the introduction of an absolute pollution exclusion. The 1986 ISO-CGL's pollution exclusion has been broadened to exclude almost all contamination or pollution, even if release of the pollutants is sudden and accidental. A major reason for this broadening of the exclusion was that the "sudden and accidental" exception in the 1973 CGL has been extensively litigated and greatly weakened by judicial decisions. As a result of the litigation, insurers sometimes found they were required by the courts to pay for pollution losses they never intended to cover and for which they never received premium.
The 1986 ISO-CGL's pollution exclusion can be problematic for insureds whose operations present an environmental pollution exposure, such as exterminators, painters or farmers who spray their fields with herbicides. Fortunately for these insureds, the ISO also made endorsements available which can provide the insured with some pollution coverage at additional cost.
|War
The war exclusion in the 1973 CGL form excludes coverage for bodily injury or property damage arising out of declared or undeclared war, or any act incident to war. The exclusion only applies, however, to liability assumed by the insured under an incidental contract. First aid expenses incurred by the insured that are covered by the "Supplementary Payments" provisions of the policy are also excluded.
Although worded differently, the overall effect of this exclusion under both the 1973 CGL and 1986 ISO-CGL forms is comparable.
|Host Liquor Liability
The host liquor liability exclusion in the 1973 CGL form precludes coverage for bodily injury or property damage for which the insured or its indemnitee is held liable under liquor liability laws. However, the exclusion applies only if the insured is in the business of manufacturing, selling, distributing, or serving alcoholic beverages. If the insured owns or leases property at which alcoholic beverages are manufactured, distributed, sold or served, and the law imposes liability upon the insured if such operations are conducted illegally, the liquor liability exclusion may or may not apply, depending on the circumstances and the insured's role in the unlawful operation.
The 1986 ISO-CGL policy form refers to those in the business of furnishing alcoholic beverages, rather than those selling them as stated in the 1973 CGL form. Unlike its predecessor in the 1973 CGL policy, this exclusion does not extend to owners or lessors of premises used for alcohol-related purposes. The new wording thus implies coverage for those who are sued for serving liquor to a party guest who allegedly causes an accident that results in bodily injury or property damage.
|Workers Compensation
Coverage is excluded in the 1973 CGL for any obligation the insured has under a workers compensation, disability benefits or unemployment compensation law or any similar law.
Although worded differently, the scope of this exclusion in the 1986 CGL form is comparable.
|Employment
The 1973 CGL's employment exclusion precludes coverage for bodily injury to an insured's employee when such injury occurs within the course and scope of employment. Coverage for such injury is normally provided under the employers' liability coverage section of a workers' compensation and employers' liability (WC/EL) insurance policy. The exclusion does not apply to liability assumed by the insured under an "incidental contract," but does apply to any obligation of the insured to indemnify another party for damages arising out of the employee's injury.
The wording of the employment exclusion was modified in the 1986 ISO-CGL form to clarify the insurer's intent to eliminate any overlap with employers' liability or workers' compensation coverage. The exclusion in the 1986 ISO-CGL form has been broadened to not only apply to obligations of the insured to indemnify another, but to any obligation the insured may have to share damages as well. The effect of the new exclusion wording is to exclude coverage for losses that call for both contribution and indemnification by the insured.
Also, under the employment exclusion in the 1986 ISO-CGL, coverage is clearly excluded for dual-capacity claims and claims by family members of employees for damages consequential to the employee's injury. For example, if an employee working with asbestos brings that material home on his/her clothing and family members sustain illness or injury due to exposure to the contaminant, the 1986 ISO-CGL policy will not provide coverage for the injured family members.
|Care, Custody, or Control
With the exception of liability assumed under a written sidetrack agreement, the care, custody or control exclusion in the 1973 CGL form excludes coverage for damage to property that is owned, used or occupied by the insured. The exclusion extends to property of others in the care, custody or control of the insured. By exception to the exclusion, coverage is provided for property damage resulting from the use of elevators.
The 1986 ISO-CGL forms contain no distinct counterpart to the 1973 CGL's care, custody or control exclusion. Instead, the 1986 ISO-CGL forms combine under one exclusion all that is excluded under the care, custody or control, alienated premises, and broad form property damage exclusions found in the 1973 CGL policy and BFCGL endorsement.
The care, custody or control exclusion of the 1986 ISO-CGL policy forms differs from the exclusion in the 1973 CGL form in two additional important ways. First, application of the care, custody or control exclusion under the 1986 ISO-CGL forms is limited solely to personal property. (Real property in the care, custody or control of the insured is subject to another part of the exclusion that deals with broad form property damage exposures.) Second, the exclusion in the 1986 ISO-CGL forms makes no exception for damage to personal property in the insured's care, custody or control arising out of the use of elevators. If coverage for the elevator exposure is desired, it must be purchased by endorsement.
|Alienated Premises
The alienated premises exclusion in the 1973 CGL form precludes coverage for property damage arising out of any premises alienated (e.g., vacated) by the named insured.
In the 1986 ISO-CGL forms, the alienated premises exclusion has been incorporated into the property damage exclusion. However, the exclusion does not apply if the alienated premises is the named insured's work and was never occupied, rented or held for rental by the named insured. The new wording may prevent insurers from relying on the alienated premises exclusion to deny a claim where coverage to a named insured contractor or developer would otherwise apply under broad form property damage insurance.
To illustrate, consider the situation where an insured developer subcontracts the construction of a condominium. After the work has been completed and sold, the property sustains damage which is attributed to the subcontractor. With broad form property damage coverage applicable to completed operations, coverage should apply for damage to the work performed on behalf of the developer. Under the 1973 CGL form, however, insurers sometimes took the position that such coverage was precluded by the alienated premises exclusion.
As a result of the wording revision in the 1986 ISO-CGL forms, property damage to work performed by developers and contractors after operations have been completed remains excluded. However, the alienated premises exclusion should not apply to work performed on behalf of the named insured that is sold upon completion. If the contractor or developer uses a unit of a project as a model home, or occupies a unit as an office until all units are sold, then the alienated premises exclusion would likely apply to that occupied unit.
|Design Error
In part, the design error exclusion in the 1973 CGL form eliminates coverage for loss of use of tangible property which has been impaired, though not injured or destroyed, as a result of (1) a delay or lack of performance by or on behalf of the named insured under a contract or agreement, or (2) a failure of the named insured's products or work to meet the quality represented or warranted by the named insured.
The design error exclusion has been modified in the 1986 ISO-CGL forms by introduction of the term impaired property. In the 1973 CGL form, the design error exclusion applies in part when there is an absence of physical injury to tangible property. Disputes sometimes occurred when the only damage to tangible property was the presence of a defective component. By adding the term impaired property to the wording of this exclusion, the ISO attempted to resolve the potential for dispute by broadening the exclusion. Impaired property in the 1986 ISO-CGL form means property other than the named insured's products that cannot be used or is less useful because it incorporates the named insured's product or work which is thought to be defective or inadequate.
|Property Damage to Named Insured's Products
In the 1973 CGL form, coverage is excluded for property damage to the named insured's products if the damage arises out of the product itself or out of any part of the product. The exclusion was intended to apply to insureds that manufacture "products," rather than to those providing a service, such as builders or general contractors. However, if the insured is a service provider such as a building contractor, it is unclear whether the exclusion would also apply to property damage to a building after the insured's work was completed.
The intent of the products exclusion has been clarified in the 1986 ISO-CGL form, which now contains a specific exception for real property.
|Property Damage to Work by or On Behalf of the Named Insured
Coverage is excluded in the 1973 CGL form for property damage to work performed by or on behalf of the named insured if the damage arises out of that work. The insured's "work" includes materials, parts or equipment furnished in connection with such work.
When broad-form property damage (including completed operations) coverage is added to the 1973 CGL policy, the exclusion is modified to provide coverage: (1) while operations are in progress, for property damage, except to that particular part out of which the damage arose, and (2) after operations are completed, for property damage to work performed on behalf of the named insured. The property damage and damage to the insured's work exclusions of the 1986 ISO-CGL forms produce the same result.
|Product Recall (Sistership)
The 1973 CGL's product recall (sistership) exclusion precludes coverage for costs incurred in recalling the named insured's products, or in recalling work that has been completed by or for the named insured, if the recall results from a known or suspected defect or dangerous condition in the product or work.
This exclusion has been revised in the 1986 ISO-CGL form to strengthen the insurer's intent to exclude all costs for recalling goods or products, regardless of who recalls the products or who is responsible for the recall. As with the design error exclusion discussed previously, the 1986 ISO-CGL form uses the term "impaired property" in this exclusion.
|XCU Property Damage
In the 1973 CGL form, coverage can be excluded for property damage resulting from explosion (code "X") or structural collapse (code "C") or for damage to underground property (code "U") resulting from grading, filling or other construction-related activities. This exclusion typically applies to activities such as street and road construction and maintenance. Coverage for one or more of these so-called "XCU" hazards can sometimes be bought back by the insured for an additional premium.
The 1986 ISO-CGL forms do not contain this "XCU" property damage exclusion. Instead, the ISO has developed a separate optional endorsement which allows the underwriters to exclude these "XCU" hazards. The endorsement also contains provisions that allow the insured to buy back the coverage for one or more of the excluded hazards.
|Persons Insured
Under the 1986 ISO-CGL policy form, the counterpart to the "Persons Insured" section in the 1973 CGL form is captioned "Who Is An Insured." The wording of the 1973 CGL form (coupled with the "additional persons insured" provision of the BFCGL endorsement) is similar to the wording in the 1986 ISO-CGL form, with the following important differences:
1.The wording of the Who Is An Insured section in the 1986 ISO-CGL form not only excludes coverage for fellow employee actions, as does the 1973 CGL form, but also excludes coverage for suits by an employer against its employees.
2.The Who Is An Insured section under the 1986 ISO-CGL form excludes coverage for liability of any insured (including employees) that arises from the rendering of or failure to render professional medical services. However, if the employee rendering medical services is not a doctor, nurse or other medical professional, the policy should provide coverage.
3.The 1986 ISO-CGL form, like the 1973 CGL form, excludes coverage for any partnership or joint venture not shown in the policy declarations as a named insured. However, the 1986 ISO-CGL form goes one step further and excludes liability of both current and past partnerships and joint ventures.
|Limits Of Liability
Section III of both the 1973 CGL and 1986 ISO-CGL forms specifies the limits of insurance provided by the policy. The 1986 form provides six important limits on the amount payable. These limits are:
·a General Aggregate Limit,
·a Products and Completed Operations Aggregate Limit,
·a Personal and Advertising Injury Limit,
·an Each Occurrence limit,
·a Fire Damage Limit, and
·a Medical Expense Limit.
|The General Aggregate Limit
The 1973 CGL form provides for an aggregate limit of liability that applies separately to all bodily injury claims arising out of the products and completed operations hazard and to property damage claims, including all claims arising out of the products and completed operations hazard. This aggregate-limit concept has been modified in the 1986 ISO-CGL form.
The 1986 ISO-CGL's "General Aggregate Limit" was one of the most important and controversial features of the new form. The General Aggregate amount specifies a maximum policy limit for all bodily injury, property damage (other than injury and damage included in the products-completed operations hazard), personal injury, advertising injury and premises medical expense claims that occur during the policy period. One purpose of this aggregate limit may be to prevent the pyramiding of policy limits in the case of claims involving latent diseases and other exposures which occur during two or more policy periods.
|The Products and Completed-Operations Aggregate Limit
The 1973 CGL policy form contains a separate "Products and Completed-Operations Aggregate Limit" that applies separately to bodily injury and property damage claims arising out of the insured's products and completed operations. The "Products and Completed-Operations Aggregate Limit" in the 1986 ISO-CGL policy form places a single maximum policy limit on all products and completed-operations bodily injury and property damage claims. This change is generally considered to be a significant reduction in coverage under the 1986 ISO-CGL form.
|The Personal and Advertising Injury Limit
An "Each Occurrence" personal injury and advertising injury coverage limit in the 1973 CGL form was provided only when the BFCGL endorsement was attached to the policy. In the 1986 ISO-CGL form, a separate "Personal and Advertising Injury Limit" specifies the amount of insurance available for all damages because of personal injury and advertising injury sustained by any one person or organization. The ISO-CGL's General Aggregate Limit described also applies to personal injury and advertising injury claims.
|The Each Occurrence Limit
In the 1973 policy forms, an "Each Occurrence" limit of liability applies separately to each claim under Coverage A (bodily injury) and to Coverage B (property damage), subject to the aggregate limit discussed earlier.
In the 1986 ISO-CGL form, this "Each Occurrence" limit similarly applies as respects bodily injury and property damage claims, but also includes premises medical expense claims arising out of any one occurrence. This "Each Occurrence" limit is subject to the policy's General Aggregate Limit.
|The Fire Damage Limit
The Fire Damage Limit shown in the 1986 ISO-CGL policy declarations applies to property damage caused by fire to premises rented to the insured. The amount payable is subject to the Each Occurrence and General Aggregate Limit. A separate "each occurrence" coverage limit for fire damage to premises is provided in the 1973 CGL only when the BFCGL endorsement is attached.
|The Medical Expense Limit
A "Medical Expense Limit" was introduced with the 1986 ISO-CGL form. The limit specifies the maximum amount payable for medical expenses incurred following bodily injury that arises out of use of the insured's premises. This Medical Expense Limit is subject to the policy's Each Occurrence and General Aggregate Limit. There is no separate medical expense limit in the 1973 CGL form.
|Policy Territory
Under the 1973 CGL, coverage applies only to claims for bodily injury and property damage that occur within the "policy territory," as that term is defined in the "Definitions" section of the policy jacket. Under the 1986 ISO-CGL policy form, this provision is contained within the wording of the insuring agreements and is referred to as the "coverage territory."
|Definitions
In the 1973 CGL policy, the definitions of key policy terms are contained in the policy jacket. In the 1986 ISO-CGL forms, the definitions of key policy terms are contained in a separate "Definitions" section of the policy form. Each of these definitions is discussed in the following paragraphs.
|Automobile
The automobile definition in both the 1973 CGL and the 1986 ISO-CGL forms is the same.
|Bodily Injury
The bodily injury definition in the 1973 CGL policy describes those physical injuries that are covered under Coverage A of the policy. Included within the definition are bodily injury, sickness or disease sustained by a person and which occurs during the policy period, including resulting death.
The wording of the bodily injury definition in the 1986 ISO-CGL forms differs from the definition in the 1973 CGL policy. The reference to "during the policy period" does not appear in the 1986 forms. If the deleted language was present, two definitions of bodily injury would have been necessary—one for claims-made coverage and one for occurrence coverage. This is because when the injury occurs is not the sole coverage trigger under the claims-made policy form.
|Collapse Hazard
The 1973 CGL form contains a definition of collapse hazard to clarify application of the form's explosion, collapse and underground hazards (XCU) exclusion. The 1986 ISO-CGL form makes no reference to the collapse hazard. Since coverage is not excluded, there is no need for a collapse hazard definition in the policy. As stated previously, endorsements are available to exclude coverage for collapse, explosion and underground hazards. These endorsements also may include provisions allowing the insured to buy back coverage and also to limit the purchased coverage to certain specified operations.
|Completed Operations Hazard
The definition of completed operations hazard in the 1973 CGL policy means bodily injury and property damage arising out of the insured's operations, including reliance upon representations or warranties made with respect to those operations. The definition applies only if the bodily injury or property damage occurs after the operations (including materials, parts or equipment furnished therewith) have been completed or abandoned and if it occurs away from the named insured's premises. Operations requiring service, maintenance, repair or replacement after completion or abandonment are considered to be "completed."
Excepted from the 1973 CGL definition is bodily injury or property damage that results from operations in connection with the transport of property (unless caused by the loading or unloading of a vehicle), the existence of tools, equipment or materials and operations for which the classification stated in the policy or the insurer's rating manual specifies the inclusion of completed operations.
The corresponding definition in the 1986 ISO-CGL policy form is captioned Products-Completed Operations Hazard and is to be read in conjunction with the form's definitions of the terms Your Products and Your Work. While the wording of this definition in the 1986 ISO-CGL forms differs slightly from the definition wording in the 1973 CGL form, the definitions under both the 1973 and 1986 forms is comparable.
|Elevator
The elevator definition in the 1973 CGL policy clarifies what constitutes an elevator in the context of an elevator maintenance agreement within the definition of incidental contract.
Under the 1986 ISO-CGL forms, there is no coverage for, and no reference to, damage to personal property in the insured's care, custody or control caused by an elevator. Hence, the definition of elevator has been omitted from the 1986 forms.
Coverage for bodily injury liability arising from the ownership, maintenance or use of elevators still applies under the 1986 ISO-CGL forms. However, if coverage is desired for elevator damage to property, including damage resulting from elevator collision, it can be added by endorsement.
|Explosion Hazard
See definition of collapse hazard.
|Incidental Contract
Incidental contract in the 1973 CGL policy means an agreement for a lease of premises, an easement (except in connection with operations performed on or near railroads), indemnification of a municipality (except in connection with work performed for the municipality), a sidetrack agreement or an elevator maintenance agreement.
Contractual liability coverage under the 1973 CGL policy is limited to certain incidental written contracts. Broader coverage for any written or oral contract or agreement relating to the business of the named insured is commonly provided through the Broad Form Comprehensive General Liability (BFCGL) endorsement.
What is defined as an incidental contract under the 1973 CGL form and the BFCGL endorsement is called an insured contract under the 1986 ISO-CGL form. Contractual liability coverage provided under the 1986 ISO-CGL form is comparable to the coverage provided under the 1973 CGL with the BFCGL endorsement attached.
|Insured
The "Persons Insured" section in the 1973 CGL form describes those persons and entities qualifying for coverage under the policy. Included within the definition is a severability provision stating that coverage applies separately as to each insured.
In the 1986 ISO-CGL policy form, the persons and entities qualifying as insureds are stated in Section II — Who Is An Insured. The severability-of-interests provision is now contained in the "Separation Of Insureds" condition in the 1986 ISO-CGL forms. The net effect on coverage is the same in both the 1973 and 1986 forms.
|Mobile Equipment
The definition of mobile equipment has been changed in the 1986 ISO-CGL forms to reclassify as automobiles certain vehicles which may previously have been considered mobile equipment under the 1973 CGL form. The old and new definitions require careful comparison to fully understand the difference.
Under the 1973 CGL form, mobile equipment means land vehicles, whether or not self-propelled, that are designed or maintained for the sole purpose of affording mobility to certain types of equipment. Covered mobile equipment typically includes power cranes, shovels, loaders, diggers, concrete mixers (other than mix-in-transit types), graders, scrapers and other road construction or repair equipment. Also covered are air compressors, pumps, generators, spraying, welding and building cleaning equipment, and geophysical exploration and servicing equipment. All losses arising from these units are covered under the 1973 CGL form.
The 1986 ISO-CGL form, however, also states that self-propelled vehicles with certain types of permanently attached equipment are considered autos rather than mobile equipment. As a result, these vehicles are excluded from coverage. The excluded vehicles are:
(1)Equipment designed primarily for snow removal, road maintenance (except for construction or resurfacing) and street cleaning;
(2)Cherry pickers or similar devices used to raise or lower workers and which are mounted on an automobile or truck chassis and; and
(3)Air compressors, pumps and generators, including equipment used for spraying, welding, building cleaning, geophysical exploration, lighting or well servicing.
