1. Business Liability

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury", "property damage" or "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. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury", "property damage" or "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" or any offense and settle any claim or "suit" that may result. But:

(1) The amount we will pay for damages is limited as described in Paragraph D. Liability And Medical Expenses Limits Of Insurance in Section II – Liability; 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 or medical expenses.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Paragraph f. Coverage Extension – Supplementary Payments.

Analysis

The most noticeable difference between the liability section of the Businessowners form and the CGL is format. In the liability section of the Businessowners form, bodily injury and property damage liability as well as advertising and personal injury liability are all insured under one coverage called "business liability." In contrast, the CGL insures bodily injury and property damage liability under coverage A, and advertising and personal injury through coverage B. The Businessowners liability part also provides medical expenses coverage, which is equivalent to medical payments coverage (coverage C) of the CGL.

b. This insurance applies:

(1) To "bodily injury" and "property damage" only if:

(a) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

(b) The "bodily injury" or "property damage" occurs during the policy period; and

(c) Prior to the policy period, no insured listed under Paragraph C.1. 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 before the policy period.

(2) 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.

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 C.1. 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 "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 C.1. 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 only difference in 1.a. through 1.e.between the current CGL form and the liability section of the Businessowners form is that the CGL form places item 1.b.(2) in coverage section B – personal and advertising liability.

The current Businessowners form, like the CGL form, states that the insurance applies only if no insured or employee authorized to receive notice of an occurrence or claim knew prior to the policy period that bodily injury or property damage had occurred. If any of these listed insureds or employees had such knowledge, any continuation of the bodily injury or property damage will be considered to have been known before the policy period and therefore will not be covered.

This language has arisen from Montrose Chemical Corp. v. Admiral Ins. Co. 913 P.2d 878 (Cal. 1995); for more information on this language and the CGL form, see CGL Coverage Form—Coverage A. However, bodily injury or property damage that occurs during the policy period, and was not known to have occurred prior to the policy period, includes any continuation of the injury or damage occurring after the end of the policy period.

There are three ways injury or damage may be deemed to have been known to occur. First, the injury or damage is reported to the insurer. Second, an insured or another authorized person receives written or verbal claim for damages because of the injury or property damage. Third, an insured or other authorized person becomes aware by any other means—a call or text message, through social media, or a TV story, perhaps—that injury or damage has occurred.

Damages claimed because of bodily injury include damages claimed by any other person for care, loss of services, or death resulting from the bodily injury.

Supplementary Payments

(1) We will pay, with respect to any claim we investigate or settle, or any "suit" against an insured we defend:

(a) All expenses we incur.

(b) Up to $250 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which Business Liability Coverage for "bodily injury" applies. We do not have to furnish these bonds.

(c) The cost of bonds to release attachments, but only for bond amounts within our 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 court costs taxed against the insured in the "suit". However, these payments do not include attorneys' fees or attorneys' expenses taxed against the insured.

(f) Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the 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 our Limit of Insurance.

These payments will not reduce the limit of liability.

(2) If we defend an insured against a "suit" and an indemnitee of the insured is also named as a party to 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

(f) The indemnitee:

(i) Agrees in writing to:

i. Cooperate with us in the investigation, settlement or defense of the "suit";

ii. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the "suit";

iii. Notify any other insurer whose coverage is available to the indemnitee; and

iv. Cooperate with us with respect to coordinating other applicable insurance available to the indemnitee; and

(ii) Provides us with written authorization to:

i. Obtain records and other information related to the "suit"; and

ii. Conduct and control the defense of the indemnitee in such "suit".

(3) So long as the conditions in Paragraph (2) 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 B.1.b.(2) Exclusions in Section II – 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:

(a) We have used up the applicable Limit of Insurance in the payment of judgments or settlements; or

(b) The conditions set forth above, or the terms of the agreement described in Paragraph (2)(f) above, are no longer met.

Analysis

The insurer promises to pay the cost of investigation and defense of a claim or suit. Additional payments under this coverage extension include up to $250 for the cost of bail bonds required because of accidents or violations involving a vehicle to which Businessowners liability coverage applies. Loss of earnings incurred by an insured to assist in investigation or defense at the insurer's request are paid up to $250 per day. Costs taxed against the insured, prejudgment interest awarded against the insured, and interest accrued after entry of a judgment and before the insurer has paid are included. The supplementary payments do not reduce the limit of liability. The 2010 form added language that made clear the intent that only court costs taxed against the insured is covered, not attorneys' fees or expenses.

Contractual liability—that is, where the insured has assumed the liability of another—is the subject of many of the supplementary payments provisions. The suit must name both the insured and the insured's indemnitee and must seek damages for which the insured has assumed liability under an insured contract as defined. (See the Liability Definitions section.) Then, if certain other conditions are met, the insurer agrees to defend the indemnitee.

