Does the CG 21 44 endorsement limit commercial liability coverage to a specific location? Here's why it may not suit a policy that covers an insured with off-premises operations.
An employee of a coffee distributor installs a coffee maker at a customer’s location. The water hookup fails, flooding the coffee shop. The carrier denies the claim based on the designated premises endorsement, CG 21 44, explaining that this endorsement limits commercial liability coverage to the premises only.
According to the adjuster, “Since the endorsement reads ‘This insurance applies only [emphasis mine] to property damage arising out of the ownership, maintenance, use of the 817 W. Earl St. premises,’ it appears that commercial liability coverage is only limited to that location."
Q: "I was under the impression that this endorsement limits coverage to operations that emanate from the described location. Is it true that it limits commercial liability coverage to that specific location?”
A: “This is a perfect example of why the CG 21 44 should never be used on a policy that covers an insured with off-premises operations, completed operations and products exposures. The endorsement is designed for premises-only exposures, such as a restaurant or apartment complex.
Assuming your insured paid a premium for products and completed operations, the underwriter should have been aware of the nature of the insured’s operations and the possibility that they took place away from the location listed on the policy. In that case, your best hope is that the claims department will change its position based on the insured’s reasonable expectations of coverage and the fact that they presumably paid a premium for off-premises activities.
The International Risk Management Institute discusses the issue and references a court case, Century Sur. Co. v. Seductions, with a very broad interpretation of ‘incidental.’ Try citing it to convince the adjuster that this was an incidental operation.
For more information, check out a Big ‘I’ Virtual University article we previously published: ‘CGL “Designated Premises” Coverage,’ which we should probably rename as ‘CGL “Designated Premises” EXCLUSION.’ This is a messy endorsement, and agents should fight it every time an underwriter wants to attach it. There are simply too many potential situations where it’s unclear whether there’s coverage or not.”
Bill Wilson is director of the Big “I” Virtual University.
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
