“Expected & Intended Injury” – But Not Damage!

This one comes from personal experience (and you know who you are if you’re reading this!).

General Liability is, obviously, not intended to cover incidents that are intentionally done with knowledge they will cause harm. But there is an exception to this: coverage applies if you knowingly cause injury in effort to otherwise preserve persons or property. Here is the (very brief) exclusion and exception from the 2013 CGL:

a. Expected Or Intended Injury “Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.

The real-world example I was provided for something of this nature is a crane operator who has to drop a load to prevent a catastrophic failure. If they intentionally drop a load, and that injures someone, the CGL will provide coverage if that action was taken to prevent a larger event occurring.

As a side note, there is a bevy of case law regarding this “expected or intended” exclusion and how it applies, whether the language is ambiguous, and whether coverage hinges on the intention of the act or the intention of the damage. It’s definitely worth looking into.

However, for our purposes, we’re focusing on what is not in the exclusion: specifically you will note the exception provides coverage only for “Bodily Injury”. I.e., the unendorsed CGL does not cover expected or intended Property Damage; only Bodily Injury. And even then only via a narrow “reasonable use of force” exception.

In the example of a crane operator dropping a load you can see how this could be incredibly problematic: you are almost assured to cause property damage in such a case. But, going by the strict “4 corners” of the ISO policy, you’re not going to be covered for such event if your intent was to prevent a much large instance of property damage. This is true even if you intended to prevent both BI and PD because recall we are dealing with an exception to an exclusion; meaning we are talking about the type of damage covered, not the trigger itself.

Thankfully, some carriers do offer proprietary wording to add this back, and such is even included on “enhancement” endorsements among even the smaller/mutual carriers of the world. However, even some national carrier brands don’t address this in their policy and, when I brought this to them, they were flummoxed how to respond. My key partners asked for language I could provide them (and this particular one eventually manuscripted!), while others essentially shrugged.

In the end this is an incredibly easy fix for a carrier – it literally takes adding only three words to the exception (“or Property Damage”). The fact that it does need to be manually added can be troublesome – it’s going to need approval. While troublesome, and likely frustrating to carrier personnel, it’s precisely these type of esoteric situations by which brokers live and die. A client can go to nearly any broker/carrier and get an unendorsed ISO policy; if you’re not giving them a reason not to then that’s precisely what’s going to happen.

Big Results From Small Teams: Organizational Education

This will be a bit more abstract of a topic than usual, but it is no less important.

One of the greatest challenges of broker-dom is knowledge. Being an insurance broker is, after all, a professional service. Certainly we have physical “products” in the form of policies but mostly what we are selling is ourselves, our knowledge, and our service.

Because there is so much that goes into writing insurance coverage it is absolutely vital that every organization have an information sharing procedure. But I hesitate to use that word – procedure – because I often find the process is over formalized. Straight truth time: how many formal “monthly meetings” have you been in – not that you’ve lead – where you’ve felt engaged, where you’ve wanted to participate, and where the meeting went over because everyone was so invested in the topic? I’m guessing very few (and if not please let me know your secrets!).

But because education is not just an organization disseminating information from point A to point B, excitement and participation are crucial to your organization’s learning ability. A traditional “meeting” format is perfect for disseminating information but it’s very poor for creating new information. And new information – about what needs to be addressed, how current obstacles already are addressed, about what client requests are coming in – is exactly what you need to foster an organic, positive learning environment.

I suggest every organization encourage staff to create their own learning sessions among themselves. This allows them to choose times that are convenient, topics that are relevant, and participants that are engaged. Some of the best knowledge I have gained is through simple 4 person meetings where we were all excited to bring some new quirk of our job to show everyone.

It’s also through this “ground-up” method that you’ll find out individuals predilections – who is excited about what aspects of problem solving? Who is good at finding relevant information to a question that was posed? Who is adept at creating deliverables to enhance this new-found knowledge? You will get drastically more input from a handful of engaged people than you will with an entire team, even if you mandate “everyone bring one topic of discussion”. That’s old thinking – get that out of here!

Once these “mini-sessions” take off you’ll find them an incredible resource for more traditional organization-wide needs. After all, if there’s a hot topic among the mini teams there’s a good chance it’ll be important elsewhere. I can’t tell you the number of topics that have arisen in one of these small “learning sessions” that showed a need for organization-wide education.

