Tag Archives: commercial property forms

Business Income And Dependent Property From A Secondary Location

There was a lot that changed with the Commercial Property Forms in the 2013 series. In fact, most forms underwent some sort of modification. One of the most interesting of the changes was the introduction of an optional coverage available on the Dependent Property Forms for Dependent Properties in the Supply Chain (Business Interruption).

By way of background, the Business Income and Extra Expense forms require that there is direct damage at the premises described by a covered cause of loss that gives rise to a loss of income or need to pay extra costs to operate during the period of restoration. In providing this form of coverage, we have been aware of the exposure to a loss of income due to a physical loss at a location that our insured depends on for various reasons. Recognizing that a loss to a dependent location could cause financial harm to our insured, ISO created Dependent Property Endorsements (CP 1508, CP 15 09, CP 1534) provided on a scheduled basis. What this means is that, for our insured, we identify what company(ies) they are dependent on and schedule those locations on the Dependent Property Form attached to their business income policy.

For example, we could be insuring a winery that is dependent on a single manufacturer to manufacture their distinct wine bottle and provide them with their customized cork. If that bottle manufacturer had a loss to their manufacturing facility by a peril insured against on the winery's policy and the winery now has no bottles and the winery can demonstrate they are losing money or incurring an Extra Expense by going to a more expensive alternate supplier then the Dependent Property Endorsement could respond.

What we learned, when losses such as this arise, is that oftentimes the physical loss did not occur at the dependent location we scheduled on the policy but rather to a “location” that the dependent property was dependent upon to supply them a product or service. So to expand on the winery example — the bottle manufacturer is dependent on a single cork manufacturer to supply them with the blank corks they customize and the cork manufacturer has a loss (covered peril) and cannot supply the wine bottle company with the product. We never identified the cork manufacturer on our insured's policy as there was no known or direct relationship.

The new language on the Dependent Property forms have an option for “secondary contributing locations” and “secondary recipient locations.” Secondary locations are limited to direct suppliers and recipients of the dependent property's materials or supplies.

On the form, secondary contributing location and recipient location are now defined terms. There are some important clarifications of the coverage:

  1. The secondary location is not identified in the schedule. However, there is a box on the schedule that has to be marked identifying that a secondary location has been included.
  2. The secondary location cannot be owned or operated by the “contributing” or “recipient” location that is identified in the schedule.
  3. There is clarity that a secondary location is not a road, bridge, tunnel, waterway, airfield, pipeline or any other similar area or structure.
  4. There is clarity that any source of “services” in the area of water, power, wastewater removal or communication supply cannot be a secondary dependent property. These would be covered under Utility Interruption endorsements.
  5. Lastly, there is clarity that the secondary dependent property coverage is subject to the territory of the policy and is not worldwide.

This additional coverage under the Dependent Property Endorsements is very important to consider, especially for manufacturing accounts. This all gets back to our identifying exposure and providing solution.

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ISO Form Changes Commercial General Liability

In April of 2013 the ISO modified the Commercial Property Forms. It was one of the biggest changes in forms that we have seen in years with the majority of forms taking on some type of change.

Effective April 2013, many of the Commercial General Liability forms also have a new edition date. Some of the changes are minor but carry new edition dates of existing form numbers, and there are some forms that are first being introduced. It is a multistate revision and some of the specific state forms have also taken a change or introduced new forms. Some of the ISO changes have already been adopted in insurance company forms while other changes represent clarification of the “intent” of the form.

There are new multistate endorsements that are being introduced:

  • Primary And noncontributory — Other Insurance Condition Endorsement
  • Additional Insured — Owners, Lessees or Contractors — Automatic Status for Other Parties When Required in Written Construction Agreement
  • Total Pollution Exclusion For Designated Products Or Work Endorsement
  • Liquor Liability — Bring Your Own Alcohol Establishments Endorsement
  • Amendment of Personal and Advertising Injury Definition Endorsement
  • Designated Location(s) Aggregate Limit Endorsement

Specifically we will highlight those changes that have any significant impact and new endorsements to the form series. It goes without saying that any form that narrows coverage requires that we notify our insureds to avoid any gap in coverage as they renew on the new CGL edition date. All of these changes will be discussed in more detail in the Insurance Community class on March 19th.

