When Should You Accept an Oral Claim Denial?

A condo association reports that its garage door malfunctioned and damaged a unit owner’s car. Parking is available underneath the condo building, but not in individual garages.

The report says: “We had an incident end of day last Saturday. Our steel commercial garage door malfunctioned and damaged one of the resident’s cars. Specifically, the safety strip malfunctioned and failed to stop and raise the door. We are collectively of the position that this claim rests on the association for remedying the resident’s car. The door installer assessed the door yesterday and is scheduled to replace the door safety strip.”

Q: “The association’s general liability insurer says there’s no coverage because the unit owner is an additional insured on the CG 20 04—which makes them an insured. They say if this endorsement was not on the policy, it would be covered. What do you think about this?”

A: “Never accept an oral claim denial. All denials should be in writing, cite the governing policy language and explain how that language applies to the unique facts of each claim. Ask the adjuster to cite the exclusion in the CGL policy for one insured being liable to another—it doesn’t exist. There is coverage for insured vs. insured claims/suits—commonly called cross liability—under the ‘Separation of Insureds’ clause in the CGL policy.

Some carriers have ‘cross liability’ endorsements to exclude this. Absent that, the only ‘insured vs. insured’ exclusion in the CGL policy is under the ‘Who Is An Insured’ section, and it applies to claims or suits by employees and volunteer workers against specified insureds.

Keep in mind: This assumes this is the ISO CGL policy. It has the correct form number and edition date for an ISO CGL, but I don’t see any copyright notice on the policy, which would reveal whether the form has been modified. I did note the ISO ‘Separation of Insureds’ provision was not plural—‘Separation of Insured’—so I can’t tell whether other differences apply.”

Bill Wilson is director of the Big “I” Virtual University.

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