Summary: Insurance Services Office (ISO) has developed a commercial liability umbrella form. The coverage is excess over commercial general liability and automobile liability coverages. The commercial liability umbrella policy, CU 00 01 12 01, provides coverage when aggregate limits of underlying insurance—that is, any policies of insurance listed in the declarations under the schedule of underlying insurance—are exhausted. A self-insured retention applies to exposures not covered by underlying insurance.
The following article is a general overview of the current ISO commercial umbrella liability coverage form. The coverages, exclusions, conditions, and definitions of the form are herein noted and analyzed.
1. Insuring Agreement
a. We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” 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 when the “underlying insurance” does not provide coverage or the limits of “underlying insurance” have been exhausted. When we have no duty to defend, we will have the right to defend, or to participate in the defense of, the insured against any other “suit” seeking damages to which this insurance may apply. 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 “occurrence” that may involve this insurance and settle any claim or “suit”, for which we have the duty to defend, that may result. But:
(1) The amount we will pay for the “ultimate net loss” is limited as described in Section III—Limits Of Insurance; and
(2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments — Coverages A or B.
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;
(2) The “bodily injury” or “property damage” occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1 of Section II—Who Is An Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.
Analysis
The language of this insuring agreement is essentially the same as that of the commercial general liability (CGL) coverage form, with a few exceptions in terms. (For an analysis of the CGL form's insuring agreement, see CGL Coverage Form—Coverage A; the article is on the Public Liability A.3 pages.)
As an example, under the terms of the umbrella policy, the insurer agrees to pay the ultimate net loss in excess of the retained limit because of bodily injury or property damage to which the insurance applies. “Ultimate net loss” is a defined term on the policy, as is “retained limit”, and both terms are unique to an umbrella policy.
Also, the umbrella policy stipulates that the insurer has the right and duty to defend when the underlying insurance is exhausted or not applicable. In other words, the duty to defend is primarily on the shoulders of the underlying, primary carrier. However, the umbrella insurer will step in to defend the insured when the underlying coverage limits of insurance have been used up in the payment of judgments or settlements, or when the underlying insurance simply does not apply to the claim or lawsuit.
And, the liability umbrella insuring agreement does declare that when the insurer has no duty to defend, it does have the right to defend or to participate in the defense of the insured. This is to make sure that the interests of the umbrella insurer are not ignored or compromised when the underlying insurance carrier assumes the defense of the insured and the settlement of the lawsuit.
But, the umbrella policy also states, like the CGL form, that it will not provide coverage for bodily injury or property damage that was known by an insured to have occurred prior to the policy period. This is a reaction to the Montrose Chemical Corporation decision from California .
c. “Bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph 1. of Section II—Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim, includes any continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.
d. ”Bodily injury” or “property damage” will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II—Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim:
(1) Reports all, or any part, of the “bodily injury” or “property damage” to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the “bodily injury” or “property damage”; or
(3) Becomes aware by any other means that “bodily injury” or “property damage” has occurred or has begun to occur.
e. Damages because of “bodily injury” include damages claimed by any person or organization for care, loss of services or death resulting at any time from the “bodily injury”.
Analysis
The important point here is that the insurer wants to clarify when bodily injury or property damage is deemed to have been known by an insured. Paragraphs d.(1) and d.(2) are self-explanatory and could easily be proven. But, d.(3) is rather broad in scope and could be problematic should an insurer try to prove when and if an insured somehow became aware of bodily injury or property damage.
1. Exclusions
This insurance does not apply to:
a. Expected or Intended Injury. “Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.
b. Contractual Liability. “Bodily injury” or “property 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 damages:
(1) That the insured would have in the absence of the contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured contract”, provided the “bodily injury” or “property damage” occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an “insured contract”, reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of “bodily injury” or “property damage”, provided:
(a) Liability to such party, for, or for the cost of, that party's defense has also been assumed in the same “insured contract”; and
(b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.
c. Liquor Liability. “Bodily injury” or “property damage” for which any insured may be held liable by reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.
This exclusion does not apply to the extent that valid “underlying insurance” for the liquor liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury” and “property damage”. Coverage provided will follow the provisions, exclusions and limitations of the “underlying insurance” unless otherwise directed by this insurance.
Analysis
These exclusions are the same as exclusions a, b, and c of the commercial general liability coverage form. For an analysis of these exclusions, see CGL Coverage Form—Coverage A.
Note, though, that the liquor liability exclusion does not apply for the umbrella policy if liquor liability is covered in an underlying policy. If that is the case, the umbrella coverage will follow the provisions, exclusions, and limitations of the underlying insurance.
d. Workers Compensation and Similar Laws. Any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law.
e. E.R.I.S.A. Any obligation of the insured under the Employees' Retirement Income Security Act (E.R.I.S.A.), and any amendments thereto or any similar federal, state or local statute.
f. Auto Coverages.
(1) ”Bodily Injury” or ” property damage” arising out of the ownership, maintenance or use of any “ auto” which is not a “covered auto”; or
(2) Any loss, cost, or expense payable under or resulting from any first party physical damage coverage; no-fault law; personal injury protection or auto medical payments coverage; or uninsured or underinsured motor law.
g. Employer's Liability. “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 that “employee” as a consequence of Paragraph (1) above.
This exclusion applies whether the insured may be liable as an employer or in any other capacity, and to any obligation to share damages with or repay someone else who must pay damages because of the injury.
This exclusion does not apply to liability assumed by the insured under an “insured contract”.
With respect to injury arising out of a “covered auto”, this exclusion does not apply to “bodily injury” to domestic “employees” not entitled to workers' compensation benefits. For the purposes of this insurance, a domestic “employee” is a person engaged in household or domestic work performed principally in connection with a residence premises.
This exclusion does not apply to the extent that valid “underlying insurance” for the employer's liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury”. Coverage provided will follow the provisions, exclusions and limitations of the “underlying insurance” unless otherwise directed by this insurance.
h. Employment-Related Practices. “Bodily injury” to:
(1) A person arising out of any:
(a) Refusal to employ that person;
(b) Termination of that person's employment; or
(c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person; or
(2) The spouse, child, parent, brother or sister of that person as a consequence of “bodily injury” to that person at whom any of the employment-related practices described in Paragraphs (a), (b), or (c) above is directed.
