 The CGL also covers property damage, or, more specifically, ”physical injury to tangible property.” Simple, right? Not exactly. Let’s look at this phrase with a bit more grammatical detail:  These five words are a phrase, or, “… a group of words not containing a verb and its subject. A phrase is used as a single part of speech.”[1] Central to this phrase is a preposition, which shows “the relation of a noun or pronoun to some other word in the sentence.”[2] The first two words (physical damage) are a noun phrase which is then related to “tangible property” via the preposition “to.” The online Merriam-Webster dictionary contains two potential definitions for "to:" 1.) “a function word to indicate contact or proximity,” 2.) or “a function word to indicate the result of an action or a process.” Using each definition, we get
Number 2 is clearly the mostly likely and commonly accepted definition. I’ve included number 1 mostly out of a sense of completeness. However, it’s also a possibility once we dig deeper into the definitions of the phrase’s words. Let’s further break down this phrase by defining each of the key words:[3]
We can combine the first three words into the following: “harm to (a) body that is perceptible (by touch).” Although it seems painfully obvious, a third party must be able to perceive the harm. Most definitions of the word property use the word, “thing” -- a broad and indefinite word, meant to connote, well, anything. Definitions of the word property also refer to the concept of ownership, which means the person alleging damage should have possession of the item. In legal terms, this usually means title, even if the concept is demonstrated informally. That's it for this post. Next time, I'll look at some of the different types of property seen in the case law. [1]That’s from my VERY old Warriner’s English Grammar and Composition, © 1973. [2] Id [3] I use three dictionaries: a 1982 American Heritage Dictionary, a 2004 Oxford English Dictionary, and the online Merriam-Webster Dictions.
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 If you're considering forming a captive insurance company as part of your overall risk management strategy, you probably have a lot of questions. In this webinar we look at: 1.) Risk -- what it is; what it isn't; how we can pay for it 2.) Insurance -- what it is; what it isn't 3.) Forming and running the captive It's on Friday, January 25 at noon. You can sign up here. The CGL allows an individual to sue for two types of damages: bodily injury and property damage. The policy defines the former as, “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” According to the dictionary, “bodily” means “of or pertaining to the body,” which, in turn, means, “the entire material structure and existence of an organism.” Injury means, “to undergo physical harm.” Combining these two definitions yields the following definition: “physical harm to the material structure of an organism” -- an unsurprising conclusion. The policy also covers damages from sickness or disease. These are somewhat similar terms to the layman, although using the conjunction “or” to separate them implies a meaningful difference. “Disease” is, “an abnormal condition of an organism or part, especially as a consequence of infection, inherent weakness, or environmental stress.” On the other hand, “sick” means “suffering from or affected with a physical illness.” The difference between the two seems very nuanced. The former is perhaps more severe and more likely to be resulting from external events under the control of the insured (asbestos would be a potential example), while the latter appears to be something such as an extended cold. Let’s apply these definitions to a “slip and fall” in which the plaintiff breaks a bone and also contracts pneumonia while in the hospital. The broken bone is clearly a “bodily injury” while the pneumonia is either a “sickness” or “disease.” We can more or less apply these definitions to any situation where the plaintiff’s body sustains physical damage as well as some type of infection and arrive at the same result: coverage for the damage. Finally, let’s discuss the “including death resulting from any of these at any time” clause. The purpose of this clause is to address one of the most potentially expensive results of a case from a wrongful act: wrongful death: “Any fatality caused by the wrongful acts of another may result in a wrongful death claim. Many wrongful death claims are based upon death resulting from negligence, for example following a motor vehicle accident caused by another driver, a dangerous roadway or defective vehicle, or medical malpractice.[2]” This is an incredibly complicated are of law, far beyond the scope of a blog post. Suffice it to say it’s probably covered. Next, I’ll take a look at property damage. Dictionary definitions are from The American Heritage Dictionary, (c) 1985  A discussion of the CGL’s insuring clause (where the insurer specifically states it will pay a claim in specific situations) requires a reference to §224 of the Restatement of Contracts, which defines a condition as, “… an event, not certain to occur, which must occur … before performance under a contract becomes due.” Two events must occur before an insurer will pay a claim. The first is an “occurrence,” which the policy defines as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” This is the event that harms the plaintiff, who then initiates the second event by filing a “suit,” which is a “… proceeding in which damages … are alleged.” Once a suit is filed, the insured informs the insurer, who will then perform the following acts: We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. This paragraph contains several key insurer obligations