Please set up your API key!

The Rough Notes Company Inc.

THREE MILLION GALLONS OF WATER

THREE MILLION GALLONS OF WATER

THREE MILLION GALLONS OF WATER
August 30
08:37 2019

Three million gallons of water was released following the collapse of a dam; killing seven people and causing property damage. The owner of the dam sued the prior owner because of the structural integrity of the dam. The prior owner sought coverage under its policy with James River Insurance who declined coverage because the Limitation of Coverage for Designated Premises or Projects Protected listed only the office location as being covered. The prior owner disagreed.

Here is how the court ruled.

The Kaholo Dam in Hawaii collapsed. Three million gallons of water was released killing seven people and causing significant property damage. James Pflueger (Pflueger) owned the dam at the time of the loss. He sued C. Brewer and Company, Ltd. (Brewer), the prior owner of the dam, for having sold him a dam with questionable structural integrity.

Brewer filed a complaint asking for a ruling regarding the coverage available from 17 different insurance companies. The action in this case applies to coverage provided by James River Insurance Company (James River) because it was the only one of the 17 insurance policies that was in effect at the time of the dam breach.

James River denied coverage because of a Limitation of Coverage to Designated Premises or Projects endorsement. The dam was not listed as a designated premises or project, so James River argued that no coverage was owed. The trail court awarded summary judgement for James River. Brewer appealed.

Brewer argued that the following wording in the endorsement was ambiguous:

This insurance applies only to “bodily injury”, “property damage”, “personal and advertising injury” and medical expenses arising out of the ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises;

It argued that injury and damage due to negligent business decisions made in the designated premises (the corporate headquarters) should be covered.

The appellate court found Brewer’s alternative reading of the endorsement to be reasonable which resulted in the endorsement being ruled ambiguous. However, the appellate court ruled that it was necessary to determine the parties’ intent in using the endorsement. The trial court’s decision was vacated. James River appealed.

The Supreme Court of Hawaii carefully reviewed the language of the endorsement to see if the limitation was clear and unequivocal. It concluded that the wording was not and therefore affirmed the ruling in Brewers favor of the appellate court. It vacated the portion of the appellate court regarding the need to determine the intent of the parties.

The case was remanded back to the trial court for further action.

C. Brewer and Company LTD., Respondent/Plaintiff-Appellant v. Marine Indemnity Insurance Company of America; Fireman’s Fund Insurance Company of Hawaii; and James River Insurance Company, Petitioners/Defendants – Appellees. No. SCWC-28958. March 27, 2015. Supreme Court of Hawaii

A recent change in an endorsement

The CG 21 44-Limitation of Coverage to Designated Premises or Project endorsement has been unchanged since 07/01/98 until 04/1/2017 when it grew from 113 words to 1,142 words. ISO’s Release Notes explained that the endorsement was changed, partly, to address the courts’ finding in the court case above.

Here is a brief explanation of the CG 21 44 change in the PF&M analysis.

(April 2019)

INTRODUCTION

This list identifies endorsements available to modify the Insurance Services Office (ISO) Commercial General Liability Coverage Forms. It is arranged by form number and title and briefly explains the use of each endorsement. It does not include any state specific endorsements, changes or amendments. New endorsements introduced, or endorsements changed in the 04 13 edition and since are in bold print.

EXCLUSION ENDORSEMENTS (CG 21)

CG 21 44–Limitation of Coverage to Designated Premises or Projects (0417 change)

(Use with CG 00 01 and CG 00 02)

This restrictive endorsement is intended to restrict coverage to either a specific scheduled premise or a specific scheduled operation/project. Some significant lawsuits found off-premises coverage in the prior edition so the wording in the new version is much more precise. Of particular note is that the phrase “arising out of” has been eliminated when referring to the premises. The goal is to cover ONLY injuries that occur on the premises itself and to not cover injuries from activities or decisions that might emanate from that premises.

Related Court Cases:

Bachelor Party Goes Bad

Designated Premises Or Project Endorsement Is Not Specific Enough

Uncovering significant gaps

The CG 21 44 is often used as a Bandaid to make an otherwise unattractive risk look attractive by attempting to convert the very broad commercial general liability coverage into a very narrow specific coverage form. When a significant loss, such as seven deaths and three million gallons of water, occurs the CG 21 44 might not prove strong enough to resist coverage. A better way may be to identify potential coverage gaps and find markets to cover the problem.

