Commercial General Liability Policy Exclusions, Endorsements and Conditions

To complete any analysis of the coverage that exists under a company’s commercial general liability (“CGL”) insurance policy, it is important to look at the exclusions, endorsements and conditions.

Exclusions. First, it is important to understand that the insuring agreement in the CGL policy is very broad. The many exclusions that likewise exist take away coverage that the broad insuring agreement otherwise provides.

Here is an example of the broad insuring agreement and how the exclusions take away coverage. A business selling alcoholic beverages is sued for negligence as the establishment sold alcohol to a person under the legal drinking age and she was involved in an automobile accident seriously injuring others. The injured persons sued the business. Under the CGL insuring agreement, all the elements are easily met—thus it would appear the Insurer is obligated to pay all sums and damages the Insured is legally obligated to pay because of “bodily injury” caused by an “occurrence”. One big problem—the liquor liability exclusion which states that the CGL insurance does not apply to bodily injury or property damage caused by among other things, the furnishing of alcoholic beverages to a person under the legal drinking age.

The list of exclusions within the standard CGL policy covers four pages. Many of the exclusions are unimportant to most businesses such as the liquor liability exclusion we discussed above. Those that are usually important include the following exclusions: Expected or Intended Injury; Contractual Liability; Workers Compensation Laws; Employer’s Liability; Pollution; Damage to Property; Damage to Your Product; and Damage to Your Works.

Endorsements. Unlike an exclusion which takes away coverage otherwise granted to the insured under the insuring agreement, an endorsement essentially changes or supplements an insurance policy’s general terms. An endorsement may serve a number of functions including broadening the scope of coverage or restricting or limiting the scope of coverage. .

Conditions. The conditions section of the CGL policy is perhaps the most straightforward and easy to understand. Here you will find duties in the event of a loss and other general policy terms. Keep in mind that a failure to comply with the conditions could jeopardize coverage.

There are three very important conditions within a CGL policy that must be satisfied for coverage to be provided under the CGL policy. Lets now look at some of the conditions.

One condition is the obligation for the Insured to provide timely notice of any claim to the insurer. Timely notice is important so as to not prejudice the insurance company’s ability to investigate and adequately defend the claim.

A second very important condition is the obligation of the insured to fully pay the premium—which should not strike anyone as a surprise.

The third condition is the obligation of the insured to cooperate with the insurer in the defense of the case. This condition is certainly logical as the insurance company would have a real difficult time in defending a claim without the cooperation of the insured

A fourth condition is the right of the insurance carrier to access the books and accounts of the insured. This should be expected as the insurer may need to access certain records to adjust a claim or to conduct a premium audit.

A fifth condition that we will discuss relates to the fact that if the insured has rights to recover all or part of any payment made by the insurance carrier under the insuring agreement, those rights are transferred to the insurer. The insured must do nothing after the loss that would impair this right. At the request of the insurance company the insured will bring suit in its name or transfer those rights to the insurance company and help them enforce them.