Commercial General Liability

Azfar Arshad

Sources of Risks in Liability Insurance

• The Premises Risks

• The Operating Risk

• The Product Risk

Premises Risk

• Refers to the company’s premises including land, works, manufacturing plant, machinery, raw material etc

Operating Risk

• Risk lies in the particular nature of the company ie in the way in which the company offers and provides its gods or services.

• Closed Operations operating risk is largely confined to the enclosed work site.

• Open Operations works on third-party sites eg building firms, forwarding agents etc.

Products Risk

• Relates to what the company manufactures or what services it performs.

• The policy does not cover loss or damage to product but only the consequential losses.

• Defective matches spontaneously combust destroying customers warehouse.

Premises RiskLarge Medium Small Reason

PharmaciesChemist

Manufacture of Pharmaceutical products

Heating fuel trade (incl. fuel depots / tanks)

Restaurant

University hospital

(commercial) Painting business

Agriculture operations / farms

Operation RiskLarge Medium Small Reason

PharmaciesChemist

Manufacture of Pharmaceutical products

Heating fuel trade (incl. fuel depots / tanks)

Restaurant

University hospital

(commercial) Painting business

Agriculture operations / farms

Product RiskLarge Medium Small Reason

PharmaciesChemist

Manufacture of Pharmaceutical products

Heating fuel trade (incl. fuel depots / tanks)

Restaurant

University hospital

(commercial) Painting business

Agriculture operations / farms

Premises RiskLarge Medium Small Reason

PharmaciesChemist

X Intensive customer traffic, rather simple, closed premises

Manufacture of Pharmaceuticals

X Complex buildings and installation, few visitors

Heating fuel trade (incl. fuel depots/tanks)

X High environment impairment risk (inc. fuel depots) (spills)

Restaurant X Many customers, varied installations (Kitchen, etc)

University hospital X Expensive personal injury resulting from malpractice

(Commercial) Painting business

X Little customer traffic, simple premises

Agriculture operations / farms

X Few visitors, but dangerous installation (silos, manure pit)

Operation RiskLarge Medium Small Reason

PharmaciesChemist

X Danger of medicine exploding, improper storage (shelf falls)

Manufacture of Pharmaceutical products

X Explosion hazard, environment impairment due to chemical spill

Heating fuel trade (incl. fuel depots / tanks)

X Heating oil spills from storage facilities, fire hazard, poisonous vapors

Restaurant X Exposure of person or property due to employee negligence.

University hospital X Expensive personal injury resulting from malpractice

(Commercial) Painting business

X Open operations, poisonous paints and solvents, fire hazard

Agriculture operations / farms

X Relatively little contact with public

Product RiskLarge Medium Small Reason

PharmaciesChemist

X Medicines directly applied to persons

Manufacture of Pharmaceutical products

X Wide variety of product claims (series – claims)

Heating fuel trade (incl. fuel depots / tanks)

X Low exposure (the oil will have to damage the furnace)

Restaurant X Food poisoning

University hospital X Food, medicines and blood derivatives

(Commercial) Painting business

X Paints and varnishes can damage the surface they are applied to.

Agriculture operations / farms

X Losses due to impurities, milk, meat, eggs

CGL - Coverages

• Bodily injury and Property damage Liability

• Personal and advertising injury Liability

• Liability arising out of Travelling executives

• Medical Payments

CGL - Coverages

• Bodily injury and Property damage Liability arising out of – Premises– Operations – Products– Products – completed operations• Includes “bodily injury and property damage occurring

away from your premises and arising out of your product and your work.

CGL - Coverages

• Personal and advertising injury Liability– PI means injury other than “bodily injury” arising

out of following offenses• False arrest, detention or imprisonment• Malicious prosecution• The wrongful eviction from, wrongful entry into, or

invasion of the right of private occupancy • Oral or written publication that slanders or libels a

person or disparages an organization goods or services• Oral or written publication that violates a persons right

of privacy.

CGL - Coverages

• Personal and advertising injury Liability– AI means injury arising out of following offenses• Oral or written publication that slanders or libels a

person or disparages an organization goods or services• Oral or written publication that violates a persons right

of privacy. • Misappropriation of advertising ideas or style of doing

business• Infringement of copyrights, title or slogan.