The self-propelled equipment described in (2) and (3) may pose both a general liability and auto liability exposure. An automobile liability policy may be required to cover the equipment while it is in motion and a general liability policy may be required to cover the equipment while it is in operation. As with the 1973 CGL policy, any equipment maintained solely for use on the insured's premises is covered under the 1986 ISO-CGL as mobile equipment. The effect of the new wording in the 1986 ISO-CGL form distinguishes between losses arising out of the vehicle itself and those losses arising out of the operation of the mounted equipment.
When the 1973 CGL policy was issued for municipalities, an endorsement was necessary to clarify that vehicles such as those used for snow removal, road maintenance and street sweeping were to be considered automobiles rather than mobile equipment. Since these vehicles are not covered as mobile equipment under the 1986 ISO-CGL forms, the clarification endorsement is not required.
|Named Insured
The named insured in the 1973 CGL policy means the person or organization named in Item 1. of the policy declarations. The term named insured used in the 1973 CGL form is replaced by the word "you" in the 1986 ISO-CGL forms.
While "you" is not defined as such in the 1986 forms, its applicability is explained under Section II — Who Is An Insured.
|Named Insured's Products
In the 1973 CGL form, named insured's products includes goods or products manufactured, sold, handled or distributed by or for the named insured.
The term named insureds products used in the 1973 CGL form has been replaced by the term your product in the 1986 ISO-CGL forms. In addition, the definition of your product in the 1986 forms has been expanded to include goods or products disposed of by the named insured. Real property is specifically excepted from the definition in the 1986 ISO-CGL form. This exception is intended to prevent insurers from considering the named insured's work on real property as the work product of the named insured in order to deny coverage.
|Occurrence
In the 1973 CGL form, the term occurrence means an accident, including a continuous or repeated exposure to substantially the same general harmful conditions, that results in bodily injury or property damage that is neither expected nor intended by the insured.
There is no reference to injury or damage that is neither expected nor intended by the insured in the definition of occurrence under the 1986 ISO-CGL form. Rather, the reference to intentionality appears as part of the intentional acts exclusion under Coverage A of the 1986 ISO-CGL form, which also makes an exception for bodily injury resulting from the reasonable use of force to protect persons or property. The reasonable-use-of-force exception was added to the 1973 CGL by the BFCGL endorsement.
|Policy Territory
In the 1973 CGL, the policy territory is defined as:
1.The United States, its territories and possessions, and Canada;
2.International waters or air space, provided the bodily injury or property damage occurs during transportation or travel between the countries listed in 1. above; and
3.Anywhere in the world, with respect to bodily injury or property damage arising out of the insured's products that are sold for use or consumption within the policy territory, providing the original suit is first filed within the policy territory.
The 1986 ISO-CGL form uses the term coverage territory rather than policy territory.
Under the 1973 CGL form, two conditions had to be fulfilled in order for losses arising out of the insured's products losses to be covered worldwide:
·The original suit for damages had to be brought in the U.S., its possessions or Canada, and
·The product had to be sold for use or consumption in the policy territory.
This last condition has led to questions regarding the intent of the buyer and seller of products that ended up outside the U.S. or its territories. If a product was sold with the intent that it be used or consumed in the U.S., its possessions or Canada, coverage could apply on a worldwide basis. However, if the product ends up outside the covered territory, the seller's intent may become an issue. Whether the product was made to be shipped outside the covered territory, or whether the insured seller knew the product was likely to end up outside the coverage territory, sometimes became a point of controversy.
The wording of the coverage territory definition in the 1986 ISO-CGL provides a more manageable coverage test. The 1973 CGL's requirement that the product be sold for use or consumption within the policy territory has been replaced with a requirement only that the product be made or sold in the U.S. Coverage should therefore follow the product worldwide, whether or not it is intended for use in the coverage territory. Also, the 1986 form requires that the suit for damages be brought in the coverage territory, while the 1973 CGL policy requires that the original suit be brought in the policy territory.
In addition, in the 1986 ISO-CGL form, coverage applies in all parts of the world if the insured's responsibility to pay damages is determined in a suit filed in the policy territory. This revised wording may indicate a change in coverage when interpreted in light of the defense provisions of the 1986 ISO-CGL forms.
|Products Hazard
Under the wording of the products hazard definition in the 1973 CGL policy, coverage applies to bodily injury and property damage that occurs away from the insured's premises and arises out of the named insured's products. Coverage applies as long as the products are no longer in the insured's possession. Included within the definition are representations and warranties made with respect to the named insured's products.
The 1973 CGL's products hazard definition is included as part of the definition of products-completed operations hazard in the 1986 ISO-CGL forms and should be read together with the ISO-CGL's definition of your product. While the wording of the definitions differ in the 1986 ISO-CGL form, coverage is comparable to that provided under the 1973 CGL form.
|Property Damage
The 1973 CGL's reference to property damage and loss of use that occurs during the policy period does not appear in the property damage definition in the 1986 ISO-CGL forms. If the wording had not been deleted, two definitions of property damage would have been necessary—one for the claims-made policy form and one for the occurrence policy form. This is because when the occurrence takes place is not the sole coverage trigger under the 1986 claims-made ISO-CGL form.
|Underground Property Damage Hazard
See collapse hazard discussion.
|Supplementary Payments
The 1973 CGL's "Supplementary Payments" provisions are described in the policy jacket. In the 1986 ISO-CGL forms, the "Supplementary Payments" provisions are stated in a separate section of the policy and apply to both Coverages A and B. The provisions are comparable to the same provisions found in the 1973 CGL policy, with a few differences. The primary differences are:
1.The "Supplementary Payments" provisions in the 1986 ISO-CGL form do not provide coverage for the cost of first aid to others at the time of an accidental bodily injury. These costs are now covered under Coverage C (Medical Payments) of the 1986 ISO-CGL forms.
2.Earnings lost by the insured while assisting the insurer in the investigation and defense of claims or suits are reimbursed up to $100 a day under the 1986 ISO-CGL forms. The 1973 CGL provides a $25 per day reimbursement limit.
3.Coverage for interest on judgments under the 1973 CGL applies only to interest which accrues after the entry of any judgment. The 1986 ISO-CGL form also provides coverage for pre-judgment interest that may be awarded.
4.Unlike the 1973 CGL form, the 1986 ISO-CGL policy form does not provide coverage for the cost of appeal bonds that may be required in a covered suit.
|Conditions
In the 1973 CGL, the policy conditions are contained in the policy jacket. In the 1986 ISO-CGL form, some of the conditions are contained in the "Conditions" section of the policy form. Other conditions are contained in the ISO "Common Policy Conditions" form included with the ISO-CGL policy. These conditions are discussed in the following paragraphs.
|Premium
The counterpart to the 1973 CGL's premium condition in the 1986 ISO-CGL form is entitled "Premium Audit." The provisions under the 1973 CGL and 1986 ISO-CGL forms are comparable.
|Inspection and Audit
The "Inspection and Audit" condition in the 1973 CGL policy permits (but does not obligate) the insurer to inspect the named insured's property and operations at any time. The condition also permits the insurer to audit the named insured's books and records at any time during the policy period (or up to three years thereafter).
The premises inspection and audit provisions are now contained in separate "Inspections and Surveys" and "Examination of Your Books and Records" conditions of the ISO "Common Policy Conditions" form. The scope of these conditions under both the 1973 CGL and the "Common Policy Conditions" forms is comparable.
|Financial Responsibility
The "Financial Responsibility" condition in the 1973 CGL policy states that when certified as proof of financial responsibility under the provisions of any motor vehicle financial responsibility law, the policy will provide the coverage required by such law.
The 1986 ISO-CGL form has no counterpart to the 1973 CGL's "Financial Responsibility" condition. The reason is that motor vehicles (other than mobile equipment) are usually covered elsewhere, such as under business auto liability or truckers liability policies. Elimination of the financial responsibility condition in the 1986 ISO-CGL could be interpreted as a restriction of coverage.
|Insured's Duties in the Event of Occurrence, Claim, or Suit
The wording of the 1973 CGL's "Insured's Duties" condition is essentially unchanged in the occurrence version of the 1986 ISO-CGL policy form. The wording was modified, however, in the claims-made version of the 1986 ISO-CGL form. Please refer to the discussion of "Differences In Coverage Under The Claims-Made Policy Form" later in this section.
|Action against Company
There are two counterparts to 1973 CGL's action-against-company condition in the 1986 ISO-CGL policy form. The first counterpart is captioned "Legal Action Against Us" and contains provisions pertaining to when a legal action can be filed against the insurer. The second counterpart is captioned "Bankruptcy" and contains the bankruptcy or insolvency wording of the 1973 CGL's condition. The provisions of this condition under both the 1973 CGL and 1986 ISO-CGL forms are comparable.
|Other Insurance
The "Other Insurance" condition in the 1973 CGL policy clarifies how coverage applies if there is other insurance available to the insured to pay for a loss that is also covered by the CGL policy.
The wording of the "Other Insurance" condition in the 1986 ISO-CGL occurrence form is comparable to the wording in the 1973 CGL policy in terms of the treatment of primary and excess coverages. Apart from the differences applicable to the claims-made policy form, the method of sharing losses under the 1986 ISO-CGL form follows closely with that of the 1973 CGL "Other Insurance" condition quoted previously. For a discussion of the 1986 claims-made ISO-CGL "other insurance" condition, see "Differences In Coverage Under the Claims-Made Policy Form" later in this section.
|Subrogation
The counterpart to the 1973 CGL's "Subrogation" condition is captioned "Transfer of Rights of Recovery Against Others To Us" in the 1986 ISO-CGL form. The provisions of the condition in both the 1973 CGL and 1986 ISO-CGL forms are comparable.
|Changes
The counterpart to the wording of the "Changes" condition in the 1973 CGL is found in the ISO "Common Policy Conditions" of the 1986 ISO-CGL form. The provisions of the condition under both the 1973 CGL and 1986 ISO-CGL forms are comparable.
|Assignment
The counterpart to the 1973 CGL's "Assignment" condition in the 1986 ISO-CGL forms is entitled "Transfer of Your Rights and Duties Under the Policy." The provisions under both the 1973 and 1986 forms are comparable.
|Policy Term
The "Policy Term" condition in the 1973 CGL policy provides that if the policy is issued as a three-year policy, the aggregate limits of liability stated in the declarations apply to each consecutive annual period.
There is no specific counterpart to this condition in the 1986 ISO-CGL form. However, the subject of this condition is addressed in the "Limits of Insurance" section of the 1986 ISO-CGL form.
|Cancellation
The counterpart to the 1973 CGL "Cancellation" condition is found in the ISO "Common Policy Conditions." Under the 1973 CGL cancellation condition wording, it is possible for any named insured to cancel coverage. If there is more than one named insured and little communication between them, the wording could pose a potential problem. The cancellation condition in the "Common Policy Conditions" form states specifically that the first named insured is the person or entity authorized to cancel coverage.
This condition in the "Common Policy Conditions" form also states that the policy may be canceled subject to 10 days' notice for nonpayment of premium and 30 days for all other reasons, unless otherwise dictated by law. Under the 1973 CGL, the condition states only that the insurer must give the insured 10 days notice of cancellation.
|Declarations
The "Declarations" condition in the 1973 CGL policy states that in accepting the policy, the named insured agrees that the statements made in the policy declarations are the named insured's agreements and representations, that the policy was issued based on those representations, and that the policy embodies all coverage agreements between the named insured and the insurer or its agents.
The 1986 ISO-CGL forms do not have a separate "Declarations" condition. However, the 1986 form contains a condition entitled "Representations" which is comparable to the "Declarations" condition of the 1973 CGL policy.
|Differences in Coverage under the Claims-Made Policy Form
|Why the Claims-Made CGL Form Was Developed
There were many reasons given by the ISO for developing a claims-made version of the 1986 ISO-CGL policy form. One reason was the increasing amount of litigation involving the application of occurrence-based coverage for claims involving latent bodily injury and long-term exposure (e.g., claims involving DES or asbestos exposure where symptoms may not be manifested for several years following the exposure).
Another reason given by the ISO was that inflation was eroding the value of coverage limits provided by general liability policies issued many years prior to a claim being submitted. It was therefore becoming increasingly difficult for insurers to rate and price liability coverage, particularly if the proposed insured's operations had the potential to generate claims several years or even decades after policy expiration.
A third reason given by the ISO was that a claims-made policy prevents the combining ("stacking") of the coverage limits of several policies with respect to claims involving bodily injury or property damage that occur over a period of several years.
|Controversy over the Claims-Made ISO-CGL Form
When the claims-made version of the 1986 ISO-CGL policy was first proposed, a controversy developed between the ISO and state insurance regulators. Much of the opposition to the new form involved the policy provision for an optional Extended Reporting Period (also known as the ERP, or "tail coverage") which the insured could purchase to extend the time period in which to report claims under the policy. As proposed, insurers could charge as much as 200% of the policy's annual premium for the ERP endorsement. The proposed policy form also allowed the insurer to change the coverage Retroactive Date and to issue so-called "laser beam" endorsements to restrict coverage to the point where the insured was almost forced to purchase the ERP.
Opponents of the proposed claims-made ISO-CGL form also argued that the form was inferior to the occurrence policy form, and that use of the claims-made form should be restricted to classes of risks that had the potential for latent long-tail injury or damage exposures. The ISO countered such arguments by maintaining that the claims-made form was not inferior to the occurrence form, and that liability exposures cannot be separated by latent and non-latent exposures.
The final version of the proposed 1986 claims-made ISO-CGL form attempted to resolve most of the controversy by providing for the following:
·A Basic Extended Reporting Period that applied to claims resulting from occurrences that were not reported to the insurer during the policy period, but which resulted in claims being filed within 60 days of policy expiration. In addition, a five-year Extended Reporting Period applied to claims filed within five years following the expiration date of the policy resulting from an occurrence that was reported to the insurer during the policy period or within 60 days following policy expiration. Both Extended Reporting Periods were automatically provided at no additional cost, even if the policy was canceled for non-payment of premium.
·Written notice of a claim was not necessary in order to trigger coverage. Rather, any form of notice to the insurer would be considered sufficient to trigger coverage.
·Loss (claims) data would be made available to the first named insured within 30 days of notice of cancellation or non-renewal. The information would be provided in other circumstances within 45 days of the insured's written request as long as such request was made within 60 days of the policy termination date.
·An optional Supplemental Extended Reporting Period would be made available at additional cost that would extend the period in which covered claims could be reported beyond the time provided by the Basic Extended Reporting Periods.
·Language was added to the optional Supplemental Extended Reporting Period endorsement which provided for the policy aggregate limit of liability to be reinstated to 100% of the limits originally provided by the expiring policy. The new aggregate limits would be applicable to claims reported during the Supplemental ERP.
|Coverage Features Unique to Claims-Made Policy Forms
Claims-made liability insurance policies contrast with the more common occurrence policies by the manner in which policy coverage is triggered. Under the occurrence coverage concept, the policy in effect at the time the bodily injury or property damage takes place is the policy obligated to pay or defend the claim or suit, even if the claim is reported months or years following policy expiration. Under the claims-made coverage concept, the policy in effect when the claim is reported is the policy obligated to pay or defend the claim or suit, subject to limitations explained in the following paragraphs.
|Retroactive Dates
A controversial feature of the 1986 ISO-CGL claims-made policy form when it was first introduced was the concept of a "Retroactive Date." Under this concept, coverage is precluded for claims that result from an occurrence that takes place prior to a date specified by the insurer and shown on the policy declarations. This condition applies even if the claim is reported during the policy period.
Under the claims-made coverage concept, the obligation of an insurer to pay claims and related expenses exists only if a covered claim is first made against the insured both during the policy period (or within any applicable Extended Reporting Period) and on or after the specified Retroactive Date.
Insurers typically establish a Retroactive Date in one of three ways:
(1)The Retroactive Date is the same as the policy's inception date.
This provision normally occurs when the insured organization is a newly formed entity, when no previous coverage existed, or when a change of insurer is made. Underwriters are reluctant to provide coverage for occurrences that may have taken place in a prior time period, especially if no prior insurance was in force. The risk is that the insurer may inadvertently assume the exposure for an unknown number of occurrences that may develop into future claims.
(2)The insurer imposes a Retroactive Date that is earlier than the policy's inception date.
This provision normally occurs when the insurer has provided coverage for an organization for consecutive years. However, even if a new insurer provides coverage, that insurer may use a prior Retroactive Date. Use of a prior Retroactive Date is usually limited to situations where the insurer feels there is little or no likelihood of claims arising from occurrences that took place prior to the inception date of the policy.
(3)The insurer imposes no Retroactive Date.
Lack of a Retroactive Date imposes the least restriction on the insured and, as a result, is the most desirable. Lack of a Retroactive Date means a claims-made policy will pay for all covered claims made during that policy period (or Extended Reporting Period), regardless of when the occurrence that resulted in the claim took place. Insurers typically resist issuing claims-made insurance policies without a Retroactive Date.
Once a Retroactive Date is established, it is usually not changed unless there is a change in insurers.
|Advancement of the Retroactive Date
Insurers may sometimes advance the Retroactive Date on policy renewal, thereby making the Retroactive Date the same as the effective date of the renewal policy. By advancing the Retroactive Date, the insurer excludes coverage by the renewal policy for all claims arising out of occurrences that took place prior to the new Retroactive Date. Coverage would also be excluded for potential claims that may arise out of a situation that existed prior to the renewal date.
As an alternative to advancing the Retroactive Date, insurers may use an "Exclusion of Specific Accident(s) Product(s), Work or Location(s)" ("laser beam") endorsement to restrict claims-made policy coverage. Laser-beam endorsements are more specific in their application and exclude coverage only for claims arising out of a particular exposure, such as the products, work, location(s) or accident(s) which are specifically described in the endorsement. These endorsements are explained in more detail later in this section.
|Extended Reporting Periods (Tail Coverage)
Claims that arise from occurrences that take place on or after the Retroactive Date may not be reported to the insured or insurer during the policy period. For this reason, claims-made policy forms contain a provision allowing the insured additional time to notify the insurer of late-reported claims. Such provisions are typically known as "Extended Reporting Periods" (ERPs) or "tail" coverage. A Basic Extended Reporting Period is provided by the insurer at no additional charge. The insured is usually given the option to purchase a Supplemental Extended Reporting Period. The Supplemental ERP gives the insured additional time in which to report claims and is subject to certain limitations discussed in the following paragraphs.
In the 1986 ISO-CGL claims-made policy form, the Basic and Supplemental Extended Reporting Periods apply only to claims involving bodily injury and property damage. In the 1989/90 and subsequent ISO-CGL claims-made form revisions, the Basic and Supplemental ERP provisions extend to personal injury and advertising injury claims. Both ERP provisions only apply to claims resulting from offenses committed during the policy period.
|Basic Extended Reporting Period
The ISO-CGL claims-made policy form contains a coverage provision for claims that result from occurrences that take place during the policy period and on or after any imposed Retroactive Date, but which are not reported until after the policy expires. There is no additional premium charge for this coverage feature, which is called the Basic Extended Reporting Period.
Under the Basic ERP, the policy provides coverage for late-reported claims as follows:
1.If an occurrence which may result in a covered claim is reported to the insurer by the insured during the policy period, or within 60 days following policy expiration, the policy will respond if the claim is received and reported within five years of policy expiration. (This is sometimes called the "midi-tail.")
2.If an occurrence which may result in a covered claim is not reported to the insurer during the policy period or within 60 days following expiration of the policy, the policy will respond only if the claim is received and reported within 60 days of policy expiration (This is sometimes called the "mini-tail.")
