Analysis:

Punitive damages are court awards beyond merely compensating an injured party. Such awards are designed to act as a punishment to deter future infractions by defending parties that may have been found to exhibit reckless or malicious behavior. Some of these awards have been so large that they may be a contributing factor to social inflation. Social inflation in general refers to an increase in property/casualty insurance claim costs due to social and behavioral trends towards increased litigation and higher jury awards. While some jurisdictions prohibit insurers from insuring punitive damages, others do not. Some ISO products already have punitive damages exclusions contained in the forms, but not all do. Currently, the exclusions are contained within CG 00 66 Product Withdrawal Coverage Form, CG 04 36 Limited Product Withdrawal Expense Endorsement, and in various Stop Gap liability endorsements.

This new endorsement which excludes multiple, exemplary and punitive damages is being made available for attachment under the following ISO products:

Commercial General Liability Coverage Part
Electronic Data Liability Coverage Part,
Owners and Contractors Protective Liability Coverage Part
Pollution Liability Coverage Part
Products/Completed Operations Liability Coverage Part
Railroad Protective Liability Coverage Part
Underground Storage Tank Policy

With this endorsement, even if a court awards multiple, punitive or exemplary damages to a defendant, those expenses will not be covered by the insurance policy. Since the endorsement does not currently exist on these policies, its attachment will generally result in a reduction of coverage.

Third Party Litigation Funding

CG 99 11 Condition - Litigation Funding Mutual Disclosure

A. The following is added to the Conditions section:

Litigation Funding Mutual Disclosure

If we and an insured do not agree whether or to what extent a claim or "suit" is covered by this Policy, either party may make a written demand for mutual disclosure of any "third-party litigation funding agreement(s)" regarding that claim or "suit".

When this demand is made, each party must disclose in writing within 30 days whether they or their attorney(s) have executed any "third-party litigation funding agreement(s)". If a party or their attorney(s) have executed any "third-party litigation funding agreement(s)", the written disclosure must include:

a. A copy of such "third-party litigation funding agreement(s)";
b. The names of each person or organization who has entered into such "third-party litigation funding agreement(s)";
c. Whether such person or organization is required to approve of or be consulted on litigation or settlement decisions, and if so, the nature of the terms and conditions relating to that approval or consultation; and
d. A brief description of the financial interest of any person or organization who provided such funding.
Each party must provide to the other party a copy of any update of their written disclosure within 30 days of: 

a. Any change in the above information in Paragraphs a. through d.; or
b. When the parties or their attorney(s) have executed any "third-party litigation funding agreement(s)" after the initial demand.

B. The following is added to the Definitions section:

"Third-party litigation funding agreement" means any agreement for funding provided to a party or their attorney(s) for a specified legal matter, or portfolio of specified legal matters, in exchange for an agreement by the party or their attorney(s) to repay the funding or pay any applicable consideration, contingent upon the outcome of the specified legal matter or portfolio of specified legal matters.

Analysis:

This is a new endorsement adding as a policy condition the need to disclose third-party litigation funding agreements as they apply to the various coverage parts within the ISO commercial general liability program.

Third-party litigation funding, also known as TPLF or third-party funding, is on the rise and may be a contributing factor to social inflation. Being a growing, multi-billion dollar industry that is largely unregulated, this type of funding is changing the claims and litigation landscape. There have been efforts at both federal and state levels to establish disclosure rules as part of litigation discovery practices. Some states have enacted laws to this effect, which may include a requirement to disclose the existence or contents of the third-party litigation funding agreement.

This new condition provides for mutual disclosures in scenarios where an insured and the insurer do not agree on whether coverage is provided. To ensure understanding, “third-party litigation funding agreement” is a defined term in the endorsement. Under the condition, once a demand is made, either party has 30 days to comply with the requirement to provide a written disclosure if they or their attorney have executed any third-party litigation funding agreements, with such disclosure containing the information outlined in the four parts listed as a. through d. in the endorsement. In addition, if either party updates the agreement, this must be disclosed and the updated written agreement must be provided to the other party within 30 days of changes affecting any part of the four parts a. through d.; or whenever the "third-party litigation funding agreement(s)" have been executed after the initial demand. The condition is binding on all parties and their attorneys.

This endorsement has no impact on coverage. It is available for attachment to the following coverage parts:

Commercial General Liability Coverage Part
Electronic Data Liability Coverage Part,
Owners and Contractors Protective Liability Coverage Part
Pollution Liability Coverage Part
Products/Completed Operations Liability Coverage Part
Railroad Protective Liability Coverage Part
Underground Storage Tank Policy

War Exclusion

CG 00 70 Exclusion – War (for use with the Commercial General Liability
Coverage Part, both the Occurrence and Claims-made versions)
CG 00 71 Exclusion – War (for use with the Owners And Contractors
Protective Liability Coverage Part)
CG 00 73 Exclusion – War (for use with the Liquor Liability Coverage Part)
CG 00 74 Exclusion – War (for use with the Railroad Protective Liability
Coverage Part)
CG 00 75 Exclusion – War (for use with the Products/Completed Operations
Coverage Part)
CG 00 76 Exclusion – War (for use with the Pollution Liability Coverage Part)
CG 00 77 Exclusion – War (for use with the Underground Storage Tank
Policy Coverage Part)
CG 00 78 Exclusion – War (for use with the Product Withdrawal Coverage
Part)

A.  Exclusion i. War under Section I – Coverage A – Bodily Injury And Property Damage Liability is replaced by the following: 

i. War 

"Bodily injury" or "property damage", however caused, arising, directly or indirectly, out of: 

(1) War, including undeclared or civil war; 

(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or 

(3) Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these. 

This exclusion applies regardless of the means used in any of the above, in Paragraphs (1) through (3), including, but not limited to, cyber means.

B.  Exclusion o. War under Section I – Coverage B – Personal And Advertising Injury Liability is replaced by the following: 

o. War 

"Personal and advertising injury", however caused, arising, directly or indirectly, out of: 

(1)  War, including undeclared or civil war; 

(2)  Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or 

(3)  Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these. 

This exclusion applies regardless of the means used in any of the above, in Paragraphs (1) through (3), including, but not limited to, cyber means.

Analysis:

Cyber risks continue to evolve, and may generally include the use of cyber means in conflicts. As such, the war exclusion for each of the coverage parts is being reinforced as to coverage intent.

This analysis shows the changes in the Commercial General Liability Coverage Part, in form CG 00 70 01 26. The endorsement replaces the war exclusion in the coverage part with a new War Exclusion. For ease in reviewing the change from how the exclusion in the endorsement differs from that in the coverage part, the only change is the inclusion of the last paragraph under each war exclusion, which is added to include cyber means within the exclusion. This sentence is added verbatim to each of the new War Exclusion endorsements: “This exclusion applies regardless of the means used in any of the above, in Paragraphs (1) through (3), including, but not limited to, cyber means”. Other than this change, the exclusion in each respective endorsement is the same as is currently embedded within the respective coverage parts.

In each case, the exclusion endorsement replaces the war exclusion contained within that coverage part, with the only change being to add cyber means to the exclusion. Each endorsement is a mandatory attachment to its respective coverage part, with no impact to coverage as these changes are simply a reinforcement of coverage intent.

Amendment of Personal and Advertising Injury Definition

With respect to the "personal and advertising injury" definition under the Definitions section, the offense under Paragraph e. does not apply.

Analysis:

This endorsement applies with respect to Coverage B, with the only change from the 04 13 edition being editorial to remove the numerical paragraph designator. The reference previously applied to paragraph 14.e.

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