C111: Advanced Loss Adjusting Chapter 1:Liability Coverage Issues Environmental Claims Review Quest
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9) Define "occurence" under a CGL policy.
Occurrence: An accident as well as continuous or repeated exposure to substantially the same general conditions
10) Explain how the following qualities affect coverage of an occurence under a CGL policy:
11) How does the concept of vicarious liability for employers apply to sexual abuse claims?
Vicarious liability for employers has expanded for sexual abuse claims. Although an employee who commits sexual abuse would not be acting within the scope of their prescribed duties, when the adult employee has significant authority and exercises it over a child, it provides the basis for the broad interpretation of vicarious liability.
Ex: Persons providing counselling and other support services represent authority figures to troubled youths. The nature of their employment provides them with broad authority.
12) How does coverage under the CGL policy apply to damage resulting from defective products or fault workmanship?
Coverage under the Commercial General Liability policy is limited to damage resulting from a defective product or faulty workmanship and does not extend to the faulty workmanship or product itself.
Ex: In the course of building a house, employees of the ABC Contracting Company Inc. did not properly secure one of the walls and it collapsed onto a neighbouring property causing damage. ABC's Commercial General Liability policy would cover the damages to the neighbour's property and any injuries to people in that house. The damages to the wall under construction would not be covered under this policy, nor would any injuries to the insured's employees. Other policies might provide such coverage.
In the above example the contractor's Commercial General Liability policy was designed to insure the risk of bodily injury or property damage caused by the contracting firm or its work. That is, the Commercial General Liability policy was meant to cover damage resulting from work done, but not the work done by the insured. Coverage is not intended for the insured's work that does not meet adequate standards.
Policies generally exclude the particular part of property on which a contractor is working. A typical Commerical General Liability working reads as follows:
This insurance does not apply to property damage to that particular part of real property on which you(the insured) or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the property damage arises out of those operations.
Some feel that if such coverage were in place it would encourage insureds to perform carelessly and then claim from insurers for redoing the work as it should have been done.
14) What are the 2 basic policy trigger approaches used in CGL and other liability policies?
The 2 basic policy trigger approaches used in the Commercial General Liability and in other liability policies are claims-made and occurrence.
15) When is coverage triggered under a claims-made wording?
Claims-made policy form was introduced in the 1980's for the bodily injury and property damage insuring agreement. It triggers coverage when a claim is made against the insured during the policy period. The date of the incident causing loss - the injury or damage - does not necessarily have to fall within the policy term.
Claims-made Insuring Agreement
We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of "bodily injury" or "property damage" to which this insurance applies but only if a claim for these compensatory damages is first made against any insured during the policy period. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments - Coverages A, B and D. This insurance does not apply to "bodily injury" and "property damage" which happened before the Retroactive Date, if any, shown in the Declarations or which occurs after the policy period. The "bodily injury" or "property damage" must be caused by an "occurrence" must take place in the "coverage territory"...
Ex: A concrete foundation for a house is poured in December of 2003. A faulty component is added to the concrete. The faulty component starts to act on the concrete foundation in 2004. Damage ensues and a claim is presented in April 2004. Although the work was done in December of 2003, the claims-made policy in force in 2004 would trigger coverage when the claim was presented to the insured, assuming an appropriate retroactive date was used.
16) What does the retroactive date specify?
Retroactive date - a cut-off date for an incident to qualify for coverage. Retroactive dates usually precede the policy's inception date. Not all claims reported during the policy period are covered, the incident must have happened within the retroactive period or the policy period.
17) What does an extended reporting period provide for?
Claims-made policies provide for an extended reporting period during which the policy does not "expire" for the purposes of reporting claims first made against an insured. The basic period of time can be extended by endorsement. These special policy extensions allow coverage for an incident happening during the policy period and advanced as a claim after expiry of the policy but within the discovery period.
