Summary: Exclusion f in the commercial general liability coverage (CGL) forms is an almost absolute pollution exclusion; pollution liability that can be inferred to be covered is that resulting from certain off premises exposures or that within the products/completed operations hazard. Exclusion f is examined in detail in another article; see CGL Coverage Form—Coverage A.
Because of the broad sweep of the pollution exclusion in the CGL forms, many insureds, even those whose chances of becoming liable for a pollution incident are remote, need some provision to buy back protection. Under the current commercial general liability program, the Insurance Services Office (ISO) has issued pollution liability forms. The following pages discuss those forms.
Topics covered: Coverage forms CG 00 39 insuring agreements CG 00 39 exclusions CG 00 39 supplementary payments CG 00 39 who is an insured CG 00 39 limits of insurance CG 00 39 conditions CG 00 39 extended reporting period option CG 00 39 definitions CG 00 40 pollution liability limited coverage form—designated sites
Coverage Forms
There are two forms available to provide coverage for pollution liability, CG 00 39 (pollution liability coverage form—designated sites) and CG 00 40 (pollution liability limited coverage form—designated sites). The main difference between the two forms is that CG 00 40 is a limited coverage form, the limitation being that there is no insuring agreement for reimbursement of mandated off-site clean-up costs, costs that the insured has to pay, under statutory authority, to clean up environmental damage. Also, the exclusions in the two forms have some differences that will be noted.
CG 00 39 Insuring Agreements
1. Insuring Agreement—Bodily Injury and Property Damage Liability
a. We will pay those sums that the insured becomes legally obligated to pay as compensatory 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 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 “pollution incident” and settle any claim or “suit” that may result. But:
(1) The amount we will pay for damages is limited as described in Section III – Limits of Insurance; and
(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments, settlements or “clean-up costs”.
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by a “pollution incident” from an “insured site” or “waste facility” in the “coverage territory”;
(2) The “bodily injury” or “property damage” is caused by a “pollution incident” that commences on or after the Retroactive Date shown in the Declarations;
(3) The insured's responsibility to pay damages because of “bodily injury” or “property damage” is determined in a “suit” on the merits in the “covered territory” or in a settlement we agree to; and
(4) A claim for damages because of the “bodily injury” or “property damage” is first made against any insured, in writing, in accordance with paragraph c. below, during the policy period or any Extended Reporting Period we provide under Section V – Extended Reporting Period Option.
c. A claim by a person or organization seeking damages will be deemed to have been made at the earlier of the following times:
(1) When notice of such claim is received and recorded by any insured or by us, whichever comes first; or
(2) When we make a settlement in accordance with paragraph 1.a. above.
All claims for damages because of “bodily injury” to the same person, including damages claimed by any person or organization for care, loss of services or death resulting at any time from the “bodily injury”, will be deemed to have been made at the time the first of those claims is made against any insured.
All claims for damages because of “property damage” causing loss to the same person or organization as a result of a “pollution incident” will be deemed to have been made at the time the first of those claims is made against any insured.
Analysis
The insurer agrees to pay those sums that the insured becomes legally obligated to pay as compensatory damages because of bodily injury (BI) or property damage (PD) to which the insurance applies. The key word here is “compensatory”. These forms provide coverage only for compensatory damages and not punitive damages.
The insurance provided by CG 00 39 applies to BI or PD only if caused by a “pollution incident” from an “insured site” or “waste facility”. These terms are defined on the form and will be discussed later in this article under the definitions section.
The mention of a retroactive date signals a claims-made type policy and an intent to limit the time period of pollution coverage. This intent is strengthened by the provision that states that a claim for damages must be first made, in writing, during the policy period or any extended reporting period and by the exclusion of any pollution incident that commenced prior to the retroactive date.
2. Insuring Agreement—Reimbursement of Mandated Off-Site Clean-Up Costs
a. We will pay for “clean-up costs” that the insured becomes legally obligated to pay for because of “environmental damage” to which this insurance applies. We have the right but not the duty to investigate, settle, contest or appeal, at our expense, any obligation asserted against an insured to pay “clean-up costs”. But the amount we will pay for such “clean-up costs” is limited as described in Section III – Limits of Insurance; and
b. This insurance applies to “environmental damage” only if:
(1) The “environmental damage is caused by a “pollution incident” that commences on or after the Retroactive Date shown in the Declarations from an “insured site” or “waste facility” in the “coverage territory”; and
(2) The insured's obligation to pay “clean-up costs” because of the “environmental damage” is asserted under the statutory authority of the government of the United States of America, Canada or any governmental subdivisions of the United States or Canada . Notice asserting such obligation must be first received by you during the policy period.
