Coverage Challenges In CGL Insuring Agreements

This article discusses certain challenges found in the insuring agreements of the Insurance Services Office, Inc. (ISO), commercial general liability (CGL) policy (April 2013 edition). Because the coverage implications of these challenges are easy to confuse, the purpose of this article is to help foster an improved appreciation when contemplating the particulars.

While the assertions here will not apply in all circumstances, as there are exceptions to every rule, the basis of the conclusions is the generally accepted insurance industry understanding of the workings of a CGL policy.

When a catastrophic event occurs, invariably, someone will insist that the CGL insurer should just write a check for the limit, deposit it with the clerk of courts, and wash their hands of the claim. In other words, they should just get out.

The wording of the ISO CGL policy does not allow the insurer to simply tender its limit and avoid defending its insureds.

The insurer’s duty to defend does not end until the applicable limit has been used in the payment of judgment or settlement. This means that an insured has a right to be defended against any "suit" alleging damages arising out of covered bodily injury or property damage unless and until the full limit is paid via a settlement or settlements or pursuant to a judgment for damages.