The Basic Extended Reported Period does not reinstate the aggregate coverage limits of the policy. Rather, the aggregate coverage limits available for payment of claims reported during the Basic ERP remain the same as the limits that were available as of the last day of coverage under the policy. In addition, the Basic ERP does not apply if there is other subsequently purchased insurance that provides coverage for the claim, even if that other insurance is not available due to exhaustion of policy limits.
|Supplemental Extended Reporting Period
The claims-made ISO-CGL policy form also contains a provision giving the insured the option to purchase a "Supplemental Extended Reporting Period" endorsement. This endorsement extends the claim reporting period beyond the time provided by the Basic Extended Reporting Period. The reporting period is extended indefinitely for claims resulting from occurrences that took place on or after the policy's Retroactive Date and prior to policy expiration or termination, whether or not the occurrence was reported to the insurer. This optional endorsement, however, must be requested by the insured in writing within 60 days following policy expiration. The insured must also promptly pay the required additional premium, which is considered fully earned upon payment.
The Supplemental Extended Reporting Period endorsement provides new policy aggregate coverage limits in an amount equal to those shown on the declarations page of the policy to which the endorsement applies. The new aggregate limits apply only to claims reported during the Supplemental ERP and are not available for claims covered under the Basic Extended Reporting Period. In addition, Supplemental ERP coverage applies excess of any other valid and collectible insurance available to the insured for claims reported following the effective date of the endorsement. The additional premium charged for the endorsement may be up to 200% of the annual premium for the policy to which the endorsement applies. Once purchased and in effect, the Supplemental Extended Reporting Period endorsement cannot be canceled by the insurer or the insured.
Neither the Basic ERP nor the Supplemental ERP extends the policy coverage period or broadens the scope of coverage — they only extend the time during which a claim covered by the policy can be reported. Coverage applies only to claims that are made during the Extended Reporting Period(s) and which arise out of occurrences that took place on or after the Retroactive Date or during the expired policy period to which the ERP applies.
|Exclusion of Specific Accident(s), Product(s), Work, or Location(s)
|(Laser Beam) Endorsements
As an alternative to Retroactive Date advancement, an "Exclusion of Specific Accident(s), Product(s), Work, or Location(s)" endorsement (also known as a "laser beam" endorsement) permits insurers to exclude coverage for claims arising out of previous known and specified occurrences or risks. The endorsement can be used when a claims-made policy is renewed or if coverage is placed with a new insurer. When issued, the endorsement allows the insurer to limit coverage for claims arising out a particular accident (occurrence) to a single policy without the insurer having to advance the Retroactive Date. The insured continues to have coverage for claims arising from non-excluded occurrences covered by the expiring policy, even if claims are made during the effective period of the renewal policy. The endorsement also allows the insurer to exclude coverage for claims arising out of occurrences at a specific location owned by the insured, and which the underwriter feels is an unacceptable risk.
New insurers usually do not need to issue a laser beam endorsement because the policy Retroactive Date is normally advanced when there is a change of insurer. The need for the new insurer to provide coverage for claims arising from occurrences prior to the new Retroactive Date is therefore eliminated. However, if the new insurer wants to exclude coverage for certain aspects of the insured's operations (such as specific types of work, certain products or specific locations), a laser beam endorsement may be issued.
When a laser beam endorsement is issued by a renewing insurer, the insurer usually also issues an "Amendment of Section V—Extended Reporting Periods For Specific Accident(s), Product(s), Work or Location(s)" endorsement (form CG 27 03). This endorsement limits application of the expiring policy's Basic Extended Reporting Period to those exposures excluded by the laser beam endorsement. Because a potential coverage gap results if a claim is reported after the Basic ERP expires, this endorsement requires that a "Supplemental Extended Reporting Period Endorsement For Specific Accident(s), Product(s), Work or Location(s)" (form CG 27 04) be made available to the insured. With the Supplemental ERP endorsement, the cost of endorsement CG 27 04 can be as much as 200% of the expiring policy's premium.
The following discussion explains only those differences between the 1973 CGL policy form and the unique features of the claims-made version of the 1986 ISO-CGL policy form.
|Insuring Agreement
Some of the most important changes contained in the 1986 claims-made ISO-CGL form arise out of the wording designed to replace or modify the "Insuring Agreement" section of the 1973 CGL form. Notable changes include the following:
1.Coverage A (Bodily Injury and Property Damage Liability) under the claims-made version of the 1986 ISO-CGL form is triggered by:
(a)claims first made against the insured during the policy period, and
(b)bodily injury or property damage resulting from an occurrence that takes place on or after the Retroactive Date shown in the policy declarations.
2.An Extended Reporting Period (ERP) endorsement is available to provide coverage for claims made against the insured after the policy expires. This coverage is available provided that the occurrence upon which the claim is based took place during the policy period or on or after the Retroactive Date imposed by the insurer.
|Coverage Trigger
Coverage A (Bodily Injury and Property Damage Liability) under the claims-made version of the 1986 ISO-CGL policy form is not triggered by an occurrence. Rather, coverage is triggered only when notice of a claim is received and recorded by the insured or the insurer. The occurrence upon which the claim is based must have taken place in the coverage territory and on or after any Retroactive Date imposed by the insurer.
As with the "occurrence" version of 1986 ISO-CGL form, written notice of a claim from the insured is not necessary to trigger coverage under the policy. Knowledge of the possibility of a forthcoming claim and verbal notice to the insurer is sufficient to trigger the policy. However, once notice of a claim has been formally received, the insured is obligated to give such notice to the insurer in writing as soon as practicable.
The coverage triggers apply only to Coverage A. The trigger for Coverage B (Personal and Advertising Injury Liability) and Coverage C (medical payments) is the same under both the occurrence and claims-made 1986 ISO-CGL policy forms.
|Extended Reporting Periods (Tail Coverage)
See "Claims-Made Coverage Features" for a detailed discussion of Extended Reporting Periods.
|Conditions
|Duties in the Event of Occurrence, Claim, or Suit
This condition in the 1986 ISO-CGL claims-made policy form requires the insured to notify the insurer of any occurrence that may result in a claim, and to notify the insurer again if and when a claim arising out of the reported occurrence is made. In many instances, the occurrence and resulting injury or damage are simultaneous. However, in cases involving a delay between the occurrence and the resulting injury or damage, the insured may be required to notify the insurer twice.
Under claims-made coverage, if an occurrence is reported but does not result in a claim during the policy period, the insurer might exclude the occurrence and/or the risk from which it arose. The exclusion may be accomplished through the use of a "laser-beam" endorsement or by advancing the policy's Retroactive Date so that it is the same as the inception date of the new or renewal policy.
When an occurrence or claim is not reported for several months, a dispute can arise between the insurer and the insured over when the insured actually had knowledge of the occurrence. If the insured had prior knowledge of the occurrence, but failed to report it to the insurer (such as might happen if the insured's legal department received a lawsuit and did not report it to the insured's risk manager), the insurer could conceivably deny coverage. For this reason, any known occurrences should be reported to the insurer, even if the insured feels the likelihood of future claims is small.
|Other Insurance
The wording of the "Other Insurance" condition in the 1986 claims-made ISO-CGL policy form is comparable to that of the 1973 CGL with regard to the treatment of primary and excess coverages. The wording of this condition in the 1986 ISO-CGL, however, is broader in scope because of its application to various claims-made features such as Extended Reporting Periods. The Basic Extended Reporting Period is not considered to be excess over any other insurance that might apply to a loss. On the other hand, coverage under the Supplemental Extended Reporting Period is considered to be excess over any subsequent policy that also provides coverage for the loss. Apart from the foregoing, the method of sharing losses under the 1973 CGL and the claims-made 1986 ISO-CGL policy forms is comparable.
|Your Right to Claim and Occurrence Information
The "Your Right to Claim And `Occurrence' Information" policy condition has been introduced with the 1986 ISO-CGL claims-made policy form. The condition affirms the insurer will provide the first named insured with claim and occurrence information relating to the policy currently in effect. The insurer will also provide the same information relating to any prior claims-made general liability coverage issued by that insurer to the same insured during the previous three years. The condition specifies the information to be provided by the insurer, which can then be forwarded by the insured to other insurers as necessary.
If the insurer elects to cancel or nonrenew coverage, this claim and occurrence information will be automatically provided to the first named insured no later than 30 days prior to policy termination. In other circumstances, the information will be provided within 45 days of receipt of a written request by the first named insured, providing the request is received by the insurer within 60 days following the end of the policy period.
|Broad Form Comprehensive General Liability (BFCGL) Endorsement
Most of the coverage provisions of the Broad Form Comprehensive General Liability (BFCGL) endorsement were incorporated into the 1986 ISO-CGL forms (both occurrence and claims-made versions), some in the form of exceptions to exclusions. Accordingly, relevant portions of the BFCGL endorsement are summarized. Following that summary, the wording of the 1986 ISO-CGL forms which addresses that particular section is compared and discussed.
|Coverages
|Contractual Liability Coverage
The contractual liability coverages provided by the BFCGL endorsement are included in the 1986 ISO-CGL policy form within the definition of insured contract. As defined in the 1986 ISO-CGL form, the term insured contract includes the five types of "incidental contracts" described in the 1973 CGL form, as well as two additional types of contracts.
One of the new contracts covered by the 1986 ISO-CGL policy is an easement or license agreement dealing with vehicle or pedestrian private railroad crossings at grade. The other newly covered contract is that part of any other contract or agreement (i.e., other than what is defined to be an "insured contract") under which the named insured assumes the tort liability of another to pay damages for bodily injury or property damage to a third person. Tort liability is liability that is imposed even in the absence of any contract or agreement.
The specific reference to, and definition of, tort liability appears intended to exclude coverage for liability assumed under the hold-harmless clause found in some contracts. For example, assume that a hold-harmless clause in a contract requires a subcontractor to hold the general contractor harmless and to indemnify the general contractor for bodily injury or property damage. Assume also that, during the course of the subcontractor's work, a third party is injured and sues the general contractor. The subcontractor's 1986 ISO-CGL insurance should pay or defend the claim against the general contractor under the insured contract provisions of that policy.
Although liability for bodily injury and property damage to a third party is contractually-assumed by the subcontractor, that same liability would exist even without the contractual assumption of the liability. However, if instead of injury to a third party there is damage to the general contractor's property, and if such damage resulted from the general contractor's own negligence, the subcontractor's 1986 ISO-CGL policy would not respond since this type of damage does not constitute tort liability imposed by law. The subcontractor would have no liability in the absence of the hold-harmless clause in the contract.
The 1973 CGL form, the BFCGL endorsement and the 1986 ISO-CGL form all exclude coverage for liability assumed after the bodily injury or property damage occurs. This limitation applies to all contracts under the 1973 CGL form and the BFCGL endorsement. However, only contracts where the insured assumes the tort liability of another to pay damages to a third person appear to be subject to this limitation in the 1986 ISO-CGL form.
|Personal Injury and Advertising Injury Liability Coverage
The "Personal Injury And Advertising Injury Liability Coverage" part of the BFCGL endorsement provides both personal injury and advertising injury liability coverage. Both of these coverages as provided by the BFCGL are now included in the 1986 ISO-CGL forms.
The BFCGL's trigger for these coverages remains unchanged in the 1986 ISO-CGL forms and is an offense that must be committed in the coverage territory and during the policy period.
|Exclusions
Most of the exclusions applicable to the "Personal Injury And Advertising Injury Liability Coverage" part of the BFCGL endorsement are incorporated in the 1986 ISO-CGL form. While many of these exclusions remained unchanged, two exclusions were modified in the 1986 form.
The first modification involves the exclusion pertaining to willful violation of a penal statute or ordinance. Under the BFCGL wording, coverage is precluded if the insured had knowledge or consent of the violation. Under the 1986 ISO-CGL forms, the exclusion applies only if the willful violation is committed by or with the consent of the insured. Mere knowledge of the violation no longer bars coverage.
The second modification involves the exclusion of coverage for partnerships and joint ventures not designated in the declarations. This exclusion now appears in the "Who Is An Insured" section of the 1986 ISO-CGL form and is applicable to all coverages under the policy.
Two of the BFCGL's personal and advertising injury exclusions have been eliminated from the 1986 ISO-CGL forms. The first precluded coverage for the insured's failure to perform under a contract. The second eliminated exclusion precluded coverage for advertising injury arising out of an insured's malicious act.
The 1986 ISO-CGL form also contains an additional advertising injury exclusion that does not appear in the BFCGL endorsement. This new exclusion precludes coverage in the event goods, products or services fail to perform according to their advertised quality or performance.
|Limits of Liability
The personal injury and advertising injury "Limits of Liability" provisions of the BFCGL endorsement were incorporated in the 1986 ISO-CGL forms under the caption "Limits of Insurance." The scope of these provisions under the BFCGL endorsement and 1986 ISO-CGL form are comparable.
|Additional Definitions
The "Additional Definitions" section of the "Personal Injury And Advertising Injury Liability Coverage" part of the BFCGL endorsement contains definitions of the terms advertising injury and personal injury. The definition of advertising injury in the 1986 ISO-CGL policy form is worded differently than the advertising injury definition in the BFCGL endorsement. However, the scope of coverage is comparable.
The wording of the definition of personal injury in the 1986 ISO-CGL form also differs from the wording in the BFCGL endorsement. Under the 1986 ISO-CGL definition, personal injury specifically excludes bodily injury. No such exclusion is found in the personal injury definition in the BFCGL endorsement. By separating bodily injury from personal injury, the 1986 form both clarifies and restricts coverage for personal injury offenses. In addition, under the 1986 ISO-CGL form, coverage for personal injury arising from wrongful entry or eviction of a person is similarly both restricted and clarified by being limited to a room, dwelling or premises which the person occupies.
Premises Medical Payments Coverage
The counterpart to the "Premises Medical Payments Coverage" provided by the BFCGL endorsement is Coverage C (Medical Payments) of the 1986 ISO-CGL form. Differences in coverage provided under the 1986 form are the following:
·Under the 1986 CGL form, the medical expenses must be incurred and reported within one year of the date of the accident. The BFCGL endorsement contains no reporting limitation and requires only that the expense be incurred within one year.
·The 16 exclusions applicable to premises medical payments coverage under the BFCGL endorsement have been condensed into eight exclusions in the 1986 ISO-CGL form. Also, whereas the exclusions in the BFCGL apply only to the "named insured," their counterparts in the 1986 CGL form have been broadened to apply as respects any insureds. This broadening of the scope of the exclusions may be considered a restriction of coverage under the 1986 ISO-CGL form.
·There is no coverage under the BFCGL endorsement for medical expenses related to services rendered by the named insured, an employee of the named insured or any organization or person contracted by the named insured to provide such services. Because this exclusion does not appear in the 1986 ISO-CGL form, coverage for such services may be provided.
·The "Limits of Liability" addressed by the "Premises Medical Payments" section of the BFCGL endorsement are now found under Section III — Limits of Insurance, in the 1986 ISO-CGL form. The minimum limit under the 1986 form has been increased to $5,000 per person. Under the BFCGL endorsement, the coverage limit was only $1,000 per person. However, Coverage C under the 1986 ISO-CGL form also is subject to the policy's Coverage A Each Occurrence Limit and General Aggregate Limit. This limitation in the 1986 form is probably of little concern to most insureds.
·The definition of medical expense as contained in the BFCGL endorsement does not appear in the 1986 ISO-CGL form. However, the covered expenses are listed in the Coverage C insuring agreement in the 1986 form. The expenses covered are comparable.
|Host Liquor Law Liability Coverage
The "Host Liquor Law Liability Coverage" part of the BFCGL endorsement modifies the 1973 CGL's liquor liability exclusion to provide the insured with coverage for liability arising out of the giving or serving of alcoholic beverages at incidental business activities, such as a company-sponsored social function. The resulting coverage, however, does not apply to insureds that are in the business of manufacturing, distributing, selling or serving of alcoholic beverages.
The BFCGL's host liquor law liability coverage provision is not included in the 1986 ISO-CGL form. In the past, insurers relied on the wording of the provision in the BFCGL to clarify what exposures were excepted from the 1973 CGL's liquor liability exclusion. However, a number of courts interpreted the BFCGL wording as providing liquor liability coverage, even where none was intended by the insurer.
Since the BFCGL wording is not included in the 1986 ISO-CGL policy forms, coverage for host liquor liability can be inferred. Under the 1986 form, the liquor liability exclusion applies only if the named insured is in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. Those insureds who serve alcoholic beverages at incidental business functions should be covered. The key to determining if host liquor liability coverage exists is whether the named insured is in the business of serving, furnishing or selling alcoholic beverages. Those insureds that serve or furnish alcoholic beverages as part of a sales presentation or fund-raising activity may not be covered under the 1986 ISO-CGL form.
While owners or lessors of premises used by others in the business of manufacturing, serving or selling alcoholic beverages are not specifically subject to the 1986 ISO-CGL's liquor liability exclusion, host liquor liability coverage for these persons should not be assumed. If a lease provides for the tenant to pay the lessor based on a percentage of liquor sales, for example, the courts could interpret this arrangement as being one in which the lessor is in the business of selling alcoholic beverages. Accordingly, any contracts or agreements in which the landlord has some influence over, or benefits from, the lessee's operations should be carefully reviewed by qualified counsel.
Fire Legal Liability Coverage—Real Property
The BFCGL endorsement contains a distinct fire legal liability coverage part. Under the 1986 ISO-CGL form, fire legal liability coverage is provided via exception wording contained in the paragraph following the Coverage A exclusions. The 1986 wording states that certain property damage exclusions do not apply to damage by fire to premises rented to the insured.
Coverage is limited to $50,000 per occurrence under the BFCGL whereas the Each Occurrence policy limit specified in the declarations for fire damage liability under the 1986 ISO-CGL forms is $25,000. In addition, the coverage limit under the 1986 ISO-CGL forms is subject to the Coverage A Each Occurrence Limit and the General Aggregate Limit. The coverage limit is subject to no such per-occurrence or aggregate limitation in the BFCGL endorsement. The total per-occurrence and aggregate coverage limitations imposed under the 1986 ISO-CGL could potentially present a problem if, for example, a fire that damaged premises leased by the insured also causes bodily injury or damage to other expensive property. Conceivably, there might not be enough coverage to pay for both the resulting premises damage and the bodily injury or property damage claim.
As stated in the BFCGL endorsement, fire legal liability coverage is excess over other valid and collectible insurance. The same provision is incorporated in the "Other Insurance" condition in the 1986 ISO-CGL form.
|Broad Form Property Damage Liability Coverage
An exclusion in the 1973 CGL precludes coverage for damage to property in the care, custody or control of the insured, or over which the insured is exercising physical control. In addition, coverage is excluded for property damage to work performed by or on behalf of the named insured if the damage arises out of that work. The BFCGL endorsement modifies the wording of both of these 1973 CGL exclusions so that coverage is excluded only for that part of the insured's work that causes the damage, and also excludes only damage to the insured's work that results from the work itself. Coverage for damage to other property that results from the insured's work has been inferred because it was not excluded.
The counterpart to the "Broad Form Property Damage Liability Coverage" provided by the BFCGL endorsement is found in the exceptions to the damage-to-property exclusion in the 1986 ISO-CGL form.
In the past, insurers sometimes denied coverage for property damage to the insured's completed operations if the damage was caused by faulty workmanship of the insured. The basis for the denial of coverage was the wording of the BFCGL exclusion that precludes coverage for damage to property which has been damaged as a result of faulty workmanship performed by or on behalf of the insured. Under the 1986 form, the exclusions relating to broad form property damage coverage apply only to work in progress on real property.