This exclusion applies whether the insured may be liable as an employer or in any other capacity, and to any obligation to share damages with or repay someone else who must pay damages because of the injury.
Analysis
This set of exclusions is not out of the ordinary. Workers compensation, ERISA obligations, auto coverages, employers' liability, and employment-related practices are all areas typically not covered by a general liability policy. What stands out here are the exceptions that the umbrella policy makes.
For example, the auto exclusion applies to autos that are not covered autos, that is, autos to which underlying insurance does not apply. The umbrella policy does provide coverage for covered autos. Also, domestic employees who do not qualify for workers compensation insurance are not included in the exclusion with respect to bodily injuries caused by covered autos.
As another example of an exception, the umbrella policy provides coverage for employers liability risks on a follow-form basis if coverage exists in an underlying policy.
i. Pollution.
(1) ”Bodily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time; or
(2) ”Pollution cost or expense”.
This exclusion does not apply if valid “underlying insurance” for the pollution liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury” and “property damage”. Coverage provided will follow the provisions, exclusions and limitations of the “underlying insurance”.
Analysis
The umbrella contains an absolute pollution exclusion. There are stated no exceptions as can be found on the CGL form. However, if underlying coverage exists for pollution liability, the exclusion does not apply.
j. Aircraft or Watercraft. “Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft 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) A watercraft while ashore on premises you own or rent;
(2) A watercraft you do not own that is:
(a) Less than fifty feet long; and
(b) Not being used to carry persons or property for a charge;
(3) Liability assumed under any “insured contract” for the ownership, maintenance or use of aircraft or watercraft.
(4) The extent that valid “underlying insurance” for the aircraft or watercraft liability risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury” or “property damage”. Coverage provided will follow the provisions, exclusions and limitations of the “underlying insurance” unless otherwise directed by this insurance; or
(5) Aircraft that is:
(a) Chartered by, loaned to, or hired by you with a paid crew; and
(b) Not owned by any insured.
k. Racing Activities. “Bodily injury” or “property damage” arising out of the use of “mobile equipment” or “autos” in, or while in practice for, or while being prepared for, any prearranged professional or organized racing, speed, demolition, or stunting activity or contest.
l. War. “Bodily injury” or “property damage” due to war, whether or not declared, or any act or condition incident to war. War includes civil war, insurrection, rebellion or revolution. This exclusion applies only to liability assumed under a contract or agreement.
Analysis
Note that the aircraft or watercraft exclusion does not mention autos. That is because, unlike the commercial general liability policy, the umbrella policy does not exclude bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment of an auto owned or operated by, rented or loaned to any insured. As long as the underlying insurance provides coverage for covered autos, the umbrella policy follows form. For that matter, the umbrella policy does extend coverage to aircraft and watercraft liability risks that underlying insurance covers.
The umbrella also broadens watercraft coverage by increasing the specified size limitation found in the CGL form from less than twenty-six to less than fifty feet long; of course, the watercraft is not covered under either the CGL form or the umbrella policy if it is used to carry persons or property for a charge. As for aircraft coverage, the umbrella policy does apply to nonowned aircraft that is chartered by, loaned to, or hired by the named insured with a paid crew.
m. Damage to Property. “Property damage” to:
(1) Property:
(a) You own, rent, or occupy including any costs or expenses incurred by you, or any other person, organization, or entity, for repair, replacement, enhancement, restoration, or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property; or
(b) Owned or transported by the insured and arising out of the ownership, maintenance or use of a “covered auto”.
(2) Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;
(3) Property loaned to you;
(4) Personal property in the care, custody or control of the insured;
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
Paragraph (2) of this exclusion does not apply if the premises are “your work” and were never occupied, rented or held for rental by you.
Paragraphs (1)(b), (3), (4), (5) and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.
Paragraphs (3) and (4) of this exclusion do not apply to liability assumed under a written Trailer Interchange agreement.
Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations hazard”.
n. Damage To Your Product. “Property damage” to “your product” arising out of it or any part of it.
o. Damage To Your Work. “Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”. This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
p. Damage To Impaired Property Or Property Not Physically Injured. “Property damage” to “impaired property” or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to “your product” or “your work” after it has been put to its intended use.
q. Recall Of Products, Work, Or Impaired Property. Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:
(1) ”Your product”;
(2) ”Your work”; or
(3) ”Impaired property”;
if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.
Analysis
The exclusions are basically the same as those found on the commercial general liability policy, with one addition. The umbrella policy excludes damage to property the insured owns or transports and that arises out of the ownership, maintenance, or use of a covered auto. This is in keeping with the fact that CU 00 01 is a liability policy and a liability policy is not written to provide coverage for first party physical damage claims.
Also, for information on trailer interchange coverage, see Truckers Coverage Form; the article is on the Auto E.1 pages.
r. Personal and Advertising Injury. “Bodily injury” arising out of “personal and advertising injury”.
s. Professional Services. “Bodily injury” or “property damage” due to rendering or failure to render any professional service. This includes but is not limited to:
(1) Legal, accounting or advertising services;
(2) Preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications;
(3) Engineering services, including related supervisory or inspection services;
(4) Medical, surgical, dental, x-ray or nursing services treatment, advice or instruction;
(5) Any health or therapeutic service treatment, advice or instruction;
(6) Any service, treatment, advice or instruction for the purpose of appearance or skin enhancement, hair removal or replacement or personal grooming;
(7) Optometry or optical or hearing aid services including the prescribing, preparation, fitting, demonstration or distribution of ophthalmic lenses and similar products or hearing aid devices;
(8) Body piercing services;
(9) Services in the practice of pharmacy; but this exclusion does not apply if you are a retail druggist or your operations are those of a retail drugstore;
(10) Law enforcement or firefighting services; and
(11) Handling, embalming, disposal, burial, cremation or disinterment of dead bodies.
