Commercial General Liability Insurance
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For information about our various bond resources, visit Bond Resources . Commercial General Liability Insurance As of October 15, 2010 What Is Commercial General Liability Insurance? Commercial General Liability (CGL) insurance protects business owners against claims of liability for bodily injury, property damage, and personal and advertising injury (slander and false advertising).Premises/operations coverage pays for bodily injury or property damage that occurs on your premises or as a result of your business operations.Products/completed operations coverage pays for bodily injury and property damage that occurs away from your business premises and is caused by your products or completed work. Excess liability insurance pays for covered losses that exceed your CGL policy's dollar limit. Umbrella liability insurance is excess liability insurance coverage above the limits of automobile liability and CGL policies. The umbrella policy also provides liability coverage for exposures not covered under the primary CGL insurance policies and not excluded by the umbrella liability insurance policy. ClaimsMade Versus Occurrence Policies Occurrence policies cover claims arising from injury or damage occurring while the policy is in force, regardless of when the claim is first made. Claimsmade policies cover claims that arise from injury or damage occurring during the policy period and reported to the insurer during the policy period. Claims arising from events outside the policy period or claims reported to the insurer outside the policy period are not covered unless special coverage is purchased or arranged with the insurer. This special coverage comes in two forms: 1. Prior acts ("nose") coverage covers claims that arise from injury or damage occurring before the policy period, but reported to the insurer after the policy period begins. Prior acts coverage is provided by establishing a "retroactive date" covering injury or damage occurring after the retroactive date. The retroactive date usually appears in the declarations page accompanying your policy. It may be the effective date of the policy or an earlier date. Prior acts coverage does not cover claims that were known at the time your policy began. 2. Runoff ("tail") coverage, also called extended reporting period, pays for residual claims made after your policy expires. A typical claimsmade policy provides a short reporting period of 30 or 60 days after the policy's expiration date to file claims that arose too late to report before the policy expired. Runoff coverage starts when the 30 or 60day period ends and is provided for an additional premium. The extended reporting period may be one, three, or five years, or even unlimited. If a claimsmade policy does not continue (expires, cancels, or nonrenews), you should purchase either
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Commercial General Liability Insurance
Transcript of Commercial General Liability Insurance
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Forinformationaboutourvariousbondresources,visitBondResources.
CommercialGeneralLiabilityInsuranceAsofOctober15,2010
WhatIsCommercialGeneralLiabilityInsurance?CommercialGeneralLiability(CGL)insuranceprotectsbusinessownersagainstclaimsofliabilityforbodilyinjury,propertydamage,andpersonalandadvertisinginjury(slanderandfalseadvertising).Premises/operationscoveragepaysforbodilyinjuryorpropertydamagethatoccursonyourpremisesorasaresultofyourbusinessoperations.Products/completedoperationscoveragepaysforbodilyinjuryandpropertydamagethatoccursawayfromyourbusinesspremisesandiscausedbyyourproductsorcompletedwork.
ExcessliabilityinsurancepaysforcoveredlossesthatexceedyourCGLpolicy'sdollarlimit.
UmbrellaliabilityinsuranceisexcessliabilityinsurancecoverageabovethelimitsofautomobileliabilityandCGLpolicies.TheumbrellapolicyalsoprovidesliabilitycoverageforexposuresnotcoveredundertheprimaryCGLinsurancepoliciesandnotexcludedbytheumbrellaliabilityinsurancepolicy.
ClaimsMadeVersusOccurrencePoliciesOccurrencepoliciescoverclaimsarisingfrominjuryordamageoccurringwhilethepolicyisinforce,regardlessofwhentheclaimisfirstmade.
Claimsmadepoliciescoverclaimsthatarisefrominjuryordamageoccurringduringthepolicyperiodandreportedtotheinsurerduringthepolicyperiod.Claimsarisingfromeventsoutsidethepolicyperiodorclaimsreportedtotheinsureroutsidethepolicyperiodarenotcoveredunlessspecialcoverageispurchasedorarrangedwiththeinsurer.Thisspecialcoveragecomesintwoforms:
1. Prioracts("nose")coveragecoversclaimsthatarisefrominjuryordamageoccurringbeforethepolicyperiod,butreportedtotheinsurerafterthepolicyperiodbegins.
Prioractscoverageisprovidedbyestablishinga"retroactivedate"coveringinjuryordamageoccurringaftertheretroactivedate.Theretroactivedateusuallyappearsinthedeclarationspageaccompanyingyourpolicy.Itmaybetheeffectivedateofthepolicyoranearlierdate.Prioractscoveragedoesnotcoverclaimsthatwereknownatthetimeyourpolicybegan.