The BFCGL's "Broad Form Property Damage Liability Coverage" coverage is excess of other valid and collectable coverage. A comparable provision is contained in the "Limits of Insurance" section of the 1986 ISO-CGL form.
|Incidental Medical Malpractice Liability Coverage
The "Incidental Medical Malpractice Liability Coverage" part of the BFCGL endorsement amends the 1973 CGL's definition of bodily injury to include injury that arises out of the rendering or failure to render medical services. Coverage is therefore afforded to insureds that have only an incidental (i.e., not regular) medical malpractice exposure, such as an insured who might provide first aid to an injured customer.
Unlike the BFCGL endorsement, the 1986 ISO-CGL policy form contains no specific reference to incidental medical malpractice liability coverage. However, as stated under the Who Is An Insured section of the 1986 ISO-CGL form, coverage does not apply to employees who cause bodily injury or property damage while performing professional health care services. By inference, the 1986 ISO-CGL provides medical malpractice coverage as long as the health care services (such as first aid) are provided by an employee who is not a professional health care provider.
|Non-Owned Watercraft Liability Coverage
The "Non-Owned Watercraft Liability Coverage" part of the BFCGL endorsement amends the 1973 CGL's watercraft exclusion to provide coverage for non-owned watercraft if the watercraft is less than 26 feet in length and not used to transport persons or property for a charge.
The counterpart to the BFCGL coverage provision appears in the 1986 ISO-CGL form as an exception to the Coverage A aircraft, auto and watercraft exclusion. The coverage provided under both the BFCGL and 1986 ISO-CGL forms is comparable.
|Limited Worldwide Liability Coverage
See discussion of the 1973 CGL's policy territory definition. Policy territory is referred to as coverage territory in the 1986 ISO-CGL policy form.
|Additional Persons Insured
The counterpart to the "Additional Persons Insured" provisions of the BFCGL endorsement has been incorporated into the "Who Is An Insured" section of the 1986 ISO-CGL policy form. It should be noted, however that the "Persons Insured" provisions of the 1973 CGL form provide coverage for any partnership or joint venture that is designated in the policy. The "Who Is An Insured" provisions in the 1986 ISO-CGL forms specifically preclude coverage for activities arising out of the conduct of both current and past partnerships or joint ventures unless those entities are named insureds under the policy.
|Extended Bodily Injury Coverage
The "Extended Bodily Injury Coverage" part of the BFCGL endorsement amends the definition of occurrence to include intentional acts of bodily injury (such as assault and battery) committed by the insured for the purpose of protecting persons or property.
Such coverage was incorporated into Coverage Part A of the 1986 ISO-CGL form as an exception to the intentional-acts exclusion. The scope of coverage afforded is similar under the 1973 CGL policy with the BFCGL endorsement and the 1986 ISO-CGL form.
|Automatic Coverage—Newly Acquired Organizations
The BFCGL's "Automatic Coverage for Newly Acquired Organizations" coverage part automatically extends coverage for a period of 90 days to any organization (other than a joint venture) which is newly acquired or formed by the named insured and over which the named insured maintains ownership or majority interest.
A somewhat similar but more restrictive provision is found under the "Who Is An Insured" section of the 1986 ISO-CGL forms. The 1986 form similarly grants 90 days coverage for newly acquired or formed organizations, but specifically excludes coverage for bodily injury or property damage that occurred prior to the acquisition or formation of any organization. Also, the 1986 form excludes coverage for personal injury or advertising injury arising out of an offense committed before the acquisition or formation of any organization.
|Comparison of the 1986 ISO-CGL Forms With The 1989/90 (Implementation Date) ISO CGL Forms
|Introduction
In 1988, several revisions to the 1986 ISO-CGL occurrence and claims-made policy forms were proposed. Most of the resulting revisions are editorial in nature. These revisions have been designed to make the format of both policy forms more consistent and to clarify some of the wording felt by the ISO and others to be ambiguous. However, there have also been some significant changes in coverage. These significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
Unless otherwise noted, the revisions have been made to both the occurrence and claims-made versions of the 1989/90 ISO-CGL policy form. Revisions that are unique to the claims-made version of the ISO-CGL policy form are discussed at the end of this comparison under the caption "Differences in Coverage Under the Claims-Made Policy Form."
The revised ISO-CGL occurrence and claims-made policy forms both bear a revision date of 1988. However, the forms were not introduced until 1989, and not accepted by the majority of states until 1990. For this reason, both the occurrence form (CG 00 01) and the claims-made form (CG 00 02) are referred to as the "1989/90 ISO-CGL forms" in FC&S Umbrella.
|Summary of 1989/90 ISO-CGL Coverage Form Changes
The most significant revisions to the 1986 ISO-CGL form that were incorporated in the 1989/90 ISO-CGL form are the following:
1.The policy definition of you and your has been expanded to include any other person or organization which qualifies as a named insured under the policy. According to the ISO, the intent of this revision was to give full coverage consideration to newly acquired organizations. The wording of the "Who Is An Insured" section of the policy has been similarly modified to provide that any newly-acquired organization qualifies as a named insured if there is no other insurance available to that organization.
2.The Personal and Advertising Injury (Coverage B) coverage trigger in the claims-made version of the 1989/90 ISO-CGL has been changed from an "offense committed" basis to a claims-made basis. Coverage under the policy is therefore no longer triggered only by the timing of the offense, but also by the presentation of a claim. This change helps reduce the likelihood of problems related to claims-made umbrella policies, many of which contain a claims-made coverage trigger for personal and advertising injury.
To conform with this coverage trigger change, wording of the Extended Reporting Period section of the ISO-CGL claims-made policy form and the optional Supplemental Extended Reporting Period endorsement has been revised.
3.The contractual liability exclusion wording has been revised to clarify that coverage for liability assumed under an insured contract only applies to bodily injury or property damage that occurs subsequent to execution of the contract. This provision was previously located within the insured contract definition.
4.The pollution exclusion has been strengthened and broadened. Among the changes are:
·The exclusion now encompasses loss resulting from the seepage and migration of pollutants.
·Coverage is now excluded for pollution originating from any premises, site or location.
·Coverage is not only excluded for pollution resulting from the insured's current operations (including current occupancy of a site or location), but also from past operations and site occupancy.
·The exclusion now applies to all insureds under the policy, not just the named insured.
·The exclusion of coverage for cleanup costs no longer applies only to governmental requests. The exclusion now applies to any request, including that contained in a claim or suit.
5.The care, custody or control exclusion now applies to all insureds under the policy, including additional insureds and employees.
6.The "Who Is An Insured" section of the policy has been modified to preclude coverage for work-related bodily injury or personal injury to the spouse, child, parent, brother or sister of the named insured or a co-employee.
7.The insured must now report both occurrences and offenses to the insurer. Also, the insured must now give written notice to the insurer "as soon as practicable" after a claim or suit is received.
8.The definition of insured contract has been modified to clarify the insurer's intent to provide liability coverage for contractors whose contracts require indemnification of a municipality and to eliminate coverage for construction or demolition operations on or within 50 feet of a railroad. The exclusion of coverage for construction or demolition operations applies unless those operations are in connection with an easement agreement. The railroad construction provision had been inadvertently omitted from the 1986 version of the ISO-CGL forms.
9.The definition of personal injury has been expanded to include invasion of the right of private occupancy along with wrongful eviction and wrongful entry. Coverage has been restricted for any of these offenses committed by or on behalf of the owner, landlord or lessor of a room, dwelling or premises.
10.The property damage definition wording has been revised to clarify that loss of use of damaged property is deemed to occur at the time of the physical injury that caused the loss of use. The same concept applies to loss of use of tangible property that has not been physically injured.
11.The suit definition has been expanded to include alternative dispute resolution proceedings.
12.The definitions of your product and your work have been modified to include the providing of or failure to provide warnings and instructions.
13.The "Your Right To Claim And Occurrence Information" condition in the 1989/90 ISO-CGL claims-made forms has been revised to prohibit the insured from disclosing claim and occurrence information provided by the insurer to any claimant or his/her representative without the insurer's consent.
Many umbrella policies were revised to conform with the 1986 ISO-CGL policy form revisions. Using those umbrella forms with the underlying 1989/90 ISO-CGL form poses a potential for coverage gaps. As always, the wording of umbrella policies should be carefully compared with the wording of underlying primary liability policies to identify potential coverage problems.
In addition to the ISO-CGL policy form changes discussed in the following comparison, the ISO also has issued a number of new and revised endorsements. For this reason, the wording of endorsements also should also be considered when evaluating coverage adequacy.
|How to Use This Comparison
The following coverage comparison contains a brief summary of each section of the 1986 ISO-CGL occurrence policy form that was modified by the 1989/90 form revision. Following each summary is a concise discussion comparing the coverage provided by the 1989/90 ISO-CGL form revision with that of the 1986 version.
At the end of this comparison section, relevant changes to the 1989/90 claims-made ISO-CGL policy form are compared with the 1986 claims-made ISO-CGL form and the differences analyzed and discussed.
|Preamble
In the preamble to the 1986 ISO-CGL form, the terms you and your are stated to mean the named insured. In the 1989/90 ISO-CGL form, the definition of you has been modified to include any other persons or entities qualifying as a named insured under the policy. According to the ISO, the 1989/90 wording change was intended to reaffirm that for purposes of coverage, newly acquired organizations are now granted the same status as named insureds.
The definition of insured in both the 1986 and the 1989/90 ISO-CGL forms includes newly acquired organizations. As a result, this change in the 1989/90 ISO-CGL could be considered a coverage limitation. By virtue of the revised preamble wording, newly acquired organizations may be subjected to the obligations of a Named Insured. For example, failure to report a claim or to fully disclose all material facts in an application could significantly jeopardize coverage.
|Section I—Coverages
|Coverage Trigger
Coverage A under the occurrence version of both the 1986 and 1989/90 ISO-CGL forms applies to bodily injury or property damage resulting from an occurrence that takes place within the coverage territory and during the policy period. However, in both the occurrence and claims-made versions of the 1986 ISO-CGL forms, Coverage B applies to personal injury or advertising injury that results from an offense committed within the coverage territory and during the policy period. This has been changed in the 1989/90 ISO-CGL claims-made form and is discussed under both Section I—Coverage B Insuring Agreement and the section captioned "Differences In Coverage Under The Claims-Made Policy Form" at the end of this policy comparison section.
|Coverage A Exclusions
|Contractual Liability
The contractual liability exclusion in the 1986 ISO-CGL form precludes coverage for the insured's contractually assumed liability unless the contract or agreement qualifies as an insured contract.
In the 1989/90 ISO-CGL forms, wording has been added to the exclusion which clarifies that only injury or damage that occurs after execution of the insured contract is covered. In the 1986 ISO-CGL, this provision was included as part of the insured contract definition.
|Pollution
There have been several changes to the wording of the ISO-CGL's pollution exclusion in the 1989/90 policy form that both broaden and strengthen the scope of the exclusion. These changes are discussed in the following paragraphs.
·The exclusion in the 1986 ISO-CGL form applies to the discharge, dispersal, release or escape of pollutants. The exclusion in the 1989/90 ISO-CGL form now also applies to the seepage and migration of pollutants.
·By virtue of the definition of you in the preamble of the 1986 ISO-CGL, the exclusion applies to pollution originating from any premises that is owned, rented or occupied by the named insured. In the 1989/90 ISO-CGL policy form, the exclusion has been broadened to preclude coverage for pollution originating from any location that is or was at any time owned, rented to or occupied by any insured.
·In the 1986 ISO-CGL policy form, the exclusion applies to any location being used by the named insured for the storage, disposal, treatment, etc. of waste. In the 1989/90 form, this portion of the exclusion has been broadened to apply to any insured rather than to just the named insured. The exclusion also now extends to locations that were used for such activities in the past.
·In the 1986 ISO-CGL form, the exclusion applies only to pollutants which are being transported by or for the named insured or others for whom the named insured is responsible. In the 1989/90 ISO-CGL form, the exclusion also applies to pollutants that were at any time transported, handled, stored, etc. as waste.
·The 1986 ISO-CGL excludes pollution originating from any site or location on which the named insured, its contractors or subcontractors are performing operations. However, the exclusion applies only if the pollutants were brought to the location in connection with those operations, or if the operations are related to the testing or cleanup of pollutants.
This part of the pollution exclusion has been expanded in the 1989/90 ISO-CGL form and now applies to "premises" as well as sites and locations. Also, the exclusion now applies to any insured under policy, not just the named insured. Further, new wording was added to clarify that the exclusion only applies if the insured, its contractors or subcontractors is responsible for bringing pollutants onto the worksite.
The exclusion of clean-up costs has been broadened in the 1989/90 ISO-CGL. The exclusion now precludes coverage for the cost of remediating pollution damage incurred not only as a result of any insured's operations, but also from the operations of any subcontractors or contractors working on an insured's behalf. According to the ISO, the new wording was intended to clarify that there is no coverage for liability arising out of the Superfund Amendment and Reauthorization Act of 1986.
·A new exception to the 1986 ISO-CGL's pollution exclusion has been added with the 1989/90 form revision. The exception in the 1989/90 ISO-CGL applies when bodily injury or property damage is caused by a "hostile fire." Hostile fire then is defined within the exclusion as meaning a fire that breaks out from it's intended location. This hostile fire exception was previously added to the 1986 ISO-CGL form by endorsement.
·In the 1986 ISO-CGL form, application of the pollution exclusion as respects clean-up costs is limited to those costs resulting from a governmental directive or request upon the named insured. In the 1989/90 ISO-CGL form, the exclusion has been expanded to encompass more of the insured's potential exposure for clean-up costs. The exclusion now applies to the costs arising out of any (not just governmental) request that any insured (not just the named insured) or others respond to a pollution situation.
It is not clear whether the courts will find that the cost of relocating due to threatened pollution will be encompassed by this new wording. It is also unclear whether this new exclusion encompasses clean-up costs incurred voluntarily to mitigate further damages. In the past, many courts have ruled that costs incurred in mitigating damages do not constitute an obligation for which the insured is legally required to pay. However, some courts have found that failure by an insurer to cover attempts to mitigate damages is a "Catch-22" situation for the insured, since coverage could conceivably be denied if the insured fails to mitigate damages. Once knowledge of a problem exists, failure to correct (or to try to correct) the problem may make future damages intentional and, as such, not covered by a liability policy.
Also, the cleanup costs portion of the exclusion in the 1989/90 ISO-CGL form, like the 1986 version, precludes coverage for clean-up costs associated with directives or requests by government entities. However, the 1989/90 exclusion wording is broader than the wording found in the 1986 CGL form. Under the terms of the 1989/90 ISO-CGL form, the cleanup costs exclusion applies to a claim or suit by or on behalf of a government authority for damages because of testing for, monitoring, etc. for pollutants. The new wording precludes coverage for damages or reimbursement expenses claimed by the government against the insured. Such a claim could arise, for example, when the government hires a private contractor to clean up the pollution and then seeks to recover the costs from the insured.
In addition to these changes, ISO has made pollution endorsements available to broaden pollution coverage and to provide a so-called "absolute pollution exclusion" for certain classes of risks.
|Owned Property/Real Property/Alienated Premises/Care, Custody, or Control/Incorrect Work
The 1986 ISO-CGL form excludes coverage for personal property in the care, custody or control of the named insured. By inference, damage to property in the care, custody or control of any insured other than the named insured (e.g., an additional insured or an employee) is not encompassed by the exclusion.
In the 1989/90 ISO-CGL policy form, the exclusion has been broadened so that it now applies to personal property in the care, custody or control of the insured, as opposed to the named insured. As a result of the new wording, insureds may be able to argue that the exclusion does not apply to damage to property in the care, custody or control of any insured other than the insured against whom the claim is made.
|Section II—Who Is an Insured
|Paragraph 2 of the Who Is an Insured Section
In the 1986 ISO-CGL form, coverage was excluded for bodily injury and personal injury to the named insured or to co-employees while in the course of employment. In the 1989/90 form, the scope of the exclusion has been expanded to also include the spouse, child, parent, brother or sister of that co-employee. Also now excluded is coverage for any obligation to share damages with or repay someone else who must pay damages because of the injury. According to the ISO, this change was made to be consistent with the Coverage A employers' liability exclusion.
|Section IV—Conditions
|Duties in The Event of Occurrence, Claim, or Suit
The 1986 ISO-CGL form contains a provision requiring the insured to promptly notify the insurer of any "occurrence" that may result in a claim under the policy. Once a claim or suit is received, the insured is then required to promptly provide the insurer with written notice of the claim or suit.
In the 1989/90 form, the reference to an occurrence has been expanded to include both an occurrence and an offense. Also, under the new wording, the insured must give written notice to the insurer "as soon as practicable" after a claim or suit is received.
|Section V—Definitions
|Insured Contract
Under the 1986 ISO-CGL's insured contract definition, coverage applies as respects contracts or agreements 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.
In the 1989/90 ISO-CGL form, new wording has been added to clarify that when the tort liability of a municipality is transferred to a contractor or subcontractor by statute, the contractor's or subcontractor's indemnification obligation qualifies as an insured contract subject to all other policy provisions.
Also, new wording has been added to clarify that while license or easement agreements are covered, no coverage is granted when such agreements are related to or involve construction or demolition operations within 50 feet of any railroad property.
|Personal Injury
The definition of personal injury in the 1986 ISO-CGL policy form includes as a covered offense the wrongful entry or eviction of a person into or from a room, dwelling or premises that the person occupies. In the 1989/90 ISO-CGL policy form, invasion of the right of private occupancy has been added to the definition as a covered personal injury offense. Also added in the 1989/90 form is reference to occupancy by or on behalf of the owner, landlord or lessor of the room, dwelling or premises.
However, the new wording is ambiguous. It is unlikely that this revised wording means that for coverage to apply, the offense must be committed against someone who occupies a room, dwelling or premises by or on behalf of the owner, landlord or lessor. More likely, the ISO means that the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy must occur by or on behalf of the owner, landlord of lessor. If the latter interpretation is correct, this was a significant narrowing of coverage from that provided under the 1986 ISO-CGL policy.
For example, a wrongful entry, eviction or invasion of private occupancy not authorized by the owner but due to the owner's negligence may not be encompassed by this definition. Also, if this new definition appears in a policy used by a municipality, the definition may not encompass wrongful entry, eviction or invasion of private occupancy by a police officer or other public employee. Because such an act would not be by or on behalf of the owner, landlord or lessor, it would appear to be excluded from coverage.
|Property Damage Definition
Under the 1986 ISO-CGL policy form, property damage is defined to include loss of use of the damaged property. In the 1989/90 ISO-CGL form, a statement has been added to the definition to avoid possible confusion as to when the actual loss of use would be deemed to have occurred. The new wording provides that loss of use will be considered to occur at the time of the physical injury that resulted in the property damage.
|Suit
In the 1986 ISO-CGL policy form, suit is defined to include an arbitration proceeding. In the 1989/90 ISO-CGL policy form, the suit definition includes all types of alternative dispute resolution techniques. According to the ISO, the new wording has been added to encourage the use of alternative dispute resolution techniques such as pre-trial mediation and mini-trials.
|Your Product and Your Work
The your product and your work definitions in the 1986 ISO-CGL form clarify the scope of policy coverage for liability arising out of the insured`s products and completed operations. While the wording of the your product and your work definitions as they appear in the 1986 ISO-CGL form remains unchanged in the 1989/90 forms, new wording has been added to both definitions. The revised definitions now include the providing or not providing of warnings or instructions.
The reference to warranties and representations in the definitions is important because claims arising from use of the insured's products or the insured's work may allege a breach of expressed or implied warranties or may contain allegations that warnings or instructions were inadequate or absent.