Analysis
Bodily injury arising out of personal and advertising injury is covered by coverage B under the terms of the umbrella policy, so such injury is specifically excluded under coverage A. This is to prevent double liability coverage under the one umbrella policy.
The umbrella policy has a professional services exclusion that is not found on the CGL form (although the CGL form does usually exclude professional services liability through the use of an endorsement). The point here is that such an exposure is a specialized risk and should be insured under a professional liability policy.
1. Insuring Agreement
a. We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages when the “underlying insurance” does not provide coverage or the limits of “underlying insurance” have been exhausted. When we have no duty to defend, we will have the right to defend, or to participate in the defense of, the insured against any other “suit” seeking damages to which this insurance may apply. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply. We may, at our discretion, investigate any offense that may involve this insurance and settle any claim or “suit”, for which we have the duty to defend, that may result.
But:
(1) The amount we will pay for the “ultimate net loss” 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 or settlements under Coverages A or B.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments — Coverages A and B.
b. This insurance applies to “personal and advertising injury” caused by an offense arising out of your business but only if the offense was committed in the “coverage territory” during the policy period.
Analysis
The coverage B insuring agreement has the same promises as the coverage A agreement, except that it applies to personal and advertising injury instead of bodily injury and property damage. Of course, coverage B applies to offenses as opposed to occurrences, but this is in keeping with the fact that coverage B deals with intentional acts and not accidents.
1. Exclusions
This insurance does not apply to:
a. ”Personal and advertising injury”:
(1) Knowing Violation of Rights of Another. Caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict “personal and advertising injury”;
(2) Material Published With Knowledge of Falsity. Arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity;
(3) Material Published Prior to Policy Period. Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;
(4) Criminal Acts. Arising out of a criminal act committed by or at the direction of the insured;
(5) Contractual Liability. For which the insured has assumed liability in a contract or agreement. This exclusion does not apply to:
(a) Liability for damages that the insured would have in the absence of the contract or agreement.
(b) Liability for false arrest, detention or imprisonment assumed in a contract or agreement.
Analysis
The exclusions are similar to those found on the commercial general liability policy, but notice that the umbrella policy in exclusion (5) explicitly exempts liability for false arrest, detention, or imprisonment assumed in a contract or agreement. For more analysis on these exclusions, see CGL Coverage Form—Coverage B; the article is on the Public Liability A.4 pages.
(6) Breach of Contract. Arising out of a breach of contract, except an implied contract to use another's advertising idea in your “advertisement”;
(7) Quality or Performance of Goods – Failure to Conform to Statements. Arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your “advertisement”;
(8) Wrong Description of Prices. Arising out of the wrong description of the price of goods, products or services stated in your “advertisement”;
(9) Infringement of Copyright, Patent, Trademark or Trade Secret. Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your “advertisement”, of copyright, trade dress or slogan.
(10) Insureds in Media and Internet Type Businesses. Committed by an insured whose business is:
(a) Advertising, broadcasting, publishing or telecasting;
(b) Designing or determining content of web-sites for others; or
(c) An Internet search, access, content or service provider.
However, this exclusion does not apply to Paragraphs 14.a., b. and c. of “personal and advertising injury” under the Definitions Section.
For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting.
(11) Electronic Chatrooms or Bulletin Boards. Arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control.
(12) Unauthorized Use of Another's Name or Product. Arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.
(13) Pollution. Arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.
(14) Employers Liability. To:
(a) A person arising out of any:
i. Refusal to employ that person;
ii. Termination of that person's employment; or
iii. Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person;
(b) The spouse, child, parent, brother or sister of that person as a consequence of “bodily injury” to that person at whom any of the employment- related practices described in Paragraphs (i), (ii), or (iii) above is directed.
This exclusion applies whether the insured may be liable as an employer or in any other capacity, and to any obligation to share damages with or repay someone else who must pay damages because of the injury.
(15) Professional Services. Arising out of the rendering or failure to render any professional service. This includes but is not limited to:
(a) Legal, accounting or advertising services;
(b) Preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications;
(c) Engineering services, including related supervisory or inspection services;
(d) Medical, surgical, dental, x-ray or nursing services treatment, advice or instruction;
(e) Any health or therapeutic service treatment, advice or instruction;
(f) Any service, treatment, advice, or instruction for the purpose of appearance or skin enhancement, hair removal or replacement or personal grooming;
(g) Optometry or optical or hearing aid services including the prescribing, preparation, fitting, demonstration or distribution of ophthalmic lenses and similar products or hearing aid devices;
(h) Body piercing services;
(i) Services in the practice of pharmacy; but this exclusion does not apply if you are a retail druggist or your operations are those of a retail drugstore;
(j) Law enforcement or firefighting services; and
(k) Handling, embalming, disposal, burial, cremation or disinterment of dead bodies.
b. ”Pollution cost or expense”.
Analysis
Exclusions (6), (7), (8), (9), (10), (11), and (12) are similar to commercial general liability policy exclusions pertaining to coverage B, personal and advertising injury liability, and exclusions (10), (11), and (12) are a reflection of the response to the liability exposures created by the Internet and web-sites.
The pollution exclusion is present to prevent coverage B from applying to a pollution spill that a claimant may allege is a wrongful entry into or invasion of the right of private occupancy.
Coverage B also has exclusions for employment-practices liability and the rendering or failure to render professional services. These exposures are meant to be covered by other liability forms or specialty type policies; for examples, see Employment-Related Practices Liability Coverage; and see Professional Liability Insurance.
1. We will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend, when the duty to defend exists:
a. All expenses we incur.
b. Up to $2000 for cost of bail bonds (including bonds for related traffic law violations) required because of an “occurrence” we cover. We do not have to furnish these bonds.
c. The cost of bonds to release attachments, but only for bond amounts within the applicable limit of insurance. We do not have to furnish these bonds.
d. 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.
e. All costs taxed against the insured in the “suit”.
f. 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.
g. 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.
These payments will not reduce the limits of insurance.