One of the coolest aspects of these sessions is getting to know everyone’s passion. Everything in your organization – absolutely everything – is complex when you look at the details. There is no small job – just big people who think jobs are small. So when you start running learning sessions like this you’ll get a massive amount of insight and expertise you never knew you needed. Everything from how to save a few computer clicks for a task that’s performed 2,000 times a day, to better ways to send information between teams, to how to make invoices look cleaner, to… all sorts of topics you never knew you needed because the “top down” approach simply doesn’t allow it.

In short, every single person in your organization is a thought leader and it takes creativity to tap that. These individuals are mired in day to day work and often don’t have the opportunity to voice their opinion in an appropriate setting – and a “team wide meeting” is not an appropriate setting. People need to be able to be open and honest, and be able to talk to their peers rather than someone who controls their vacation days. It’s only through empowerment of the individual, organically, can you start to see what needs there are to address.

Finally, it is incredibly important to memorialize all of this. Having a good info-sharing plan in your organization isn’t enough because once those people leave, their info is gone as well. This is where the more traditional process takes place – have your learning session teams write down notes and topics of discussion. It doesn’t need to be anything serious – really just what people brought up and how it was addressed; think of it like meeting “minutes”. These can then be reviewed for commonality.

If you want to take it a step further, there are so many technology tools to help you. Everything from message boards, to knowledge bases, to Wikis. Heck, if someone wants to let them send out a newsletter to team members with topics or circumstances they find particularly interesting.

Many organizations tend to look at “education” and internal info as a very straightforward process. But brokers deal in ambiguity every day. And even when we’re dealing with literal policy contract language, every exception has a caveat has a circumstance where it doesn’t apply. A good broker is good because of how they deal with that complexity and ambiguity. If you’re not innovating your education methods you’re doing yourselves, and your clients, a disservice.

Reviewing the Unendorsed CGL Pollution Exclusion

As a broker, I tell my clients never to rely upon their CGL for pollution related liability. Although I choose those words carefully – “rely upon” – as in some situations the CGL can be somewhat responsive to pollution loses. In fact I once had an educator say he refers to the Pollution Exclusion as a “sieve” and I think that phrasing fits – there is some coverage but it must be a specific case that allows it to go through the “sieve”.

Below is a line-by-line analysis of the unendorsed ISO CGL Pollution Exclusion. Note this is 2007 wording as that is what my notes are predominantly for; I’m not aware of any significant changes since but please let me know if otherwise!

So let’s begin:

[This insurance does not apply to…]

f. Pollution

(1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened dis-charge, dispersal, seepage, migration, release or escape of “pollutants”:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. However, this subparagraph does not apply to:

Pollution at an owned/rented premises is referred to as “Premises Pollution” (natch) and is typically the primary (coverage A) insuring agreement of a standalone pollution policy.

Note that this exclusion applies at your premises regardless of whether they solely exist there (such as a storage tank) or if they were brought to your premises, even by a third party. If the “escape” of pollutants happens on your premises, coverage is excluded.

The exceptions to this:

(i) “Bodily injury” if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for personal use, by the building’s occupants or their guests;

(ii) “Bodily injury” or “property damage” for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured; or

(iii) “Bodily injury” or “property damage”arising out of heat, smoke or fumes from a “hostile fire”;

To summarize, we are adding back coverage for:

i. HVAC/Plumbing mechanicals releasing smoke

ii. Off-Premises work for an Additional Insured, and only for ongoing operations. We will see more restrictions later; this coverage grant is not nearly as broad as it seems.

iii. Smoke & fumes due to a fire at your premises

Continuing the exclusion:

(b) At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;

(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:

(i) Any insured; or

(ii) Any person or organization for whom you may be legally responsible; or

Naturally the CGL is not the policy for you if you handle waste in any capacity. This can be a catch for certain contractors, manufacturers, etc. who may handle, or haul debris that’s not theirs.

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations if the “pollutants” are brought on or to the premises, site or lo cation in connection with such operations by such insured, contractor or subcontractor. However, this subparagraph does not apply to:

Here we see the additional limitations I mentioned earlier. The best way to visualize this is: if the pollutants are either yours, or from someone you hired, there is no coverage. This reinforces the intent of the CGL to not be a true “pollution” policy – if you handle pollutants, if you have an existing exposure for them, then CGL is not intended to protect from that.