3. No other obligation or liability to pay sums or to perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS
Analysis
The second insuring agreement of CG 00 39 commits the insurer to pay for clean up costs that the insured becomes legally obligated to pay. This duty of the insurer is based on “environmental damage”, a defined term on CG 00 39 that applies to injury done to or upon land, the atmosphere, or any body of water by pollutants. This coverage for clean up costs is limited, but it stands in stark contrast to the pollution exclusion found on the CGL form that precludes any coverage for clean up costs.
The limitation on this insuring agreement is not just the amount described in the limits of insurance section of CG 00 39 and stated on the declarations page. For the insurer to pay the clean up costs, the environmental damage has to be caused by a pollution incident that commences on or after the retroactive date from an insured site or waste facility. In other words, the damage to the environment has to be caused by the discharge or escape of pollutants from, for example the specific location stated on the dec page, into or upon the land, the atmosphere, or body of water after the insured's coverage has taken effect.
Furthermore, the insured's obligation to pay the clean up costs has to be asserted under the authority of the government. John Q. Citizen can not demand that the insured clean up the pollution damage and have this coverage form respond; the government must be the instigating instrument. The government notice or order to clean up the pollution must be received by the named insured during the policy period in order for the insuring agreement to apply.
The insurer declares that it has the right but not the duty to investigate, settle, contest or appeal any obligation asserted against the insured. The insurer is declaring here that it will control the course of any claim made against the insured, and that the insured can not demand or require the insurer to settle a claim, to fight a claim, or to allow the insured veto power over any settlement procedures or claim payment.
CG 00 39 Exclusions
a. Prior Pollution Incidents
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” caused or contributed to by any “pollution incident” that commenced prior to the Retroactive Date shown in the Declarations.
Analysis
This exclusion is just a reinforcement of the claims-made nature of CG 00 39. The insuring agreement declared that the insurance applied only if the injury or damage was caused by a pollution incident that “commences on or after the Retroactive Date shown in the Declarations”. This exclusion is just the counterpart to the insuring agreement to make clear that CG 00 39 is not meant to apply to pollution incidents that occur before the insured's coverage under CG 00 39 begins.
b. Expected or Intended Injury
This insurance does not apply to “bodily injury”, “property damage”, or “environmental damage” expected or intended from the standpoint of the insured.
Analysis
This exclusion states the fact that CG 00 39 is not meant to cover intentional damage done by the insured. Just as with other liability policies, CG 00 39 applies to injuries or damage that the insured unintentionally causes.
c. Contractual Liability
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.
Analysis
If the insured has agreed to assume the liability of another party, CG 00 39 will not respond to any claim based on that agreement. There is no exception here for an insured contract.
d. Workers Compensation and Similar Laws
This insurance does not apply to any obligation of the insured under a workers compensation, disability benefits or unemployment compensation laws or any similar law.
e. Employer's Liability
This insurance does not apply to “bodily injury to:
(1) An “employee” of the insured arising out of and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured's business; or
(2) The spouse, child, parent, brother or sister of the “employee” as a consequence of paragraph (1) above.
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.
Analysis
These two exclusions deal with workers compensation and employer's liability. The wording of the exclusions parallels the workers compensation exclusion and the employer's liability exclusion found in the commercial general liability forms. These exclusions are discussed in the article dealing with the CGL form; see CGL Coverage Form—Coverage A. Note that under exclusion e., there is no exception for liability assumed by the insured under an insured contract.
f. Damage to Property or Environment
This insurance does not apply to “property damage” or “environmental damage” to:
(1) A “waste facility”;
(2) Property you own, rent, or occupy;
(3) Premises you sell, give away or abandon, if the “property damage” or “environmental damage” arises out of any part of those premises;
(4) Property loaned to you; or
(5) Personal property in the care, custody, or control of the insured.