Analysis
This section is identical to the commercial general liability policy, except that the umbrella policy allows up to $2,000 for the cost of bail bonds as opposed to the $250 limit under the CGL form. And, the umbrella policy will pay for the bail bonds required because of an occurrence covered by the policy, while the CGL form pays for bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which the bodily injury liability coverage applies. So, in keeping with the scope of the umbrella policy, it provides broader supplementary payments.
For more information on supplementary payments, see General Provisions of the CGL; the article is on the Public Liability A.6 pages.
2. When we have the right but not the duty to defend the insured and elect to participate in the defense, we will pay our own expenses but will not contribute to the expenses of the insured or the “underlying insurer”.
3. If we defend an insured against a “suit” and an indemnitee of the insured is also named as a party of the “suit”, we will defend that indemnitee if all of the following conditions are met:
a. The “suit” against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an “insured contract”;
b. This insurance applies to such liability assumed by the insured;
c. The obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same “insured contract”;
d. The allegations in the “suit” and the information we know about the “occurrence” are such that no conflict appears to exist between the interests of the insured and the interests of the indemnitee;
e. The indemnitee and the insured ask us to conduct and control the defense of that indemnitee against such “suit” and agree that we can assign the same counsel to defend the insured and the indemnitee; and
a. The indemnitee:
(1) Agrees in writing to:
(a) Cooperate with us in the investigation, settlement or defense of the “suit”;
(b) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the “suit”;
(c) Notify any other insurer whose coverage is available to the indemnitee; and
(d) Cooperate with us with respect to coordinating other applicable insurance available to the indemnitee; and
(2) Provides us with written authorization to:
(a) Obtain records and other information related to the “suit”; and
(b) Conduct and control the defense of the indemnitee in such “suit”.
So long as the above conditions are met, attorneys' fees incurred by us in the defense of that indemnitee, necessary litigation expenses incurred by us and necessary litigation expenses incurred by the indemnitee at our request will be paid as Supplementary Payments. Notwithstanding the provisions of Paragraph 2.b.(2) of Section I—Coverage A—Bodily Injury And Property Damage Liability, such payments will not be deemed to be damages for “bodily injury” and “property damage” and will not reduce the limits of insurance.
Our obligation to defend an insured's indemnitee and to pay for attorneys' fees and necessary litigation expenses as Supplementary Payments ends when we have used up the applicable limit of insurance in the payment of judgments, or settlements, or the conditions set forth above, or the terms of the agreement described in Paragraph f. above, are no longer met.
Analysis
The umbrella states that where the insurer has the right to defend but not the duty, it is only responsible for its own expenses if it chooses to participate in the defense. The umbrella insurer will not contribute to defense costs expended by either the insured or the primary insurer, even if it benefits from that defense. This reinforces the idea that the primary insurer is the main party responsible for defending the insured against a lawsuit and thus, is usually the party that pays defense costs.
1. Except for liability arising out of the ownership, maintenance, or use of “covered autos”:
a. If you are designated in the Declarations as:
(1) An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.
(2) A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business.
(3) A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.
(4) An organization other than a partnership, joint venture or limited liability company, you are an insured. Your “executive officers” and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
(a) A trust, you are insured. Your trustees are also insureds, but only with respect to their duties as trustees.
b. Each of the following is also an insured:
(1) Your “volunteer workers” only while performing duties related to the conduct of your business, your “employees”, other than either your “executive officers” (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these “employees” or “volunteer workers” are insureds for:
(a) ”Bodily injury” or “personal and advertising injury”:
(i) To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), to a co-”employee” in the course of his or her employment or performing duties related to the conduct of your business, or to your other “volunteer workers” while performing duties related to the conduct of your business:
(ii) To the spouse, child, parent, brother or sister of that co- “employee” or “volunteer worker” as a consequence of Paragraph (a)(i) above; or
(iii) For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in Paragraphs (a)(i) or (ii) above.
(b) ”Property damage” to property:
(i) Owned, occupied or used by,
(ii) Rented to, in the care, custody or control of, or over which physical control is being exercised for any purpose by you, any of your “employees”, “volunteer workers”, any partner or member (if you are a partnership or joint venture), or any member (if you are a limited liability company).
(2) Any person (other than your “employee” or “volunteer worker”), or any organization while acting as your real estate manager.
(3) Any person or organization having proper temporary custody of your property if you die, but only:
(a) With respect to liability arising out of the maintenance or use of that property; and
(b) Until your legal representative has been appointed.
(4) Your legal representative if you die, but only with respect to duties as such. That representative will have all your rights and duties under this Coverage Part.
c. With respect to “mobile equipment” registered in your name under any motor vehicle registration law, any person is an insured while driving such equipment along a public highway with your permission. Any other person or organization responsible for the conduct of such person is also an insured, but only with respect to liability arising out of the operation of the equipment, and only if no other insurance of any kind is available to that person or organization for this liability. However, no person or organization is an insured with respect to:
(1) ”Bodily injury” to a co-”employee” of the person driving the equipment; or
(2) ”Property damage” to property owned by, rented to, in the charge of or occupied by you or the employer of any person who is an insured under this provision.
d. Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization. However:
(1) Coverage under this provision is afforded only until the 90th day after you acquire or form the organization or the end of the policy period, whichever is earlier;
(2) Coverage A does not apply to “bodily injury” or “property damage” that occurred before you acquired or formed the organization; and
(3) Coverage B does not apply to “personal and advertising injury” arising out of an offense committed before you acquired or formed the organization.
Analysis
In the first sentence, the umbrella excludes from this paragraph liability arising out of the ownership, maintenance, or use of covered autos; liability arising from covered autos is addressed in Paragraph 2 of this section. The remainder of the paragraph mirrors the commercial general liability policy.
For an analysis of the who is an insured provision, see General Provisions of the CGL.
2. Only with respect to liability arising out of the ownership, maintenance, or use of “covered autos”:
a. You are an insured.
b. Anyone else while using with your permission a “covered auto” you own, hire, or borrow is also an insured except:
(1) The owner or anyone else from whom you hire or borrow a “covered auto”. This exception does not apply if the “covered auto” is a trailer or semi-trailer connected to a “covered auto” you own.
