The pairing between adjusters and agents is often a peaceful co-existence, but it may suddenly be disrupted by tenacious disagreements.
Recently two examples crossed the Independent Insurance Agents & Brokers of America Virtual University radar. Read the two stories, condensed for brevity and clarity, below:
A manufacturer shipped a large quantity of a liquid product to a customer. For convenience in either shipping or processing, the shipment arrived at the customer in multiple containers, which the customer combined into a single batch. Upon testing, the entire shipment was found to be defective and had to be discarded. Naturally, the customer refused to pay the invoice for the liquid until it was fully replaced with an acceptable replacement. The manufacturer, in searching for the error, found that although nearly every separate container had tested as correct prior to shipping, at least two were mislabeled or improperly included from a rejected batch. The manufacturer turned to its Commercial General Liability form (ISO CG 00 01 04 13) and requested the insurer pay for the financial loss of the first shipment. The carrier denied the entire claim, citing Exclusion k:
This insurance does not apply to:
k. Damage To Your Product
“Property damage” to “your product” arising out of it or any part of it.
The manufacturer and its agent did not totally disagree, but argued the exclusion should only apply to the defective parts of the shipment. Under this argument, the carrier should pay the amount of the claim for any portions of the shipment that the manufacturer could document were satisfactory. This, they explained, would have been exactly how the carrier would have paid the claim if the customer had not rendered the entire shipment useless by mixing the defective and good batches together. The carrier rejected this argument, again denying the entire claim.
There is one key element of evidence missing in the discussion. Exclusion k. clearly excludes any property damage to “your product.” Is that term also defined by the Commercial General Liability form? Ah, so it is, as follows:
21. “Your product”:
a. Means:
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Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:
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(a) You;
(b) Others trading under your name; or
(c) A person or organization whose business or assets you have acquired; and
Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.
b. Includes:
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Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product”; and
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The providing of or failure to provide warnings or instructions.
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c. Does not include vending machines or other property rented to or located for the use of others but not sold.
As 21 b. and c. have no bearing on this claim, let's focus solely upon 21 a. “Any goods or products” seems pretty comprehensive to me. The entire shipment, good or defective, is clearly the insured's “product,” and there is no coverage for any loss to any of that product under its Commercial General Liability policy. If the manufacturer wants to pursue an action against its customer for contributory negligence, that is a different question, but such a claim will still not trigger any response under the insured's own Commercial General Liability policy.
Final resolution? The manufacturer may be unhappy, but the agent should quietly exit the dispute, now knowing his adjuster “partner” was in the right all along.
(Photo: Thinkstock)
Potential food delivery coverage issue
An agent proffered an intriguing query about food delivery, specifically, as to whether the originating restaurant's Commercial General Liability policy (ISO 00 01 04 13) would provide liability coverage for the restaurant if a bodily injury claim later arose from allegations of food spoilage or foodborne illness from a delivered meal?
Where, asked the agent, are the restaurant's “operations” considered completed under the Commercial General Liability policy, and where does the liability coverage end during the delivery process? Will the answer differ if the delivery was made via the increasingly popular independent delivery services, whose handling or storage may have added to or even created the cause of loss? Given the details of this question, and the fact the agent didn't cite any carrier-specific form, we again turn to the ISO forms.
First, food and drink created/cooked/prepared by the restaurant clearly falls under the Commercial General Liability definition of “Your Product” cited previously in this article. Second, we find in the ISO Commercial Lines manual a mandatory endorsement for any restaurant risk — the CG 2407 01 96 — Products/Completed Operations Hazard Redefined. Here is the applicable wording from the endorsement:
Paragraph a. of the definition of “Products-completed operations hazard” in the DEFINITIONS Section is replaced by the following:
“Products-completed operations hazard”:
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- a. Includes all “bodily injury” and “property damage” that arises out of “your products” if the “bodily injury” or “property damage” occurs after you have relinquished possession of those products.
To simplify the analysis even more, the endorsement language doesn't state that the definition language in the Commercial General Liability form is modified or revised, it is replaced. Note how much of the original query we can now set to rest:
- There is no complicated test of when the restaurant hands over the food, or whether it is directly given to the ultimate consumer or a delivery service: Has the restaurant, or has it not, “relinquished possession” of its products?
- Bodily injury is clearly included in the hazard.
- It doesn't matter where the food is at time of ingestion.
- It doesn't matter how it was delivered or by whom (although there may be some subrogation possibilities created, it's still the restaurant's product).
Final resolution? The coverage is clear and unambiguous. The agent can now relax in the knowledge this is not likely to be a source of future marital tension. If the claim does arise, the agent can likely keep the issue from blowing up into a major crisis by calmly recounting to his “partner” this bridge had already been crossed during pre-marital counseling with his insurance coverage therapist.
Remember that insurance can be a motherlode of valuable conflict resolution or avoidance lessons for all of us in relationships.
Chris Amrhein, AAI, is an insurance educator and speaker, and serves as the chief fun officer at Insuranceisfun.com. Opinions expressed in this article are his own.
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