MAJOR CHANGES COMING WITH ISO CGL ENDORSEMENT FILINGS
Endorsements effective in December should lead insurance pros to search out potential coverage gaps
By Linda D. Ferguson, CPCU
Anticipated but unusual events attract attention. The solar eclipse over the Midwest resulted in major traffic jams in Tennessee. News of Super Bowl Sunday, the return of Halley’s comet and a Rolling Stones tour are sure to attract attention. Similarly, the Insurance Services Office, Inc. (ISO)’s highly unusual but still anticipated filing of 92 new and 42 updated commercial general liability endorsements effective December 2019 should result in insurance professionals searching out potential coverage gaps.
The filing is considered unusual because this massive endorsement filing is being made with no changes in the coverage forms. It is anticipated because the last major commercial general liability filing was made in 2013. Making all of these endorsements optional provides considerable flexibility for ISO insurance carriers and may result in some carriers refusing to write a particular classification or insured without the attachment of one of the newly introduced endorsements.
This article doesn’t address all the changes but rather highlights certain major ones. More important, it serves as an alert to check renewals and new policies for endorsements with the edition date 1219 as the last four digits of the endorsement number.
Additional insured endorsements
Major changes have been made in the additional insured endorsements.
The first change should not be surprising because it is a natural continuation of changes made in 2013 to certain addtional insured endorsements that removed the words “arising out of,” thereby limiting coverage to damages due to actions of the named insured or those working on its behalf. Two forms—Additional Insured—Managers or Lessors of Premises and Owners of Other Interests from Whom Land Has Been Leased—have been updated with this more restrictive wording.
Making all of these endorsements optional provides considerable flexibility for ISO insurance carriers and may result in some carriers refusing to write a particular classification or insured without the attachment of one of the newly introduced endorsements.
A second change is fairly subtle but potentially limiting. The form no longer refers to the limits on the declarations but instead refers only to “applicable limits.” This means that if any endorsement on the policy contains an applicable sub-limit, the sub-limit would also apply to the additional insured. While this keeps the named insured and the additional insured on equal footing on the policy, it means that any additional insured trying to confirm limits will need more than the policy declarations or a certificate of insurance.
A change that will be considered positive for many is the increase in automatic status endorsements. Five new endorsements are introduced. The one concern in using these or any of the automatic status endorsements is that the endorsement applies only when the terms of the contract or agreement match the requirements of the endorsement. If the terms don’t match, the additional insured could be denied coverage and the named insured could be found in breach of its contract.
A long overdue change comes with the introduction of the Automatic Insured Status for Newly Acquired or Formed Limited Liability Companies (LLCs). When this endorsement is attached, newly formed or acquired LLCs are automatically covered as named insureds for up to 90 days.
Other significant changes
The three druggists endorsements have been changed in a fundamental way. Instead of the term “druggists” being used in the title and throughout the endorsement, the term “pharmacists” is used. Other modifications related to healthcare services have been added. In addition, a new exclusion has been introduced that will remove products coverage for pharmacist-provided products while retaining the coverage for all other items.
Exclusion—Athletic or Sports Participants is more restrictive than previously because injuries that “arise from an activity” or are due to negligent hiring, etc., are specifically excluded. Although the wording is subtle, it could have a significant impact due to concussions and other issues that arise after the athlete or participant leaves the event.
Several new endorsements have been introduced.
Exclusion—Athletic or Sports Participant—All Contests or Exhibitions applies to any and all sporting or athletic contests or events. The wording is similar to the above except that it is applicable to any risk.
Premium Audit Noncompliance Charge is a new type of endorsement. Its purpose is not to provide or take away coverage. Its purpose is to penalize a named insured who is not forthcoming with information needed to properly audit a policy. The endorsement explains what the penalty is and the conditions under which it would be imposed. Although it appears flexible in how the schedule is completed, how it is actually implemented could vary significantly by carrier.
Cannabis exclusions are introduced that must be carefully reviewed because they apply to products containing any amount of THC. While a less onerous exclusion provides an exception for hemp products, the listing of product is specific, which means that some hemp products may not be covered. It is important to review and understand the total THC limitation, because all hemp products contain small to trace amounts of THC.
Exclusions are also added for injuries or damages due to electronic smoking devices. One exclusion is total and excludes all hazards related to the devices. A second exclusion is available, however, that excludes only the vapor and its health-related issues. This means that the burns due to exploding devices could possibly be covered but that any lung or other health-related issues would not be.
Coverage for genetically modified organisms is totally excluded in one endorsement while excluded for only designated operations or products in a less stringent endorsement. These exclusions apply to more than the products-completed operations hazard. They also exclude injury or damage that occurs when the organisms are released or migrate beyond approved confines.
Another major exclusion is for allegations of earth movement due to operations of the insured. Variations apply to only the products-completed operations hazard or to only scheduled projects, but the main endorsement excludes all earth movement allegations.
The ISO filing contains 97 pages of explanation and 134 endorsements; this article is just an overview of some of the changes taking place. If you would like to review the changes independently, consider contacting your state’s department of insurance and obtaining a copy of the ISO filing. You can also access the online filings for your state by entering https://filingaccess.serff.com/sfa/home/XX in the URL and typing your state abbreviation in place of the XX. As an example, in Indiana the URL is https://filingaccess.serff.com/sfa/home/IN.
Any subscriber to Rough Notes PF&M can review the article titled ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses for a brief description of every endorsement.
Linda D. Ferguson, CPCU, is a seasoned insurance product and coverage expert with more than 45 years of experience in the industry.