(2) Your “employee” if the “covered auto” is owned by that “employee” or a member of his or her household.
(3) Someone using a “covered auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.
(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their “employees”, while moving property to or from a “covered auto”.
(5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a “covered auto” owned by him or her or a member of his or her household.
(6) Employees” with respect to “bodily injury” to any fellow “employee” of the insured arising out of and in the course of the fellow “employee's” employment or while performing duties related to the conduct of your business.
c. Anyone liable for the conduct of an insured described above is also an insured, but only to the extent of that liability.
3. Any additional insured under any policy of “underlying insurance” will automatically be an insured under this insurance. If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance required by the contract, less any amounts payable by any “underlying insurance”. Additional insurance coverage provided by this insurance will not be broader than coverage provided by the “underlying insurance”.
No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations.
Analysis
This paragraph lists separate qualifications for who is an insured with respect to the ownership, maintenance, or use of covered autos. It is similar to the who is an insured provision of the business auto coverage form; for an analysis, see Business Auto Form—Liability Coverage.
Owners or loaners of covered autos are not insureds. Employees who injure fellow employees in the course of employment are also not considered insureds under the umbrella policy. So, for example, if an employee of the named insured is driving a company car on business and has a fellow employee as a passenger, and has an at fault accident, the umbrella policy will not provide coverage for the driving employee because he is not considered an insured. The named insured is still considered an insured for coverage purposes, but of course, the workers comp and employers' liability exclusions would prevent insurance under the umbrella policy from applying to a claim by the injured employee.
Since the who is an insured provisions closely follow underlying general liability and auto policies provisions on the subject, it then naturally follows that additional insureds under any policy of underlying insurance are automatically considered insureds under CU 00 01. But, there are limitations to this consideration.
For example, the additional insured coverage provided by the umbrella policy is only as broad as the coverage provided by the underlying insurance; in other words, the additional insured has no insurance coverages that the insured under the underlying insurance policies does not have. Also, if coverage provided to the additional insured is required by a contract, the most the umbrella insurer will pay on behalf of the additional insured is the amount required by the contract, less any amount payable by underlying insurance. This allows the umbrella insurer to have a definite contractually required amount that it can set aside for payment to an additional insured.
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, “suits” brought, or number of vehicles involved; or
c. Persons or organizations making claims or bringing “suits”.
2. The Aggregate Limit is the most we will pay for the sum of all “ultimate net loss” under:
a. Coverage A, except “ultimate net loss” because of “bodily injury” or “property damage” arising out of the ownership, maintenance or use of a “covered auto”; and
b. Coverage B.
3. Subject to 2. above, the Each Occurrence Limit is the most we will pay for the sum of all “ultimate net loss” under Coverage A because of all “bodily injury” and “property damage” arising out of one “occurrence”.
4. Subject to 2. above, the Personal and Advertising Injury Limit is the most we will pay under Coverage B for the sum of all “ultimate net loss” because of all “personal and advertising injury” sustained by any one person or organization.
The Aggregate Limit, as described in Paragraph 2. above, applies separately to each consecutive annual period and to any remaining 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 umbrella policy establishes the most that the insurer will pay for a claim or lawsuit against the insured. The limits that are set on the declarations page will not be exceeded regardless of the number of insureds, claims, or number of vehicles involved. The limits of insurance section notes that the policy has an aggregate limit, an each occurrence limit, and an any one person or organization limit.
The aggregate limit is the sum of all ultimate net loss under coverage A and B of the policy, except for auto claims. Auto claims, for some reason, are not counted against the aggregate limit of the umbrella policy. Of course, bodily injury or property damage arising out of the use or ownership of a covered auto is subject to the each occurrence limit.
Coverage A has the each occurrence limit. As an example of these limits, say the insured's policy has a $2,000,000 aggregate limit, a $1,000,000 each occurrence limit. If the insured is liable for bodily injuries to another person arising out of one occurrence, and the ultimate net loss reaches the $1,000,000 mark, the insured has that amount available for the claim. Once that claim is paid, the insured has $1,000,000 of the aggregate limit left for other claims that may arise during the policy period. If the ultimate net loss from that one occurrence is $1,500,000, the insured still has only the $1,000,000 limit available for payment because of the each occurrence limit.
Coverage B has the any one person or organization limit. For example, if the insured has a total of $2,000,000 available as the aggregate limit during the policy period, but only a $500,000 per person limit on coverage B claims, the most the insurer will pay for personal and advertising injury to any one person or organization is $500,000. If more than one person suffers such injuries, each can collect up to $500,000, but if the aggregate limit of $2,000,000 is reached during the policy period, the insured has no more limits of insurance available under the umbrella policy for payments to claimants.
1. Appeals. If the “underlying insurer” or insured elects not to appeal a judgment in excess of the “retained limit”, we may do so at our own expense. We will be liable for taxable costs, pre- and post judgment interest and disbursements.
2. Bankruptcy.
a. Bankruptcy Of Insured. Bankruptcy or insolvency of the insured or of the insured's estate will not relieve us of our obligations under this Coverage Part.
b. Bankruptcy Of Underlying Insurer. Bankruptcy of the “underlying insurer” will not relieve us of our obligations under this Coverage Part.
However, this insurance will not replace the “underlying insurance” in the event of bankruptcy or insolvency of the “underlying insurer”. This insurance will apply as if the “underlying insurance” were in full effect.
3. Duties in the Event of Occurrence, Offense, Claim or Suit.
a. You must see to it that we are notified as soon as practicable of an “occurrence” or an offense, regardless of the amount, which may result in a claim. To the extent possible, notice should include:
(1) How, when and where the “occurrence” or offense took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the “occurrence” or offense.
b. If a claim is made or “suit” is brought against any insured, you must:
(1) Immediately record the specifics of the claim or “suit” and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or “suit” as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation or settlement of the claim or defense against the “suit”; and
(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.
d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.
Analysis
The umbrella coverage form basically offers the same conditions as the commercial general liability policy. For more information on the conditions, see General Provisions of the CGL.
