Revised Coverage Forms Ring in the New Year
By David Thamann
From a January 2005, issue of National Underwriter—Property and Casualty edition
Two of the most widely used coverage forms from Insurance Services Office (ISO) have been revised. The commercial general liability (CGL) coverage form and the personal auto policy (PAP) are the forms. This article offers a summary of the revisions. The CGL form, CG 00 01, has a new edition date of December, 2004. The PAP, PP 00 01, has a new edition date of January, 2005.
One of the changes in the revised CGL form deals with the pollution exclusion. That exclusion did allow an exception for bodily injury caused by smoke, fumes, or vapor from equipment used to heat the insured's building. That exception has been expanded now to include equipment used to cool or dehumidify the building. The thinking here is that equipment used to heat, cool or dehumidify can emit the same injurious fumes or vapor, and the CGL form should apply equally to such equipment.
Another revision pertains to auto liability coverage. The CGL form has applied to bodily injury (BI) and property damage (PD) caused by mobile equipment, such as bulldozers, farm machinery, and forklifts. Sometimes, this type of equipment is driven on public roads, accidents occur, and the auto issues of uninsured motorists (UM) coverage or no-fault coverage arise. This happens because some states consider such vehicles to be subject to auto compulsory or financial responsibility laws, and if, for example, UM coverage is mandatory, when those vehicles are involved in accidents on public roads, the general liability insurance is required to pay UM benefits. This is not the coverage intent of the CGL form.
In order to prevent the CGL form from providing auto liability coverage, the form has expanded the auto exclusion and rewritten the definition of “auto” and “mobile equipment” to clarify that vehicles subject to a compulsory or financial responsibility law are autos, not mobile equipment. The revised CGL form means to emphasize that BI or PD caused by the ownership or use of motor vehicles subject to state motor vehicle laws is to be an auto exposure and not a general liability exposure.
The war exclusion on the CGL form has been changed so that BI or PD arising out of warlike actions by a military force or by any authority using military personnel or other agents is now excluded; and this exclusion is no longer applicable only to liability assumed under a contract or agreement. Thus, BI or PD from another terrorist attack could conceivably be excluded under the new CGL form. And, note that this war exclusion has also been added to coverage B, personal and advertising injury liability. So, claims for personal and advertising injury (a defined term) due to war or warlike actions will not be covered by the CGL form.
A new exclusion has been added to the CGL form. Damages arising out of the loss of or loss of use of electronic data are specifically excluded. This exclusion is meant to strengthen the point that coverage for PD under the CGL form does not extend to electronic data. The reasoning is that the CGL form applies to damage to tangible property, not intangible property like electronic data.
Medical payments coverage is also affected by the changes to the CGL form. The athletics activities exclusion is expanded to apply to “a person injured while practicing, instructing, or participating in any physical exercises or games, sports, or athletic contests.” This is an attempt to clarify that anyone participating in any kind of athletics—from an organized softball league to a spur-of-the-moment pickup basketball game—is not entitled to med pay.
As for the personal auto policy, the revisions extend throughout the policy.
In the definitions section, the words “occupying” and “newly acquired auto” are adjusted a little to clarify the intent of the definitions, not to alter the meaning.
A new sentence is added to the supplementary payments clause in the liability coverage part of the PAP. The sentence reinforces the point that the supplementary payments do not reduce the policy's limit of liability.
The other insurance clauses in the PAP are revised to clarify that any insurance provided for temporary substitutes is excess. The PAP already considers insurance for autos not owned by the named insured as excess over any other collectible insurance. This particular revision emphasizes that an auto the named insured may use as a temporary substitute for his owned auto—such as a loaner from a garage—is, in fact, an auto not owned by the named insured and so, covered on an excess basis.
The med pay coverage of the PAP is expanded to apply to BI sustained by an insured while occupying a pickup or van that is not owned by the named insured, while being used in the business of an insured.
Uninsured motorists coverage has been excluded under the PAP if the insured settled the claim without the consent of the insurer. In response to judicial decisions that required a settlement to prejudice the insurer's right to recovery before the consent exclusion could be applied, the revised PAP now specifically includes the prejudice language in the exclusion. UM coverage is not provided if the insured settles the claim “and such settlement prejudices our right to recover payment.”
The coverage for damage to the insured's car section of the PAP contains most of the changes under the January, 2005 edition. The electronic equipment exclusion has been rewritten to apply to loss to any electronic equipment that reproduces, receives, or transmits audio, visual, or data signals. The revised exclusion goes on to list items that are included in this category and that reflect today's world; for example, navigation systems, internet access systems, personal computers, and video entertainment systems. In addition, the limit of liability for loss to a nonowned trailer is increased to $1,500, and the appraisal clause now calls for selecting a “competent and impartial” appraiser.
Finally, the duties after an accident section of the PAP has been changed. The insurer now declares that it has no duty to provide coverage if the insured's failure to comply with the listed duties after an accident or loss “is prejudicial to us.” This complements the prejudice language now found in the UM coverage part of the PAP.
These are the changes made to the CGL form and the PAP. But it should be noted that the revised forms have to be approved by the various state departments of insurance. Note also that individual company considerations may govern if an insurer will use the revised forms as is; some insurers may, others may not, still others may revise the revisions. In any case, it is always best to check the language on the policy received from the insurance company to make sure the insured has the desired and proper insurance coverage.