Analysis
This exclusion is not that different from the damage to property exclusion that is found on the CGL form. Basically, the exclusion declares that CG 00 39 will not cover damage to property owned, rented, or in the custody of the insured. That type coverage is best handled by a property form and not a liability form.
g. Clean-Up Costs
This insurance does not apply to “clean-up costs” or any other expense incurred by you or others to test for, monitor, clean-up, remove, contain, treat, detoxify or neutralize pollutants on or at:
(1) A “waste facility”; or
(2) Premises you own, rent or occupy;
or to any recovery claimed for such cost or expense.
Analysis
CG 00 39, with exclusion g., excludes insurance for clean-up costs or any other expenses incurred by the named insured or others to test for, clean-up, remove, or contain pollutants on or at a waste facility or premises owned, rented, or occupied by the named insured. Thus, while this form agrees to pay mandated off-site clean-up costs for damages caused by a pollution incident from a waste facility, it will not pay for clean-up costs at the waste facility itself, whether those costs are paid by the named insured or some other entity (such as a governmental agency) that cleans up the facility and then seeks remuneration.
h. Products-Completed Operations Hazard
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” included within the “products-completed operations hazard” and arising out of an emission, discharge, release or escape which originates away from any “insured site”.
Analysis
This exclusion is for damages included within the products-completed operations hazard (a defined term) and arising out of an emission, discharge, release, or escape that originates away from any insured site. Thus, in order to complement the pollution exclusion as found on the CGL coverage form, this exclusion on the pollution liability coverage form does apply to damages arising out of products or completed operations, just as the CGL form's exclusion usually does not apply.
i. Offshore Facility
This insurance does not apply to “bodily injury”, “property damage”, or “environmental damage” arising out of the ownership or operation of any offshore facility as defined in the Outer Continental Shelf Lands Act Amendment of 1978 or the Clean Water Act of 1977 as amended in 1978 or any deepwater port as defined in the Deepwater Port Act of 1974 as amended or as may be amended.
Analysis
Following the products-completed operations hazard exclusion is an exclusion for damages arising out of the ownership or operation of any offshore facility or any deepwater port. CG 00 39 is not meant to provide pollution liability coverage for such things as offshore oil drilling rigs or deepwater ports where oil is loaded into or unloaded from oil tankers. Those exposures are special and demand specialized coverage. Note that this exclusion depends on definitions found outside this coverage form, and that the Federal laws mentioned in this exclusion are subject to legislative change and judicial interpretation.
j. Closed Waste Sites
This insurance does not apply to “bodily injury”, “property damage”, or “environmental damage” arising out of a “pollution incident” from an “insured site” or any part of an “insured site” that was used by you for the storage, disposal, processing or treatment of waste materials and was
(1) Sealed off, closed, abandoned or alienated prior to the Retroactive Date shown in the Declarations of this Coverage Part; or
(2) Sealed off or closed subject to statute, ordinance or governmental regulation or directive requiring maintenance or monitoring during or after sealing off or closure.
Analysis
Damages arising from an insured site used for the storage, disposal, processing, or treatment of waste materials are excluded if that site was closed or abandoned prior to the retroactive date shown on the coverage form. If such a site was closed subject to statute or governmental regulation requiring maintenance or monitoring, any damages arising out of a pollution incident from the site are also excluded. CG 00 39 does apply to damages arising out of a pollution incident from a waste site, but not if that waste site was or is closed. This emphasizes two points: first, CG 00 39 is a claims-made policy with a retroactive date that must be taken note of; and second, if the government has closed a waste site for whatever reason, CG 00 39 is not going to pay for the maintenance or monitoring activities that the insured may be required to do in compliance with the governmental closure order.
k. Aircraft, Auto, Rolling Stock or Watercraft
This insurance does not apply to “bodily injury”, “property damage”, or “environmental damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto”, rolling stock or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading or unloading”.
This exclusion does not apply to:
(1) Parking an “auto” on, or on the ways next to, premises you own or rent, provided the “auto” is not owned by or rented or loaned to you or the insured; or
(2) ”Bodily injury” or “property damage” arising out of the operation of any of the equipment listed in paragraph f.(2) or f.(3) of the definition of “mobile equipment”.
