Scope of Coverage under CGL Form

A prospective insured, a scrap dealer, currently is rated (incorrectly, we believe) as an auto dismantler; he also tears down buildings. However, this latter activity is not listed on his policy. The coverage has been renewed four times and the insurer has never been notified of any changes in the operation of the insured company. In fact, we believe the operations of the company have never changed and the insurer was provided incorrect information at the original inception of the policy.

So, we are wondering if coverage would be provided if a claim occurs while the insured is dismantling a building. For example, the insured damages a neighboring property during the work, or a passing pedestrian is injured by falling material. What is your opinion?

Maine Subscriber

If the insured has a standard commercial general liability coverage form, it applies to the insured's operations, so the sample claims you ask about would be covered while the insured was dismantling a building. However, you would have to consider which exclusions might be applicable to the specific claim, whether there are any limiting endorsements attached to the policy, and whether the insurer would have a case for misrepresentations (or fraud) against the insured. And one more thing: the insurer does have the right to audit the insured's exposures and adjust the premium if necessary based on the audit information. This is usually done at the close of each audit period, but the right of the insurer to examine and audit the insured's books and records as they relate to the policy exists for up to three years after the policy period.