Note that while CU 00 01 does not relieve the insurer of its duty in the event the underlying insurer becomes insolvent or goes bankrupt, the umbrella policy does not replace the underlying insurance. As an example: damages to the claimant total $2,000,000; the underlying limits are $1,500,000 and the umbrella policy has a limit of insurance of $2,000,000; the underlying insurer becomes insolvent; the umbrella policy will only cover damages beyond the underlying limits, or $500,000.
Note also that the umbrella policy affords the insurer the right to appeal judgments, in excess of the limits of underlying insurance, even if the underlying insurer or the insured chooses not to appeal. The umbrella insurer agrees to pay for the expenses of such an appeal, along with taxable costs, prejudgment and post judgment interest, and disbursements.
4. Legal Action Against Us. No person or organization has a right under this Coverage Part:
a. To join us as a party or otherwise bring us into a “suit” asking for damages from an insured; or
b. To sue us on this Coverage Part unless all of its terms have been fully complied with.
A person or organization may sue us to recover on an agreed settlement or on a final judgment against an insured obtained after an actual trial; but we will not be liable for damages that are not payable under the terms of this Coverage Part or that are in excess of the applicable limit of insurance. An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative.
5. Other Insurance.
a. This insurance is in excess over, and shall not contribute with any other insurance, whether primary, excess, contingent or on any other basis. This condition will not apply to insurance specifically written as excess over this Coverage Part.
When this insurance is excess, we will have no duty under Coverage A or B to defend the insured against any “suit” if any other insurer has a duty to defend the insured against that “suit”. If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.
b. When this insurance is excess over other insurance, we will pay only our share of the “ultimate net loss” that exceeds the sum of:
(1) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and
(2) The total of all deductibles and self-insured amounts under all that other insurance.
6. Premium Audit.
a. We will compute all premiums for this Coverage Part in accordance with our rules and rates.
b. Premium shown in this Coverage Part as advance premium is a deposit premium only. At the close of each audit period we will compute the earned premium for that period and send notice to the first Named Insured. The due date for audit and retrospective premiums is the date shown as the due date on the bill. If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium, we will return the excess to the first Named Insured.
c. The first Named Insured must keep records of the information we need for premium computation, and send us copies at such times as we may request.
7. Representations or Fraud. By accepting this policy, you agree:
a. The statements in the Declarations are accurate and complete;
b. Those statements are based upon representations you made to us;
c. We have issued this policy in reliance upon your representations; and
d. This policy is void in any case of fraud by you as it relates to this policy or any claim under this policy.
8. Separation of Insureds. Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the Named Insured, this insurance applies:
a. As if each Named Insured were the only Named Insured; and
b. Separately to each insured against whom claim is made or “suit” is brought.
9. Transfer of Rights of Recovery Against Others to Us. If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring “suit” or transfer those rights to us and help us enforce them.
10. When We do not Renew. If we decide not to renew this Coverage Part, we will mail or deliver to the first Named Insured shown in the Declarations written notice of the nonrenewal not less than thirty days before the expiration date.
If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
Again, most of the conditions listed here are standard commercial general liability provisions. The umbrella policy does add a disclaimer that specifically voids the policy for fraud by the named insured relating to the policy or claims under the policy.
11. Loss Payable. Liability under this Coverage Part shall not apply unless and until the insured or insured's “underlying insurer” has become obligated to pay the “retained limit”. Such obligation by the insured to pay part of the “ultimate net loss” shall have been previously determined by a final settlement or judgment after an actual trial or written agreement between the insured, claimant, and us.
12. Transfer of Defense. When the underlying limits of insurance have been used up in the payment of judgments or settlements, the duty to defend will be transferred to us. We will cooperate in the transfer of control to us of any outstanding claims or “suits” seeking damages to which this insurance applies which would have been covered by the “underlying insurance” had the applicable limit not been used up.
13. Maintenance of Underlying Insurance. The “underlying insurance” listed in the schedule of “underlying insurance” in the declarations shall remain in full effect throughout the policy period except for reduction of the aggregate limit due to payment of claims, settlement, or judgments.
Failure to maintain “underlying insurance” will not invalidate this insurance. However, this insurance will apply as if the “underlying insurance” were in full effect.
You must notify us as soon as practicable when any “underlying insurance” is no longer in effect.
14. Expanded Coverage Territory .
a. If a “suit” is brought in a part of the “coverage territory” that is outside of the United States of America (including its territories and possessions), Puerto Rico or Canada , and we are prevented by law, or otherwise, from defending the insured, the insured will initiate a defense of the “suit”. We will reimburse the insured, under Supplementary Payments, for any reasonable and necessary expenses incurred for the defense of a “suit” seeking damages to which this insurance applies, that we would have paid had we been able to exercise our right and duty to defend.
If the insured becomes legally obligated to pay sums because of damages to which this insurance applies in a part of the “coverage territory” that is outside of the United States of America (including its territories and possessions), Puerto Rico or Canada, and we are prevented by law, or otherwise, from paying such sums on the insured's behalf, we will reimburse the insured for such sums.
b. All payments or reimbursements we make for damages because of judgments or settlements will be made in U.S. currency at the prevailing exchange rate at the time the insured became legally obligated to pay such sums. All payments or reimbursements we make for expenses under Supplementary Payments will be made in U.S. currency at the prevailing exchange rate at the time the expenses were incurred.
c. Any disputes between you and us as to whether there is coverage under this policy must be filed in the courts of the United States of America (including its territories and possessions), Canada or Puerto Rico.
d. The insured must fully maintain any coverage required by law, regulation or other governmental authority during the policy period, except for reduction of the aggregate limits due to payments of claims, judgments or settlements.
Failure to maintain such coverage required by law, regulation or other governmental authority will not invalidate this insurance. However, this insurance will apply as if the required coverage by law, regulation or other governmental authority was in full effect.
Analysis
This set of conditions helps describe the nature of the umbrella policy.
