ISO COVERAGE FORM & ENDORSEMENT CHANGES DIGGING THROUGH THE DETAILS APRIL 9, 2013

Transcription

1 ISO COVERAGE FORM & ENDORSEMENT CHANGES DIGGING THROUGH THE DETAILS APRIL 9, 2013

2 INTRODUCTIONS CHRISTINE J. WILLIAMS U.S. Casualty Client Management Leader JOHN H. DENTON Excess Casualty Claims Leader WILLIAM EUSTACE Legal and Policy Forms Advisor, US Casualty

3 TODAY S AGENDA Overview. Insurance Services Office (ISO) general liability (GL) coverage form changes. GL endorsement changes. Questions and answers. 2

4 OVERVIEW

5 OVERVIEW ISO general liability form changes and endorsements: Effective April 1, Direct effect on ISO forms. Indirect effect for carrier and manuscript forms that are usually based on ISO forms. Focus today: Technical aspects of policy language changes. Changes will affect organizations differently. Reach out to your local Marsh contact, trusted advisor, or send an to 4

6 ISO GL COVERAGE FORM CHANGES

7 ISO GL COVERAGE FORM CHANGES CGL CHANGES TO THE ISO FORM Not as significant as prior changes (for example, 1966, 1973, 1986). Changes potentially expand, contract and/or clarify coverage: Liquor liability exclusion: - Clarification or contraction? Aircraft, auto, or watercraft: - Clarification? Electronic data exclusion: - Expand or confirm coverage? Recording and distribution of material or information in violation of law: - Contraction of coverage? Material published with knowledge of falsity: - Clarification? Other insurance: - Clarification? 6

8 ISO GL COVERAGE FORM CHANGES CGL LIQUOR LIABILITY EXCLUSION 7

9 ISO GL COVERAGE FORM CHANGES CGL LIQUOR LIABILITY CASES 1. Claims based on negligent supervision / failing to provide transportation Penn-America Ins. Co., 27 A.2d 259 (Pa. Sup. Ct. 2011) Claim based on negligence in ejecting inebriated patron from insured s premises so as to render him a danger behind the wheel of a car not excluded by liquor liability exclusion. State Automobile Mut. Ins. Co. v. Lucchesi, 2012 WL (M.D. Pa. 2012) Claim that insured was negligent in permitting [plaintiff] to leave the premises while visibly intoxicated, failing to administer programs designed to identify and assist intoxicated patrons, and failing to ensure that [plaintiff] left the establishment with a competent individual held excluded by liquor liability exclusion. 8

10 ISO GL COVERAGE FORM CHANGES CGL LIQUOR LIABILITY EXCLUSION 9

11 ISO GL COVERAGE FORM CHANGES CGL LIQUOR LIABILITY CASES 2. BYOB or non-profits Cormier v. Travelers Ins. Co., 618 So.2d 1185 (Ct. App. La. 1993) Non-profit American Legion held to be in the business of serving alcohol and thus exclusion applied. American Legion Post #49 v. Jefferson Ins. Co., 125 N.H. 758 (1984) American Legion not in the business of selling alcoholic beverage and thus exclusion does not apply. 10

12 ISO GL COVERAGE FORM CHANGES CGL AIRCRAFT, AUTO, OR WATERCRAFT EXCLUSION 11

13 ISO GL COVERAGE FORM CHANGES CGL ELECTRONIC DATA EXCLUSION 12

14 ISO GL COVERAGE FORM CHANGES CGL CYBER LIABILITY No ISO cyber liability exclusion, but electronic data exclusion may be relevant. Claim still must trigger one of the coverage parts: bodily injury/property damage/personal and advertising injury. Availability of cyber coverage: 75% of companies experienced at least one cyber breach during the previous 12 months, according to a Symantec survey. Cyber policies can be customized to include any or all of the following coverages: - Privacy and computer security liability. - Information asset coverage. - Business interruption coverage including extra expense. - Cyber crime coverage. - Cyber extortion coverage. - Criminal reward fund coverage. - Breach and crisis management coverage. - Media liability. - Professional liability. 13

15 ISO GL COVERAGE FORM CHANGES CGL RECORDING AND DISTRIBUTION OF MATERIAL OR INFORMATION IN VIOLATION OF LAW 14

16 ISO GL COVERAGE FORM CHANGES CGL COVERAGE FOR FAX BLAST CASES Maxum Indemnity Co. v. Eclipse Manufacturing Co., 848 F.Supp. 2d 871 (N.D. Ill. 2012) Insured entitled to coverage for fax blast claims under the personal and advertising injury coverage part as an invasion of privacy. Penzer v. Transportation Ins. Co., 29 So.2d 1000 (Fl. 2010) Fax blast claims covered under personal and advertising injury. Telecommunications Network Design v. Brethren Mut. Ins. Co., 5 A.3d 331 (Pa. Sup.Ct. 2010) Fax blast claim held not to constitute invasion of privacy and thus coverage not triggered. ACE Rent-A-Car, Inc. v. Empire Fire & Marine Ins. Co., 580 F.Supp. 2d 678 (N.D. Ill. 2008) (Indiana law) Fax blast claims not invasion of privacy. 15

