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10.6 Section IV – Commercial General Liability Conditions

The Commercial General Liability Conditions apply in addition to the Common Policy Conditions found in a Commercial Package Policy (CPP). Together, these conditions explain the duties, rights, and responsibilities of the insured and the insurer under the policy.

Bankruptcy​

The insured’s bankruptcy or insolvency does not relieve the insurer of its obligations under the policy. This means the insurer must still fulfill its coverage obligations, even if the insured or the insured’s estate becomes bankrupt or insolvent.

Duties in the Event of Occurrence, Claim, or Suit​

The insured is responsible for making sure the insurer is notified in writing as soon as practicable when an occurrence or offense may result in a claim. The notice should include key details, such as:

  • When and where the occurrence or offense took place;
  • The names and addresses of any injured persons;
  • The names and addresses of any witnesses; and
  • The nature and extent of any injury or damage.

If the insured receives a claim, the insured must immediately record the details of the claim and notify the insurer as soon as practicable. The insured must also send the insurer copies of any demands, notices, summonses, or other legal papers received in connection with the claim or suit. These documents should be forwarded to the insurer immediately so the insurer can evaluate the claim and provide a defense when required by the policy.

The insured must not voluntarily make payments, assume obligations, or incur expenses without the insurer’s consent. If the insured does so, the insurer is not responsible for those costs. An exception applies to first-aid expenses. The insured may provide or pay for first aid at the time of an accident without first obtaining the insurer’s consent.

The insured may not bring legal action against the insurer until the insured has fully complied with all policy terms and conditions. This includes duties such as providing proper notice of an occurrence, claim, or suit as required by the policy.

Other Insurance​

CGL coverage may be written on either a primary or excess basis. When the policy is written on a primary basis and other collectible primary insurance also applies to the same loss, the insurers share the loss. The loss is generally shared on a contribution by equal shares basis. Under this method, each insurer contributes an equal amount until the loss is paid or until one insurer’s limit is exhausted. If the other policy does not allow contribution by equal shares, the loss is shared on a pro rata basis according to each policy’s applicable limit of insurance.

Premium Audit​

The advance premium is considered a premium deposit rather than the final premium. The actual earned premium is determined by an audit conducted at the end of the policy period. The first named insured is responsible for keeping the records needed for the insurer to calculate the final premium. These records may include sales, receipts, payroll, or a combination of these factors, depending on how the policy premium is rated. If the audit shows that the earned premium is greater than the advance premium deposit, the insured must pay the additional premium owed.

Representations​

The named insured agrees that the statements made in the insurance application are accurate and complete. These statements are based on the representations the named insured made to the insurer. The insurer relies on those representations when deciding whether to issue the policy and under what terms. For this reason, accurate and complete information in the application is an important condition of coverage.

Separation of Insureds (Severability)​

The term insured applies separately to each person or organization that qualifies as an insured under the policy. This means the policy applies to the specific insured against whom a claim is made or a suit is brought, rather than treating all insureds as one collective group. However, this separate application of coverage does not increase the policy’s limits of insurance. The limits apply collectively to all insureds. Therefore, multiple claims or suits against multiple insureds do not increase the amount available for a single occurrence or for the policy period.

Transfer of Rights of Recovery Against Others to the Insurer​

The Subrogation condition gives the insurer the right to recover amounts it has paid on behalf of the insured from any party that may be legally responsible for the loss. Under this condition, the insured agrees to transfer those recovery rights to the insurer. The insured must also do nothing after a loss to impair the insurer’s ability to seek recovery from the responsible party.

When the Insurer Does Not Renew​

If the insurer decides not to renew the policy, the insurer must provide written notice to the first named insured at least 30 days before the policy expiration date.

Insured’s Right to Claim Information (Claims-Made Form only)​

Upon cancellation, nonrenewal, or written request by the first named insured, the insurer will provide a claims summary. This summary may include paid claims, claims for which the insurer has established reserves, and notices the insurer has received about occurrences that may result in future claims.