According to the ISO, the added wording has been introduced to clarify an apparent ambiguity in the prior wording and is a result of litigation in which the courts found negligence regarding warnings or instructions to be outside the scope of the products hazard.
|Differences in Coverage under the Claims-Made Policy Form
The following discussion explains the differences between the 1986 ISO-CGL claims-made policy form and the 1989/90 ISO-CGL claims-made policy form. The differences discussed are unique to the claims-made versions of the ISO-CGL form.
|Section I—Coverages
|Coverage B Insuring Agreement
Under the Coverage B insuring agreement of the 1986 ISO-CGL claims-made policy form, coverage for personal injury and advertising injury liability is triggered by an offense committed within the coverage territory and during the policy period. In the 1989/90 claims-made ISO-CGL form, this coverage is triggered by not only an offense committed in the coverage territory and during the policy period, but also by a claim reported during the policy period (or any applicable Extended Reporting Period). According to the ISO, this wording was changed to be consistent with the coverage trigger of Coverage A.
One benefit to insureds resulting from this wording change is that the 1989/90 ISO-CGL claims-made policy form is now more compatible with many claims-made umbrella policy forms. In the past, there were potential problems because personal injury and advertising injury coverage under many claims-made umbrella forms is not triggered by an "offense." Rather, all coverages (bodily injury, property damage, personal injury, and advertising injury) are triggered by the filing of a claim.
This change in the wording of the 1989/90 ISO-CGL Coverage B trigger also resulted in changes in the wording of most ISO endorsements used with claims-made coverage. The wording modifications were necessary to make the endorsements applicable to Coverage B.
|Section IV—Commercial General Liability Conditions
|Your Right to Claim and Occurrence Information Condition
The wording of this condition in the 1989/90 claims-made ISO-CGL form is the same as the wording of the condition in the 1986 ISO-CGL claims-made form with one notable exception. New wording has been added in the 1989/90 form which provides that the insured shall not disclose claim and occurrence information obtained from the insurer to any claimant or any claimant's representative without the insurer's consent.
Because newly acquired organizations are included as insureds in the 1989/90 ISO-CGL form, it may be more difficult for the insured to control the disclosure of this information.
|Section V—Extended Reporting Periods
In the 986 claims-made ISO-CGL policy form, an Extended Reporting Period is available if the retroactive date is advanced or if the new or renewal policy provides occurrence-based bodily injury and property damage coverage. In the 1989/90 claims-made ISO-CGL form, the reference to new or renewal occurrence-based coverage now includes personal injury and advertising injury in addition to bodily injury and property damage.
Also, the Basic Extended Reporting Period provided under the 1986 ISO-CGL claims-made form applies as respects occurrences reported to the insurer. In the 1989/90 claims-made ISO-CGL policy form, the Basic Extended Reporting Period now applies as respects both occurrences and offenses reported to the insurer. Under the new wording, coverage more clearly applies to personal injury and advertising injury claims.
In the 1986 ISO-CGL form, the Supplemental Extended Reporting Period is defined as being five years after the end of the policy period for claims arising out of an occurrence reported within 60 days of the end of the policy period, and 60 days for all other claims. In the 1989/90 claims-made ISO-CGL form, the Supplemental Extended Reporting Period is now stated to begin when the Basic Extended Reporting Period ends.
|Comparison of the 1989/90 (Implementation Date) ISO CGL Forms with the 1993 ISO CGL Forms
|Introduction
Revisions to the 1989/90 ISO-CGL policy form (both occurrence and claims-made versions) were proposed in November, 1992. While many of the proposed revisions were editorial in nature, some of the revisions result in significant coverage changes. These significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
The revisions have been made to both the occurrence and claims-made versions of the 1993 CGL policy form. In addition, some minor editorial changes have been made with the 1993 claims-made version of the ISO-CGL. Since these editorial changes do not have a meaningful impact on coverage, they are omitted from the following discussion.
Although implemented in late 1993 and 1994 in most states, both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 1993 ISO-CGL form bear an edition date of October, 1993.
|Summary of 1993 ISO CGL Coverage Form Changes
The most significant revisions to the 1989/90 ISO-CGL form that have been incorporated in the 1993 ISO-CGL form are the following:
1.The scope of the employer's liability exclusion has been expanded to include persons performing duties related to the conduct of the insured's business. Also, by virtue of the newly-added policy definitions of employee, leased worker and temporary worker, the exclusion now clearly applies to leased workers, but not to temporary workers.
2.The wording of the mobile equipment exclusion has been revised to clarify the insurer's intent to exclude coverage for vehicles that are actually used in pre-arranged racing, speed, demolition or stunting activities.
3.Coverage has been broadened to include the insured's liability for fire damage to premises the insured temporarily occupies even in the absence of a written occupancy agreement.
4.Wording of the "Who Is An Insured" section of the policy has been modified to exclude coverage for bodily injury or property damage to the named insured's partners or members if the named insured is a partnership or joint venture.
5.The "Who Is An Insured" section has also been modified to broaden the categories of excluded property in the care, custody and control of any insured.
6.Employee is now defined in the policy as including workers leased by the insured from an employee leasing company. As a result of the definition, the applicability of coverage to these persons has been clarified.
7.Executive officer has also been newly defined in the policy. As a result of the new definition, coverage for these persons and application of the policy's fellow employee exclusion has been clarified.
8.Leased worker is another newly-defined policy term. As a result of the new definition, the persons qualifying for coverage as leased workers and applicability of the policy's employers' liability and fellow-employee exclusions has been clarified.
9.By virtue of revised insured contract definition wording, the scope of the contractual liability exclusion has been narrowed as respects indemnity agreements in connection with work performed for railroads.
10.Temporary worker has been added as a defined term in the policy. Coverage as respects these workers has now been clarified.
Implementation of the 1993 ISO-CGL form creates some potential for coverage gaps. Many umbrella policy forms have been revised to conform with the 1986 or 1989/90 ISO-CGL policy form revisions, but have not been further revised to conform with the 1993 ISO-CGL revisions. As always, the wording of umbrella policies should be carefully compared with the wording of any underlying primary liability policies to identify potential coverage gaps. The wording of endorsements also should be also considered when evaluating coverage adequacy.
|How to Use This Comparison
The following coverage comparison contains a brief summary of each section of the 1989/90 ISO-CGL occurrence policy form that was modified by the 1993 form revision. Following each summary is a concise discussion comparing the coverage provided by the 1993 ISO-CGL form revision with that of the 1989/90 version.
|Section I—Coverages
|Coverage A Exclusions
In the 1993 version of the ISO-CGL policy form, each of the Coverage A exclusions is identified by a heading or caption. The format of the Coverage A Exclusions section is otherwise unchanged.
|Employers' Liability
In the 1989/90 ISO-CGL policy form, the employers' liability exclusion applies to bodily injury sustained by an employee that arises out of his or her employment by the insured. In the 1993 ISO-CGL, new wording was added that expands the scope of the exclusion to also apply to persons performing duties related to the conduct of the insured's business.
The scope of the employers' liability exclusion has also been expanded in the 1993 ISO-CGL as a result of newly-added employee, leased worker and temporary worker definitions. Employee is defined in the 1993 form as including a leased worker. The leased worker definition, however, states that temporary workers do not fall within the scope of the definition. By virtue of the new leased worker definition, temporary workers are not considered to be the same as regular employees for purposes of the employers' liability exclusion. The impact of this change is also discussed in Section II—Who Is An Insured.
There is a potential problem with the concept of treating leased workers as employees for purposes of general liability coverage. In some states, the scope of the workers' compensation law does not, or cannot, apply to leased workers. To mitigate this potential problem, the ISO has introduced an endorsement entitled "Coverage for Injury to Leased Worker" (CG 04 24) which removes "leased worker" from the definition of the term employee. However, the endorsement modifies the definition of employee only as it applies with respect to the employers' liability exclusion. Other coverage for the acts of leased workers within the scope of their work for the insured (i.e. as employees) would still apply.
|Mobile Equipment
The mobile equipment exclusion in the 1989/90 ISO-CGL policy form applies to bodily injury or property damage arising out of the use of mobile equipment in prearranged racing, speed or stunting activities. In the 1993 form, newly-added wording clarifies the intent of the exclusion by limiting the scope to only that mobile equipment which is actually used in the racing, speed, or stunting activity. Coverage for other mobile equipment, such as graders, tractors, etc., unless otherwise excluded, is still provided under the 1993 ISO-CGL form.
|War
|Exception to Exclusions Section
The conclusion of the Coverage A Exclusions section in the 1989/90 ISO-CGL policy form provides coverage for fire damage to premises rented to the insured. In the 1993 ISO-CGL, this provision has been broadened to include coverage for fire damage to premises temporarily occupied by the insured with permission of the premises owner. Coverage therefore applies whether or not the occupancy is under a formal lease or rental agreement. The new wording has also been added to the "Limits Of Insurance" section to clarify the application of coverage limits for fire legal liability under Coverage A.
|Section II—Who Is An Insured
|Paragraph 1 Of The "Who Is An Insured" Section
Wording of paragraph 1. of the "Who Is An Insured" section is the same in the 1989/90 and 1993 ISO-CGL policy forms and includes reference to executive officers. However, in the 1993 ISO-CGL, Executive officer is a newly-defined policy term and means a person holding any of the officer positions created by the insured's charter, constitution, by-laws or similar governing document.
Prior to this executive officer definition, the insured might have been able to argue that managers and supervisors were covered by the policy as executive officers for any bodily injury or personal injury they might cause to other employees. As a result of this revision, however, managers and supervisors are clearly not included within the scope of the definition of executive officer unless their titles are listed in the insured organization's governing documents. This is a potentially significant reduction in coverage for managers, supervisors, or other middle and top management personnel who are no longer covered by the executive officer definition.
|Paragraph 2 of the "Who Is An Insured" Section
Portions of the wording of paragraph 2 of the "Who Is An Insured" section in the 1989/90 ISO-CGL policy form have revised with the 1993 ISO-CGL form. Coverage for employees and executive officers has been clarified with the addition of definitions of these two terms. Under the new definitions, leased workers are now treated the same as employees and executive officers are covered as long as they hold positions referred to in the organization's governing documents. In addition, coverage for employees previously applied, with some exceptions, while the employees were within the scope of their employment by the insured. In the 1993 ISO-CGL, coverage also now extends to employees while they are performing duties related to the insured's business.
New wording was also added in the 1993 form to clearly exclude coverage for bodily injury and personal injury to the named insured, its partners, members (if the insured is a partnership or joint venture) or employees if the injury is caused by a co-employee while in the course of his or her employment or while performing duties related to the conduct of the insured's business. The ISO has stated that this revision was merely a clarification of prior wording and represents no change in coverage intent. However, any clarification of policy wording usually results in the restriction of the insured's ability to claim coverage under ambiguous policy provisions. Thus, the revision may be seen by some as a coverage restriction.
Another change to paragraph 2 of the "Who Is An Insured" section of the 1993 ISO-CGL broadens the categories of excluded property that is in the care, custody or control of the insured. Under the revised wording in the 1993 form, the exclusion not only applies to property in the care, custody and control of any insured (including employees and partners or members of joint ventures), but also as respects property over which the insured is exercising physical control. The effects of this revision, if any, may be determined by future litigation.
|Section V—Definitions
|Format
Four newly-defined terms were added in the 1993 ISO-CGL policy form. Since the definitions appear in alphabetical order, the entire "Definitions" section was renumbered as a result of the inclusion of the newly-defined terms.
|Employee
A definition of employee was added to the 1993 ISO-CGL policy form. Under the 1989/90 and prior ISO-CGL coverage forms, the term employee was not defined. As a result, employers could claim that they had liability coverage for all employees, whether those employees were permanent, temporary or leased.
By defining employee as including leased workers but not temporary workers, the ISO effectively broadens the scope of the employers' liability exclusion as it applies to leased workers. The ISO-CGL policy no longer provides employers' liability coverage for direct or consequential bodily injury to leased workers.
|Executive Officer
A definition of executive officer was also added to the 1993 ISO-CGL policy form. Under the "Who Is An Insured" section of the 1989/90 and prior ISO-CGL forms, coverage is provided for the named insured's executive officers while performing activities within the scope of their duties. Under the new definition, however, in order for coverage to apply to executive officers, their position (title) must be referred to in the insured organization's by-laws, charter or other governing document.
Addition of an executive officer definition clarifies application of the policy's fellow-employee exclusion. The result is a potentially significant restriction of coverage. Managers and supervisors, who may have in the past been considered to be executive officers, are no longer able to claim coverage for bodily injury or personal injury to co-workers under the 1993 ISO-CGL policy form.
|Insured Contract
Coverage for premises lease agreements as insured contracts in the 1989/90 ISO-CGL policy form has been clarified in the 1993 ISO-CGL form. The revised definition now makes a clear exception for fire damage to premises rented to or temporarily occupied by the insured. The insured's tort liability (liability imposed on the insured even in the absence of a contractual assumption of liability) for fire damage to rented or temporarily occupied premises is still covered by the policy. This revision only clarifies the intent of the insurer to preclude coverage for only that part of the lease or occupancy contract that requires the insured to indemnify another party in the event of such damage.
Also, in the 1989/90 ISO-CGL, the insured contract definition wording precludes coverage for that portion of a contract that provides for indemnification of any person or organization for bodily injury or property damage that arises out of construction or demolition operations affecting railroad property. In the 1993 form, the reference to "any person or organization" has been changed to "a railroad." In addition, the revised wording in the 1993 ISO-CGL policy form clarifies that an agreement which specifically provides for indemnification of a railroad is not considered to be an insured contract. Indemnification agreements in connection with work performed for entities other than a railroad still appear to qualify as insured contracts, and thus are covered by the policy.
As a result of the 1993 revision, coverage for a hold harmless agreement executed by the insured in favor of a railroad is now clearly excluded from coverage. Insureds who are contractors required to indemnify railroads in connection with work performed near railroad property can be better protected through purchase of a railroad protective liability policy obtained in the name of the railroad.
It should be noted that there is a potential restriction in contractual liability coverage if the insurer issues a "Changes In CGL Coverage" policy endorsement (CG 00 43 00 92) that was introduced by ISO in December, 1993. Under the wording of the endorsement, defense costs for anyone other than an insured are considered damages resulting from liability assumed by the insured under an insured contract. Such costs are clearly included within the policy's limit of liability. Under other circumstances, such as when the policy provides defense to a suit filed against the insured, defense costs are usually paid in addition to the policy limit (until the policy limit of liability is exhausted).
In the past, general liability insurers usually assumed the cost of defending an insured's indemnitee under an insured contract and paid the indemnitee's defense costs in addition to policy limits. By developing endorsement CG 00 43, ISO's position appears to be that the cost of defending an indemnitee under an insured contract is not intended to be payable outside the CGL policy limits. In fact, the ISO contends insurers that have paid such costs in addition to policy limits have been doing so for business considerations. However, the endorsement also provides that defense costs are considered to be damages only if the contract under which the insured assumes the liability of another party includes the assumption of the other party's defense.
Even if endorsement CG 00 43 is issued, however, the cost of defending the insured's indemnitee would be appear to be payable by the insurer in addition to policy limits if the indemnitee is added to the policy as an "additional insured."
|Leased Worker
The leased worker definition was added to the 1993 ISO-CGL policy form. Under the definition, leased worker means a person leased to the insured by a labor leasing firm to perform duties related to the conduct of the insured's business. The term leased worker does not include a temporary worker as the latter term is also defined in the policy.
From the standpoint of an employee who is leased to an insured by a labor leasing firm, this new policy definition broadens coverage. Leased employees are specifically granted the same coverage benefits as regular, permanent employees under the 1993 ISO-CGL policy, subject to the limitations described in the "Who Is An Insured" section of the policy.
However, from the standpoint of the insured, the new definition restricts the coverage previously provided by the 1989/90 and prior ISO-CGL policy forms. Because leased workers are now considered to be employees, coverage is excluded under the 1993 form for any work-related injury 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 cases, the insured would have no coverage for work-related injuries sustained by leased employees, and the leased employees may not have workers' compensation coverage. This situation could result in the insured having to defend an employers' liability suit without the benefit of insurance coverage.
Also, the fellow-employee exclusion which formerly did not apply to leased workers now clearly does apply to those workers. As a result of this new definition, leased employees can no longer claim that they are not employees within the meaning of the CGL policy and that they are therefore entitled to coverage under the policy if injured by a co-employee.
In jurisdictions where leased workers are not covered under workers' compensation laws, the insured should consider purchase of the "Coverage for Injury to Leased Worker" endorsement (CG 04 24). This endorsement is briefly discussed under the employers' liability exclusion.
|Temporary Worker
A definition of temporary worker was added to the 1993 ISO-CGL policy form. Under the definition, a temporary worker means a person who substitutes for a permanent employee who is on leave or who is hired to meet seasonal or short-term workload conditions.
The temporary worker definition distinguishes temporary workers from regular and leased employees. Since temporary workers are not considered to be regular or leased employees, the employers' liability exclusion in the 1993 ISO-CGL policy clearly does not apply to them.
|Comparison of the 1993 ISO CGL Forms with the 1996 ISO CGL Forms
|Introduction
Revisions to the 1993 ISO-CGL occurrence and claims-made policy forms were proposed in 1994. While some of the proposed revisions were editorial in nature, others result in significant coverage changes. These significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
Like its 1986, 1989/90 and 1993 counterparts, the 1996 ISO-CGL claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 1996 CGL form revisions apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 1996 ISO-CGL form bear an edition date of January, 1996.
|Summary of 1996 ISO-CGL Coverage Form Changes
The most significant coverage changes and clarifications resulting from the 1996 ISO-CGL form revisions are summarized here:
1.The wording of the Coverage A and Coverage B insuring agreements has been revised to clarify that the insurer's defense obligation extends to any insured under the policy, not just to the named insured. This obligation is subject to certain limitations.
2.Coverage is provided for contractually-assumed defense of an insured's indemnitee under an insured contract, subject to certain conditions. If these conditions are met, defense costs are paid in addition to policy limits.
3.The escape of pollutants necessary for the operation of mobile equipment brought to a job site is now covered if the pollutants are normally contained within the mobile equipment.
4.The pollution exclusion that previously applied only to Coverage A (Bodily Injury and Property Damage Liability) now also applies to Coverage B (Personal Injury and Advertising Injury Liability).
5.New wording has been added to clarify how the policy's supplementary payments provisions and coverage limits apply as respects costs and expenses incurred in defending an insured's indemnitee under an insured contract. Such costs and expenses will be paid in addition to policy limits only if certain conditions are met.
6.The wording of the "Who Is An Insured" section of the policy has been modified to include coverage for limited liability companies.
7.The wording of the "Who Is An Insured" section of the policy has also been clarified to reaffirm that the fellow-employee exclusion does not apply to executive officers.
8.The wording of the "Duties" condition has been modified to conform with the revised Supplementary Payments provisions regarding the obligation to defend an insured's indemnitee under an insured contract. If the insured is providing coverage (defense or otherwise) for an indemnitee, the indemnitee is discouraged from incurring any costs or obligations without the insurer's consent.
9.The "Other Insurance" condition has been revised to clarify that coverage applies excess in situations where the insured is given permission to occupy a portion of a building without payment of rent if there is other fire insurance available to cover a loss. Also, the revised wording clarifies that the insurer will not defend any suit which another insurer has a duty to defend.
10.Wording of the insured contract definition has been changed to clarify that coverage does not apply to any supervisory, inspection, architectural or engineering activities, whether those activities are services or of another nature.
