ISO’s CGL Changes for 2013 – Part II

Endorsement Changes

ISO’s 2013 CGL filing revises 12 individual endorsements while making mass changes to 24 additional insured endorsements and 34 professional service endorsements. Additionally, six new CGL endorsements are introduced in this filing. At least one of the new endorsements may create issues the industry may not be as ready to address as ISO may believe. This section is divided into two parts, revised endorsements are presented first and the newly introduced endorsements conclude this article.

Revised Endorsements

Limited Product Withdrawal Expense Endorsement – CG 04 36. ISO revises this endorsement by removal of the phrase, “to effect the settlement of any claim or ‘suit'” in Paragraph B.3.a. According to ISO, this phrase is unnecessary because the endorsement provides coverage for product withdrawal expense, not for claims or suits. Because the phrase had nothing to do with the coverage provided by the endorsement, there is no impact on coverage.

Paragraph B.3.b. contains the second revision to this endorsement. ISO revised the wording to reinforce that the Participation Percentage (the insured’s portion of the costs) is found in the endorsement’s Schedule rather than in the Declarations. The new wording also reinforces that the insured agrees to bear its cost of participation in the withdrawal and will not obtain other insurance to cover this participatory portion. Lastly, ISO removes the term “loss” and replaces it with “product withdrawal.” These changes do not impact coverage.

Electronic Data Liability Endorsement – CG 04 37. ISO is broadening the coverage by narrowing the application of this exclusionary endorsement by an exception to the exclusion. ISO is excepting the insured’s liability for damages because of “bodily injury” from the exclusion. This makes the endorsement consistent with the underlying liability policy wording.

Changes to Various Additional Insured Endorsements

Twenty-four of the 31 additional insured endorsements are amended in this filing. These changes limit the coverage extended by these endorsements to the amount of transfer allowed by the various state anti-indemnification statutes; additionally, the new wording limits the breadth of coverage extended to the endorsed AI to that required by the contract between the parties. All additional insured endorsements common to construction are altered by these changes. Key features of these changes include:

Endorsement language now states that the coverage afforded to the additional insured is limited to the amount permitted by law in the subject state.

New wording specifying that the coverage afforded the additional insured will not be broader than the contract or agreement requires.

A limitation on the amount of coverage extended to the additional insured. ISO’s AI endorsements now state that the coverage limit extended to the additional insured is the greater of: 1) the amount required by the contract; or 2) the limit of coverage.

Several editorial changes were made to make some additional insured endorsements consistent with other form and endorsement changes reported elsewhere in this article.

Additional Insured – Users of Golfmobiles – CG 20 08. ISO introduced a new definition to clarify what qualifies as a golfmobile; because this is a new definition, the change may be considered a restriction of coverage. For purposes of the endorsement, a golfmobile is now defined as a motorized land conveyance designed to carry up to four persons on a golf course (to play golf), and not built or modified to exceed 25 miles per hour on level ground.

Liquor Liability Exclusion Endorsements – CG 21 50, CG 21 51, CG 29 52, CG 29 53. ISO made three changes to these endorsements (which can be combined into two). The goal: to make these endorsements consistent with and applicable to the newly worded liquor liability exclusion in the various general liability forms presented in the first article. The alterations to these endorsements are:

These endorsements exclude the bring-your-own (BYO) exposure when any person brings his own alcohol onto the premises for consumption on the insured’s premises. The underlying general liability forms were revised to state that BYO exposures are not in the business of selling, serving…. The revised exclusions remove this protection and results in a reduction of coverage.

For consistency with changes made to the underlying coverage forms, these endorsements are amended to state that coverage is excluded even when claims against an insured allege negligence or wrongdoing in supervising, hiring, employment, training, monitoring, or failure to provide transportation. As in the underlying form, this is a clarification of coverage but may be seen as a reduction in coverage in those states where court decisions have allowed coverage for such claims in the past.

Revisions to Various Professional Services Exclusions

Thirty-four “professional services” exclusion endorsements are revised in this filing. The impetus for these changes is an unpublished Fourth Circuit Court of Appeals case from 1999, Liberty Life Ins. Co. v. Travelers Indem. Co. of Illinois. The court held that the exclusion in the CGL form that barred coverage for the claim against an employee did not apply to Liberty Life in its oversight role as the agent’s principal (in essence, for its vicarious liability).

In response to this finding, ISO enhanced the exclusionary wording to specifically address and exclude claims alleging insured negligence or other wrongdoing in the hiring, employment, training, supervision or monitoring of others. ISO views this as a reinforcement of coverage intent and not a reduction in coverage; however, these changes may be viewed as a reduction in states where courts have ruled that the professional services exclusion does not apply to these types of vicarious liability claims.

Exclusion – Failure to Supply – CG 22 50. In a 2010 rules filing, ISO introduced the Biofuel Distributor classification. Within the rules pertaining to this new classification, ISO instructed that the CG 22 50 was to be attached to any policy covering biofuel distribution risks. The wording of this exclusionary endorsement is altered by this filing to expressly state that it applies biofuel distributers. Effectively there is no change in coverage, only an extension to include this type of operation.

Pesticide or Herbicide Applicator Endorsements (CG 22 64 & CG 28 12) and Lawn Care Services Coverage Endorsement (CG 22 93). The titles of these endorsements are altered by this filing. According to ISO, this change is made to better reflect the coverage provided (or excluded) by the endorsement. Obviously, since this is just a name change, there is no impact on the coverage provided or limited by these exclusionary endorsements.

