Mind the Gap
By Marc McNulty, CIC, CRM
LESSER-KNOWN ENDORSEMENTS: PART TWO
A look at general liability and commercial auto endorsements
Part one of our “lesser-known endorsements” mini-series shed some light on property and crime endorsements that newer producers may not be familiar with. We found a way to expand property coverage by gaining coverage for items that are typically excluded in coverage forms; we explored a solution for tenants to cover property that is in their care, custody, or control; and we discovered some endorsements that expand the definition of “employee” in crime coverage forms.
But what about general liability endorsements? Surely by now you’ve faced a situation where an additional insured needs to be added to a policy. Of course, you had to figure out if an automatic additional insured endorsement will suffice or if you need to list the entity on a specific form to comply with the contractual needs of your client. There are continuing education classes that spend hours on this topic alone, so we won’t work on dissecting that here.
Surely it can’t be that complicated to properly address the liability needs of your client, right? Well, it depends on the business exposures your client faces.
However, you’ve probably had to add waiver of subrogation or primary and noncontributory status to a general liability policy form per a request from your electrical contractor client (most likely a certificate of liability insurance request). Or maybe you have a lawn and landscape contractor who needed limited pollution coverage for lawn care services and/or the application of pesticides or herbicides.
Surely it can’t be that complicated to properly address the liability needs of your client, right?
Well, it depends on the business exposures your client faces.
Additional Insured—Church Members and Officers (CG 20 22 10 01)
Speaking of businesses, what if your client isn’t a business but rather a religious institution? While many insurance companies offer proprietary enhancement endorsements that broaden coverage for these types of accounts, you’ll want to make sure liability situations for members are adequately addressed.
For example, what if a member of a congregation were to trip, fall, and injure him or herself while at the church? The CG 00 01 04 13 contains the following exclusion under Coverage C – Medical Payments:
We will not pay expenses for “bodily injury”:
To any insured, except “volunteer workers”.
If the member was attending service, this could be a problem. However, there might be coverage if they were there volunteering their time at the church. This then begs the question, how is “volunteer workers” defined in the commercial general liability coverage form?
“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.
So, depending on the situation, the church member might be considered a “volunteer worker.” However, just to make certain, you can add the CG 20 22 Additional Insured – Church Members and Officers endorsement, which amends the above exclusion as follows:
Paragraph 2.a., Exclusions of Section I—Coverage C—Medical Payments is replaced by the following:
We will not pay expenses for “bodily injury”:
To any insured, except church members who are not paid a fee, salary or other compensation.
This helps to ensure that church members and volunteers aren’t excluded from medical payments coverage (provided they aren’t receiving compensation in any capacity). This endorsement also amends Section II – Who Is An Insured of the commercial general liability form to include church members (with respect to activities performed on behalf of the church) as well as trustees, officials, or members of the board of governors of the church. Members of the clergy are also included as insureds with respect to their duties with the church.
Social Service Agencies—Volunteers as Insureds (CA 99 34 10 13)
Like churches, social service agencies have their own set of unique exposures. For example, there are faith-based charitable organizations that rely on volunteers to use their own cars to transport senior citizens who no longer drive. You may recall that volunteers aren’t specifically mentioned in the CA 00 01, and while having Symbol 9 on the commercial auto policy for non-owned autos might potentially address this exposure, you can be certain by adding the CA 99 34.
This endorsement modifies the Who Is An Insured provision under Covered Autos Liability Coverage as follows:
Anyone volunteering services to you is an “insured” while using a covered “auto” you don’t own, hire or borrow to transport your clients or other persons in activities necessary to your business. Anyone else who furnishes that “auto” is also an “insured”.
Additional Insured—Club Members (GC 20 02 11 85)
Speaking of volunteers, what if you insure a private club that has members and those members perform activities on behalf of the organization? The CG 20 02 amends the Who Is An Insured provision (notice a trend here?) to include members for club activities or activities that the members perform on behalf of the club.
Waiver of Transfer of Rights of Recovery Against Others To Us (CA 04 44 10 13)
Didn’t we already mention waiver of subrogation earlier? Yes, we did, but that was with regard to general liability insurance. A similar type of endorsement is available for commercial auto coverage.
However, pay close attention to the last portion of the form language (italicized for emphasis):
The Transfer Of Rights Of Recovery Against Others To Us condition does not apply to the person(s) or organization(s) shown in the Schedule, but only to the extent that subrogation is waived prior to the “accident” or the “loss” under a contract with that person or organization.
Similar to some of the various additional insured endorsements that are available for general liability, this endorsement requires that an appropriate contract be in place prior to the loss.
Employee As Lessor (CA 99 47 10 13)
You may encounter a situation where the owner of a company purchases a vehicle in his or her name with the intent of using the vehicle solely for business purposes. This could be done for a variety of reasons but, no matter the reason, you’ll want to consider adding this form to ensure the vehicle is considered an owned auto by the Named Insured as opposed to a vehicle that is hired, borrowed, or leased. A description of any autos to which this situation applies will be listed on the endorsement.
Employee Hired Autos (CA 20 54 10 13)
While we’re on the subject of employees and cars that are hired, borrowed, or leased—you’re bound to encounter a situation where a client has employees who travel and need to rent a car as part of the process. Here’s the key question: Are they renting the vehicle in the name of the business or are they renting it personally and then submitting the cost for reimbursement back to the insured company?
If they are renting it in their personal name, there’s going to be a coverage gap and your client’s commercial auto policy won’t pick up the exposure.
To remedy this situation, add the CA 20 54 onto the policy, which amends the Who Is An Insured provision as follows:
An “employee” of yours is an “insured” while operating an “auto” hired or rented under a contract or agreement in an “employee’s” name, with your permission, while performing duties related to the conduct of your business.
An important phrase to note is “while performing duties related to the conduct of your business.” If the insured’s employee uses the car to go sightseeing or barhopping, for instance, the form will not extend coverage since those aren’t duties relating to the conduct of the business.
As I’m sure you’ve figured out by now, there seems to be an endless supply of endorsements that expand coverage, particularly when it comes to modifying the Who Is An Insured language that is present in the general liability and commercial auto coverage forms. Keep in mind that we didn’t even touch upon some of the forms that are specifically available for vendors, concessionaires, governmental subdivisions, etc., but there are ISO additional insured forms for these types of exposures and more.
Veteran producers in your office can prove to be a source of valuable information when it comes to properly addressing complicated exposures. In addition, you can always learn more about this subject by attending continuing education classes, such as the Commercial Casualty Institute and James K. Ruble Seminars that are offered by The National Alliance for Insurance Education & Research, or by reading books such as The Additional Insured Book offered by IRMI. Finally, you’ll find that many industry leaders, including contributors to Rough Notes, offer valuable insight regarding proper coverage for unique exposures via blog posts, articles, and books.
Marc McNulty, CIC, CRM, is a principal at The Uhl Agency in Dayton, Ohio, and has been with the agency since 2001.He divides his time among sales, marketing, technology and operational duties. You can reach Marc at firstname.lastname@example.org