11.The products-completed operations hazard definition has been revised to clarify that this coverage does not apply to injury or damage arising out of the transportation of the insured's property unless the injury or damage results from an insured's loading or unloading of a vehicle that is neither owned nor operated by an insured.
|Each of the revisions are discussed in detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 1996 ISO-CGL form creates a potential for coverage gaps. Many umbrella policies have been revised to conform with the 1986, 1989/90 or 1993 CGL revisions, but have not yet been revised to conform with the 1996 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying general liability policies to identify potential coverage gaps. The wording of endorsements also should be considered when evaluating the adequacy of coverage layers.
|How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 1993 ISO-CGL policy form that was revised with the 1996 form revision. Following each summary is a concise discussion comparing the coverage provided by the 1996 ISO-CGL form revision with that of the 1993 version.
|Section I—Coverages
|Coverage A Insuring Agreement
In the 1993 ISO-CGL policy form, the Coverage A insuring agreement provides that the insurer will defend any suit seeking damages because of bodily injury or property damage for which the policy provides coverage. In the 1996 ISO-CGL form, the Coverage A insuring agreement has been revised to provide that the insurer will defend the insured against any suit. This revision is essentially editorial and was intended to clarify that the insurer defends insureds, not lawsuits. The revised wording also clarifies that the defense obligation applies to any insureds under the policy, not just the named insured.
In addition, new wording was added to the insuring agreement to clarify that the insurer has no duty to defend the insured against any suit that seeks damages not covered by the policy. The new wording reaffirms that the insurer only has an obligation to defend an insured against any cause of action where, if the insured is found liable, there would be coverage under the policy.
The revised wording appears to be intended to eliminate potential ambiguity regarding the insurer's obligation to defend entire suits when only a portion of the allegations are covered by the policy. However, if read literally, the revised wording means the insurer has no duty to defend against any suit that contains allegations that are not covered by the policy. The ISO has stated that the revised wording is intended to clarify that there is no duty to defend only if none of the allegations in a suit are covered by the policy, even if the insured is found to have liability. The courts may differ in their interpretation of this apparent ambiguity.
|Coverage A Exclusions
|Contractual Liability
The 1993 ISO-CGL's contractual liability exclusion precludes coverage for the insured's contractually-assumed liability, subject to certain exceptions. An exception applies if the contract or agreement qualifies as an "insured contract" or if liability would be imposed on the insured in the absence of the contract or agreement.
In the 1996 ISO-CGL, new exception wording was added to the exclusion. Under the new wording, reasonable attorney's fees and litigation expenses incurred in defending a party for whom the insured has contractually assumed liability are specifically covered. These expenses are considered damages and are subject to the policy's limit of liability if (1) the insured assumes liability for defending the other party in an insured contract, and (2) the fees and expenses are incurred in defending the other party against allegations that are covered by the policy.
However, where defense expenses are assumed under an insured contract, and all of the Supplementary Payments provisions are met, defense expenses will be paid in addition to the policy's limit of liability. If any of the requirements of the Supplementary Payments provisions are not complied with, then the exceptions to the contractual liability exclusion apply.
The revised wording of the 1996 ISO-CGL insuring agreement as respects contractually-assumed defense obligations also creates the opportunity for coverage disputes in certain circumstances. These circumstances are discussed under the caption "Supplementary Payments—Coverages A And B."
|Pollution Exclusion
In the 1993 ISO-CGL policy form coverage is excluded for pollution resulting from work performed by the insured or the insured's contractors if the pollutants are brought to the worksite by the insured or the contractor.
New exception wording was added to the exclusion with the 1996 ISO-CGL form revision. Under the new wording, the exclusion does not apply to the escape of pollutants from mobile equipment when those pollutants are considered necessary for the operation of the equipment and escape from a part of the equipment designed to hold such pollutants (e.g., a gas tank or oil reservoir). A similar exception has typically been made with regard to automobiles in auto liability policies, but was previously omitted in ISO-CGL policies, even though the same exposure exists with regard to mobile equipment. The pollution exclusion still applies, however, if the pollutants are intentionally discharged from the mobile equipment.
|Coverage B Insuring Agreement
The wording of the 1996 ISO-CGL Coverage B insuring agreement has been revised to conform with the revised wording of the Coverage A insuring agreement. The implications of this revised wording are discussed under the "Coverage A Insuring Agreement" caption.
|Coverage B Exclusions
The wording of the personal injury and advertising injury exclusions in the 1993 ISO-CGL policy form has been retained with the 1996 form revision. However, in the 1996 ISO-CGL, a new subpart to these exclusions was added that precludes coverage for personal injury and advertising injury resulting from pollution and pollution cleanup costs. Also added was the definition of pollutants.
According to the ISO, a pollution exclusion was added to the Coverage B section of the policy to clarify the original underwriting intent. Damages resulting from pollution incidents were never intended to be covered under Coverage B. This wording change was prompted by adverse court decisions which resulted in the ISO-CGL policy being held to cover pollution-related personal injury claims. Such a claim could result, for example, if the property of a business owner (Company A) was allegedly damaged by discharge of pollutants into an underground aquifer by a neighboring company (Company B). If the court ruled that the polluted aquifer constituted a "wrongful entry" into Company A's premises, it could also rule that a personal injury (as defined in the ISO-CGL policy) had occurred and hold Company B's ISO-CGL policy liable for coverage. The new language was included to prevent such an interpretation from triggering coverage under the 1996 ISO-CGL policy.
The new wording, however, also creates the potential for a coverage dispute. For example, assume again that Company A's property becomes less valuable because of the polluted aquifer and that the president of Company A writes an open letter to a local paper stating the pollution was caused by illegal dumping of pollutants by Company B. As a result of the damaging letter, Company B loses business and sues Company A for libel. If Company B's suit is successful, it is unclear if Company A's 1996 ISO-CGL coverage would be triggered, or if the exclusion would apply.
|Supplementary Payments—Coverages A And B
In the 1993 ISO-CGL policy forms, the Supplementary Payments section describes the costs and expenses the insurer will pay in addition to policy limits when defending the insured against a claim or suit. In the 1996 ISO-CGL form, new wording has been added to clarify how the policy's supplementary payments provisions and coverage limits apply as respects expenses incurred in defending an insured's indemnitee under an insured contract.
Under the revised 1996 ISO-CGL's Supplementary Payments provisions, the insurer will pay contractually-assumed defense costs in addition to policy limits only if certain conditions are met. The required conditions include, but are not limited to the following:
1.The insured and the insured's indemnitee are both named in the lawsuit;
2.The insured has assumed liability for defending the indemnitee in an insured contract;
3.The insured has assumed the obligation to defend, or to pay the cost of defending the indemnitee;
4.There is no conflict between the interests of the insured and the interests of the indemnitee;
5.The indemnitee agrees in writing to cooperate with the insurer in the defense of the suit and to cooperate with the insurer to coordinate any other applicable insurance available to the indemnitee; and
6.The indemnitee must give the insurer written authorization to conduct and control the defense of the indemnitee in such a suit.
If compliance with any of the stated requirements ceases, the cost of defending the insured's indemnitee will be paid as "damages" and will be subject to the policy's limit of liability.
According to the ISO, the new wording broadens coverage since it imposes a duty on insurers to defend an insured's indemnitee whereas no such duty existed previously. The added wording is intended to resolve the prior controversy over how the ISO-CGL policy's supplementary payments provisions apply when the insured assumes the obligation to defend an indemnitee under an insured contract. In the past, the ISO maintained that defense costs incurred in defending the insured's indemnitee are considered damages and are subject to the policy's limit of liability. Although most insurers pay these defense costs in addition to policy limits, the ISO has stated that the decision to do so is a business decision made by the insurer, rather than an obligation under the policy.
To support its position, the ISO has referred to endorsement CG 00 43 ("Changes in CGL Coverage") which it developed in 1992 and introduced in 1993. The endorsement specifically provides that costs incurred in defending the insured's indemnitees under an insured contract are considered to be damages under the CGL policy. This endorsement, while still available for use with pre-1996 ISO-CGL policy forms, has received little acceptance and is only used by a few insurers in a limited number of jurisdictions. The revised wording of the 1996 ISO-CGL's contractual liability exclusion appears to eliminate any need for endorsement CG 00 43.
While the revised "Supplementary Payments" provisions wording somewhat resolves the issue as respects application of policy limits in situations involving contractually- assumed defense obligations, how coverage applies in some situations still may not be clear. For example, if the indemnitee incurs expenses in its own investigation or defense of a lawsuit, it is unclear whether the indemnitee would have to prove to the indemnitor's insurer that such costs were necessary and reasonable in order to be reimbursed for the costs. It is also unclear how the costs of investigation and settlement of nonlitigated claims would be treated.
The 1996 ISO-CGL Supplementary Payments provisions clearly do not apply when the insured's indemnitee is named as the sole defendant in a lawsuit. However, it is unclear if the provisions apply in situations where both the insured and the indemnitee are named in a lawsuit but where the insurer is only able to effect a settlement on behalf of the insured (and not the indemnitee). These and other coverage questions are almost certain to result in disputes.
|Section II—Who Is An Insured
|Paragraph 1 of the Who Is An Insured Section
The first paragraph of the "Who Is An Insured" section in the 1993 ISO-CGL policy has been modified with the 1996 ISO-CGL form revision. The new wording specifically recognizes limited liability companies and their managers and members as insureds.
Under the 1996 wording, the policy might not provide coverage for limited liability companies (LLCs). The LLC is a relatively new form of business entity that is neither a corporation, partnership nor joint venture. For example, an LLC has no "directors" or "stockholders". It provides its members the benefits of limited liability and certain tax benefits free from the formal protocols of governance associated with a corporate structure.
The new wording, however, falls short of affording an LLC the same status as a corporation. There is no automatic coverage for newly formed or acquired LLCs. Also, to be eligible for coverage, current or past LLCs or their members must be specifically listed as an insured in the policy declarations. As respects acquisitions or past conduct, the LLC is now given the same status as that of a partnership or joint venture. Also, the policy definition of "executive officer" may make coverage unclear for members of LLCs, since many LLCs are governed by articles of organization that do not recognize the typical executive officer titles.
|Paragraph 2 of the Who Is An Insured Section
The second paragraph of the "Who Is An Insured" section in the 1993 ISO-CGL form has also been modified with the 1996 revision to include reference to limited liability companies. In addition, the 1986 ISO-CGL language that more clearly exempts executive officers from the "fellow-employee" exclusion has been restored.
|Paragraph 4 of the Who Is An Insured Section
The fourth paragraph of the "Who Is An Insured" section in the 1993 ISO-CGL form has also been modified with the 1996 form revision. The revised wording adds reference to limited liability companies and is essentially an editorial change to conform with the newly added wording in the first paragraph of this section as described previously.
|Last Sentence of the Who Is An Insured Section
The last sentence of the "Who Is An Insured" section in the 1993 ISO-CGL policy form has been revised in the 1996 ISO-CGL form to include reference to limited liability companies and is essentially an editorial change to conform with the newly added wording in the first paragraph of this section as described previously.
|Section IV—Conditions
|Duties in the Event of Occurrence, Offense, Claim, or Suit
In part, the "Duties" condition in the 1993 ISO-CGL policy form requires the insured to cooperate with the insurer in the investigation, defense or settlement of any claim or suit. In the 1996 ISO-CGL policy form, the wording of the condition has been revised to require the insured to cooperate in the investigation or settlement of the claim or defense against the claim or suit. The ISO has stated that the editorial change was made because the insurer defends insureds, not claims or suits.
Also, the "Duties" condition in the 1993 ISO-CGL policy form provides that any voluntary payments or obligations assumed without the insurer's consent will be made or assumed at the insured's own cost. In the 1996 ISO-CGL form, the wording was revised to provide for payments or obligations not consented to by the insurer to be made at that insured's own cost. This revision is an editorial correction to conform with the revised "Supplementary Payments" provisions regarding the obligation to defend an insured's indemnitee under an insured contract. If the insured's 1996 ISO-CGL is providing coverage (defense or otherwise) for an indemnitee, the indemnitee is discouraged from incurring any costs or obligations without the insurer's consent.
|Other Insurance Condition
The "Other Insurance" condition in the 1993 ISO-CGL policy form provides that coverage under the policy is excess over any other fire insurance that covers premises rented to the insured. In the 1996 ISO-CGL form, the wording of the condition was revised to clarify that coverage under the 1996 ISO-CGL is also excess in situations where the insured is given permission to occupy a portion of a building without payment of rent if there is other fire insurance available to cover a loss. This change was made to conform with a prior (1993) change to the wording following the Coverage A exclusions as respects coverage for the insured's fire legal liability.
Also, wording of the other insurance condition was revised in the 1996 ISO-CGL form to clarify that the insurer will not defend any suit which another insurer has a duty to defend. If another insurer has no duty to defend, or fails to perform that duty, this insurer will defend the insured and assume the insured's rights against all other insurers to recover its costs.
|Section V—Definitions
|Insured Contract
Wording of the Insured Contract definition in the 1993 ISO-CGL policy form excludes coverage for certain professional services rendered by insureds who are architects, engineers or surveyors. In the 1996 ISO-CGL policy form, the wording has been revised to clarify that coverage is excluded for any supervisory, inspection, architectural or engineering activities, whether those activities are services or of another nature.
|Products-Completed Operations Hazard Definition
The wording of the Products-Completed Operations Hazard definition in the 1993 ISO-CGL policy form has been revised in the 1996 form to clarify the coverage intent as respects transportation of property. Under the new wording, bodily injury or property damage arising out of transportation of property falls under products-completed operations coverage only if the loss results from a condition caused by the loading or unloading of a vehicle by an insured and if that vehicle is neither owned nor operated by an insured.
Products-completed operations coverage does not apply where bodily injury or property damage arises from transportation of the insured's property by the insured or if the insured is in the business of transporting property to others. Transportation of property by the insured in connection with work performed for itself or for others is considered part of the insured's ongoing, rather than "completed" operations.
New wording was also added in the 1996 ISO-CGL to clarify that the definition does not apply to bodily injury or property damage which is subject to the policy's General Aggregate Limit as specified in the declarations or in any policy schedule.
|Comparison of the 1996 ISO CGL Forms with the 1998 ISO CGL Forms
|Introduction
Revisions to the occurrence and claims-made versions of the 1996 ISO-CGL policy form were made in 1998. Some of the revisions were editorial in nature while others resulted in significant coverage changes. These significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
Like its 1986, 1989/90, 1993 and 1996 counterparts, the 1998 ISO-CGL claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 1998 CGL form revisions apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 1998 ISO-CGL form bear an edition date of July, 1998.
|Summary of 1998 ISO-CGL Coverage Form Changes
The most significant coverage changes resulting from the 1998 ISO-CGL form revisions are summarized here:
·The scope of the Coverage A pollution exclusion has been narrowed and application of the exclusion has been clarified with respect to insureds who are contractors performing services at a customer's premises. The exclusion does not apply if the customer is added as an additional insured to the policy, provided the premises was never owned or occupied by any insured other than the additional insured. In addition, exceptions to the exclusion were added for bodily injury caused by smoke or fumes from building heating equipment and for bodily injury or property damage caused by fumes from materials brought into a building in connection with operations performed by or on behalf of the insured.
·A new exception to the damage-to-property exclusion applies with respect to premises rented to the named insured for a period of seven days or less.
·A "personal and advertising injury" exclusion applicable to Coverage A (Bodily Injury and Property Damage Liability) has been introduced. The new exclusion preludes coverage for non-physical bodily injury such as emotional distress or mental anguish that results from a personal or advertising injury offense. Coverage for such injury is now clearly provided under Coverage B (Personal and Advertising Injury Liability.)
·The previously separate personal injury and advertising injury liability coverage grants have been combined into a single Coverage B insuring agreement. In addition, the scope of advertising injury liability coverage has been clarified.
·The Coverage B personal injury and advertising injury exclusions have been combined into a single set of exclusions. The wording of some of the exclusions has been modified to clarify their application and new exclusions were added.
·The "other insurance" condition has been modified. Coverage now applies 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. This provision was previously added to the ISO-CGL forms by endorsement.
·An advertisement definition has been added to clarify application of both coverage under Coverage B and the personal and advertising injury exclusions.
·Definitions of hostile fire and pollutants were added to the "Definitions" section of the policy. Previously, these definitions were contained within the text of the policy's pollution exclusions.
·The previously separate advertising injury and personal injury definitions have been replaced with a single personal and advertising injury definition. Under the new definition, consequential bodily injuries such as mental anguish or emotional distress that may result from personal or advertising injury offenses are now clearly covered under Coverage B.
Each of the revisions is discussed in detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 1998 ISO-CGL form creates a potential for coverage gaps. Some umbrella policies have been revised to conform with the 1986, 1989/90, 1993 or 1996 CGL revisions, but have not yet been revised to conform with the 1998 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying policies to identify potential coverage problems. The wording of endorsements also should be also considered when evaluating the adequacy of coverage layers.
|How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 1996 ISO-CGL policy form that was revised with the 1998 form revision. Following each summary is a concise discussion comparing the coverage provided by the 1998 ISO-CGL form revision with that of the 1996 version.
|Coverage A Exclusions
|Pollution
Under the 1996 ISO-CGL policy form, coverage is excluded for bodily injury or property damage resulting from pollution originating at any premises owned or occupied by the insured. Under the 1998 ISO-CGL form, a new exception to the exclusion applies if the insured is a contractor performing services at a customer's premises and if the customer is added as an additional insured to the policy. However, this new exception applies only if the premises was never owned or occupied by any insured other than the additional insured.
A second new exception to the pollution exclusion applies with respect to bodily injury arising out of smoke, fumes, soot or vapors from building heating equipment. In addition, a third new exception applies to bodily injury or property damage caused by fumes from materials brought into a building in connection with the insured's or a contractor's operations. The exception for injury or damage caused by smoke and fumes from a hostile fire, which previously appeared only once at the end of the exclusion, now appears in each section of the exclusion to which it applies. In addition, the definition of hostile fire has been moved to the "Definitions" section of the 1998 ISO-CGL.
The scope of the exclusion for costs related to government-ordered testing or cleanup of pollutants has been narrowed and clarified under the 1998 ISO-CGL form. Under the 1996 ISO-CGL, coverage for costs related to the testing or cleanup of pollutants is excluded even if the insured is requested to take such action by or on behalf of a governmental authority. Under the revised 1998 ISO-CGL wording, an exception to the exclusion applies if the insured has a legal liability for property damage resulting from such activities.
Damage to Property
In the 1996 ISO-CGL, coverage is excluded for damage to premises the insured owns or occupies. In the 1998 ISO-CGL, a newly-added exception applies if the premises is rented to the named insured for a period of seven days or less, such as when the insured rents a conference room for a weekend retreat. The exception does not apply, however, if the property damage is the result of a fire. As in the 1996 ISO-CGL form, the 1998 ISO-CGL grants coverage for the insured's fire damage liability vis-à-vis wording at the end of the Coverage A "Exclusions" section.
Personal and Advertising Injury
A new Coverage A "personal and advertising injury" exclusion has been introduced with the 1998 ISO-CGL form revision to avoid a potential duplication of coverage for certain non-physical bodily injuries that can result from personal or advertising injury offenses.
Prior to introduction of the 1998 ISO-CGL, there was sometimes question whether bodily injury coverage (Coverage A) could be applied to emotional distress, mental anguish or other consequential injury that resulted from personal or advertising injury offenses such as libel, slander or defamation. This ambiguity has been the subject of much litigation. However, with the addition of the Coverage A personal and advertising injury exclusion in the 1998 ISO-CGL forms, coverage for such injury is now clearly precluded under Coverage A. Coverage B (Personal and Advertising Injury Liability) is now the source of coverage for such consequential bodily injury vis a vis a new personal and advertising injury definition that has been added to the policy. The new definition includes consequential bodily injury as a covered offense.