Analysis
This exclusion is the standard auto, aircraft, and watercraft exclusion found on general liability forms, with some variances. Rolling stock is added to the list of excluded vehicles and since that term is not defined on the coverage form, the dictionary definition must be observed; rolling stock is “the wheeled vehicles owned and used by a railroad or motor carrier”. So, for example, if some injury or damage occurs as a result of the transportation of pollutants in the insured's tanker, CG 00 39 will not respond.
Another variance here from the auto exclusion that is found on the CGL form is that this exclusion does not make any exceptions for watercraft that is ashore or that is less than 26 feet long, or exceptions for liability assumed under an insured contract. Again, note that insured contracts are not part of CG 00 39.
l. Wells
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” arising out of the emission, discharge, release or escape of drilling fluid, oil, gas or other fluids from any oil, gas, mineral, water or geothermal well.
Analysis
Wells, whether they be oil, gas, or water, require specialized coverage and this exclusion makes that point.
m. Failure to Comply with Environmental Laws
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” arising out of a “pollution incident” which results from or is directly or indirectly attributable to failure to comply with any applicable statute, regulation, ordinance, directive or order relating to the protection of the environment and promulgated by any governmental body, provided that failure to comply is a willful or deliberate act or omission of:
(1) The insured; or
(2) You or any of your members, managers, partners or “executive officers”.
Analysis
CG 00 39 excludes intentional damage as was noted previously. To reinforce this, the form also excludes damages arising out of a pollution incident whereby the insured or the insured's members, partners, or executive officers willfully or deliberately fail to comply with a governmental statute, regulation, or order. Thus, if the Environmental Protection Agency has issued a regulation that the insured chooses to violate, the insurance will not apply to any forthcoming damages.
n. Acid Rain
This insurance does not apply to “bodily injury”, “property damage” or “environmental damage” arising out of acid rain.
Analysis
The subject of acid rain is not so much in the news at this time, but it is one environmental hazard that CG 00 39 will not cover. The depth and extent of acid rain damage is far too severe for standardized coverage as is found on CG 00 39.
CG 00 39 Supplementary Payments
We will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
(1) All expenses we incur.
(2) All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or “suit”, including actual loss of earnings up to $250 a day because of time off from work.
(3) All costs taxed against the insured in the “suit”.
(4) Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of insurance, we will not pay any prejudgment interest based on that period of time after the offer.
(5) All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the applicable limit of insurance.
(6) Expenses incurred by the insured for first aid administered to others at the time of any accident for “bodily injury” to which this insurance applies.
These payments will not reduce the limits of insurance.
Analysis
These supplementary payments are similar to those found on the CGL form; see General Provisions of the CGL. However, there are some differences worth noting.
CG 00 39 will not pay as supplementary payments the cost of bail bonds or the cost of bonds to release attachments. Also, defense costs based on an insured contract are not discussed here since CG 00 39 does not deal with insured contracts. Finally, note that CG 00 39 does offer a supplementary payment for certain first aid expenses incurred by the insured; since CG 00 39 does not have a medical payments insuring agreement, this supplementary payment allows the insured coverage that comes close to that particular insuring agreement.
CG 00 39 Who Is an Insured
This section of CG 00 39 is similar in wording to that found on the CGL form; see General Provisions of the CGL.
The “who is an insured” paragraphs deal with the status of the named insured as an individual, a partnership or joint venture, a limited liability company, or an organization other than a partnership, joint venture, or limited liability company.
The status of the named insured's employees as insureds is the same under CG 00 39 as under the CGL form, except that CG 00 39 does not mention “personal injury” coverage since that type of coverage is not offered by the pollution liability form. Also, while the CGL form states that an employee is not an insured for injuries arising out of his or her providing professional health care services, CG 00 39 does not have this clause; this is because, as noted previously, CG 00 39 provides first aid payments as opposed to medical payments coverage and if the employee of the named insured offers first aid to an injured person, CG 00 39 should not be expected to leave that employee without any liability coverage should that become necessary.
CG 00 39 discusses the status of an employee in the event of property damage just as the CGL form does, but adds “environmental damage” to the discussion since that hazard is covered by the pollution liability form.
CG 00 39 does not list as an insured any person or organization while acting as a real estate manager for the named insured, nor does it discuss the status of those driving mobile equipment along a public highway. Due to the nature of the coverage offered by CG 00 39, these two statuses are not relevant.