2. Runoff("tail")coverage,alsocalledextendedreportingperiod,paysforresidualclaimsmadeafteryourpolicyexpires.Atypicalclaimsmadepolicyprovidesashortreportingperiodof30or60daysafterthepolicy'sexpirationdatetofileclaimsthatarosetoolatetoreportbeforethepolicyexpired.Runoffcoveragestartswhenthe30or60dayperiodendsandisprovidedforanadditionalpremium.Theextendedreportingperiodmaybeone,three,orfiveyears,orevenunlimited.
Ifaclaimsmadepolicydoesnotcontinue(expires,cancels,ornonrenews),youshouldpurchaseeither
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runoffcoveragefromyourpreviousinsurerorprioractscoveragefromyournewinsurertopreventcoveragegaps.Generally,claimsmadepoliciesmaybelessexpensiveintheirearlyyearsasthepotentialforclaimsincreasesaspolicyyearsaccumulate.
Thedifferencesbetweenclaimsmadeandoccurrencepoliciesarebestillustratedbythefollowingexamples:
Assumeyouoperateabusinesslocatedinabuildingthatyouown.Yourcustomersmayenterthebuildingandshopformerchandiseinashowroom.OnApril15,2010,acustomerslipsandfallsinyourshowroom.Thecustomerreportstheincidenttoyoubutsayshedoesnotbelieveheisinjured.OnDecember15,however,youreceivenoticethatthecustomerhasfiledaclaimforinjuriessustainedinthefall.
OccurrencePolicy:AnoccurrencepolicywithapolicyperiodfromJune1,2009,toMay31,2010,willcovertheclaimbecausetheincidentoccurredduringthepolicyperiod.
ClaimsMadePolicy:AclaimsmadepolicywithapolicyperiodfromJune1,2009,toMay31,2010,willnotprovidecoveragebecausetheclaimwasmadeafterthepolicyexpired.If,however,youpurchasedanextendedreportingperiodfromyourinsurerwhenyourpolicyexpired,theclaimmaybecovered.
ExamplesofExclusionsinaCGLPolicyFollowingaresomeexamplesofexclusionscommonlycontainedinaCGLpolicy.Coveragevariesbyinsurerandwillincludeadditionalexclusionsotherthantheexamplesbelow.Youshouldcarefullyreviewyourpolicyandanyendorsementstoknowexactlywhatyourpolicydoesanddoesn'tcover.Talktoyouragentifyouhaveanyquestionsaboutyourpolicy,itscoverages,orpolicylimits.
DamagetoYourWorkGenerally,CGLpoliciesexcludecoverageforpropertydamagetoyourwork(seeExampleNo.1below).Thereisanexceptiontotheexclusionfordamagedworkifasubcontractorworkingforyoucausedthedamage(seeExampleNo.2below).
Example1:Youownahomebuildingbusinessthatrecentlyconstructedanewresidencewithagarage.Afterthehomeissoldandthehomeownermovesinandparkshervehicleinthegarage,theroofonthegaragecollapsesbecauseoffaultyconstruction.Thecollapsedroofdamagesthehomeowner'svehicle.Thepolicymayprovidecoveragefortherepairorreplacementofthevehiclebutmaynotpaytorepairthecollapsedroofbecausetheroofisyourwork.
Example2:ThesituationisthesameasinExample1,excepttheworktoconstructtheroofwasperformedbysubcontractorsworkingonyourbehalf.Thepolicymaycoverthedamagetothevehicleandalsomaypaytorepairorreplacetheroofconstructedbyyoursubcontractor.
DamagetoYourProductCGLpoliciesdon'tcoverpropertydamagetoyourproductarisingoutoftheproductoranypartoftheproduct.
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Example:Ifyouinstallapropanepoweredappliancethatmalfunctionsandcausesafirethatdamagesahome,yourCGLpolicymaypaytorepairthehome.Itwillnotpaytorepairorreplacetheapplianceifthemalfunctionwascausedbecausetheappliancewasfaulty.
ContractualLiabilityCGLpoliciesexcludecoverageforbodilyinjuryorpropertydamagethatyouareobligatedtopaybecauseyouassumedliabilityinacontractoragreement.Theexclusioncontainsthefollowingtwoexceptions:
1. Liabilityfordamagesthatyouwouldhaveassumedintheabsenceofthecontractoragreementand
2. Liabilityassumedinacontractoragreementdefinedinthepolicyasaninsuredcontract,ifthebodilyinjuryorpropertydamageoccursafterthecontractoragreementisexecuted.Example1:Yousignacontracttocompletetheconstructionofabuildingwithinaspecifiedamountoftime.Thecontractrequiresyoutopaydamagesifyoubreachthecontract.YourCGLpolicywillnotprovidecoverageforanydamagesyouhavetopaybecauseyoufailedtomeetthedeadline.
