The Reference Handbook on the Comprehensive General Liability Policy
From the Insurance Coverage Litigation Committee of the Tort Trial and Insurance Practice Section
Chapter 1: Introduction and Overview
By Rabeh M.A. Soofi
This book is a product of the Insurance Coverage Litigation Committee of the ABA’s Tort Trial & Insurance Practice Section, also known as TIPS. Members of our committee take pride in being “real insurance coverage lawyers.” We handle insurance law every day.
In the spirit of embracing our status as dedicated insurance practitioners, we put this book together as a survey of the many issues that arise from a liability policy. It’s an overview of the whole area. We genuinely hope that our fellow lawyers will find it useful.
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In the commercial insurance industry, there is perhaps no product more prevalent than the commercial general liability (CGL) policy. CGL policies are the most common form of liability insurance purchased by numerous public and private businesses throughout the United States1 and, as a result, are arguably the most litigated insurance product in the marketplace. CGL policies are purchased in order to provide the insured with the broadest possible spectrum of protection and to transfer to the insurer the risk of all liabilities for unintentional and unexpected personal injury or property damage arising out of the conduct of the insured’s business.2
1. Brief History of the CGL Policy
The rise of the CGL policy in the landscape of the American insurance industry is rather remarkable given its relatively short lifespan, which began in the 1940s. Generally, contractual liability insurance began early in the 1800s, taking root in the risk-transfer practices of the maritime industry.3 The early ancestors to general liability policies—public liability policies—were first written in the United States in the late 1800s and until the first quarter after the turn of the century, and provided coverage to a wide range of commercial insureds, including manufacturers, contractors, landlords, and other businesses.4
Until 1940, liability policies were written for a specific hazard. The first CGL policy was created in 1940 jointly by the National Bureau of Casualty and Surety Underwriters and the Mutual Casualty Insurance Rating Bureau,5 mainly to address the inconsistency of coverages provided by manuscript forms. It was replaced by a second version in 1943, which in turn was replaced in 1955.6 With additional revisions made in 1966, 1973, 1986, 1988, 1993, 1996, 1997, 1999, and 2001, the CGL policy (known as a comprehensive general liability policy before 1986) slowly took shape into the standard CGL policy that is known and recognizable today.7
2. Overview of CGL Policies
Although CGL policy forms can be custom-written manuscript forms or standardized forms, the most widely used forms are the ones created and maintained by the Insurance Services Office (ISO).8 The typical ISO CGL policy comprises four components, including a declarations page, insuring agreements, the policy’s terms and conditions, and, finally, endorsements.
The declarations page is usually the first page of the policy, and provides a summary of the policy. Generally, the declarations page will state the policy number, the name of the insurance company writing the policy, and contact information for the insurer, including a phone number and address. It also will be countersigned by and include the name and address of the agent, broker, or other authorized representative through whom the policy was purchased. The declarations page also will state the name and address of the insured, the effective dates of the policy, a summary of the risks insured, and the limits of liability. There may be additional information and schedules accompanying the declarations, such as the policy rate and basis for rating, and perhaps any risks or property specially covered.
The declarations page also will specify whether the CGL policy is an “occurrence-based” policy or “claims-made” policy. CGL policies can be written on an “occurrence” or “claims-made” basis, as a monocline policy, or combined with one or more other lines of insurance (such as an auto or workers compensation policy) to form a commercial package policy. A claims-made liability policy covers losses for which claims are made during the policy period. An occurrence-based liability policy covers losses that occurred during the policy period, no matter when the claim is made. If the policy is on a claims-made liability form, it also will be identified as such on the declarations page.
From there, the insuring agreement of the CGL policy lists the coverages afforded by the policy. Distinct coverages are provided, and each coverage contains its own insuring agreement and exclusions.
1. 1 Rowland H. Long, The Law of Liability Insurance § 3.06(1) (1992).
2. See, e.g., London Mkt. Insurers v. Superior Court, 53 Cal. Rptr. 3d 154, 166 (Cal. Ct. App. 2007).
3. Timothy Stanton, Now You See It, Now You Don’t: Defective Products, the Question of Incorporation and Liability Insurance, 25 Loy. U. Chi. L.J. 109, 136 n.17 (1993). Early in the 1800s, insurers indemnified vessel owners against losses from damages resulting from the collisions of two or more ships. 1 Donald S. Malecki Et Al., Commercial Liability Risk Management and Insurance 57 (1978).
4. 7A John A. Appleman, Insurance Law and Practice § 4491 (1979); Eugene R. Anderson, Joseph D. Tydings & Joan L. Lewis, Liability Insurance: A Primer for Corporate Counsel, 49 Bus. Lawyer 259, 262 (Nov. 1993).
5. George B. Flanigan, Evolution of CGL Coverage: A Four-Decade Perspective, CPCU Journal, Spring 1999.
6. Jordan S. Stanzler & Charles A. Yuen, Coverage for Environmental Cleanup Costs: History of the Word “Damages” in the Standard Form Comprehensive General Liability Policy, 1990 Colum. Bus. L. Rev. 449, 457.
7. Id.at 450 n. 3.
8. ISO was founded in 1971 in a merger of smaller underwriting service organizations. News release, ISO, Insurance Services Office Proposed Change to For Profit, http://www.iso.com/Press-Releases/1996/insurance-services-office-proposes-change-to-for-profit-part-of-managed-evolution-to-better-meet-cu.html. ISO replaced a number of state property-insurance bureaus and regional and national bureaus for various lines of property/casualty insurance. Id.
Did you find this article helpful? Do you think more information like this would help you? More information is available. This material is excerpted from The Reference Handbook on the Comprehensive General Liability Policy, 2010, by Rabeh M. A. Soofi, published by the American Bar Association Tort Trial and Insurance Practice Section. Copyright © 2010 by the American Bar Association. Reprinted with permission. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Members of the ABA Tort Trial and Insurance Practice Section can purchase this book at a discount.
Rabeh M. A. Soofi is an attorney with the firm of Ice Miller LLP in Indianapolis, Indiana. Ms. Soofi’s experience with insurance law and regulation includes working with policyholders, carriers, and regulatory agencies on litigating or otherwise resolving numerous types of disputes spanning the spectrum of policies and lines of coverage for first and third-party claims. She also practices in emerging practice areas of the insurance industry such as cyberlaw/technology coverage and Islamic insurance systems.
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