17 ISO GL COVERAGE FORM CHANGES CGL MATERIAL PUBLISHED WITH KNOWLEDGE OF FALSITY AND MATERIAL PUBLISHED PRIOR TO POLICY PERIOD 16

18 ISO GL COVERAGE FORM CHANGES CGL CONDITIONS: OTHER INSURANCE 17

19 GL ENDORSEMENT CHANGES

20 GL ENDORSEMENT CHANGES OVERVIEW ISO released amendments and new wording totaling over 300 pages. Context: In the last six years, ISO and its member carriers have participated in thousands of individual pieces of litigation discerning certain trends. Recognizable pattern. History of additional insured (AI) endorsements is one attempt by ISO to scale back the extent of coverage for AIs whether the issue was completed operations, availability of limits, or sole negligence. 19

21 GL ENDORSEMENT CHANGES PRIMARY AND NON-CONTRIBUTORY WORDING 20

22 GL ENDORSEMENT CHANGES PRIMARY AND NON-CONTRIBUTORY WORDING Rationale: Requests to introduce an endorsement to revise the other insurance condition. - Many construction agreements call for such an endorsement to be attached to the lower tier contractor s GL policy when additional insured status is required. May lessen the possibility of leaving a court with a dilemma. - Does it leave the AI uninsured or apply the AI policy to a sole negligence loss? There is also an implication that the contract would be between the named insured (NI) and the AI. - Does contract privity need to exist to trigger AI status? 21

23 GL ENDORSEMENT CHANGES ADDITIONAL INSURED DESIGNATED PERSON OR ORGANIZATION 22

24 GL ENDORSEMENT CHANGES ANTI-INDEMNITY ACTS Construction example: Downstream parties often required to indemnify and defend upstream parties. - Could find a second-tier plumbing subcontractor indemnifying the owner of a $100 million building. - Many state legislatures passed anti-indemnity acts, which forbid such contract provisions. - In theory, anti-indemnity acts nullify such provision, but there is variability among the states. - They range from restrictions on specific aspects of such provisions in certain industries to outright bans in all commerce. - Some void contractual clauses that require one party to name another party as an additional insured. ISO is attempting to take the prohibitions embodied in the various antiindemnity acts, and say that if a contractual provision goes beyond what the law allows, it will not come under the coverage of the policy. 23

25 GL ENDORSEMENT CHANGES ADDITIONAL INSURED DESIGNATED PERSON OR ORGANIZATION 24

26 GL ENDORSEMENT CHANGES ADDITIONAL INSURED DESIGNATED PERSON OR ORGANIZATION 25

27 GL ENDORSEMENT CHANGES OBSERVATIONS RELATED TO AI ENDORSEMENTS In conclusion, ISO is attempting to clarify that coverage will not: be provided where contrary to law, including applicable state antiindemnity acts; exceed the amount of insurance required by the contract between the named insured and the additional insured; make the person or organization a named insured, but instead designate them as an additional insured; or increase the applicable limits of insurance. 26

28 GL ENDORSEMENT CHANGES ADDITIONAL INSURED ENDORSEMENTS Certain Additional Insured endorsements add an extra exclusion. The exclusion applies to professional liability. It is expanded to encompass: Supervision; Hiring; Training; Employment; Monitoring; of others by the AI, if the occurrence which caused the Bodily Injury or Property Damage involved the rendering of professional architectural, engineering, or surveying services. 27

29 GL ENDORSEMENT CHANGES TOTAL POLLUTION EXCLUSION FOR DESIGNATED PRODUCTS OR WORK 28

30 GL ENDORSEMENT CHANGES AMENDMENT OF PERSONAL AND ADVERTISING INJURY DEFINITION 29

31 GL ENDORSEMENT CHANGES AMENDMENT OF PERSONAL AND ADVERTISING INJURY DEFINITION 30

32 GL ENDORSEMENT CHANGES AMENDMENT OF COVERAGE TERRITORY WORLDWIDE COVERAGE 31

33 GL ENDORSEMENT CHANGES AMENDED INSURED CONTRACT DEFINITION 32

34 ISO GL COVERAGE FORM AND ENDORSEMENT CHANGES KEY TAKEAWAYS Changes to ISO policy form: Many of the changes clarify coverage. Some changes are potentially ambiguous. Consult ISO explanatory materials. Discuss with broker and/or seek clarification from insurers if appropriate. Additional insured coverage will not: Be afforded where it would be contrary to applicable law, including (but not limited to) state anti-indemnity acts. Exceed the amount of insurance required by the contract between the named insured and the additional insured; Make the person or organization a named insured, but instead will make it an additional insured. Increase the applicable limits of insurance. As far as insured contract is concerned, that part of a contract that assumes the tort liability of another will only be considered an "insured contract" to the extent your assumption of tort liability is permitted by law. Where barred, whether by anti-indemnity or otherwise, it will not be treated as insured contract, and the policy will not stand behind that assumption of liability. 33

35 QUESTIONS AND ANSWERS Any statements made concerning legal matters are based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal advice, for which you should consult your own professional advisors. Marsh makes no representation or warranty concerning the application of policy wordings. Our views as to the form changes and their consequences are not binding on insurers, and the determination of their meaning in the event of a dispute will be made by the courts. Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman. Copyright 2013 Marsh Inc. All rights reserved. USDG 4935

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