Coverage B—Personal and Advertising Injury Liability
Insuring Agreement
In the 1996 ISO-CGL forms, Coverage B contains two insuring agreements. One insuring agreement grants coverage for personal injury liability arising out of the named insured's business and the other grants coverage for advertising injury caused by an offense committed in the course of advertising the named insured's products or services. The 1998 ISO-CGL form contains a single "personal and advertising injury" insuring agreement.
Under Coverage B in the 1998 ISO-CGL, the insurer still promises to pay sums the insured is legally obligated to pay as damages because of personal or advertising injury covered by the policy and arising out of the named insured's business. However, the term personal and advertising injury is now defined in the "Definitions" section of the policy to include bodily injury that occurs as a consequence of personal or advertising injury.
The prior reference to offenses committed "in the course of advertising" the named insured's products or services has been omitted from the 1998 ISO-CGL forms. As a consequence, the scope of the exclusions applicable to certain advertising injury offenses has been narrowed and clarified.
Coverage B Exclusions
Under the 1996 ISO-CGL form, Coverage B is subject to eight exclusions, four of which apply to both personal injury and advertising injury and four of which apply to advertising injury only. Because personal injury and advertising injury coverages have been combined into a single grant in the 1998 ISO-CGL form, the previously separate exclusions have also been combined. In addition, some exclusions have been added or clarified with the 1998 form revision.
The new and revised Coverage B exclusions in the 1998 ISO-CGL policy form are:
a.Acts caused or directed by the insured with knowledge that the act would violate another's rights and would inflict personal or advertising injury. This new exclusion precludes coverage for personal or advertising injury offenses intentionally committed by the insured.
b.Criminal acts committed or directed by the insured. Previously, this exclusion referred to the insured's willful violation of a penal statute.
c.Breach of contract, except an implied contract to use the ideas of another in the insured's advertisement. The scope of this exclusion in the 1998 ISO-CGL has been clarified by the addition of advertisement as a defined term in the policy.
d.An incorrect description of the advertised price of products or services in the insured's advertisement. The scope of this exclusion in the 1998 ISO-CGL has also been clarified by the new advertisement definition.
e.Offenses committed by any insured that is in the business of advertising, broadcasting, publishing or telecasting. Because coverage for personal injury and advertising injury are combined into a single insuring agreement under the 1998 ISO-CGL form, an exception to this exclusion applies as respects false arrest or imprisonment, malicious prosecution and wrongful eviction. The exception maintains personal injury coverage for such offenses even when the insured is in the business of advertising, broadcasting, etc.
Addition of the word "advertisement" to exclusions c. and d. is a significant modification to the 1998 ISO-CGL form. Under the 1996 and prior versions of the ISO-CGL, coverage disputes sometimes resulted from the wording of the advertising injury insuring agreement that refers to offenses occurring "in the course of advertising" the named insured's products or services. The disputes involved application of the exclusions in situations where the excluded offense occurred prior to actual broadcast or publication of the insured's advertisement. Absent wording that restricted the exclusions to offenses arising out of the advertisement itself, insurers could argue that the exclusions applied to the entire process of planning, developing, writing and broadcasting or publishing the advertisement. The new wording clarifies the scope of the exclusions by limiting their applicability to the insureds advertisement, as that term is defined in the "Definitions" section of the 1998 CGL policy.
Other Insurance Condition
Coverage under the 1996 ISO-CGL policy forms applies excess over any other, more specific types of insurance such as builder's risk, installation risk or similar coverage available to the insured to cover a loss.
Prior to the 1998 ISO-CGL revision, insurers sometimes issued a policy endorsement specifying that coverage is also excess of any other primary liability insurance covering the insured's premises and operations and to which the insured has been added as an additional insured. This provision has been added to the "other insurance" condition with the 1998 ISO-CGL revision. Consequently, issuance of the endorsement is no longer necessary.
Definitions
Advertisement
The definition of advertisement is new to the 1998 ISO-CGL forms and clarifies the scope of the policy's advertising injury coverage. Under the definition, an advertisement means a broadcast or published notice to the general public, or to a specific market segment, concerning the insured's products or services and that is intended to attract customers. Such broadcasts or notices trigger the misappropriation of advertising ideas and copyright infringement coverages under Coverage B of the policy, which are stated to specifically apply to the insured's advertisement.
Under the 1996 and prior ISO-CGL forms, the policy's advertising injury coverage applies to the insured's activities "in the course of advertising" it's products or services. The wording led to much litigation and was sometimes interpreted by the courts as extending to the entire process of creating, broadcasting or publishing virtually any form of advertising. The new advertisement definition, along with new wording of the exclusions applicable to advertising injury clarifies the scope of coverage under the policy. Unless otherwise excluded, coverage is clearly provided for advertising injury offenses committed prior to publication or broadcast of the actual advertisement. Also, application of the exclusions is restricted to advertisements directed to the general public or a specific market segment, rather than to more limited advertising, such as a sales presentation or personal letter to a consumer.
Hostile Fire
The definition of hostile fire has been added to the ISO-CGL's "Definitions" section with the 1998 form revision. Previously, this definition was contained within the text of the policy's pollution exclusions. Although it has been relocated, the wording of the definition is unchanged.
Personal And Advertising Injury
Prior to the 1998 revision, the ISO-CGL contained separate definitions of the terms advertising injury and personal injury. With the 1998 revision, these separate definitions have been combined into a single personal and advertising injury definition.
The definition of personal and advertising injury lists the offenses insured under Coverage B (Personal and Advertising Liability) of the 1998 ISO-CGL policy. Consequential bodily injury, such as mental anguish or emotional distress that may be an alleged result of one of the enumerated offenses is specifically encompassed by the definition. Previously, wording of the personal injury definition sometimes resulted in a dispute regarding whether such injuries were covered as bodily injury or personal injury. As a result of the new definition wording, consequential bodily injury resulting from personal injury offenses is clearly covered under Coverage B.
Pollutants
A definition of pollutants was added to the "Definitions" section of the ISO-CGL policy form with the 1998 revision. Previously, the pollutants definition was contained within the text of the policy's pollution exclusions. Although it has been relocated, the wording of the definition is unchanged.
Comparison of the 1998 ISO CGL Forms with the 2001 ISO CGL Forms
Introduction
Revisions to the occurrence and claims-made versions of the 1998 ISO-CGL policy form were made in 2001. Some of the revisions were editorial in nature while others resulted in significant coverage changes. These significant coverage changes are first summarized, then discussed in detail.
Like its 1986, 1989/90, 1993, 1996 and 1998 counterparts, the 2001 ISO-CGL claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 2001 CGL form revisions (except the "known loss" provision added to the occurrence form's Coverage A Insuring Agreement) apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 2001 ISO-CGL form bear an edition date of October, 2001.
Summary of 2001 ISO-CGL Coverage Form Changes
The most significant coverage changes resulting from the 2001 ISO-CGL form revisions are summarized here:
·A "known loss" provision has been added to the occurrence form's Coverage A Insuring Agreement. The added wording clarifies that coverage is granted only for bodily injury or property damage claims unknown or unexpected by the insured at the time of policy inception.
·The Coverage A aircraft, auto or watercraft exclusion was revised to clarify that it also applies in situations where an insured is allegedly negligent in the hiring, employment, supervision, training or monitoring of others.
·The Coverage A damage-to-property exclusion has been expanded to include costs related to replacing, restoring, repairing or otherwise maintaining the property as well as the cost of preventing injury to persons or damage to another's property. The definition of property damage has also been revised to clarify that electronic data, whether on computer hardware or software, is not considered "tangible property" for purposes of coverage.
·The Coverage B (Personal and Advertising Injury Liability) exclusions section has been reformatted and revised. The criminal-acts exclusion now applies only to the insured responsible for such acts. The exclusion no longer applies to other insureds who may be vicariously liable for the criminal act. In addition, three new exclusions have been added to clarify or restrict coverage for Internet and related activities.
·Coverage for trustees and volunteer workers as insureds has been added.
·The advertisement definition has been expanded to encompass and clarify coverage for exposures presented by Internet or other electronic means of communication.
·The policy territory definition has been expanded to provide coverage for Internet or electronic-based personal and advertising injury.
The definition of volunteer worker was added.
Each of the revisions is discussed in detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 2001 ISO-CGL form creates a potential for coverage gaps. Some umbrella policies have been revised to conform with the 1986, 1989/90, 1993, 1996 or 1998 CGL revisions, but have not yet been revised to conform with the 2001 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying policies to identify potential coverage problems. The wording of endorsements also should be also considered when evaluating the adequacy of coverage layers.
How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 1998 ISO-CGL policy form that was revised with the 2001 form revision. Following each summary is a concise discussion comparing the coverage provided by the 2001 ISO-CGL form revision with that of the 1998 version.
Coverage A—Bodily Injury and Property Damage Liability
Insuring Agreement
Under the 1998 ISO-CGL form, Coverage A (Bodily Injury and Property Damage Liability) applies to bodily injury or property damage that occurs during the policy period and within the policy's coverage territory. Once the policy trigger conditions are met, the policy will respond, even if the claim is presented months or even years after the policy has expired.
In some cases, bodily injury or property damage that manifests itself during the policy period results from an occurrence that took place prior to policy inception. In the past, coverage disputes have developed over which CGL policy should provide coverage—the policy in effect at the time of the original occurrence, or the policy in effect when the injury or damage becomes evident. A similar question can arise over injury or damage that occurred prior to policy inception, but which reoccurs during the policy period.
The 2001 ISO-CGL attempts to clarify coverage in such situations by incorporating a "known loss" provision. Under the provision wording, coverage for bodily injury or property damage that results from an occurrence that took place prior to policy inception is covered, but only if the insured was unaware of the actual or potential injury or damage at the time of policy inception. This is the case even if the claim involves a continuation, change or resumption of bodily injury or property damage that occurs during or after the policy period.
Coverage A Exclusions
Auto, Aircraft, or Watercraft
Wording of the Coverage A "auto, aircraft or watercraft" exclusion has been modified in the 2001 ISO-CGL form. The new wording addresses the issue of negligent supervision, which some courts have recognized as a separate cause of action, even when the ownership or operation of autos, aircraft or watercraft by an insured was a direct cause of injury or damage.
The added wording clarifies that the exclusion applies even if an insured is negligent in the hiring, employment, supervision, training or monitoring of others as long as the injury or damage involved the ownership, maintenance, use or entrustment to others of aircraft, autos or watercraft. Thus, even if the courts are willing to consider negligent entrustment or supervision by an insured as a separate cause of action by a plaintiff, there is no coverage for such action under the 2001 ISO-CGL.
Damage to Property
The 1998 ISO-CGL's exclusion for damage to property owned, rented to or occupied by the insured has been expanded in the 2001 ISO-CGL form. Now included within the exclusion is any cost or expense associated with replacing, restoring, repairing or otherwise maintaining the property. Similarly, costs related to preventing injury to persons or damage to another's property are also excluded.
Coverage B Exclusions
Under the 1998 ISO-CGL form, Coverage B is subject to twelve exclusions, ten of which apply to specific types of injury or injury occurring under specified conditions and two of which apply as respects pollution cleanup. The 2001 ISO-CGL contains fourteen Coverage B exclusions, twelve of which apply to specific types of injury or injury occurring under specified conditions, including three exclusions that have been revised. Two exclusions have been added to encompass the insured's Internet and electronic media activities.
The revised and new Coverage B exclusions in the 2001 ISO-CGL policy form are discussed here:
a.In the 1998 ISO-CGL, the Coverage B (Personal and Advertising Injury Liability) criminal-acts exclusion applied as respects any insured under the policy. The wording of the exclusion has been revised in the 2001 ISO-CGL to apply only as respects the insured. As a result of the revised wording, the exclusion now 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.
b.By virtue of the revised advertisement definition, the intellectual property exclusion now precludes coverage for material placed on the Internet or similar means of communication. However, the exclusion only applies only as respects that part of a website that is considered to be the insured's advertisement.
c.Added language modifies the 1998 ISO-CGL exclusion for personal and advertising injury committed by insureds in the business of advertising, broadcasting, telecasting or publishing. In the 2001 forms, the exclusion also applies to insureds in Internet-related businesses, such as those that design websites or that are search, access, content or service providers. An exception to the exclusion still applies as respects false arrest or imprisonment, malicious prosecution and wrongful eviction.
d.A new exclusion precludes coverage for offenses arising out of an electronic chatroom or bulletin board hosted, owned or controlled by the insured.
e.Another new exclusion applies with respect to 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.
Prior to introduction of the 2001 ISO-CGL revision, it was sometimes unclear how personal and advertising injury coverage applied in situations where the insured conducted advertising or other business over the Internet or other electronic means. By adding the new exclusion wording, the ISO has attempted to clarify that general liability coverage is intended to apply to the insured's Internet activities in the same manner as it applies to the insured's advertising, communications and publishing activities conducted through more traditional media.
Section II—Who Is An Insured
The 2001 ISO-CGL specifically extends coverage to trustees, but only with respect to their duties as such. In addition, with two exceptions, volunteer workers are now treated the same as the insured's employees. Unlike employees, however, volunteers can still seek coverage under the policy if they are injured by a co-employee who is driving the insured's mobile equipment. Also, the injury-to-employees exclusion under Coverage C (Medical Payments) also does not apply to volunteer workers under the 2001 ISO-CGL.
Section V—Definitions
Advertisement
Prior to the 1998 version, the ISO-CGL's advertising injury coverage applied to the insured's activities "in the course of advertising" its products or services, and was sometimes interpreted by the courts as applying to virtually any form of sales or marketing. With the 1998 ISO-CGL revision, coverage was clarified as being limited 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 under the 1998 form 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.
Whether the ISO-CGL's coverage for personal and advertising injury applies to advertising over the Internet or other electronic means has been resolved with the 2001 ISO-CGL revision. The advertisement definition has been expanded to encompass such exposures. As respects Web sites, however, 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.
Coverage Territory
Under the 1998 and prior ISO-CGL forms, worldwide coverage is limited to situations involving products liability and short-term travel on the insured's business. Under the 2001 ISO-CGL, worldwide coverage also applies as respects personal and advertising injury offenses that take place via the Internet or other electronic means of communication.
Property Damage
New wording has been added to the property damage definition with the 2001 ISO-CGL revision to clarify that 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.
Volunteer Worker
A definition of volunteer worker was added to the ISO-CGL with the 2001 form revision. Under the definition, a volunteer worker is 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. For coverage purposes, volunteer workers are treated the same as employees with two exceptions. The Coverage C (Medical Payments) co-employee injury exclusion does not apply to these workers, nor are these workers excluded from coverage if injured by a co-employees driving the insured's mobile equipment.
Comparison of the 2001 ISO CGL Forms with the 2004 ISO CGL Forms
Introduction
Revisions to the occurrence and claims-made versions of the 2001 ISO-CGL policy form were made in 2004. Some of the revisions were editorial in nature while others resulted in significant coverage changes. These significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
Like its 1986, 1989/90, 1993, 1996, 1998 and 2001 counterparts, the 2004 ISO-CGL claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 2004 ISO-CGL form revisions apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 2004 ISO-CGL form bear an edition date of December, 2004.
Summary of 2004 ISO-CGL Coverage Form Changes
The most significant coverage changes resulting from the 2004 ISO-CGL form revisions are summarized here:
·The building and heating equipment exception to the pollution exclusion has been expanded to include equipment used to cool or dehumidify the building, as well as equipment used to heat water for the personal use of the building's occupants and their guests;
·The auto, aircraft or watercraft exclusion has been modified to clarify that coverage does not apply to equipment that is attached to 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. In conjunction with this change, the definitions of auto and mobile equipment have also been revised;
·The Coverage A war exclusion has been expanded to include warlike action by a military force, by any government, or by other authority using military personnel or other agents;
·A new electronic data exclusion has been added;
·A war exclusion was added to the Coverage B, Personal and Advertising Injury Liability coverage section. At the same time, the exclusion was deleted from the Coverage C, Medical Payments section of the policy;
·The Coverage C athletic activities exclusion has been modified to clarify that it applies to any participation in any physical exercise,, game, sport or athletic contest;
·The reference to coverage for those who drive certain types of mobile equipment has been removed from the "Who Is An Insured" section of the policy. As the result, coverage no longer applies to those persons if the equipment is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is located or principally garaged;
·Wording of the policy's other insurance condition has been modified to clarify that coverage applies on an excess basis if the named insured is added by endorsement to another CGL policy as an additional insured for both premises/operations and products/completed operations exposures; and
·The definitions of auto and mobile equipment have been modified to conform with the changes made to the auto, aircraft and watercraft exclusion and the "Who Is An Insured" section of the policy.
Each of the revisions is discussed in more detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 2004 ISO-CGL form creates a potential for coverage gaps. Some umbrella policies have been revised to conform with the prior CGL revisions, but have not yet been revised to conform with the 2004 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying policies to identify potential coverage problems. The wording of endorsements also should be also considered when evaluating the adequacy of coverage layers.
How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 2001 ISO-CGL policy form that was revised with the 2004 form revision. Following each summary is a concise discussion comparing the coverage provided by the 2004 ISO-CGL form revision with that of the 2001 version.
Coverage A—Exclusions
Pollution
In the 2001 ISO-CGL form, the part of the exclusion that deals with pollutants that seep from or escape from any premises, site, or location owned or occupied by any insured does not apply to bodily injury that is sustained within a building and caused by smoke, vapor, fumes, or soot from equipment used to heat, cool, or dehumidify that building. As an example, if carbon monoxide fumes seep from a furnace and injure customers or visitors in the insured's building, and the injured parties (or their estates) file a lawsuit against the insured, the pollution exclusion on the ISO-CGL form will not prevent coverage for the insured.
In the 2004 ISO-CGL, language was added that pertains to equipment used to cool or dehumidify the building. Since such equipment can emit fumes or vapors similar to equipment used to heat a building, and since the intent of the CGL form is to provide coverage for such an exposure, the language of this exception was revised. Also added was language pertaining to equipment used to heat water for personal use by the building's occupants or their guests. This would describe a boiler, a small hot plate, or just about any piece of equipment that is used to heat water in the insured's building.
Auto, Aircraft, and Watercraft
By exception to the auto, aircraft and watercraft exclusion, the 2001 ISO-CGL, allows coverage for liability arising out of the operation of certain types of mobile equipment that is attached to certain specifically-described, self-propelled autos and precludes liability arising out of the use of other types of autos. Because compulsory auto insurance laws sometimes led to insurers having to pay for certain types of claims resulting from the use of attached mobile equipment, such as uninsured or underinsured motorists claims or personal injury protection (PIP) claims, the ISO was prompted to clarify which claims the CGL policy is intended to cover versus which claims the commercial auto policy is intended to cover. The result of this clarification was a revised auto, aircraft and watercraft exclusion in the 2004 ISO-CGL.
By a newly-added exception to the exclusion, the 2004 version of the ISO-CGL form allows coverage for liability arising out of equipment that is attached to a land vehicle that falls under a statutory financial responsibility or other compulsory auto insurance law in the state where the vehicle is licensed or principally garaged. These types of vehicles are considered autos and the CGL form strives to emphasize this point. If the vehicle itself is the cause of any bodily injury or property damage, the CGL form will not respond to a claim; however, if machinery or equipment attached to the vehicle causes the injury or damage, the CGL form will apply.
