ISO has filed a change for its BOP, CGL, and umbrella and excess programs that, according to IRMI, “…marks a significant and historically unprecedented narrowing of coverage that has traditionally been available to general liability insureds with respect to designated premises.” This change is effective in most jurisdictions in April 2017 and applies to ISO forms BP 04 12, CG 21 44, CU 21 11, and CX 21 10. Your carriers may use these form numbers or their own. The ISO forms’ titles are “Limitation Of Coverage To Designated Premises, Project Or Operation.”
These “designated premises/projects” endorsements have been problematic for years because of the language that says that coverages apply only if arising out of “The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises….” The question has always been, to what extent are operations away from a designated premises covered? How far away can you be and what constitutes “necessary or incidental to”?
In their filing, ISO cites two recent court cases where coverage was found for BI and PD that occurred, in one case, at an unscheduled premises (largely because the “negligent decision” from which the BI/PD arose took place on the scheduled location) and, in another case, 500 miles from the designated premises. As a result, ISO has revised the language on all of the aforementioned forms so that coverage applies only if loss:
- Occurs on the premises shown in the Schedule or the grounds and structures appurtenant to those premises; or
- Arises out of the project or operation shown in the Schedule;
For designated premises, there is no longer any automatic coverage for “operations necessary or incidental to those premises.” This is true premises-only liability in that there is no coverage that takes place off premises (or appurtenant grounds/structures) UNLESS such off-premises operations are specifically scheduled. The question is, how do you know what operations might be necessary or incidental to the designated premises so that you can list ALL of them.
Aside from that, what are the implications if Hired and Nonowned Auto coverage has been added. Many carriers have H/NO endorsements for their CGL policies. ISO does not. They removed this endorsement from the GL line over 30 years ago and coverage in the ISO program must be added via Symbol 1 or Symbols 8 & 9 under their BAP program. But ISO still provides the BP 04 -04 – Hired Auto And Non-Owned Auto Liability endorsement in their BOP program.
So, for H/NO coverage, what is the potential implication for this designated premises change? A literal interpretation would be that, if only a premises is scheduled without any mention of a project or operation, then the H/NO coverage under the BP 04 04 only applies to accidents that occur on that premises. Needless to say, this makes the coverage under the BP 04 04 virtually illusory and certainly can’t be the intention of the BP 04 04. However, that’s exactly what a literal reading of these forms would indicate.
As a result, when an ISO BOP policy includes H/NO coverage under the BP 04 04 AND the designated premises limitation BP 04 12 endorsement, in addition to the schedule premises, a notation should probably be made in the “Project Or Operation” schedule that coverage applies to the operation of autos covered by the BP 04 04 (along with a list of any other operations necessary or incidental to the scheduled premises). If your carriers also provide H/NO coverage via proprietary endorsements on their CGL policies, the same action might be taken on the CG, CU, and CX Limitation endorsements.
The better solution is to have the BP 04 12 REMOVED from the policy if at all possible in order to avoid these issues.
Consider sending a link to this blog post to your underwriters and ask them what they suggest you do. Then feel free to return and Comment on this post below…you do not need to include the name of the insurer, just how they plan to address this issue.
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