Review the General Information Questionnaire of the Producer’s Commercial Lines Risk Evaluation System that is an important tool to use in finding gaps.

Category: Service Businesses Risk: Abstracters

GENERAL INFORMATION

Account: _____________________________________________________________________

Account number: _______________________________________________________________

Agency: ______________________________________________________________________

 

Agency number: ________________________________________________________________

Producer: _____________________________________________________________________

Producer number: ______________________________________________________________

Legal business name(s)

_____________________________________________________________________________

_____________________________________________________________________________

Mailing address:

_____________________________________________________________________________

_____________________________________________________________________________

Email: ________________________________________________________________________

Website: ______________________________________________________________________

 

Type of entity:

___ Individual___ Corporation___ Sub-S Corp.
___ Partnership___ Joint Venture
___ Not-for-profit___ Limited Liability Company

 

SIC Code(s): __________________________________________________________________

NAICS Code(s):_____________________________________________________________________

Federal ID Number: ____________________________

When did the applicant start business operations? ___________________________________________

When did the present management assume control? _________________________________________

How many years experience does the owner have in this type of business? _______________________

How many years experience does the manager have in this type of business? _____________________

Has the applicant ever been involved in a bankruptcy procedure? ___ Yes ___ No

If yes, explain including the type of bankruptcy, the filing date, and the resolution.

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

Names of subsidiary companies or joint ventures that are not part of this application:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

Important PeopleNamePhone Number
Owner/Principal__________________________________________
Other Decision Makers__________________________________________
Plant and Grounds__________________________________________
Financial__________________________________________
Legal__________________________________________
Claims__________________________________________

 

The applicant’s primary operations are:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

The applicant’s secondary and/or incidental operations are:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

 

The applicant used to be involved in the following operations, but they have been discontinued:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

The hours of operations are: _____________________________________________________________

How many days per week is the applicant open? ___

Is this a seasonal operation? ___ Yes ___ No

If yes, what is the season? From: _____________ to: _____________

Does the applicant have a safety program? ___ Yes ___ No

If yes, answer the following:

Name of safety director: _____________________________________________

Safety director phone number: ________________________________________

Safety director email address: ________________________________________

Attach a copy of the safety program.

Does the applicant have a disaster plan? ___ Yes ___ No

If yes, answer the following:

Name of disaster coordinator: ________________________________________

Disaster coordinator phone number: ___________________________________

Disaster coordinator email address: ___________________________________

Attach a copy of the disaster plan.

Doing the best for your client

The Producer’s Commercial Lines Risk Evaluation System questionnaire takes time to complete but it sets you apart because of its thoroughness. It tells your client that you are interested in learning about its business so that you can make informed suggestions on coverages and that you can present your client to only insurance carriers who are prepared to provide the coverage and service needs your client needs. The upfront time in completing the form will save time in the years to come.

Here you can review a letter you might want to use in contacting a current client or a prospect about providing a risk management survey and then use the Producer’s Commercial Lines Risk Evaluation System to guide you through the process.

Dear [Name]:

We’ve found that many people are surprised when they take a close look at the coverages they have and compare them with what they really need. They may have enough property protection but not enough for their liability exposures. Or, they find additional exposures that have not been identified and are potentially uncovered.

At the [Agency], we first complete a survey with you to assess your insurance wants and needs. Then we develop a program that meets your specific needs using the products of various quality companies. This system can uncover gaps or overlaps in your coverage. The result can save you money and improve your insurance situation because you pay for only the coverages you need.

There is no cost or obligation to make sure your insurance covers your specific needs. The [Agency] will be there to help you make this important evaluation.

We’ll call you within the week to discuss this important service in more detail. In the meantime, please call or email if you have questions or concerns about your present coverages.

Sincerely,

Related Articles

accessIMP-sidebar rn-subscribe-sidebar-cta_magazine rn-subscribe-sidebar-cta_blog rnc-advantageplus-sidebar_login rnc-pro-sidebar_login

Spread The Word & Share This Page

Trending Tweets