Liquor Liability Form Revisions
One of the areas that has taken on a significant change is in the area of Liquor Liability. There are several forms that have taken the new edition date including:

Liquor Liability Coverage Form CG 00 33 04 13
Liquor Liability Coverage Form CG 00 34 04 13
Amendment Of Liquor Liability Exclusion CG 21 50 04 13
Amendment Of Liquor Liability Exclusion — Exception For Scheduled Premises Or Activities CG 21 51 04 13
Liquor Liability — Bring Your Own Alcohol Establishments CG 24 06 04 13
NEW
Amendment Of Liquor Liability Exclusion CG 29 52 04 13
Amendment Of Liquor Liability Exclusion — Exception For Scheduled Premises Or Activities CG 29 53 04 13

As with most liability changes there is case law that gives rise to the need for clarification and form revision. Some of the specific court cases relating to this change are:

  • PENN-AMERICA INS.CO. v. PECADILLOS, INC. (27A.3d259 (2011) Superior Court of Pennsylvania;
  • McGuire v. Curry and Park Jefferson Speedway, Inc., a South Dakota Corporation (766 N. W. 2d 501 (2009);
  • SIMMONS V. HOMATAS (925 n. e. 2D 1089 (2010; 236 ill. 2D 459) Supreme Court of Illinois., to name a few.

In the case of PENN-AMERICA INS.CO. v. PECADILLOS, INC. (27A.3d259 (2011) Superior Court of Pennsylvania, two customers entered the bar after visiting several other drinking establishment where they drank in excess. They continued to drink at Pecadillos, became further intoxicated, and were asked to leave even though they were in no condition to drive. The patrons left, caused an accident, killed two individuals and injured 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 court 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 the case of 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.

In the last case, SIMMONS V. HOMATAS (et al On Stage Productions, Inc.,) (925 n. e. 2D 1089 (2010; 236 ill. 2D 459) Supreme Court of Illinois, the Illinois court had to rule on whether a business that does not serve alcoholic beverages but allows patrons to bring in alcohol is considered in the business of selling alcoholic beverages. In this case the club, operated by Stage Productions, is a nude strip club that does not serve alcohol but allows its patrons to bring their own alcohol and sells them set ups — providing glasses, mixers, ice, etc. Homatas and his companion brought in a fifth of rum and vodka and became intoxicated. They left the club and retrieved their car from valet parking. The valet parker opened the driver's door and told Homatas to leave the premises. Fifteen minutes later, Homatas collided with another vehicle, resulting in the death of four individuals.

The case had to deal with 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. 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.

Due to these cases and others, the ISO has revised the Liquor Liability exclusion in the various GL coverage forms to clearly state that the Liquor Liability exclusion 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;

if the “occurrence” which caused the “bodily injury” or “property damage” involved that which is described in Paragraph (1), (2) or (3) of the exclusion.

There is further clarity that a Bring Your Own Alcohol Establishment (BYO) is not considered in the business of selling, serving or furnishing alcoholic beverages. There is a new endorsement available in the series that specifically deals with the BYO exposure titled: Liquor Liability Bring Your Own Alcohol Establishment.

Pollution Form Revisions
There are a couple of forms relating to Pollution that have been modified with the 4/13 change including:

Pollution Liability Coverage Form Designated Sites Cg 00 39 04 13
Pollution Liability Limited Coverage Form Designated Sites Cg 00 40 04 13
Total Pollution Exclusion For Designated Products Or Work Cg 21 99 04 13
Pesticide Or Herbicide Applicator — Limited Pollution Coverage Cg 28 12 04 13

In the Pollution Liability Coverage Forms CG 00 39 and CG 00 40 the “Aircraft, Auto, Rolling Stock or Watercraft” exclusion is revised to clarify coverage as relates claims for negligence in the “supervision, hiring, employment, training or monitoring of others” when the claim involves injury or damage arising out of the use of an automobile. This exclusion has been reviewed in prior form series including in 2000 and 2003. There is a new exclusionary endorsement introduced titled: Total Pollution Exclusion for Designated Products or Work CG 21 99. This new endorsement is similar to the CG 21 98 except that it limits the applicability of the exclusion to the specific product or work described in the schedule on the endorsement. Caution when reviewing the endorsement — it is broadening if the CG 21 99 replaces the CG 21 98. However, addition of the endorsement to a policy that does not contain the CG 21 98 would result in a reduction in coverage.

Additional Insured Endorsements
There are approximately 24 Additional Insured Endorsements that have taken the new edition date. These changes are due, in part, to the various state laws that have “anti-indemnification” laws that prohibit provisions in construction contracts which require one party to indemnify another against liability for the other party's own negligence or fault. Also, there are some states that prohibit providing insurance to an additional insured for the party's own negligence.