rights. First, the insurer will pay sums “the insured becomes legally obligated to pay.” While a jury verdict is the obvious example, out-of-court settlements are far more common. At minimum, there must be a formal agreement. Second, the insurer has a duty to defend. This is a great advantage for the insured who will not have to pay for an attorney. Third, the insurer may investigate the claim itself, which is reserved to prevent insurance fraud. Finally, the insurer can settle the suit, essentially acting as an agent for the insured. And this leads us to a discussion of several key GGL concepts: occurrence, bodily injury, and property damage. Let’s begin with "occurrence," which is defined in Texas as … … a fortuitous, unexpected, and unintended event. ... We have further said that an intentional tort is not an accident and thus not an occurrence regardless of whether the effect was unintended or unexpected. ... But a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly (Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex., 2007)). The three adjectives of fortuitous, unexpected and unintended have one thing in common: a level of randomness so high that an insured cannot plan for the event. For example, a business in Houston, Texas knows that a hurricane will eventually hit the city. But it doesn’t know when; it could be next year or in five years. The high level of unpredictability makes planning impossible and thereby triggers the need for insurance. In addition, an act performed negligently is also a trigger. The legal concept of negligence also contains a random element similar to fortuitousness. In addition, negligence is one of the most common causes of action a third-party will bring against an insured, more or less guaranteeing that the CGL has to cover this cause of action. And that's it for this post. Next up, I'll look at bodily injury and property damage.  If you're considering forming a captive insurance company as part of your overall risk management strategy, you probably have a lot of questions. In this webinar we look at: 1.) Risk -- what it is; what it isn't; how we can pay for it 2.) Insurance -- what it is; what it isn't 3.) Forming and running the captive We'll be hosting this on January 11 at noon. You can sign up at this link. The commercial general liability policy is “the” workhorse business insurance policy, providing coverage for millions of businesses around the country. Over the next few posts, I’ll be taking a look at it from a lawyer’s perspective, looking at key policy language to see what exactly what's covered. Here is an upload of the front page of the latest CGL. Please use it for reference. 
First, a few general observations. An insurance policy is a contract between two parties – the insurance company and the insured. Courts use standard interpretation maxims to determine the contact’s meaning. There are two key rules to keep in mind about this process. First, an insurance policy is an adhesion contract – a contract written entirely by one party. To overcome the inherent advantage this gives the insurer, courts interpret the contract’s terms and conditions against the drafter (the insurance company). From a practical perspective, this means judges will try to find coverage, under the assumption that the insured wouldn’t have purchased the policy to remain uninsured. Second, courts will use a word’s plain meaning to determine what a term means. On that matter, I’ll be using the dictionary (actually several dictionaries) – a lot. Specifically, I’ll reference the American Heritage Dictionary © 1985 (a gift from my Dad a long time ago), the Concise Oxford English Dictionary ©2004, and the online Merriam-Webster Dictionary.
Let’s begin with the policy name (number (1) on the CGL above), which actually contains a fair amount of important data. “Commercial” means, “of or pertaining to commerce,” which, in turn, is “the buying and selling of goods.” -- a remarkably limiting definition. Several dictionaries add that “commercial” also means, “the intent to make a profit.” The word “general” might seem odd at first. I would argue the key definition for this word is “not specialized or limited” and then use this phrase as a way to compare the CGL to far more specific policies like Pollution, Employment Practices, and Cyber-Liability. Each of the latter three policies covers specific risks and none others. Compare those to the CGL which covers “non-specific” risks. “Liability” means, “the quality of being liable” a legal term meaning, “Obligated according to law.” In other words, a court says you’re responsible, which implies a lawsuit. Let’s wrap this up by translating the policy name into “plain English.” The policy covers the costs of court-imposed general liability arising from business operations. Using the above form as a guide, let’s move onto number (2), which states; “”you” and “you’re” refer to the Named Insured shown in the Declarations. Here’s a tip: when you get your policy, make sure the named insured is the correct insured. Be very specific: for example, if your company’s name is Acme, LLC, but the declarations say “Acme, Inc.,” ask the insured to change the name. Number (3): “we” and “us” refer to the insurer providing coverage. This usually isn’t an issued. But, as with the named insured observation, make sure it’s the right company. Number (4): The word “insured” actually covers a much wider number of people than you’d think. There is an entire page and a quarter of potential insureds later in the policy. So, that’s it for this blog post. Think of this as the “intro” piece. Next time, I’ll start in on the far more complex issues of “occurrence,” “bodily injury,” and “property damage.” |
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