Exclusively from Foa & Son
Over the past few decades coverage provided in commercial property and liability policies has followed an interesting arc. In the years following WWII, policies were limited to specific defined coverages. You bought a fire insurance policy (not “all risk”). You bought an owners liability policy (not “comprehensive general liability”). If something other than a fire or slip and fall led to a claim, you were out of luck unless you bought specific additional coverages for them.
In the 1970’s and 80’s insurance companies competed for business by offering “multi-peril” policies. Property coverages, general liability, crime, inland marine and other coverages were all bundled into one policy, and coverage grants were gradually broadened. For a couple of decades commercial insurance coverages really were quite broad. Property policies were “all risk”, with just certain limited exceptions. General liability policies really were “comprehensive”. For general liability policies in particular, the 1985 edition of standard policy forms probably marked the last time they would ever be as broad in scope; ever since then, each succeeding revision of standard policy forms has mostly reduced coverage, often in significant ways.
It’s happening again. The Insurance Services Office (ISO), the organization that writes standard policy forms used in whole or part by the majority of all insurance companies, is filing a revision to a standard GL endorsement that has thus far flown somewhat under the radar, but will likely be appearing with more frequency in the future. Called the “Limitation of Coverage to Designated Premises or Project” Endorsement, it takes away a whole lot of liability insurance coverage that an unsuspecting insurance buyer might think they have.
Most folks who buy general liability insurance likely think that their policy will cover them for claims that might arise out of the normal operations of their business. In the past that might have been a reasonable assumption, but not so much anymore. There has been an ongoing war between insurance companies trying to write policies that cover risks they know, understand and can properly price for, and creative plaintiff’s attorneys trying to find coverage in policies that underwriters never contemplated. The lawyers are winning, and underwriters respond by continually narrowing the scope of the coverage they offer.
This particular CGL endorsement was always intended to apply to claims arising out of the ownership, maintenance, or use of specifically described insured premises, “and all operations necessary or incidental thereto.” This language has been understood by insurance adjusters to include any off-premises exposures that were legitimately connected to the business conducted on the premises. Courts have been persuaded to interpret “necessary or incidental” in ways never intended or foreseen by underwriters. The result is the new revision of this endorsement, which is a significant narrowing of coverage. When this new version of the endorsement is attached to a liability policy claims will only be covered if they specifically occur at the designated premises or project, or (new wording) in connection with specific described operations. Anything else happening anywhere else…no coverage.
This endorsement (the prior version, that is) is fairly common with real estate or site specific risks (retail operations, condominiums and apartments, etc.), and may often be seen on non-profits. While unwelcome, the prior version did allow for some coverage for offsite exposures. With this revision, that’s gone. Buyers should beware of this endorsement going forward. If your underwriter offers it, reject it. If you have no choice, try to write the description of premises or operations a broadly as possible. And we will of course also keep our eyes out for you.