One of the clarifications in the new Additional Insured Endorsements is to add new language that will provide insurance to an additional insured “only to the extent provided by law.” Further clarification is that the coverage provided under the Additional Insured Endorsement cannot be broader coverage than that provided to the named insured. There is a new Additional Insured endorsement introduced in this form series titled: Additional Insured-Owners, Lessees or Contractors — Automatic Status for Other Parties When Required in Written Construction Contract Agreement (CG 20 38). This endorsement provides additional insured status to parties to whom the named insured has become obligated due to written contract or agreement to name an additional insured under their policy.

Primary and Non-Contributory — Other Insurance Endorsement CG 20 01 04 13 — New Form
A new form has been introduced to clarify that coverage is made available to an additional insured on a “primary and non-contributory” basis. This change is particularly important for the construction client because construction contracts oftentimes require that the additional insured is provided coverage on a “primary and noncontributory” basis. The provisions require that:

  • The additional insured is a named insured on other insurance available to them; and
  • A written contract or agreement has been entered into by the insured stating that the insured's policy will be primary and wound not seek contribution from any other insurance available to the additional insured.

There are several other forms that have taken a change in edition date that we will be discussing in our upcoming New Commercial General Liability Form class taught on March 19th. The class is being taught by Marjorie Segale, AFIS, CISC, CIC, RPLU, CRIS, ACSR, CISR. Marjorie is the Vice President and Director of Education for the Insurance Community Center and President of Segale Consulting Services, LLC.

This is a listing of the forms that have changed. If it form is marked in “red” it is a new form to the series.

