Bodily Injury/Personal Injury/Property Damage/Advertising Injury (BI/PI/PD/AI)

August 2, 2011

All D&O policies contain exclusions for loss associated with or arising out of claims that allege bodily injury and property damage. These exclusions focus on specific types of injury rather than a particular type of wrongful act. Most D&O policies also exclude some types of personal injury and/or advertising injury. An example of exclusion wording that excludes bodily injury, property damage, and certain personal injury offenses follows:

The Insurer shall not be liable to make any payment for Loss in connection with a Claim made against an Insured:

(f) for emotional distress or for injury from libel, slander, defamation, disparagement, or a violation of a person's right of privacy; …

(k) for bodily injury, sickness, disease, or death of any person, or damage to or destruction of any tangible property, including the loss of use thereof;

National Union 70320 (4/98)

Because D&O policies provide a form of errors-and-omissions-liability coverage, it is reasonable that the policy forms exclude claims based on bodily injury, property damage, and personal injury, all of which may be at least partially insured under commercial general, automobile, and umbrella liability policies.

The language used in D&O policies to exclude bodily injury, personal injury, property damage, and advertising injury rarely matches exactly the language that grants such coverage under the standard ISO CGL policy. Some D&O policies exclude an extensive list of injuries; others exclude only a handful. The following side-by-side comparison of the National Union exclusion shown previously and definitions contained in the 2007 version of the ISO CGL policy coverage grant illustrates this point.

 

 

Standard ISO-CGL Policy (CG 00 01 12 07)

National Union 70320 (4/98) Exclusion 4.(f) and 4.(k)

Bodily Injury Definition

Includes bodily injury, sickness, and disease, including resulting death.

Includes bodily injury, sickness, disease and death of any person.

Personal and Advertising Injury Definition

Injury, including consequential bodily injury arising out of one or more of the following offenses:

 

no definition

 

1.  False arrest, detention or imprisonment.

not excluded

 

 

2.  Malicious prosecution

 

not excluded

 

 

3.  Wrongful eviction, wrongful entry, invasion of the right of private occupancy

 

Injury from a violation of a person's right of privacy.

 

 

4.  Libel or slander, including disparagement of goods, products or services

 

excluded

 

 

5.  Oral or written publication of material that violates a person's right of privacy

 

excluded

 

 

6.  Use of another's ideas in the Insured's advertisement.

 

not excluded

 

 

7.  Copyright, title or slogan infringement

 

not excluded

Property Damage Definition

1.  Physical injury to tangible property. Includes resulting loss of use.

Damage to or destruction of tangible property, including loss of use thereof.

 

 

2.  Loss of use of tangible property not physically injured.

 

not excluded

 

D&O insurers may not necessarily intend to exclude exactly that which is covered by the CGL policy. In fact, there appears to be several potential overlaps in coverage. For example, the property damage exclusion in the National Union D&O policy noted previously closely matches the standard CGL insuring agreement as respects damage to or destruction of tangible property including loss of use thereof. However, the National Union exclusion is silent regarding loss of use of tangible property that is not physically injured, thereby creating a potential overlap of coverage with the CGL policy. Such overlaps in coverage also may exist with respect to certain types of personal and advertising injury.

Coverage under a D&O policy is generally broader than coverage under the standard CGL policy, especially if the CGL policy contains endorsements precluding coverage for claims based on personal and advertising injury (CG 21 38), abuse or molestation (CG 21 46) or employment-related practices (CG 21 47). Obviously, D&O coverage for any claim would be subject to other policy provisions and would have to be based on a wrongful act by an insured individual.

There are other notable characteristics of the wording of these exclusions. Consider these two examples:

The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured:

5. Alleging, arising out of, based upon, attributable to, or in any way involving, directly or indirectly:

a. Bodily injury, sickness, disease or death of any person, mental anguish or emotional distress. . . .;

b. Damage to or destruction of any tangible property, including loss of use thereof;

RSUI RSG 211003 (02/04)

The Insurer shall not be liable under any Coverages to make any payment for Loss as a result of a Claim made against an Insured:

1. (g) for bodily injury, sickness, disease or death of any person, or for damages to or destruction of any tangible property or loss of use of tangible property whether or not damaged or destroyed;

Arch 00 ATL0003 00 04 05

Language in the first example refers to claims “…based upon, arising out of, or attributable to” a list of specific types of injury. This wording contrasts with language in the second example, which refers only to claims made against the insured individuals “for” certain specified injuries. The language in the first example is far more restrictive. Exclusions that contain the prefatory “for” language are preferred because they may not exclude coverage for some derivative-action or third-party claims that are indirectly based on bodily injury, property damage or other specified injuries.

A few D&O policies contain language specifically providing that claims of bodily injury and property damage are not excluded when made in the form of a derivative or securities class action lawsuit. This provision is illustrated in 3.(a) of the exclusion that follows..

3. for any actual or alleged bodily injury, sickness, disease or death of any person, or damage to or destruction of any tangible property including loss of use thereof; however, this exclusion shall not apply to:

(a) any Claim brought by a security holder of the Company or Outside Entity in their capacity as such, including without limitation any shareholder derivative or securities class action lawsuit;

(b) any Claim to the extent such Claim alleges mental anguish or emotional distress; or

(c) Independent Directors

Old Republic ORUG-88 (10/2009)

Such affirmative language is highly desirable. Unfortunately, many policy forms do not specifically address this issue.

Bodily-injury, property-damage, personal-injury, and advertising-injury exclusions may be combined into a single exclusion, as in the National Union example at the beginning of this discussion. They also may appear as separate distinct exclusions, having, in most cases, the same overall effect as a unitary exclusion. The exception is when a policy uses multiple individual exclusions that are inconsistent, using “for” language in one exclusion, and a more-encompassing reference to claims “based upon or attributable to or arising from” in a different exclusion. This is illustrated in the following example.

The Insurer shall not be liable to make any payment for Loss resulting from any Claim:

2. for bodily injury, mental anguish, emotional distress, sickness, disease, or death of any person or damage to or destruction of any tangible property including the loss of use thereof….

4. based upon, arising out of, or directly or indirectly resulting from a Company Wrongful Act in connection with any actual or alleged libel, slander, infringement, piracy, misappropriation, disclosure, or slander of title of any actual, alleged, or prospective copyright, patent, service mark, trade name, trade mark, licensing right, ideas, or trade secrets;

Crum & Forster MP424.1 (04/04)

Some forms that contain inconsistent prefatory wording of exclusions may, for example, use the limited “for” wording in the personal injury exclusion and the broader “based upon, arising out of, or attributable to” wording in the bodily injury and property damage exclusion.