Q

My insured is selling his lumberyard business and will cease all operations, although the corporation will continue to exist. I realize that his products and completed operations exposure will continue after the sale of his business, but I am unsure how to cover this for him. Is there an appropriate liability classification for discontinued operations?

Mississippi Subscriber

A

The ISO commercial lines classification table does not have a code for discontinued operations. However, you are correct in that the insured will still have a claim exposure from his products and completed operations even after the day to day business operations cease. So, how does the insured get insurance coverage for this exposure?

Under the standard CGL form, the insurance applies to bodily injury and property damage that occurs during the policy period. So, for example, if an injury occurred while a liability policy is in force, it makes no difference if the claim is made after the insured ceased his operations; coverage will still apply. Unfortunately, this means that the insured will have to keep his CGL form in force even after he ends his business. As for the premium, since it is based on gross sales for lumberyard operations, the insurer should be willing to write the policy on an “if any” basis, or at least, at a bare minimum gross sales figure.

If the insurer is not willing to continue to write the CGL policy under these terms, you may want to try the specialty lines market.