Example2:Yousignacontracttoholdharmlessandindemnifyanotherpartyfortheotherparty'snegligenceifthatnegligenceresultsinbodilyinjuryorpropertydamage.YourCGLpolicymayprovidecoveragetoindemnifytheotherpartydependingonthewordingoftheindemnityagreement.
RecallofProducts,Work,orImpairedPropertyCGLpolicieswillnotpaythecosttorecallfaultyproducts,work,orimpairedproperty.However,thiscoveragemaybeaddedtothepolicybyendorsementforanadditionalpremiumcharge.
Workers'CompensationandEmployer'sLiabilityCGLpoliciesarenotintendedtoprovidecoverageforworkers'compensationoremployer'sliability.Thisexclusionprohibitssuchcoverage.
PollutionExclusionsintheCGLPolicy
Thepollutionexclusioneliminatescoverageforinjuriesordamagestoathirdpartyresultingfromapollutioneventarisingfromyourbusinessoperations.Theexclusionappliestotheactual,alleged,orthreateneddischarge,dispersal,seepage,migration,release,orescapeofpollutants.Apollutantistypicallydefinedasanysolid,liquid,gaseous,orthermalirritantorcontaminant,includingsmoke,vapor,soot,fumes,acids,alkalis,chemicals,andwaste.Wasteincludesmaterialstoberecycled,reconditioned,orreclaimed.Thepollutionexclusionincludedinmostgeneralliabilitypoliciesmaycontainsomeofthefollowingexceptionsthatcouldprovidelimitedcoveragefor:
Injuriessustainedwithinabuildingandcausedbysmoke,fumes,orvaporsproducedbyequipmentthatisusedtoheat,cool,ordehumidifythebuildingorequipmentusedtoheat
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waterforpersonaluse.Yourproductsorcompletedoperations.Injuriesordamagearisingoutofheat,smoke,orfumesfromahostilefire.(Hostilefireisdefinedasafirethatbecomesuncontrollableorbreaksoutfromwhereitwasintendedtobe.)Injuriesordamagethataninsuredcontractormaybeheldliableforiftheownerofthepremiseshasbeenaddedasanadditionalinsuredtothecontractor'spolicy.Injuriesordamagearisingoutoftheescapeoffuelsorlubricantsnecessaryfortheoperationofmobileequipment.Injuriesordamagesustainedwithinabuildingandcausedbythereleaseofgases,fumes,orvaporsfrommaterialsbroughtintothebuildinginconnectionwithoperationsperformedbyyouoracontractororsubcontractorworkingonyourbehalf.
Totalpollutionexclusionseliminateallcoverage,includingcoverageforpremises/operationsandproducts/completedoperations.Ifyourbusinesseshasasignificantpollutionexposure,youmaychoose,inconjunctionwithyourinsurer,toincludeatotalpollutionexclusionandpurchaseaseparatepollutionliabilitypolicythatmayprovidecoveragebettersuitedtotheriskandiseasiertoratebasedonthenatureofyourbusiness.
WhatisaPremiumAudit?MostCGLpoliciesareauditablepoliciesandcontainaconditioncommonlycalled"PremiumAudit."Thepremiumthatispaidattheinceptionofthepolicyisadeposit(estimated)premium.Auditablepoliciesusuallyuseestimatedpayroll,sales,orunitssoldasthepremiumbasetocalculatethedeposit(estimated)premium.
Theinsurerisentitledtoexamineyourbooksandrecordstodeterminewhethertheactualpayroll,sales,orunitssoldaregreaterorlessthanwhatwasestimated.Thisisusuallydoneaftertheexpirationofthepolicy,butmayalsobedoneduringthepolicyperiod.Iftheactualpayroll,sales,orunitssoldisgreaterthanwasestimated,youmayoweadditionalpremium.Iftheactualpayroll,salesorunitssoldislessthanwhatwasestimated,youmaybedueareturnpremium.Therefore,itisimportanttoprovideanestimateofthepayroll,sales,orunitstobesoldthatisasaccurateaspossibletoavoidhavingtopayanadditionalpremium.
WhatKindsofInsurersOfferCGLInsurance?TheTexasDepartmentofInsurance(TDI)recognizesthefollowingfourtypesofinsurersthatmayoffercommercialgeneralliabilityinsuranceinTexas.Tocheckonwhetheracarrierislicensed,eligible,orregisteredinTexas,callTDI'sConsumerHelpLineat1.800.252.3439,orusetheCompanyLookupfeatureontheTDIwebsiteathttps://apps.tdi.state.tx.us/pcci/pcci_search.jsp.