The conditions that must be met include the insurance must apply to such liability; the insured must have assumed the obligation to defend; there is no conflict of interest between the insured and the indemnitee; the insured and indemnitee must allow the insurer to direct the defense of the suit and to provide the same counsel for both; and the indemnitee must agree in writing to cooperate with the insurer.

The insurer's obligation to the indemnitee ends when the applicable limit of insurance has been
used up in the payment of a judgment or settlement, or when the conditions outlined are no longer being met.

Medical Expenses

2. Medical Expenses

a. We will pay medical expenses as described below for "bodily injury" caused by an accident:

(1) On premises you own or rent;

(2) On ways next to premises you own or rent; or

(3) Because of your operations;

provided that:

(a) The accident takes place in the "coverage territory" and during the policy period;

(b) The expenses are incurred and reported to us within one year of the date of the accident; and

(c) The injured person submits to examination, at our expense, by physicians of our choice as often as we reasonably require.

b. We will make these payments regardless of fault. These payments will not exceed the Limits of Insurance of Section II – Liability. We will pay reasonable expenses for:

(1) First aid administered at the time of an accident;

(2) Necessary medical, surgical, X-ray and dental services, including prosthetic devices; and

(3) Necessary ambulance, hospital, professional nursing and funeral services.

Analysis

Although the insuring agreement for medical expenses is identical to that in the CGL form, the applicable exclusions are located later in the policy. To be covered, an accident must take place within the coverage territory as defined and during the policy period. The accident must occur on premises owned by or rented to the insured business, on ways next to the owned or rented premises, or occur due to the insured's operations. For example, the insured's business might be an appliance dealership. While installing a dishwasher, the insured employee accidentally drops it on the customer's foot. The medical expenses arising out of this accident will be covered.

The payments are available regardless of negligence or fault on anyone's part. If the customer in the dishwasher example was asked to move out of the way, and failed to do so, the payments are still available up to the section II limit of liability ($5,000 on a per-person basis) for medical expenses.

Who Is An Insured

1. If you are designated in the Declarations as:

a. 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.

b. 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.

c. 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.

d. 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.

e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

Analysis

Several types of business organization are included, with a description as to who within that organization is an insured. In each of these organizations, insured status is enjoyed only as long as the person is performing duties with respect to the conduct of the insured business.

A limited liability company is operated by members and managers who are immune from any debt or liability attached to the company. As with a partnership, the earnings are passed through the company to the members and taxed at their own personal rate. As with a corporation, only the company's assets are at risk, and not the personal assets of the owners.In order to accommodate this newer form of business organization, the definition of "who is an insured" includes limited liability companies, their members, and their managers.

The 2010 form added a trust, as well as trustees, as insureds, with respect to their duties as trustees only. This represents a broadening of coverage.

2. Each of the following is also an insured:

a. Your "volunteer workers" only while performing duties related to the conduct of your business, or 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:

(1) "Bodily injury" or "personal and advertising injury":

(a) 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), or to a co-"employee" while 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;

(b) To the spouse, child, parent, brother or sister of that co-"employee" as a consequence of Paragraph (a) above;

(c) For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in Paragraph (a) or (b); or

(d) Arising out of his or her providing or failing to provide professional health care services.

(2) "Property damage" to property:

(a) Owned, occupied or used by;

(b) 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).

Analysis

Volunteer workers are insureds while performing duties related to the conduct of the insured business. While the same preclusions of coverage apply in regards to other insureds, such as for bodily injury to the named insured, they enjoy payments for medical expenses not available to other insureds.

The definition of "employee" encompasses leased employees but not temporary employees. Therefore, if an employee negligently injured a temporary worker,presumably the employee would be considered an insured for any resulting claim or suit, since the exclusion applies to a co-"employee" as defined.

Any claim made by a relative of an employee injured by a fellow employee is not covered. Likewise, any claim to share damages because of any injury as described is not covered. These exclusions are in keeping with the workers compensation and employers liability exclusions, since those claims properly fall to that coverage, not the Businessowners liability coverage.

Exclusion (1)(d) refers solely to the employee providing the professional healthcare services ("professional health care" means that provided by a nurse or doctor, not a fellow worker applying a band-aid). Therefore, the named insured would be protected for any liability arising from such an act.

For further discussion of employees as insureds, see General Provisions of the CGL.

b. Any person (other than your "employee" or "volunteer worker"), or any organization while acting as your real estate manager.

c. Any person or organization having proper temporary custody of your property if you die, but only:

(1) With respect to liability arising out of the maintenance or use of that property; and

(2) Until your legal representative has been appointed.

d. 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 Policy.

Analysis

Persons or organizations acting as the named insured's real estate manager are insureds while acting in that capacity. Provisions c. and d. detail who is an insured upon the death of the named insured.

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

The current CGL form provides limited coverage for newly acquired organizations, but the Businessowners form does not. However, the preclusion of coverage for any past exposures is identical to that in the CGL form. There is no coverage for the conduct of any current or past partnership, joint venture, or limited liability company not shown as a named insured in the declarations.

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