(Part 2) Commercial Property & Casualty Insurance – The Basics



Defined: The state of being bound or obliged in law or justice to do, pay, or make good something; legal responsibility.

         General Liability Insurance

An insurance policy issued to business organizations to protect them against liability claims for bodily injury and property damage arising out of premises, operations, products, and completed operations; and advertising and personal injury liability. The usual insuring agreement summarized states “ We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.  We will have the right and duty to defend the insured against any suit seeking damages those damages.  However, we will have no duty to defend the insured against  any suit seeking damages for bodily injury or property damage to which this insurance does not apply.  We may, at our discretion, investigate any occurrence and settle any claim that may result…  There are typically 15 exclusions to this broad coverage insuring agreement.  The usual policy states that “The insurance does not apply to:”

  1. Expected or Intended Injury
  2. Contractual Liability
  3. Liquor Liability
  4. Workers’ Compensation and Similar Laws
  5. Employer’s Liability
  6. Pollution
  7. Aircraft, Auto or Watercraft
  8. Mobile Equipment
  9. War
  10. Damage to Property
  11. Damage To Your Product
  12. Damage To Your Work
  13. Damage To Impaired Property or Property Not Physically Injured
  14. Recall of Products, Work or Impaired Property
  15. Personal and Advertising Injury (although in most general liability policies this exposure to loss is covered under a separate insuring agreement within the policy.

Exclusions exist because either the exposure to loss is better covered by another policy form or the exposure is deemed to be uninsurable due to the inability to predict a maximum probable loss.  Most, if not all of the coverage excluded by the policy, can be either purchased back by an endorsement or be purchased on a separate policy covering that specific exposure.

Pollution Liability Insurance

An endorsement to a general liability policy or a specific policy covering bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.  The Pollution Exclusion in a General Liability Policy is the most problematic and misunderstood exclusion.  Pollution Liability Insurance does not simply buy back the pollution exclusion in the General Liability Policy and is not a standardized form used by all or most insurance companies.  Although the coverage is much more available now than in the past and has a relatively robust completive marketplace, the issue is still wrought with confusion and misunderstanding.  I buyer should make sure they understand what the policy they buy actually covers and to what extent, as well as the exclusions to the policy.

Occurrence & Claims Made Liability Coverage Forms

Although not the issue it once was, this still continues to be a mystery to many insurance buyers and unfortunately insurance practioners, including agents, brokers, underwriters and claims adjusters.

Occurrence Liability Form – a claim is covered for accidents that occur during the policy period.  With certain exceptions, the time that the bodily injury or property damage actually occurred is irrelevant to expiration of the policy, only: did the accident occur during the policy period?

Claims Made – a claim is covered only if it is first made against the insured during the policy period (or an extended reporting period within the policy or created by the purchase of an endorsement). With certain exceptions, the time that the bodily injury or property damage actually occurred is irrelevant to claims-made coverage.  A claim is considered made when it is received and recorded by the insured or the insurer, or when the insurer makes a settlement, whichever happens first. The stipulation that the claim must first be made during the policy period is an important one.  Sometimes multiple claims for the same bodily injury are brought against the insured at various times.