18) List 3 circumstances that might lead to gaps in an insured's coverage.
a) State how coverage is triggered for each of the following trigger theories:
d) continuous trigger
B) Manifestation: Holds that injury or damage does not happen until the injury or disease becomes apparent, i.e., manifests itself.
Thus the Commercial General Liability policy in place when the 3rd party could have or did become aware of the damage or injury would respond to the claim. Suppose a person has been exposed to asbestos fibers but shows no symptoms of illness immediately. After a number of years, the person develops persistent cough and x-rays show lung damage - the manifestation of the illness from contact with asbestos. The symptoms that impaired the claimant's sense of well-being or the lung damage would be considered manifestations of the illness. The policy in effect when this happened would respond to the claim.
This theory can also apply to property damage liability claims.
Ex: in the winter, road salt contaminates the concrete floor of a parking garage and causes the concrete to deteriorate. Throughout the winter, as cars track salt into the garage, the damage continues. At first the damage is not visible; when the concrete starts to crumble, the Commercial General Liability policy coverage may be triggered.
C) Exposure: Holds that any policy in place during the time that the claimant was exposed to the harmful conditions causing deterioration should respond. Insurers on the risk during the periods in which the injured party was exposed to the substance could be called on to pay the loss. Assume the injured party worked in the harmful environment from 1950 to 1965 and symptoms of the disease manifested within the person in 1992. Policies insuring from 1950 to 1965, during the time of exposure to the injurious substance, would be triggered under this theory.
Consider a property damage example:
Assume that the deterioration to the garage began when the first car tracked salt into the garage and continued with each subsequent car. The claim for the damage would trigger policies in force during the period of exposure(while the garage was operating).
C) Continuous Trigger or Triple Trigger: Identifies 3 events that trigger coverage :
1) during the exposure to the offending product, Ex: the inhalation of asbestos fibers in asbestosis claims;
2) during the latency period when the disease is progressing but there is not necessarily any further exposure to the damaging substance and the symptoms of the disease do not yet exist;
3) when the injury becomes manifest. The argument is that the disease is progressing continuously since the initial exposure and all policies in effect over this period would be activated.
Injury-in-fact theory: Holds that a policy will respond if damage actually happened during the policy period, whether or not anyone was or could have been aware of it, and regardless of when the negligent act or omission took place. All policies in effect during the period an injury happens would be triggered; but not those in effect when a claimant was only exposed to harmful conditions.
Ex: that injury happens as a person inhales or ingests asbestos fibre. Injury or damage not detected at the time of injury will not affect the application of this coverage theory.
19) How have Canadian courts applied coverage trigger theories?
In Privest Properties v. Foundation Company of Canada(1991) the B.C. Supreme Court said that there was no uniformity of opinion on the coverage trigger theories but the trend was to adopt the injury-in-fact theory in bodily injury cases and the manifestation theory in property damage cases.
20) What guideline must an insured abide by with respect to the timing of claims reporting?
21) What are the duties of an insured towards their insurer when reporting a claim, as outlined in the CGL policy?
23) Define "personal injury" as it applies to a CGL policy.
24) Under what circumstances does personal injury coverage extend to the insured's intentional acts?
25) What is the difference between libel and slander?
26) List the ways in which slander or libel can injure someone's reputation.
27) What is usually the purpose of a lawsuit brought in slander or libel?
28) What can be done to mitigate damages due to libel or slander?
29) List the recognized defences available to defend against a claim of a libel or slandor.
30) Give 3 medical expenses covered under the CGL medical payments insuring agreement.
31) Who is excluded from medical payments under the medical payments insuring agreement?
32) Upon whom does the onus of proving the existence of an insurance policy fall?
33) What is the function of a sunset clause in a reinsurance agreement?
34) What is a typical definition of "pollutant" in a CGL policy wording?
35) What 2 factors create a demand for a prompt response on an environmental claim?
36) Why is nuissance a difficult tort to defend against?
37) Define "brownfields".
38) What kind of experts might loss adjusters need for residential oil spill claims?
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