CG 00 39 Limits of Insurance
1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:
a. Insureds;
b. Claims made or “suits” brought;
c. Persons or organizations making claims or bringing “suits”; or
d. Governmental actions taken with respect to “clean-up costs”.
2. The Aggregate Limit is the most we will pay for the sum of:
a. All damages because of “bodily injury” and “property damage”; and
b. All “clean-up costs” incurred because of all “environmental damage”.
3. We will pay damages and “clean-up costs” only for the amount of the damages or “clean-up costs” which are in excess of the deductible amount, if any, shown in the Declarations. Subject to the Aggregate Limit above, the most we will pay in any one “pollution incident” for the sum of:
a. All damages because of all “bodily injury” and “property damage”; and
b. All “clean-up costs” incurred because of all “environmental damage”;
will be the lesser of:
(1) The Each “Pollution Incident” Limit; or
(2) The sum of those damages and “clean-up costs”.
We may, or will if required by law, pay all of any deductible amount, if applicable, to effect settlement of any claim or “suit”. Upon notice of our payment of a deductible amount, you shall promptly reimburse us for the part of the deductible amount we paid.
The Limits of Insurance of this Coverage Part apply separately to each consecutive annual period and to any remaining period of less than twelve months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than twelve months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.
Analysis
This section of the pollution liability coverage form reflects the nature of the coverage that is offered. There is no discussion of medical expenses or damages under coverage B (personal and advertising injury liability) because CG 00 39 does not provide such coverages. This form speaks of “governmental actions taken with respect to clean up costs” and costs incurred because of “all environmental damage”.
The bottom line is that CG 00 39 has limits to the amounts that it will provide to pay those sums that the insured becomes legally obligated to pay. CG 00 39 has an aggregate limit that is the most that will be paid for the sum of all damages and clean up costs for which the insured is legally responsible. In addition, CG 00 39 has a “pollution incident” limit listed on the declarations so that no more than that limit will be paid in any one incident.
As examples, say the insured has an aggregate limit of $500,000 and a pollution incident limit of $300,000. If the insured has a claim against him for a pollution incident in the amount of $100,000, there is payment for that full amount; the pollution incident limit has not been breached and the aggregate limit has been reduced by $100,000. If the insured gets hit with a claim for a pollution incident in the amount of $400,000, CG 00 39 will pay the $300,000 pollution incident limit, with the aggregate being reduced by that same amount. Note that if the insured suffers a claim for a pollution incident in the amount of $600,000, the amount paid will be $300,000 and not the aggregate limit because payments are subject to the pollution incident limit; the aggregate limit remaining in this instance is $200,000. If the insured on the other hand suffers two pollution incidents, one in the amount of $300,000 and one in the amount of $400,000, CG 00 39 will pay the $300,000 claim in full and pay $200,000 of the other claim, with the aggregate limit then being exhausted.
CG 00 39 mentions a deductible that may exist. The deductible, or any amount less than the deductible is, of course, paid by the insured. If, however, the insurer pays that deductible, by choice or by law, the named insured is required to reimburse the insurer.
CG 00 39 Conditions
The conditions section of the pollution liability coverage form contains most of the conditions that are part of the CGL form; for information on the conditions, see General Provisions of the CGL (CGL occurrence form) and “Claims-Made CGL Form”, Casualty & Surety, Liability section (CGL claims-made form). The pollution liability form is worded, of course, to reflect its coverage of “pollution incidents” as opposed to “occurrences” and “offenses”.
CG 00 39 does not have the “when we do not renew” clause that the CGL forms have and does not have the “your right to claim and occurrence information” clause that appears on the CGL claims-made form. CG 00 39 does have a conditions clause that the CGL forms do not have: coverage part issued to comply with law or regulation. This clause is discussed below.
9. Coverage Part Issued To Comply With Law Or Regulation
If this policy is issued to comply with any law or regulation which requires notice of cancellation to any governmental body, cancellation may not be effected until the required notice has been provided by you or us.
Analysis
This clause simply clarifies the point that, should the law require notice of cancellation of this coverage, that cancellation is not in effect until the notice has been provided. In other words, if the insurer wants to cancel this policy and the law requires a cancellation notice to be given to the government so that the government is aware that insurance coverage no longer exists for the insured for his or her pollution liability, the cancellation is not in effect until the required notice has been provided.