There are a handful of exceptions here but, again, they are limited.

(i) “Bodily injury” or “property damage”arising out of the escape of fuels, lubricants or other operating fluids which are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of “mobile equipment” or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold, store or receive them. This exception does not apply if the “bodily injury” or “property damage” arises out of the intentional discharge, dispersal or release of the fuels, lubricants or other operating fluids, or if such fuels, lubricants or other operating fluids are brought on or to the premises, site or location with the intent that they be discharged, dispersed or released as part of the operations being performed by such insured, contractor or subcontractor;

(ii) “Bodily injury” or “property damage”sustained within a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations being performed by you or on your behalf by a contractor or subcontractor; or

(iii) “Bodily injury” or “property damage”arising out of heat, smoke or fumes from a “hostile fire”.

There is a lot to unpack here, but I’d summarize these as:

i. Obviously your equipment is going to have “pollutants” inside of it (fuels, oil, etc.) and the CGL does cover unintentional release of those. However note the incredibly strict requirement that such release must be from a part of the vehicle designed to store those pollutants. In practical terms this means something like extra fuel you may bring in a can, or extra oils and lubes, will not be covered if they spill since those didn’t escape from “that part of the vehicle” designed to hold them. This really is only for (e.g.) an accident with your mobile equipment that releases incidental fuels and such.

ii. Once again we see a very specific set of wording here with “materials brought into that building“. The number of cases this is likely to apply will be very limited.

iii. This is similar to “hostile fire” wording we’ve seen before.

We have one final section to exclusion 1:

(e) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations if the operations are to test for, monitor, clean up, remove,contain, treat, detoxify or neutralize, orin any way respond to, or assess the effects of, “pollutants”.

Similarly to waste handling, the CGL is not sufficient if your operations are to otherwise work with pollutants (testing for, cleaning, etc.). The exclusion is fairly strict here – even if the liability is from a subcontractor you do not have coverage. This means simply “subbing out” your pollution related items (say requesting a survey before a job begins) is not enough to insulate you. You will need to review your sub’s coverages, request to be an AI, and/or otherwise look at your own policy.

Section 2 of the policy deals with the “non-liability (i.e., statutory) costs associated with pollutant losses:

(2) Any loss, cost or expense arising out of any:

(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, “pollutants”; or

(b) Claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, “pollutants”.

However, this paragraph does not apply to liability for damages because of “property damage” that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or “suit” by or on behalf of a governmental authority.

This is important as standalone pollution coverage is available for these costs, many of which are quite substantial, especially if you’re dealing with waterways. Since this is also a completely separate section to the exclusion (item 2 instead of item 1) it also means that if you otherwise have coverage under the CGL for a pollution loss, you still won’t have statutory/regulatory compliance costs paid.

The Pollution Exclusion is one of the hardest to parse. For a personal “internal summary” I reiterate what I said before: my advice is to never rely on the CGL for pollution coverage. Even if you are “lucky” enough to have some sort of pollution loss covered you’re still bare for any sort of continued testing and regulatory compliance, costs which can accrue for literal years.

In a future article we will look at options for some coverage here, on the Auto, as well as a sample standalone policy. Stay tuned!

Hired & Non-Owned Auto on the GL – A Problem

Let’s say you have an insured with multiple companies, all owning various assets or performing different operations. A classic example is a property owner who deeds each of her properties into a separate LLC. No problem here – simply write a separate General Liability/Package policy for each location with a Designated Premises/Project limitation. This happens all the time, especially in the world of real estate where a designated premises endorsement is sometimes mandatory. 

Like a good insurance broker you recommend Hired & Non-Owned Automobile to the insured. For ~$150 to add to a BOP, and slightly more to put it on a Package, it’s a no-brainer upgrade – everyone should have this coverage in place. 

But here’s the rub – most Hired & Non-Owned coverage is an endorsement that amends the underlying General Liability… which you’ve limited to Designated Premises or Projects. Meaning your Hired & Non-Owned Auto coverage likely only protects the insured from BI/PD arising out of the ownership, maintenance, use, etc. of the designated premises, or only those operations you specified. 

As long as you put Hired & Non-Owned Auto coverage on each policy though, maybe you’re safe? Probably not 100%. Let’s say you have an insured that owns various real estate under the name “Real Estate LLC”. There are 3 properties, each insured with separate carriers for price or coverage reasons and each with a policy that contains a Designated Premises Limitation. You’ve done your job and endorsed Hired & Non-Owned onto to all 3 policies. 