One of the provisions declares that liability under the umbrella policy will not apply unless and until the insured or the underlying insurer become obligated to pay the available limits of the scheduled underlying insurance. In other words, if the limits of insurance on the underlying policy or the self-insured retention of the insured are not breached, the umbrella policy will not come into play.
Another provision notes that when the underlying limits of insurance have been used up in the payment of judgments or settlements, the umbrella insurer will take over the duty to defend the insured. The underlying insurance policy has a declaration that its duty to defend ends when the applicable limit of insurance is used up, so this particular provision tells the insured that his defense is still being handled by an insurer.
Another provision requires the maintenance of underlying insurance. Failure to maintain underlying insurance will not invalidate the umbrella policy coverage, but the umbrella insurer will apply the insurance of the umbrella policy as if the underlying insurance were in full effect. As an example: the underlying insurance has policy limits of $1,000,000, and the umbrella policy applies to the ultimate net loss in excess of this amount; the insured cancels the underlying insurance policy in the middle of the policy period; if a loss then occurs, the umbrella policy will not pay the claim unless the amount of the claim is more than the $1,000,000 limit of the underlying policy.
Finally, since the umbrella policy has an expansive coverage territory by definition, the last of the policy's conditions recognizes this expansion by describing what will happen if a lawsuit against the insured is brought in an area outside the United States, Puerto Rico, or Canada . Should that happen, the umbrella insurer declares that, if it is prevented by law or otherwise from defending the insured, the insured should defend itself and the insurer will then reimburse the insured. The insurer will pay any reasonable and necessary expenses incurred by the insured for the defense against the lawsuit. And, should the insured lose the lawsuit and become obligated to pay the plaintiff, this last condition on the umbrella policy acts to reassure the insured. The umbrella insurer promises that if it is prevented by law or otherwise from paying the amount due, the insured should pay it and the insurer will reimburse the insured for the amount paid.
This final condition on CU 00 01 notes that all payments or reimbursements made for such damages as described in the previous paragraph will be made in U.S. currency at the prevailing exchange rate at the time the insured became legally obligated to pay.
1. ”Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purpose of attracting customers or supporters is considered an advertisement.
2. ”Auto” means a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including any attached machinery or equipment. But “auto” does not include “mobile equipment”.
3. ”Bodily injury” means bodily injury, disability, sickness, or disease sustained by a person, including death resulting from any of these at one time. “Bodily injury” includes mental anguish or other mental injury resulting from “bodily injury”.
4. ”Coverage territory” means anywhere in the world with the exception of any country or jurisdiction which is subject to trade or other economic sanctions or embargo by the United States of America.
5. ”Covered auto” means only those “autos” to which “underlying insurance” applies.
6. ”Employee” includes a “leased worker”. “Employee” does not include a “temporary worker”.
7. ”Executive officer” means a person holding any of the officer positions created by your charter, constitution, by-laws or any other similar governing document.
8. ”Impaired property” means tangible property, other than “your product” or “your work”, that cannot be used or is less useful because:
a. It incorporates “your product” or “your work” that is known or thought to be defective, deficient, inadequate or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement;
if such property can be restored to use by the repair, replacement, adjustment or removal of “your product” or “your work”, or your fulfilling the terms of the contract or agreement.
Analysis
Definitions 1, 2, 6, 7, and 8 are taken from the definitions section of the commercial general liability policy. For more information on these definitions, see Commercial General Liability Definitions; the article is on the Public Liability A.2 pages. CU 00 01 does expand the bodily injury definition to include mental anguish or other mental injury resulting from bodily injury. This is not to say that the umbrella policy would apply to mental injury resulting from mental stress. An actual bodily injury is required before any mental stress or anguish claims are accepted as covered by the umbrella policy.
Coverage territory encompasses a broader reach in the umbrella than in the commercial general liability policy. In the umbrella policy, the coverage territory is mostly worldwide and applies to operations of the insured, products and completed operations of the insured, and other liability exposures. And, the coverage territory (in connection with the expanded coverage territory condition in CU 00 01) for the umbrella policy does not require a lawsuit against the insured to be brought in the U.S., Puerto Rico, or Canada . The suit can be brought just about anywhere in the world and the umbrella insurer will honor its duty to defend.
9. ”Insured contract” means:
a. A contract for a lease of premises. However, that portion of the contract for a lease of premises that indemnifies any person or organization for damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner is not an “insured contract”;
b. A sidetrack agreement;
c. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;
d. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;
e. An elevator maintenance agreement;
f. That part of any contract or agreement entered into, as part of your business, pertaining to the rental or lease, by you or any of your “employees”, of any “auto”. However, such contract or agreement shall not be considered an “insured contract” to the extent that it obligates you or any of your “employees” to pay for “property damage” to any “auto” rented or leased by you or any of your “employees”.
That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.
Paragraphs f. and g. do not include that part of any contract or agreement:
(1) That indemnifies a railroad for “bodily injury” or “property damage” arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, roadbeds, tunnel, underpass or crossing;
(2) That pertains to the loan, lease or rental of an “auto” to you or any of your “employees”, if the “auto” is loaned, leased or rented with a driver; and
(3) That holds a person or organization engaged in the business of transporting property by “auto” for hire harmless for your use of a “covered auto” over a route or territory that person or organization is authorized to serve by public authority.
Analysis
The umbrella policy differs from the commercial general liability policy definition of insured contract by adding provisions for auto rental or lease contracts. This is merely a reproduction of the definition of insured contract that appears in the business auto coverage form (seeBusiness Auto Definitions), and reinforces the fact that the umbrella policy does apply to auto liability exposures.
10. ”Leased worker” means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. “Leased worker” does not include a “temporary worker”.
11. ”Loading or unloading” means the handling of property:
a. After it is moved from the place where it is accepted for movement into or onto an aircraft or watercraft;
b. While it is in or on an aircraft or watercraft; or
c. While it is being moved from an aircraft or watercraft to the place where it is finally delivered;
but “loading or unloading” does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft or watercraft.