CGL - Coverages

• Medical Payments– Indemnity iro bodily injury caused by an accident• On premises• On ways next to premises• Because of your operations

CGL - Insured

• In case of: – Individuals: Insured and Spouse (in respect of

conduct of business only)– Partnership: All partners, members and their

spouses– Limited Liability Companies: Corporate Entity,

members, managers and employees– Other Organizations : Directors, Executive

Officers, employees

Scope of Indemnity in time

Various Stages of liability Claims

• The Initial Act – Negligence or other legal wrongdoing

• The injury, loss or damage• The Manifestation of the injury or the loss• The policy holder’s awareness of injury or loss• The claim against the policy holder• The notification of the claim to the insurer• The final Settlement of the Claim

Various Triggers the question are we at risk

• Acts Committed

• Occurrence

• Manifestation

• Claims Made

Scope of indemnity in time Triggers

• Focus – Claim Made• According to the Claim Made principle, the cover is

triggered when the injured party makes his / her claim for compensation against the insured

• The applicable cover is therefore the policy in force at this time

Scope of indemnity in time Triggers

• Focus – Claim Made• Determining a specific event to a specific policy year

is a tough task• The right policy year determines: applicable cover,

extent of financial indemnity and (MOST IMPORTANT) the liable insurer

• Unclear is very often the “occurrence” principle as it leads to the triple trigger problem

Scope of indemnity in time Triggers

• The Triple Trigger Problem• Claims free policies will be triggered after a long time • High sums. 10 year ongoing renewed and each year

can be triggered• Accumulation of one policy holder or an entire

industry• It is clear now: we have not charged the right

premium• Reserves? Do we have enough – obvioulsy not

IBNR’s?

Scope of indemnity in time Triggers

• CM solves this problems • Eliminates / restricts room for interpretation• The event of trigger is brought into the present• Insurer can react faster which allows• Carrier to maintain capacity over longer periods• Occ. based policies may be eroded over time • Older, lower limits do not fit to today’s

compensation payments

Scope of indemnity in time Triggers

• CM - Key Elements

• Retroactive Date• Scope of indemnity in time • Discovery period• Claims series clause (batch clause)

Scope of indemnity in time Triggers

• Retroactive Date

• Usually fixed on the date of the 1st CM Policy • Cover only for events happened after the

retro date AND• Claims related to the event has to be made

during the CM policy period

Retro-active Date

Scope of indemnity in time Triggers

• Discovery Period

• It covers those events which takes place during the actual policy period but which only give rise to claims during the discovery or extended reporting period

• Discovery periods can vary from a few months upto several years, but usually not more than 5 years.

Scope of indemnity in time Triggers

• Claim Series Clause

• An occurrence or series of occurrence arising directly from a common cause shall be deemed to be one Occurrence regardless of the number of persons who sustain Bodily injury or Property damage

• All such Occurrence shall be deemed to have occurred on the day of the 1st claim arising out of such occurrence.

Scope of indemnity in time Triggers

• Risks to be underwritten on CM Principle • Latent losses already known• Substance that have gradual of continuing

effect• Products that may create mass losses• Risk where individual losses are difficult to

allocate an exact point in time.

Scope of indemnity in time Triggers

• Risks to be underwritten on CM Principle

• Pharmaceutical risks • Chemical risks • Oil and Petro risks• Cosmetics• Professional Indemnity (A&E, MedMal etc)

Scope of indemnity in time Triggers

• Focus – Occurrence Principle• The date of insured event: is the occurrence during

the policy period • Retro Date: Without time limit even when the act

was committed prior to policy and loss was unknown at inception

• Series Clause: same as CM• Limit: The limit of the year applicable at the time loss

occurred, which may be too low or already eroded.

Scope of indemnity in time Triggers

• Focus – Deciphering Triggers• This Insurance does not apply to bodily injury or

property damage which occurred before the retroactive date ……….

• Losses are insured which are caused within the policy period and which occur within turkey ………..

• This Insurance applies only to bodily injury or property damage which occurs during the policy period ……….