Now this client, via their “Real Estate LLC”, is about to purchase a 4th property. They drive over to meet the seller and cause a serious accident. Very arguably the injured party can say your client was driving for/on behalf of “Real Estate LLC” – after all Real Estate LLC was the one making the deal to purchase this property. Clearly this is a Hired/Non-Owned situation – a member of Real Estate LLC was using an auto that Real Estate LLC does not own in its business on its behalf. 

Now remember – we have three policies written in the name of “Real Estate, LLC”. But all have a Designated Premises Limitation which says in part: 

[We cover liability for] The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises; 

While undefined, simply because an action is being conducted by a common owner doesn’t make that action “necessary or incidental” to any particular owned premises, otherwise this endorsement would be meaningless. So the question is – does looking at a new building, completely unrelated to your others, constitute “necessary or incidental” activities, as it relates to the other properties and their policies, thus triggering the General Liability coverage (and the Hired/Non-Owned endorsed thereto) under one or more? While ultimately a legal question, my answer would be an emphatic, “No.” 

There are solutions to this situation – write Hired/Non-Owned on a separate/standalone auto policy; this policy won’t be limited to the “Designated Premises” like the GL would be. Further, since a separate Hired/Non-Owned Auto policy would “follow the insured”, you wouldn’t need to endorse it on every policy that insured has – potentially saving money.

Granted, it can be difficult to find a carrier that will write standalone Hired & Non-Owned coverage, but it’s even more unlikely to be able to change or manuscript your GL coverage.

Granted, this is likely a small crack in coverage but it’s one to be aware of. It’s also more likely to affect “smaller” insureds who don’t have the clout – say a schedule of 50 properties – to be able to convince a carrier to offer an exception. At the very least, though, even if you can’t find coverage you need to make your clients aware of the potential gap.

Personal Methods for Servicing an Account

Below are the “First Steps” I personally take when attempting to understand and present an account. These are not concrete in any fashion but simply methods I’ve developed and which have received positive feedback. If you can be an expert on your own clients then you can present them much more holistically to your carriers, and any sort of give-and-take will be far, far easier because of it.

Create a Profile

Without exception, every single one of you clients should have a profile. Think of these as “sell sheets” – they are the highlights of your client and provide a basic overview of history and operations.

Profiles will be the first thing most carriers review and, as such, help to frame the discussion. Think of it this way: if you were to simply rely on ACORDs for information you would know very little about an actual company and anything that “stood out” to you, say seeing an extra heavy fleet, will do so in the worst possible way. You would start to ask yourself why they’re on there, think about the huge risk associated with extra heavy units rather than PPT, etc.

You do this because you’re an insurance person and you’re supposed to go off on mental tangents like that. After all, our job is to anticipate the unexpected as best we can and protect our clients from it. But you absolutely do not want a carrier making their own assumptions about what is and is going on.

In essence, the more open ended questions you leave your carrier partner with the more they’re going to assume negatively in your favor. After all they have a limited time frame in the day just like you, so why would you make it hard for them to find relevant information, especially when it’s on something that may be concerning with appetite or capacity.

Profiles are an introduction and, if done right, allow the entire process to proceed with much less resistance and stumbling. It puts both you and your carrier partner on the same page – literally (see what I did there?).

At the very least, these profiles should contain:

  • Name, history, size, employee count
  • Description of operations
  • Safety program/risk management
  • List of operating entities/FEINs

I cannot tell you the number of times simply going through this process has produced new information for me – whether it’s finding a new corporate entity, or finding one that has shut down, or getting details on a service offered I never knew about.

Consider the profile a little research project and treat it accordingly – because any carrier partner is going to do the same thing and you do not want to be the one learning new information about your client when you discuss policy terms.

Review Legal Sources, Review Ownership, Review JVs, and Make an Org Chart

Related to the Profile but important enough that it bears repeating: look up all entities your client has. Domestically, nearly every state will provide you with free access to the Secretary of State business register website where you can search by name, sometimes owner, etc. The number of entities you will find will astound you – I have even had the pleasure of telling the client about an entity that was opened up in their name.

