The Difference Between CGL and E&O Claims

February Forms & Substance

The Difference Between CGL and E&O Claims

Pull that CGL policy out of your desk drawer. Got it?

Ok, now here’s a pop quiz.

You have three hours to complete it. Ready? Find the professional liability exclusion in the CGL. What? You didn’t find it? Surely it’s there somewhere—even the ISO homeowners forms have one, right?

As amazing as it sounds, there is no professional liability exclusion in the CGL. However, the lack of a specific exclusion doesn’t mean that all errors, omissions, mistakes, etc. are covered, but the lack of one sure makes it difficult to determine whether some occurrences are covered or not. Recently, the Big “I” Virtual University heard about a contractor who accidentally built a house that extended across the property line of a neighbor. The CGL carrier denied the claim, saying it was a professional liability claim.

What do you think? Was this an “occurrence” (defined in the CGL to include an accident) that triggers coverage under the CGL? Has there been any “property damage” as defined by the policy?

Unfortunately, there isn’t enough space to explore all these issues here, but there is plenty of information on the topic in the Big “I” Virtual University Research Library.

For answers and more questions, click here.

May I Use That Auto?

Most auto policies—personal and commercial—exclude the use of autos without permission. Commonly referred to as “car thief” exclusions, they may exclude even more than that. Just what constitutes “permission” from the owner or user’s perspective, and does it have to be explicit or not?

The PAP and BAP differ somewhat in their approach in that the PAP provides very broad coverage for individuals within the “insured” definition and deals with the permissive use issue via exclusion. The BAP, on the other hand, addresses the
issue within the “who is an insured” section without a special exclusion.

The other major area in which these forms differ is in what constitutes “permission.” The PAP considers permission from the perspective of the operator, while the BAP requires either explicit or implicit permission be granted by the named insured/
owner.

In addition, whether use is permissive or not may depend on the edition date of the policy form. For example, in the case of the PAP, there was a “family member” exception added to the exclusion in 1998.

To explore the policy language and case law involving the ISO PAP and BAP with regard to permissive
use, along with the validity of driver exclusion laser endorsements that target specific individuals, click here.


Rental Cars and Unauthorized Drivers

An insured called to advise that he was going on vacation and renting a car in his name. He has a 19-year-old that he understands cannot drive the rental car by the rental car company’s requirement. However, he is planning on letting the 19-year-old drive

the car anyway. His question was: Will his personal auto policy cover him in the event of an incident while his son is driving the rental car?

The answer is no—it is highly unlikely that his PAP would respond because of the following exclusions.

Liability Exclusion: 8. Using a vehicle without a reasonable belief that that “insured” is entitled to do so. This exclusion (A.8.) does not apply to a “family member” using “your covered auto” which is owned by you.

Physical Damage Exclusion: 8. Loss to any “non-owned auto” when used by you or any “family member” without a reasonable belief that you or that “family member” are entitled to do so.

Clearly, there is knowledge that the 19-year-old is not entitled to use the vehicle and it is presumed that he knows that. His only option would be to buy the rental company’s liability and LDW/CDW coverages, although almost certainly the coverage would be voided if an unauthorized driver uses the vehicle.

The solution here is to abide by the contract. It is doubtful that teaching a young person to willfully violate agreements is a good lesson to be passing along anyway.

To review our complete analysis, click here.

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