Commercial General Liability Coverage Form (Occurrence) CG 00 01 04 13
Commercial General Liability Coverage Form (Claims Made) CG 00 02 04 13
Owners And Contractors Protective Liability Coverage Form Coverage For Operations Of Designated Contracto CG 00 09 04 13
Liquor Liability Coverage Form (Occurrence) CG 00 33 04 13
Liquor Liability Coverage Form (Claims Made) CG 00 34 04 13
Railroad Protective Liability Coverage Form CG 00 35 04 13
Products/Completed Operations Liability Coverage Form (Occurrence) CG 00 37 04 13
Products/Completed Operations Liability Coverage Form (Claims Made) CG 00 38 04 13
Pollution Liability Coverage Form Designated Sites CG 00 39 04 13
Pollution Liability Limited Coverage Form Designated Sites CG 00 40 04 13
Underground Storage Tank Policy Designated Tanks CG 00 42 04 13
Electronic Data Liability Coverage Form CG 00 65 04 13
Product Withdrawal Coverage Form CG 00 66 04 13
Limited Product Withdrawal Expense Endorsement CG 04 36 04 13
Electronic Data Liability CG 04 37 04 13
Primary And Non-Contributory — Other Insurance Endorsement CG 20 01 04 13
Additional Insured Concessionaires Trading Under Your Name CG 20 03 04 13
Additional Insured Controlling Interest CG 20 05 04 13
Additional Insured Engineers Architects Or Surveyors CG 20 07 04 13
Additional Insured User Of Golfmobiles CG 20 08 04 13
Additional Insured Owners, Lessees Or Contractors Scheduled Person Or Organization CG 20 10 04 13
Additional Insured Managers Or Lessors Of Premises CG 20 11 04 13
Additional Insured State Or Governmental Agency Or Subdivision Or Political Subdivision — Permits Or Authorizations CG 20 12 04 13
Additional Insured State Or Governmental Agency Or Subdivision Or Political Subdivision — Permits Or Authorizations Relating To Premises CG 20 13 04 13
Additional Insured Vendors CG 20 15 04 13
Additional Insured Mortgagee, Assignee Or Receiver CG 20 18 04 13
Additional Insured Executors, Administrators, Trustees Or Beneficiaries CG 20 23 04 13
Additional Insured Owners Or Other Interests From Whom Labor Has Been Leased CG 20 24 04 13
Additional Insured Designated Person Or Organization CG 20 26 04 13
Additional Insured Co-Owner Of Insured Premises CG 20 27 04 13
Additional Insured Lessor Of Leased Equipment CG 20 28 04 13
Additional Insured Grantor Of Franchise CG 20 29 04 13
Oil Or Gas Operations Non-Operating, Working Interests CG 20 30 04 13
Additional Insured Engineers, Architects Or Surveyors CG 20 31 04 13
Additional Insured Engineers, Architects Or Surveyors Not Engaged By The Named Insured CG 20 32 04 13
Additional Insured Owners, Lessees Or Contractors — Automatic Status When Required In Construction Agreement With You CG 20 33 04 13
Additional Insured Lessor Of Leased Equipment Automatic Status When Required In Lease Agreement With You CG 20 34 04 13
Additional Insured — Grantor Of Licenses — Automatic Status When Required By Licensor CG 20 35 04 13
Additional Insured — Grantor Of Licenses CG 20 36 04 13
Additional Insured — Owners, Lessees Or Contractors — Completed Operations CG 20 37 04 13
Additional Insured — Owners, Lessees Or Contractors — Automatic Status For Other Parties When Required In Written Construction Agreement CG 20 38 04 13
Exclusion — Designated Professional Services CG 21 16 04 13
Amendment Of Liquor Liability Exclusion CG 21 50 04 13
Amendment Of Liquor Liability Exclusion — Exception For Scheduled Premises Or Activities CG 21 51 04 13
Exclusion — Financial Services CG 21 52 04 13
Exclusion — Funeral Services CG 21 56 04 13
Exclusion — Counseling Services CG 21 57 04 13
Exclusion — Professional Veterinarian Services CG 21 58 04 13
Exclusion — Diagnostic Testing Laboratories CG 21 59 04 13
Total Pollution Exclusion For Designated Products Or Work CG 21 99 04 13
Exclusion — Inspection, Appraisal And Survey Companies CG 22 24 04 13
Exclusion — Professional Services — Blood Banks CG 22 32 04 13
Exclusion — Testing Or Consulting Errors And Omissions CG 22 33 04 13
Exclusion — Construction Management Errors And Omissions CG 22 34 04 13
Exclusion — Products And Professional Services (Druggists) CG 22 36 04 13
Exclusion — Products And Professional Services (Optical And Hearing Aid Establishments) CG 22 37 04 13
Exclusion — Camps Or Campgrounds CG 22 39 04 13
Exclusion — Engineers, Architects Or Surveyors Professional Liability CG 22 43 04 13
Exclusion — Services Furnished By Health Care Providers CG 22 44 04 13
Exclusion — Specified Therapeutic Or Cosmetic Services CG 22 45 04 13
Exclusion — Insurance And Related Operations CG 22 48 04 13
Exclusion — Failure To Supply CG 22 50 04 13
Pesticide Or Herbicide Applicator — Limited Pollution Coverage CG 22 64 04 13
Druggists CG 22 69 04 13
Real Estate Property Managed CG 22 70 04 13
Colleges Or Schools (Limited Form) CG 22 71 04 13
Colleges Or Schools CG 22 72 04 13
Professional Liability Exclusion — Computer Software CG 22 75 04 13
Professional Liability Exclusion — Health Or Exercise Clubs Or Commercially Operated Health Or Exercise Facilities G 22 76 04 13
Professional Liability Exclusion — Computer Data Processing 22 77 04 13
Exclusion — Contractors — Professional Liability 22 79 04 13
Limited Exclusion — Contractors — Professional Liability 22 80 04 13
Exclusion — Adult Day Care Centers 22 87 04 13
Professional Liability Exclusion — Electronic Data Processing Services And Computer Consulting Or Programming Services 22 88 04 13
Professional Liability Exclusion — Spas Or Personal Enhancement Facilities CG22 90 04 13
Exclusion — Telecommunication Equipment Or Service Providers Errors And Omissions CG22 91 04 13
Lawn Care Services — Limited Pollution Coverage CG22 93 04 13
Limited Exclusion — Personal And Advertising Injury — Lawyers CG22 96 04 13
Exclusion — Internet Service Providers And Internet Access Providers Errors And Omissions CG22 98 04 13
Professional Liability Exclusion — Web Site Designers CG22 99 04 13
Exclusion — Real Estate Agents Or Brokers Errors Or Omissions CG23 01 04 13
Liquor Liability — Bring Your Own Alcohol Establishments CG24 06 04 13
Amendment Of Personal And Advertising Injury Definition CG24 13 04 13
Waiver Of Governmental Immunity CG24 14 04 13
Amendment Of Coverage Territory — Worldwide Coverage CG24 22 04 13
Amendment of Coverage Territory — Additional Scheduled Countries CG24 23 04 13
Amendment Of Coverage Territory — Worldwide Coverage With Specified Exceptions CG24 24 04 13
Amendment Of Insured Contract Definition CG24 26 04 13
Limited Contractual Liability — Railroads CG242 7 04 13
Designated Location(S) Aggregate Limit CG25 14 04 13
Pesticide Or Herbicide Applicator — Limited Pollution Coverage CG28 12 04 13
AMENDMENT OF LIQUOR LIABILITY EXCLUSION CG29 52 04 13
AMENDMENT OF LIQUOR LIABILITY EXCLUSION — EXCEPTION FOR SCHEDULED PREMISES OR ACTIVITIES CG29 53 04 13

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