On the flip side, always, always, always ask about Joint Ventures. These often will not show up in searches since they will be under different names, or ownership will be in the name of an executive and not the company. Especially in certain industries (looking at you, construction) JVs are incredibly common and set up almost without thought. However, when it comes to insurance programs, consequences can be dire if you don’t have it set up correctly.

Finally, you need to review ownership – especially if your client has JVs. Never think that something is a subsidiary until you see the stock holdings. Often you will be told something is a subsidiary when it’s really a sister company. And to the client it is – if Martha owns both 100% of Company A and Company B, she basically considers them subsidiaries. However, from an insurance standpoint, they are separate – you will not get “automatic” coverage for one simply because you insure the other.

Get DETAILS on the Operations

The number of industry people I’ve met who know nothing about their client beyond “oh they’re an XYZ maker” is astounding. If someone makes wood products do they also have tree farms or storage areas? Do they take in recycled or treated wood? What machinery do they use and is it a fire or personnel hazard? If someone is a medical office do they use third parties, such as overseas radiologists? Do they moonlight anywhere? If your client is in construction do they also design? Etc. Etc.

Your client is the best source of information for them, so as you’re getting the “basics” down for your profile make a list of questions you have – what kind of equipment is used? What’s your territory of operations? Do you sell overseas?

A great place to review what might be asked are the applications that are ultimately going to need completed anyway. So take a look at those and see what carriers want to know about and then go even a step further. This is because if an application asks “Do you perform XYZ” the question is likely there because of appetite or coverage reasons. So if you get that information beforehand you’re in a much better position than trying to figure it out 2 weeks after you sent in an application and 3 days before you need the quote.

Review Safety Programs

Every client of decent size will (or should) have a safety program. While not all industries will be as critical of these, it’s incredible information to have and to provide with an application even if it’s not specifically asked for. Being able to show a dedicated, robust safety program up front will help allay concerns should they arise later.

If your client requires all your employees to get a certain certification state it loud and proud! If they won awards, provide magazine articles showing such! If they work with very large national/international partners say that as well – those entities have the luxury of being judicious regarding who they use and it’s a definite star on your record if you are in such a trusted network.

Review Claims, Loss Picks, Details/Response

This topic is incredibly important because it’s likely the part your direct carrier partner (underwriter) has the least control over. If someone picks out at $X then it’s hard to bargain around that.

However, what you can do is review everything yourself first. Get 5-10 year loss runs and run a loss pick. For any significantly sized claims get details and, just as importantly, get responses your client made to their operations to prevent that from happening.

This is because anything of concern in claims is going to get kicked upstairs and you’re going to have near-zero influence on it. But what you can do is get all the information beforehand and present a compelling case to your direct partner (underwriter) then *they* will have the tools to advocate on your behalf. This underwriter, and their direct reports, will be the ones interfacing with whichever division is able to make an exception. So if you leave them hanging with imperfect information then you’re sabotaging your own efforts.

Anticipate and Provide

A few years into the insurance service game and you should know what is generally required of each client and/or carrier. It’s crazy to think that though we are busy all the time, we actually only “work” on a submission for a very short period of time, just at multiple intervals.

Your carriers work the same way – they want to pick up a file and complete it. If they can’t it gets put back down and you either get to wait another week or you get a 10 word e-mail with a single question. Then another. Then one asking for a copy of financials. Then, then, then….

You can save literal days or weeks off of processing time by eliminating as much of this back and forth as possible – and your carriers will love you for that. Can you imagine the feeling you’d have if you got a piece of new business that had a full copy of all policies, endorsements, applications, and currently valued loss runs – rather than the misspelled name of the business on a cocktail napkin we usually get? You’d be ecstatic – you’d be able to work on that start to finish.

Again, carriers want that to. So if you can anticipate needs – even going so far as to securing supplementals which “may not” be needed but are nice to have – it will make your relationship, and the potential outcome for your client, so much better.

 

 

You may look at this and say this is way more work than you’re doing when (e.g.) a piece of new business comes up. And you’re probably right. But I have found that these efforts save so much more time in the future and, in fact, things like the profile become a personal reference for me; I can literally open them up and copy/paste an org chart to someone rather than trying to make one from scratch via 12 screens in a management system.

But caveat emptor: these are things I do personally and they may not transfer to others. But whatever you end up doing I would suggest you track how your carrier partners respond because, ultimately, if they are happy with your work then they will be much better and able to respond to your coverage asks.