This may be confusing, but it simply reinforces the separation between auto liability and general liability claims, and acts as a complement to the exception in this exclusion that pertains to machinery or equipment attached to certain other types of vehicles listed in the definition of mobile equipment. The point is that the equipment attached to certain type vehicles is not subject to this exclusion even though the operation of the vehicle itself is excluded. If, for example, a cherry picker attached to a truck were being used to cut down a tree, there would be coverage under the CGL form for injury to a pedestrian struck by the cherry picker as it descends from the top of the tree. However, there would be no CGL coverage if the vehicle to which the cherry picker is attached hits a pedestrian while proceeding to the next job site.
The new wording has also been incorporated into the auto and mobile equipment definitions in the 2004 ISO-CGL.
War
The war exclusion has undergone a significant change with the 2004 ISO-CGL revision. Previously, the exclusion applied only to liability assumed under a contract or agreement. This restriction has been eliminated and the exclusion expanded to apply to warlike action by a military force, by any government, or by other authority using military personnel or other agents.
A prime example of this is, of course, the 9/11 attack on the World Trade Center. That was a warlike action taken by a military force or by some other authority using agents other than military personnel. Due to the high loss of life and the extraordinary amount of property damage caused by terrorist attacks, such actions were deemed to be a risk exposure beyond the intended scope of a standard general liability policy. Hence, the war exclusion was rewritten. It is now for individual umbrella insurers to decide whether to follow form or to allow for some coverage.
Electronic Data
An electronic data exclusion has been added to the 2004 ISO-CGL. The new exclusion precludes coverage for damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data. The wording is meant to strengthen the point that that the CGL form does not cover damage to electronic data, an item that is not tangible property – the CGL form applies to damage to and to loss of use of tangible property only. While some court decisions have blurred the distinction between tangible property and intangible property (for example, computer hardware and computer software, respectively), the fact remains that the CGL form was not meant to apply to damage to other than tangible property. The definition of property damage was revised previously to clarify that electronic data is not tangible property for the purposes of general liability insurance. This new exclusion complements that definition.
"Electronic data" is defined within the exclusion as being 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.
Coverage B—Exclusions
War
A war exclusion has been added to Coverage B – Personal and Advertising Injury Liability with the 2004 ISO-CGL revision. The wording of the exclusion parallels that found in Coverage A of the ISO-CGL form, except of course, that it applies to personal and advertising injury caused directly or indirectly by war or warlike actions. The purpose of the exclusion is to preclude any coverage under the personal and advertising injury liability section of the CGL form that does not exist under the bodily injury and property damage liability part pertaining to war or warlike actions. The idea here is that someone could claim a personal injury (for example, false arrest, slander, or libel) arising out of a warlike action, such as a terrorist attack, and then the insured could seek coverage under the CGL form. In such instance, this exclusion would prevent insurance coverage under the insured's CGL form. How an umbrella policy might respond to such a claim, however, is subject to that policy's language.
Coverage C—Medical Payments
Two changes to the Coverage C – Medical Payments section of the 2001 ISO-CGL policy were made with the 2004 form revision. The first change was the elimination of the war exclusion. Since there is already an exclusion pertaining to bodily injury under coverage A, the thinking was that also having an exclusion for bodily injury due to war under Coverage C is simply repetitious and unnecessary.
Athletic Activities Exclusion
A more significant revision under coverage C pertains to the athletics activities exclusion. Previously, because the term "activities" is not a defined term in the CGL policy, the courts often interpreted coverage to apply to medical expenses incurred by anyone involved in activities without regard to fault – an exposure greater than what insurers ever intended. To remedy this situation, the 2004 version of the athletic activities exclusion states that there is no coverage for bodily injury to a person injured while practicing, instructing, or participating in any physical exercises or games, sports, or athletic contests. In other words, the revised, language means that any participation in any physical exercise or game or sport or athletic contest precludes the participant from receiving medical payments coverage. For example, if the insured sponsors a semi-professional baseball team and one of the players is injured during a game, the exclusion applies. If the insured sponsors a local T-ball team and one of the children is injured during a game, the exclusion again applies. And if the insured is having the company picnic on company grounds and a child or a spouse or a friend of an employee is injured while playing basketball or softball, the medical payments exclusion applies. Thus, the exclusion is intended to apply to anyone participating in any kind of athletics, period.
Who Is An Insured
By exception to the "auto, aircraft and watercraft" exclusion, the 2001 ISO-CGL provided coverage for liability arising out of the operation of certain types of mobile equipment that is attached to certain specifically-described, self-propelled autos and precludes liability arising out of the use of other types of autos. However, because of issues related to wording of the exception, the exclusion wording was modified in the 2004 ISO-CGL to eliminate coverage for mobile equipment that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where the equipment is licensed or principally garaged. To conform with the revised exclusion wording, the portion of the "Who Is An Insured" section that refers to persons operating mobile equipment registered in the name of the named insured and that were being driven along a public highway have been removed.
Some umbrella policies may still provide coverage to such operators, even if the insured has the new 2004 ISO-CGL as an underlying general liability policy. However, the underlying policy will have to be an auto policy and not the general liability policy. Also, if the underlying general liability coverage is provided by an earlier version of the CGL form, the former language pertaining to operators of mobile equipment will still be present. For this reason, insureds need to determine which version of the CGL form is being used in order to fully understand the coverage being provided.
Conditions—Other Insurance
In the 2004 ISO-CGL, wording of the policy's other insurance condition has been modified to clarify that coverage applies on an excess basis if the named insured is added by endorsement to another CGL policy as an additional insured for both premises/operations and products/completed operations exposures.
Previously, application of the condition was limited to situations where the insured was granted additional insured status on another CGL policy for the premises and operations exposure. That meant that unless the other CGL policy also extended the additional insured coverage to the products and completed operations exposure, the insured's own CGL policy would likely share in a products/completed operations loss based upon the limited wording of the condition. To remedy a possible oversight, the ISO has modified the condition wording in the 2004 ISO-CGL to state that coverage applies on an excess basis for both premises/operations and products/completed operations exposures.
Definitions
Auto
An auto is defined, as in previous CGL forms, as a land motor vehicle, trailer, or semitrailer designed for travel on public roads, including any attached machinery or equipment. However, with the 2004 ISO-CGL revision, an auto now also includes any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.
This extension to the definition of auto is an attempt to emphasize the difference between an auto and mobile equipment so that a claim involving an auto is handled under the auto policy and a claim involving mobile equipment is handled under a general liability policy. As discussed under the "auto, aircraft and watercraft" exclusion, some courts had been requiring the CGL form to pay auto uninsured motorists liability claims or provide no-fault coverage for accidents that happened on public roads and that involved mobile equipment. The revised definition wording—to be read in conjunction with the auto exclusion—is intended to clarify that uninsured motorists coverage (and auto coverage in general) is to be handled by an auto policy and not the CGL form.
Mobile Equipment
The mobile equipment definition was also modified with the 2004 ISO-CGL form revision to complement the change in the auto definition. The mobile equipment definition now states that mobile equipment does not include any land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered autos for purposes of CGL coverage and claims involving such vehicles should be considered as auto claims and not general liability claims.
Comparison of the 2004 ISO CGL Forms with the 2007 ISO CGL Forms
Introduction
Revisions to the occurrence and claims-made versions of the 2004 ISO-CGL policy form were made in 2007. Most of the revisions were editorial in nature while a couple resulted in significant coverage changes. The significant coverage changes are first summarized, then discussed in detail in the following paragraphs.
Like its 1986, 1989/90, 1993, 1996, 1998, 2001 and 2004 counterparts, the 2007 ISO-CGL claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 2007 ISO-CGL form revisions apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 2007 ISO-CGL form bear an edition date of December, 2007.
Summary of 2007 ISO-CGL Coverage Form Changes
The most significant coverage changes resulting from the 2007 ISO-CGL form revisions are summarized here:
·A new exclusion was added to both Coverage A – Bodily Injury and Property Damage and Coverage B – Personal and Advertising Injury Liability sections of the policy. The exclusion precludes coverage for claims involving the Telephone Consumer Protection Act and CAN-SPAM Act of 2003;
·Wording has been added to the "Infringement of Copyright, Patent, Trademark or Trade Secret" exclusion to confirm that "the use of another's advertising idea in your advertisement" is still included in the definition of personal and advertising injury; and
·The policy's Supplementary Payments section has been revised to clarify coverage for certain costs taxed against the insured.
Each of the revisions is discussed in more detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 2007 ISO-CGL form creates a potential for coverage gaps. Some umbrella policies have been revised to conform with the prior CGL revisions, but have not yet been revised to conform with the 2007 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying policies to identify potential coverage problems. The wording of endorsements should also be considered when evaluating the adequacy of coverage layers.
How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 2004 ISO-CGL policy form that was revised with the 2007 form revision. Following the summary is a concise discussion comparing the coverage provided by the 2007 ISO-CGL form revision with that of the 2004 version.
Coverage A—Exclusions
Distribution of Material in Violation of Statutes
Prior to introduction of the 2007 ISO-CGL policy form, many insurers attached endorsement form CG 00 67) to the ISO-CGL form to exclude coverage for bodily injury, property damage, and personal and advertising injury arising out of any action or omission that violates or is alleged to violate the Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003, or any other similar statute, ordinance, or regulation that prohibits or limits the sending, transmitting, communicating, or distribution of material or information. With the 2007 form revision, the endorsement wording has been added to the CGL policy as a new exclusion under the Coverage A section of the policy as exclusion "q."
Coverage B—Exclusions
Distribution of Material in Violation of Statutes
The new Coverage A exclusion q. has also been added to the Coverage B section of the policy as exclusion "p." With exception to the reference to Personal and Advertising Injury instead of Bodily Injury and Property Damage, the wording of the Coverage B exclusion is identical to the wording of the Coverage A exclusion.
As a consequence of the addition of the new exclusions to the CGL policy, endorsement CG 00 67 is being withdrawn from use by the ISO.
Infringement of Copyright, Patent, Trademark, or Trade Secret
Exclusion "i" of Coverage B pertains to personal and advertising injury arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. With the 2007 ISO-CGL form revision, the following new wording was added to the first paragraph of the exclusion: "Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in the insured's advertisement." The new wording was added to clarify the fact that "the use of another's advertising idea in your advertisement" is still included in the definition of personal and advertising injury. Exclusion (i.) will not be used to deny personal and advertising injury coverage to an insured should a claim arise against him based on the use of another's idea in the named insured's advertisements.
Supplementary Payments—Coverages A and B
Paragraph e. of the Supplementary Payments – Coverages A and B section of the CGL form pertains to costs taxed against the insured. The 2004 and previous versions of the ISO-CGL form simply declared that supplementary payments included "all costs taxed against the insured in the suit". This wording could easily lead to some confusion as to what costs were to be considered as supplementary payments, that is, payments that do not reduce the limits of insurance.
The 2007 ISO-CGL form now states that "all court costs taxed against the insured in the suit" are considered supplementary payments. Moreover, the revised wording declares that "these payments do not include attorneys' fees or attorneys' expenses taxed against the insured. As a result of the clarification, only all court costs taxed against the insured, and not all costs in general taxed against the insured are considered supplementary payments. Further, these court costs do not include attorneys' fees or expenses, since such fees and expenses made on behalf of the insured are already included as items the insurer promises to pay by virtue of paragraph (a.) of the supplementary payments section that includes "all expenses we incur."
Comparison of the 2007 ISO CGL Forms with the 2013 ISO CGL Forms
Introduction
Revisions to the occurrence and claims-made versions of the 2007 ISO-CGL policy form were made in 2013. Some of the revisions were editorial in nature while some resulted in significant coverage changes. The significant coverage changes are first summarized, then discussed in detail.
Like the 1986, 1989/90, 1993, 1996, 1998, 2001, 2004 and 2007 ISO CGL forms, the 2013 edition claims-made policy form contains features and provisions unique to claims-made coverage. These claims-made features will not be discussed in the following text, as all of the 2013 ISO-CGL form revisions apply to both the occurrence and claims-made policy formats.
Both the occurrence version (CG 00 01) and the claims-made version (CG 00 02) of the 2013 ISO-CGL form bear an edition date of April, 2013.
Summary of 2013 ISO-CGL Coverage Form Changes
The most significant coverage changes resulting from the 2013 ISO-CGL form revisions are summarized here:
·The scope of the liquor liability exclusion has been expanded to clarify how the exclusion applies when claims allege negligence in the serving of alcoholic beverages and where establishments permit customers to bring their own alcohol onto the premises. The new wording reaffirms applicability of the exclusion even when claims allege the insured was negligent in the hiring, training and supervision of its employees or failed to provide transportation to intoxicated customers. It also clarifies that bring-your-own ("BYO") establishments are not in the business of manufacturing, selling, serving, etc. of alcoholic beverages, so the exclusion does not apply to such establishments.
·Wording has been added to the electronic data exclusion to clarify that it does not apply with respect to bodily injury that results from inability to access electronic data or from the loss of use of electronic data;
·The title and wording of the Distribution of Material in Violation of Statues exclusions in Coverage A and Coverage B have been revised to clarify and expand the applicability of the exclusions; and
·The Excess Insurance section of the Other Insurance condition has been modified so that an endorsement is no longer required for the condition to apply.
Each of the revisions is discussed in more detail in the following paragraphs.
As with any change to underlying coverage, implementation of the 2013 ISO-CGL form creates a potential for coverage gaps. Some umbrella policies have been revised to conform with the prior CGL revisions, but have not yet been revised to conform with the 2013 ISO-CGL revisions. As always, the wording of umbrella policies should be compared with the wording of any underlying policies to identify potential coverage problems. The wording of endorsements should also be considered when evaluating the adequacy of coverage layers.
How to Use This Comparison
The coverage comparison contains a brief summary of each section of the 2013 ISO-CGL policy form that was revised with the 2013 form revision.
Coverage A—Exclusions
Liquor Liability
Prior to the 2013 ISO-CGL form revision, it was unclear how the liquor liability exclusion applied in some situations where bodily injury or property damage occurred after the serving or consumption of alcohol on an establishment's premises. Following some significant court cases that tested the scope of the exclusion, the Insurance Services Office has attempted to resolve potential issues by added wording that clarifies how the exclusion applies in such situations.
In Penn-America Ins. Co. v. Pecadillos, Inc. (27A.3d259 (2011), two intoxicated customers entered the bar after visiting several other drinking establishments where they drank alcohol in excess. They continued to drink alcohol at Pecadillos, became further intoxicated, and were eventually asked to leave the bar, despite being in no condition to drive. The patrons left the premises and subsequently caused an accident, killing two individuals and injuring two others. The insured argued that the allegations in the underlying action against them fell outside the related CGL policy's liquor liability exclusion. The Superior Court of Pennsylvania ruled that a "duty to defend" was triggered when an insured was alleged to have continued to serve intoxicated patrons and then ejected them in a dangerously inebriated condition.
In another case, McGuire v. Curry and Park Jefferson Speedway, Inc., a South Dakota Corporation (766 N. W. 2d 501 (2009), a racetrack employer allowed an unsupervised, underage employee access to alcoholic beverages. The employee was a runner hired to deliver alcohol and other supplies to the racetrack's concession stands and bars. One day after the employee's shift ended, he drove his vehicle off the racetrack's premises while intoxicated and injured a passenger on a motorcycle. The plaintiff's suit filed against the racetrack alleged negligent hiring, retention and supervision of an underage employee. The court concluded that the racetrack did have a duty to supervise the employee and to disallow access to alcoholic beverages.
According to ISO, it is due to these cases and others that the liquor liability exclusion has been revised to clearly state that it applies even if the claims against any insured allege the negligence or other wrongdoing in:
·The supervision, hiring, employment, training or monitoring of others; or,
·Providing or failing to provide transportation with respect to any person that may be
under the influence of alcohol.
For the clarification to apply, conditions under which the liquor liability exclusion applies, as stated in the exclusion, must be satisfied.
The ISO's revision also clarifies applicability of the exclusion where establishments don't serve alcohol, but allow patrons to bring their own alcoholic beverages onto the premises. In Simmons v. Homatos, 925 N.E. 2D 1089 (2010), the Supreme Court of Illinois had to rule on whether a business that does not serve alcoholic beverages but allows patrons to bring in alcohol is considered to be "in the business" of selling alcoholic beverages. In this case, a strip club did not serve alcohol, but allowed its patrons to bring in their own alcohol and sold them set ups (glasses, mixers, ice, etc.) Two customers brought in their own alcohol, became intoxicated, and left the club after retrieving their car from valet parking. Fifteen minutes later, the patrons collided with another vehicle, resulting in the death of four individuals. The court addressed the question of whether the business can be liable for injuries that arise, not as a result of serving alcohol, but as a result of actions in connection with allowing patrons to consume alcohol that they brought on the premises. In this case, the court concluded that the plaintiff's common law claims were not preempted by the state's Dram Shop laws. The court went on to state that the business was not in the business of selling liquor even though they provided the set-ups for the liquor that was brought in by the patrons.
Added wording to the exclusion now clarifies that ISO-CGL provides coverage (subject to the other policy terms and conditions) for liability arising out of the operation of a bring-your-own ("BYO") establishment, even if the establishment charges a fee (such as a "corkage fee") or a license is required for the operation.
Electronic Data
After the Electronic Data exclusion (exclusion "p.") was added to the ISO-CGL policy with the 2004 form revision, the ISO had apparently received inquiries about the applicability of the exclusion and whether it applies to bodily injury that arises out of the inability to access or loss of use of electronic data. Because so many devices and machines are heavily computer-reliant, it is easy to imagine how, for example, loss of a vehicle's blind spot warning system could result in an accident and significant bodily injury.
The added wording clearly states that exclusion "p." does not apply to liability for damages because of bodily injury, thereby eliminating the prior ambiguity.
Recording and Distribution of Material or Information in Violation of Law
With introduction of the 2007 ISO-CGL policy form, an exclusion "q." was added to Coverage A that precludes coverage for bodily injury, property damage, and personal and advertising injury arising out of any action or omission that violates or is alleged to violate the Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003, or any other similar statute, ordinance, or regulation that prohibits or limits the sending, transmitting, communicating, or distribution of material or information. A similar exclusion was added to Coverage B as exclusion "p." With the 2013 form revision, both Coverage A exclusion "q." and Coverage B exclusion "p." have been retitled as "Recording And Distribution Of Material Or Information In Violation of Law."
The exclusion has been modified and expanded to include the Fair Credit Reporting Act, and any amendment of, or addition to that law, including the Fair and Accurate Credit Transaction Act or "any federal, state, or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating, or distribution of material or information." "Printing, dissemination, disposal, collecting, and recording" of material or information are activities added to the scope of the exclusion, making it now more important for businesses that perform such activities consider the purchase of cyber liability or other specialized media coverage.
Coverage B—Exclusions
Distribution of Material in Violation of Statutes
The revised Coverage A exclusion "q". has also been added to the Coverage B section of the policy as exclusion "p." With exception to the reference to "personal and advertising injury" instead of "bodily injury" and "property damage" in the first sentence of the exclusion, the wording of the Coverage B exclusion is identical to the wording of the Coverage A exclusion.
Conditions—Other Insurance
In the 2004 ISO-CGL, wording of the policy's Other Insurance condition was modified to clarify that coverage applies on an excess basis if the named insured is added by endorsement to another CGL policy as an additional insured for both premises/operations and products/completed operations exposures. With the 2013 CGL form revision, the requirement that a policy endorsement be attached to another CGL policy for the additional insured coverage to apply has been eliminated. The reason for deleting the endorsement requirement is that many insurers now offer such additional insured status within their forms and don't need to attach a separate endorsement. The additional insured coverage status is also implied, since the wording of the exclusion states that coverage is excess over other available primary insurance that covers liability arising out of premises, operations, or products/completed operations where the named insured has been added as an additional insured.
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