The problem arises over the word “provided”. Does it mean that the policy is cancelled when the insurer mails out a notice or is the policy cancelled when the government receives the notice? CG 00 39 offers no answer to the question. The dictionary reveals that “provide” means to supply or make something available, which would indicate that a simple mailing of a cancellation notice without actual acknowledgement of receipt of that mailing would suffice. However, common sense dictates that a cancellation notice should have a return receipt request on it.
CG 00 39 Extended Reporting Period Option
1. This Section applies only if:
a. We cancel or non-renew this Coverage Part for any reason except non-payment of the premium; or
b. We renew or replace this Coverage Part with other Pollution Liability insurance that:
(1) Provides claims-made coverage for Bodily Injury and Property Damage Liability; and
(2) Has a Retroactive Date later than the one shown in this Coverage Part's Declarations.
2. If we provide the Extended Reporting Period Endorsement:
a. A claim first made within one year after the end of the policy period will be deemed to have been made on the last day of the policy period, provided that the claim is for damages because of “bodily injury” or “property damage” that occurred before the end of the policy period.
b. All loss of use which results from physical injury to, destruction of or contamination of tangible property shall be deemed to occur at the time of the physical injury that caused it.
c. All loss of use of tangible property that is not physically injured, destroyed or contaminated, but has been evacuated, withdrawn from use or rendered inaccessible because of a “pollution incident” shall be deemed to occur at the time of the “pollution incident” that caused it.
d. The Extended Reporting Period Endorsement will not reinstate or increase the Limits of Insurance or extend the policy period.
3. We will issue this Endorsement if the first Named Insured shown in the Declarations:
a. Makes a written request for it which we receive within thirty days after the end of the policy period; and
b. Promptly pays the additional premium when due.
The Extended Reporting Period Endorsement will not take effect unless the additional premium is paid when due. If that premium is paid when due, the Endorsement may not be cancelled.
The Extended Reporting Period Endorsement will also amend paragraph 4.b., Other Insurance of Section IV – Pollution Liability Conditions so the insurance provided will be excess over any other valid and collectible insurance available to the insured, whether primary, excess, contingent or on any other basis, whose policy period begins or continues after the Endorsement takes effect.
4. We will determine the actual premium for the Extended Reporting Period Endorsement in accordance with our rules and rates. In doing so, we may take into account the following:
a. The exposures insured;
b. Previous types and amounts of insurance;
c. Limits of Insurance available under this Coverage Part for future payment of damages; and
d. Other related factors.
The premium for the Extended Reporting Period Endorsement will not exceed 50 percent of the annual premium for this Coverage Part and will be fully earned when the Endorsement takes effect.
5. If we fail to offer to renew this Coverage Part at the same rates or with the same form, that will not constitute cancellation or nonrenewal by us.
Analysis
This extended reporting period option is not unusual to a claims-made type policy. The CGL claims-made form has a section on extended reporting periods and this clause on CG 00 39 resembles it. For more information on the CGL form's extended reporting period, see Claims-Made CGL Form.
This extended reporting period option applies if the insurer cancels or does not renew the coverage for any reason other than nonpayment of premium. The only other way for the option to apply is if the insurer renews the coverage with a claims-made form that has a retroactive date later than the one shown in the previous policy. This retroactive date is a consideration that needs to be addressed by both the insured and the insurer. There are three possible choices for this date; the retroactive date may be the same as the policy's inception date, it may be some date earlier than the inception date, or it may not be imposed at all.
The extended reporting period option states that a claim first made within one year after the end of the policy period will be deemed to have been made on the last day of the policy period. The claim must be for damages because of bodily injury or property damage that occurred before the end of the policy period.
The insurance provided by this option is excess over any other valid and collectible insurance that is available to the insured. The option does not reinstate or increase the limits of insurance or extend the policy period. The first named insured has to make a written request for the extension within thirty days after the end of the policy period and promptly pay the additional premium when due in order for the extended reporting period to take effect.
