CGL Coverage for Rekeying Locks

We ran this “Ask an Expert” scenario by the Virtual University faculty and the consensus is that the claim is covered. Exclusion j. (4) applies only to personal property. The locks are part of the building (real property) and are not personal property. The locks (real property) were also not in the insured’s care, custody or control.

The focus is on the physical loss of the keys when the issue is the resulting loss of use of the locks. The definition of “property damage” includes loss of use of tangible property that is not physically injured, which is the nature of the loss to the locks.

The insurer would have to cite an exclusion like j.(5) or j.(6), neither of which applies because no work was being performed on the locks.

For more information, click here.


Kids, Cars and Divorce

Mom and dad are divorced. Daughter lives with mom, but dad has offered to let his daughter drive one of his cars, which is currently insured on his own personal auto policy (PAP). He’s fine with mom driving it when needed. However, he does not want to add his daughter to his policy. What are the insurance implications under mom and dad’s 2005 ISO PAPs for this arrangement?

While driving the auto, mom and daughter are covered by dad’s PAP as permissive users. However, under mom’s PAP, liability exclusionB.2.b. applies to mom and B.3.b.applies to the daughter. If mom adds the extended nonowned endorsement PP 03 06, she would have coverage, but the daughter wouldn’t. (Note: If mom had a 1998PAP rather than the 2005 edition, the 1994 PP 03 06 that was used with the 1998 edition would extend coverage to mom and daughter, something to keep in mind since many insurers still use the older edition.)

Needless to say, dad’s insurer probably isn’t going to be happy if it learns that one of his autos is being regularly used by someone who is not a member of his household. For that reason, there could be a more appropriate way to insure this scenario. To explore that option, click here.


Not All Damage to “Your Work” is Excluded

A subcontractor installing a deck on a home under construction penetrated a foundation water barrier and rain water entered, damaging the basement ceiling, wall and partition sheetrock and carpeting. The general contractor’s insurer has denied the claim under the CGL policy, citing exclusions j.(5) and j.(6). Is the insurer right? In a word…no. Exclusion j.(5) applies to property “on which” the insured “is performing” operations. The insured was not working on the property that was damaged and the damage did not occur at the time that work was being performed. Exclusion j.(6) applies to property that must be restored, repaired or replaced because the insured’s work was incorrectly performed “on it.” Again, the insured was not working on the property that was damaged and there is not evidence that the insured’s work was incorrect. These are workmanship exclusions that seek to prevent the CGL from becoming a performance bond or a warranty. They apply to damage to property on which a (sub) contractor is performing operations.

To read each of the observations of the Virtual University faculty, click on the Forms& Substance link at, click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.