LicensedInsurersTDIregulatesthepolicyformsandratesoflicensedinsurers.
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CGLpoliciesofferedbylicensedinsurersmustcontainthefollowinglegislativelymandatedprovisions:
Coveragemaynotbecancelledbytheinsurerafter60daysfromtheeffectivedateofthepolicyexceptforthefollowingreasons:
1. fraudinobtainingcoverage2. failuretopaypremiumswhendue3. anincreaseinhazardwithinyourcontrolthatwouldproducearateincrease4. lossoftheinsurer'sreinsurancecoveringallorpartoftheriskcoveredbyyourpolicyor5. atanytimeiftheinsurerisplacedinsupervision,conservatorship,orreceivershipandthe
cancellationornonrenewalisapprovedordirectedbythesupervisor,conservator,orreceiver.
Theinsurermustprovideatleast60daysnoticeofnonrenewalandmusttellyouinwritingwhyitwillnotrenewyourpolicy.
PolicyholdersobtaininginsurancefromlicensedinsurersareprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociationforupto$300,000perclaimiftheinsurerbecomesinsolvent.
SurplusLinesInsurersInsurancenotavailablethroughlicensedinsurersmaybeplacedwitheligiblesurpluslinesinsurers.TobeeligibletowritesurpluslinescoverageinTexas,theinsurermustmeetcertainrequirementsandbeonTDI's"eligiblelist."Beforesellingasurpluslinespolicy,anagentmustmakeadiligentefforttofindalicensedinsurertoissuethepolicy.
Itiscommonforsurpluslinesinsurerstoretainasignificantportionofthepremiumintheeventtheinsuredcancelsthepolicymidterm.Texaslawsregardingnoticeofcancellationandnonrenewaldonotapplytosurpluslinesinsurers.Defensecostscouldbeincludedwithinthelimitofliability,andprioractsorrunoffcoveragemaynotbeavailable.Insomecases,asurpluslinesinsurercancancelbeforeapolicy'srenewaldate.SurpluslinesinsurersarenotrequiredtofileratesandpolicyformswithTDI.PolicyformsmaybemorerestrictivethanthosethataresubjecttoTDIreview.TDIdoesnotauditthefinancesofsurpluslinesinsurers.Ifasurpluslinesinsurerbecomesinsolvent,itspolicyholdersarenotprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociation.
RiskPurchasingandRiskRetentionGroupsRiskpurchasinggroupsareformedundertheprovisionsofthefederalLiabilityRiskRetentionAct(LRRA)of1986.Apurchasinggroupconsistsofindividualsorfirmsoflikecharacteristicswhosharesimilarinsuranceneeds.TheeligibilitycriteriaformembersofapurchasinggrouparesetbyLRRA.OnceformedandregisteredwiththeStateofTexas,thegroupmayuseitspurchasingpowertoobtainliabilityinsuranceandbenefitsatpricesthatmaybelowerthanindividualsorbusinessescouldnegotiate
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separately.
Ifapurchasinggroupbuysinsurancefromalicensedinsurer,itmaybeprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociationiftheinsurerhascapitalandsurplusof$25millionormore.IfthepurchasinggroupisnotprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociation,thenitmustdisclosethistoitsmembers.
PolicyformsofferedtopurchasinggroupsbylicensedinsurersarecurrentlynotrequiredtobefiledwithTDI.However,thepoliciesmustcontainthelegislativelymandatedprovisionsrequiredtobeinpoliciesissuedbylicensedinsurers.
PolicyformsofferedtopurchasinggroupsbysurpluslinesinsurersarenotregulatedastoratesorformsandarenotprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociation.
RiskRetentionGroupsalsoareformedundertheprovisionsofthefederalLiabilityRiskRetentionAct(LRRA)forthepurposeofprovidinginsurance.Thesegroupsdonotbuycommercialinsurancepolicies,but"retain"theriskwithinthegroup.Ineffect,themembersinsureeachotheragainstliabilityclaimsandlawsuits.However,becauseariskretentiongroupisaninsurer,itmaypurchasereinsurance.Reinsuranceisaformofinsurancethatinsurancecompaniesbuyfortheirownprotection.
Theratesandpolicyformsofriskretentiongroupsarenotregulated,andpolicyholdersarenotprotectedbytheTexasPropertyandCasualtyInsuranceGuarantyAssociationintheeventtheriskretentiongroupbecomesinsolvent.
