CGL Exclusions

[flgirly]

I'm taking the Florida online General Lines course & having a hard time understanding why certain thing are excluded from BI & PD coverage form in a CGL policy. I've underlined & made bold the ones that really have me stumped..

Miscellaneous Property Damage - Subject to various exceptions, the CGL policy excludes damage for various kinds of property including: (1) property which the insured owns, rents, occupies or has on loan; or personal property in the insured's care, custody or control; (2) damage arising out of a premises the insured has sold, given away or abandoned; (3) damage to real property the insured occupies, operates, or has in their care, custody or control; and (4) that particular part of any property that must be restored, repaired, or replaced because work of the insured was incorrectly performed while the work was in progress.

Insured's Products - Damage to the insured's own products arising out of the product itself are excluded.

Insured's Work - The CGL policy excludes damage to the insured's own work. Damage arising out of the insured's work even after completion is excluded. Work done by a subcontractor is covered. ** adding premises & operations &/or products & completed operations exposure cto the polciy over this exclusion.

Defects, Delays - There is no coverage for claims based on defect, deficiency, inadequacy or dangerous condition in the insured's product or work, or from delay or failure to properly perform a contract, in so far as it makes property which contains the insured's product or work useless or less useful, or results in loss of use without physical harm to the property. This exclusion does not apply to loss of use of other property when there is sudden and accidental injury to the insured's products or work, after it has been put to its intended use. Is there an endorsement to cover this stuff??
Why cant they simplify this stuff, the wording gets me all messed..

Thanks in advance
Alaina

[superdash8]

Hi Alaina, I think what is confusing you is that this about Liability coverage, and they are saying that if you damage your own property, then you can't hold yourself liable.

[AlstonCPCU]

Care, Custody, and Control is excluded but can be bought back. It is a standard exclusion.

Personal Property of Others can either be covered by a buyback of Care Custody and Control or by adding Personal Property of Others on the Property form. Both of these coverages are subject to provisions of the coverage form regarding exclusions.

Commercial Insurance is complicated.

[LadyBroker]

Also keep in mind the CGL policy is not a Product Warranty...which is why the insured's own product is excluded for simply being defective.

[aasquith]

I think the best way to address all of these items is to remember that there is likely a better way to cover each of these exposures... Let me try to explain:

Personal Property in the insured's care, custod or control - This is excluded as this would be better covered under a bailee's coverage form. There is more coverage afforded under this form and the form specifically will address the types of items it will cover for the insured.

Damage to real property the insured occupies, operates or has in their CCC - This one has a few items to consider. If they occupy the property as a tenant, unless specifically stated in the lease agreement (triple net lease) the tenant has no insurable interest in the real property. Therefore no coverage will be afforded. If they operate the property (an example is a hotel, apartment, strip center, etc.) they would cover that location under a commercial property form versus a 3rd party liability form. Property is a first party coverage, keep that in mind. If the insured has someone's real property in their CCC, again, an insurable interest is not automatically created. This insurable interest can only be created by a written contract, which contractually shifts the burden of the insurance to your insured.

The damage to the work exclusion addresses one important issue - "that particular part" exclusion. For example. You call a plumber over to your home to reroute a copper water line. While the plumber is swetting a new joint, they start a fire by ignighting a 2X4 wall stud and burns down your home. The contractor's GL policy will respond to the house fire and pay the claim, less the "particular part" that the plumber was working on. If the elbow joint that he was working on was $1.29, the claim is paid less the $1.29 part that they were working with.

Defects & delays - this is better covered under a construction/latent defect liability policy. The defects coverage available is far superior to any GL form out there at this time, so it is better covered under this form.

Keep in mind - for any coverage form - if there is an exclusion in the policy, it is for a very good reason. Most of the time, there is another coverage form out there that will suit the exposure better. Or, common sense exclusions - if you intentionally burn your own house down, you will not be paid anything - duh!

Long story short, for a price, you can cover anything out there. Even if it's at a self-insured type of price.

[kevinraz]

Alaina - this is why people who sell insurance need to be licensed. It is complex as it must follow the laws involved which are also complex. Unfortunately insurance folk are usually equal to used car salesmen in most peoples estimation. Just with the bit of studying you've done so far you know more than most will ever know about insurance.

These types of property exclusions are in the CGL policy for several reasons: first, property should usually be covered under some type of property form - standard commercial property, bailees, inland marine, etc. Enterprising lawyers have found ways over the years to get a property coverage claim covered under CGL where it's not built into the rating, hence the complex exclusions.

Second, damage to your work, replacing your work & stuff like that can get very sticky very quickly. The CGL policy is not intended to act as a warranty that you do good work - that's your reputation & integrity. You can buy product recall for many classes of business that covers a lot of this.

Keep studying but stick to the high points. I doubt that this would be covered on a licensing test but it's good to know...however rest assured that this will come up when you start CPCU or CIC classes!

Sincerely,

Kevin Raz, AU, CIC