The author
COVERAGE CONCERNS
By Roy C. McCormick
In addition to the named insured, a sizable number of other entities can be covered
A series of some 25 additional insured endorsements has been developed by the Insurance Services Office ...
Familiarity with those entities other than the named insured that are covered under the basic commercial general liability policy and those that, additionally, may be included by endorsement is a big step toward arranging sound liability protection for businesses and other non-personal risks.
The information is acquired by first checking the pertinent provisions of the specific policy. Covered interests are grouped together. Second, review the insurer's manual rules, or other listing, of interests that may be covered by endorsement. Recognizing that there is variation in the rules of insurers, for illustration purposes, we refer to the CGL forms and endorsements drafted by the Insurance Services Office (ISO).
The inclusion of individuals and other interests under basic comprehensive general liability insurance, in addition to the entity named in policy declarations, has evolved with experience over time. New editions of CGL forms have extended coverage to additional interests with exposures arising from an ongoing close relationship with the named insured. Section II - Who Is An Insured in ISO's Commercial General Liability forms applies the protection to a broad spectrum of interests in a clearly defined manner.
The named insured, as designated in the declarations, is foremost amonq "insureds." The coverage extends to other persons and entities by virtue of the nature of the named insured and the relationship between the two. If the declarations designate the insured to be:
* An individual--such person and spouse are insureds for the conduct of any business of which the former is sole owner.
* A partnership or joint venture--in addition to named entity, members, partners and their spouses are insureds with respect to the conduct of the named insured's business.
* A limited liability company--members and managers are covered with respect to conduct of the insured business. (A limited liability company is a hybrid between a partnership and corporation.)
* An organization other than a partnership, joint venture or limited liability company (corporation, for example)--executive officers and directors are insureds but only for their duties as officers and directors. Stockholders are insureds with respect to their liability as stockholders of the named insured.
* A trust--the trustees are insured to the extent of their duties for the trust. Coverage was expanded in this respect in ISO's 10/01 CGL edition.
Employees and volunteer workers, subject to reasonable exceptions and limitations spelled out in Section II - Who Is An Insured, are other categories basically included in commercial liability insurance. A decade ago employees could be covered for additional premium by endorsement. Basic coverage was extended to volunteer workers in ISO's 10/01 CGL forms.
It is important to keep in mind that additional interests basically protected by the named insured's commercial general liability insurance are insured only with respect to liability arising from the conduct of the business that is the subject of the insurance. For example, coverage would not apply to a director of a corporation for liability incurred from his or her function as a director of another corporation.
Insurers, subject to their underwriting guidelines, can extend by endorsement the protection of the named insured's CGL insurance to certain additional interests. It is reasonable and necessary that the primary insured described in the declarations provide protection for risks accrued by such entities as a result of their relationship. A series of some 25 additional insured endorsements has been developed by the Insurance Services Office in response to need made clear by insurance company experience. Subject to their underwriting practices, insurers use these or comparable endorsements, among which the following are prominent:
* Managers or Lessors of Premises Endorsement: affords insurance to the lessor of premises in which the named insured is a tenant.
* Lessor of Land Endorsement: adds a lessor of land as an additional insured for that part of the premises leased to the named insured.
* Engineers, Architects or Surveyors Endorsement: adds these professionals as additional insureds, except for their professional liability.
* Concessionaires Endorsement: adds concessionaires that trade under the name of the named insured, such as the operator of a shoe department in a department store.
* Designated Interest Endorsement: adds a described person or organization as an additional insured when a more specific endorsement is not adaptable.
These are examples of endorsements that have been designed to add additional interests to commercial general liability insurance. There are numerous others. It should be emphasized that coverage for such interests applies only with respect to liability arising from the business or activity that is the subject of the insurance and the relationship with the named insured described in the policy declarations.
Much can be gained by reviewing the basic protection for additional interests in the CGL form issued by the insurer underwriting a particular risk, and by checking the list of endorsements available from the insurer to extend the protection to others. Such knowledge will contribute to a well-designed insurance program where matters of importance to the named insured are not overlooked. *
The author
Roy C. McCormick is a contributing editor with The Rough Notes Company.