Druggist – CG 22 69. ISO effectively broadens the coverage provided to druggist operations by this endorsement by adding an exception to the exclusion relating to bodily injury or property damage arising out of professional health care services provided by a pharmacist. Bodily injury or property damage arising out of specified services are excluded in the current endorsement. In the new version, an exception is inserted for the administration of vaccinations in accordance with state or federal law.

Real Estate Property Managed – CG 22 70. ISO updated the wording on this endorsement to reinforce the provision that the insurance provided by the coverage written for real estate managers is excess over any other available insurance, regardless if the other insurance is primary or excess. There is no change in coverage, just a reinforcement of the current provisions (and intent).

College or Schools (Limited Form) (CG 22 71) and College or Schools (CG 22 72). Exclusion “g. Aircraft, Auto or Watercraft,” is revised in both endorsements to make the wording more consistent with the same exclusion found in the CGL. This is a rewording with no impact on the coverage.

Waiver of Governmental Immunity – CG 24 14. There is no change in the wording of the endorsement, just new uses for the endorsement. ISO is making this endorsement available for use with the Owners and Contractors Protective Liability Coverage Part (CG 00 09) and the Railroad Protective Liability Coverage Part (CG 00 35).

Coverage Territory Endorsements (CG 24 22, CG 24 23 and CG 24 24). The alpha numeric paragraph designators related to Other Insurance are changed for consistency with the CGL form. The section of the newly worded endorsement refers to 4.b.(1)(c). Previously, the endorsement referred to 4.b.(3).

Amendment of Insurance Contract Definition (CG 24 26) and Limited Contractual Liability – Railroads (CG 24 27). Paragraph “f.” within the definition of an “insured contract” is amended in both endorsements to specifically state that coverage is limited to the level of tort liability that can be assumed in according to the laws of a particular jurisdiction. The newly worded endorsement ties the level of protection available to the transferor (“indemnitee,” the upper tier) to the applicable state law. However, the named insured must still be somehow involved in causing the bodily injury or property damage (does not cover extend to sole negligence of the transferor/indemnitee).

Newly Introduced Endorsements

Primary and Noncontributory – Other Insurance Condition (CG 20 01). This is a new optional endorsement introduced in response to contractual wording found in many construction contracts requiring coverage extended to the additional insured be provided on a “primary and noncontributory” basis. This endorsement alters the Other Insurance Condition to specifically state that coverage provided to an additional insured is, in fact, provided on a “primary and noncontributory” basis. This endorsement applies when:

The additional insured is a named insured on another policy; AND

A written contract or agreement requires the named insured’s policy to be primary and to not seek contribution from other insurance available to the additional insured.

The endorsement applies to the CGL only, not any umbrella that may be attached. Whether and how much of an additional premium applies is subject to the insurance carrier.

Additional Insured – Owners, Lessees or Contractors – Automatic Status for Other Parties When Required in Written Construction Agreement (CG 20 38).For use with the CGL, this endorsement allows additional insured status to be extended to an upper tier party as required by a contract, but who may not be a direct party to the contract. For instance, the contract between the general contractor and a lower-tier subcontractor may require the sub to extend additional insured-level coverage to the property owner (who is not a party to the contract between the GC and the sub). This endorsement would allow the extension of additional insured status to the owner without the need for a specific listing. An additional premium applies to this endorsement and varies by company.

Total Pollution Exclusion for Designated Products or Work – CG 21 99. Used with either of the Products/Completed Operations Coverage Parts (CG 00 37 or CG 00 38), ISO classifies this endorsement as an “additional underwriting tool” for insurance carriers. The endorsement does not replace the optional Total Pollution Exclusion – CG 21 98, it can be used in place of the CG 21 98. The key difference between the CG 21 98 and the new CG 21 99 is that the CG 21 99 applies to a pollution event (as defined in the form) from a specific product or work making this exclusion narrower than the CG 21 98 which applies to any and all pollution event (in effect giving broader coverage).

Liquor Liability – Bring Your Own Alcohol Establishments – CG 24 06. In the first section of this article the revised CG 21 50 and CG 21 51 were introduced and discussed. ISO intends this new endorsement, CG 24 06, to be used as an attachment to the either of the Liquor Liability Coverage Forms (CG 00 33 or CG 00 34) to specifically extend coverage to Bring Your Own (BYO) establishments. Remember, coverage for these types of establishments is now included in the base CGL wording.

Amendment of Personal and Advertising Injury Definition – CG 24 13. This endorsement removes coverage for “oral or written publication, in any manner, of material that violates a person’s right of privacy,” from the list of covered offenses in Coverage B – Personal and Advertising Injury (it does not affect Coverage A). ISO couches this as an additional underwriting tool. Violation of a person’s right of privacy may include, for example, the use of a picture or likeness without permission. This is a reduction in coverage when used by the underwriter.

Designated Location(s) Aggregate Limit – CG 25 14. This endorsement is intended for use with the Liquor Liability Coverage Part (CG 00 33 or CG 00 34). The current Designated Location(s) General Aggregate Limit endorsement (CG 25 04) is used for and applicable to the CGL only. The purpose of this endorsement (just like the CG 25 04) is to allow the aggregate limit to apply separately to each location where liquor is served. However, losses that cannot be attributed to a specific location are subject to the general aggregate.

The next article will address the “primary and noncontributory” requirement commonly found in construction contracts. Then, we will return to highlighting the various form and endorsement changes ISO has made to the Commercial Auto coverage and the BOP.

This is the second in a series of articles on ISO’s 2013 policy form changes. See Part 1.

Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS is the director of education for Insurance Journal’s Academy of Insurance. He can be reached at cboggs@ijacademy.com.