12. ”Mobile equipment” means any of the following types of land vehicles, including any attached machinery or equipment:
a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;
b. Vehicles maintained for use solely on or next to premises you own or rent;
c. Vehicles that travel on crawler treads;
d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted:
(1) Power cranes, shovels, loaders, diggers or drills; or
(2) Road construction or resurfacing equipment such as graders, scrapers or rollers;
e. Vehicles not described in a., b., c. or d. above that are not self- propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:
(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or
(2) Cherry pickers and similar devices used to raise or lower workers;
f. Vehicles not described in a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo. However, self-propelled vehicles with the following types of permanently attached equipment are not “mobile equipment” but will be considered “autos”:
(1) Equipment designed primarily for:
(a) Snow removal;
(b) Road maintenance, but not construction or resurfacing; or
(c) Street cleaning;
(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and
(3) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.
13. ”Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Analysis
Definitions 10, 12, and 13 are from the definitions section of the commercial general liability policy. Note though, the umbrella policy does not include a reference to an auto in its definition of “loading or unloading” since the umbrella policy does apply to auto liability exposures.
14. ”Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
e. Oral or written publication of material that violates a person's right to privacy;
f. The use of another's advertising idea in your “advertisement”; or
g. Infringing upon another's copyright, trade dress or slogan in your “advertisement”.
15. ”Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
16. ”Pollution cost or expense” means any loss, cost or expense arising out of any:
a. Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”; or
b. Claim or suit by or on behalf a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding or assessing to the effects of “pollutants”.
17. ”Products-completed operations hazard”:
a. Includes all “bodily injury” and “property damage” occurring away from premises you own or rent and arising out of “your product” or “your work” except:
(1) Products that are still in you physical possession; or
(2) Work that has no yet been completed or abandoned. However, “your work” will be deemed complete at the earliest of the following times:
(a) When all of the work called for in your contract has been completed.
(b) When all work to be done at the job site has been completed if your contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
b. Does not include “bodily injury” or “property damage” arising out of:
(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the “loading or unloading” of that vehicle by any insured; or
(2) The existence of tools, uninstalled equipment or abandoned or unused materials.
Analysis
This set of definitions somewhat mirrors those on the CGL form. See Commercial General Liability Definitions.
18. ”Property damage” means:
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.
With respect to “covered autos”, property damage also includes “pollution cost and expense”, but only to the extent that coverage exists under the “underlying insurance” or would have existed but for the exhaustion of the underlying limits.
For the purposes of this insurance, electronic data is not tangible property. As used in this definition, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software(including systems and applications software), hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
19. ”Retained limit” means the available limits of “underlying insurance” scheduled in the declarations or the “self-insured retention”, whichever applies.
20. ”Self-insured retention” means the dollar amount listed in the declarations that will be paid by the insured before this insurance becomes applicable only with respect to “occurrences” or offenses not covered by the “underlying insurance”. The “self-insurance retention” does not apply to “occurrences” or offenses which would have been covered by the “underlying insurance” but for the exhaustion of applicable limits.
21. ”Suit” means a civil proceeding in which damages because of “bodily injury”, “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent or the “underlying insurer's” consent.
22. ”Temporary worker” means a person who is furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions.
Analysis
Definition 18 expands the definition of “property damage” to include pollution cost or expense for covered autos, provided that the same coverage exists in the underlying insurance. This enables the umbrella policy to back up an underlying auto insurance policy since a standard business auto policy does cover, to a degree, pollution cost or expense. The coverage A insuring agreement of CU 00 01 refers to bodily injury and property damage, and if pollution cost or expense were not included in the definition of property damage, the coverage that does exist for this particular exposure under an underlying auto insurance policy would not extend into the umbrella scope of coverage.
The definition of property damage also makes the point that electronic data is not tangible property so that there can be no inference that damage to things like computer disks or other electronic data is to be covered under the terms of this policy.
Retained limits and self-insured retentions are defined here because the umbrella policy comes into play when these limits are exceeded in a claim against the insured. The retained limits are the limits of insurance for the respective underlying insurance policies and are scheduled on the declarations page of the umbrella policy. The self-insured retention is the amount that the insured will pay up front for a claim before the umbrella policy applies. This self-insured retention becomes applicable only with respect to occurrences or offenses that are not covered by the underlying insurance. This is logical because if the underlying insurance policies offer coverage for a liability exposure facing the insured, having a self-insured retention also apply to the exposure would give the umbrella insurer a double layer of protection.
23. ”Ultimate net loss” means the total sum, after reduction for recoveries or salvages collectible, that the insured becomes legally obligated to pay by reason of settlement or judgments or any arbitration or other alternate dispute method entered into with our consent or the “underlying insurer's” consent.
24. ”Underlying insurance” means any policies of insurance listed in the declarations under the schedule of “underlying insurance”.
25. ”Underlying insurer” means any insurer who provides any policy of insurance listed on the schedule of “underlying insurance”.
26. ”Volunteer worker” means a person who is not your “employee”, and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary or other compensation by you or anyone else for their work performed for you.
27. ”Your product”:
a. Means:
(1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:
(a) You;
(b) Others trading under your name; or
(c) A person or organization whose business or assets you have acquired; and
(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.
b. Includes:
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product”; and
(2) ”Your product” includes the providing of or failure to provide warnings or instructions.
c. Does not include vending machines or other property rented to or located for the use of others but not sold.
28. ”Your work”:
a. Means:
(1) Work or operations performed by you or on your behalf; and
(2) Materials, parts or equipment furnished in connection with such work or operations.
b. Includes:
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your work”, and
(2) The providing of or failure to provide warnings or instructions.
Analysis
Definitions twenty-four and twenty-five simply reflect the nature of the umbrella coverage. The umbrella policy comes into play when the underlying insurance is used up. That is the rationale behind umbrella policies. It then makes sense to define exactly what underlying insurance and underlying insurers are so that all parties to the umbrella insurance contract understand the lines of coverage that exist for the insured.
Ultimate net loss is an important term to define since the insuring agreements of CU 00 01 pertain to paying such a loss on behalf of the insured. The ultimate net loss amount tells the insured and the insurers exactly how much the claim against the insured costs.