CG 00 39 Definitions
The definitions section in CG 00 39 contains many of the same words that appear in the definitions section of the current CGL forms. For information on the definitions, see Commercial General Liability Definitions. The definitions that are associated with CG 00 39 are discussed below. Note that there is no definition of “insured contract” on CG 00 39 since, as noted previously, the pollution liability coverage form does not deal with insured contracts.
3. ”Clean-up costs” means expenses for the removal or neutralization of contaminants, irritants or pollutants.
Analysis
The insurer has agreed to pay clean up costs under CG 00 39; the limits to be paid for these costs are set by the limits of insurance section of CG 00 39. How the pollutants are to be removed or neutralized or even which method of clean up is chosen is not set by this definition.
4. ”Coverage territory” means the United States of America (including its territories and possessions), Puerto Rico and Canada .
Analysis
This definition is mentioned here simply to point out that “international waters” or “airspace” or “all parts of the world” are not listed in this definition like they are in the CGL form. Pollution liability coverage is limited in its territorial scope.
6. ”Environmental damage” means the injurious presence in or upon land, the atmosphere, or any watercourse or body or water of solid, liquid, gaseous or thermal contaminants, irritants or pollutants.
Analysis
This definition emphasizes the point that CG 00 39 is meant to apply to environmental damage, that is, damage to the environment. CG 00 39 will not respond to a call to clean up, for example, some paint spilled on a carpet. This definition should be considered in connection with the definition of “pollution incident” so that the thrust of coverage under CG 00 39 is clearly understood to be aimed toward damage to the environment.
8. ”Insured site” means the specific location specified in the Declarations.
13. ”Pollution incident” means emission, discharge, release or escape of pollutants into or upon land, the atmosphere, or any watercourse or body of water, provided that such emission, discharge, release or escape results in “environmental damage”. The entirety of any such emission, discharge, release or escape shall be deemed to be one “pollution incident”.
Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Analysis
This definition complements the definition of “environmental damage” and reinforces the point that CG 00 39 is meant to apply to damage done to the environment. The definition also declares that the entirety of an emission or escape of pollutants is considered to be one incident; thus, even if an escape of pollutants occurs over the course of six months, that would be treated as one incident. This is relevant because of the each pollution incident limit that is on CG 00 39, with the limit being applied to cover the entire leak as one “big” incident as opposed to many “little” incidents, each laying claim to the each pollution incident limit.
18. ”Waste facility” means any site to which waste from the operations of an “insured site” is legally consigned for delivery or delivered for storage, disposal, processing or treatment, provided that such site:
a. Is licensed by state or federal authority to perform such storage, disposal, processing or treatment; and
b. Is not and never was owned by, rented or loaned to you.
Analysis
The insuring agreement dealing with a waste facility states that coverage under CG 00 39 applies to bodily injury or property damage caused by a pollution incident from a waste facility. This definition shows that the insured has coverage if he or she has been delivering waste to a waste facility duly licensed by the government and not owned or rented by the named insured, and pollution escapes from that waste facility. In many instances, all those who have delivered waste to a facility have been brought into a lawsuit or a claim over a leak from the facility simply because they have put their waste at that facility; this definition makes sure that the insured's pollution liability form will provide defense and coverage for the insured in such an instance.
Pollution Liability Limited Coverage Form—Designated Sites CG 00 40
CG 00 40 is Pollution Liability Limited Coverage Form—Designated Sites. The reason CG 00 40 is “limited” as opposed to CG 00 39 is that the former coverage does not offer reimbursement of mandated off-site clean up costs. CG 00 40 provides coverage for bodily injury and property damage caused by a pollution incident, but no coverage for clean up costs. Therefore, any reference to clean up costs, be it in the insuring agreement, the exclusions, the conditions, or the definitions is not in CG 00 40. That is the only difference between CG 00 39 and CG 00 40.
That is the only difference, that is, with one exception. The exclusions section of CG 00 40 does mention clean up costs so as to reinforce the point that CG 00 40 does not apply to clean up costs. The exclusion is reproduced below.
n. Statutory or Governmental Assertions and Clean-Up Costs
This insurance does not apply to any loss, cost, expense or obligation:
(1) Asserted against you under the statutory authority of a governmental agency; or
(2) Incurred by you or others to test for, monitor, clean-up, remove, contain, treat, detoxify or neutralize pollutants on or at a “waste facility” or any premises you own, rent or occupy.