Commerical General Liability Insurance I
Prof. Bill Long 3/14/05
Long's Little History
The purpose of this essay is not to review the features of the CGL policy. A later essay may focus on some of these, but on this and the next page I would like to deal with what has become one of the highest stakes issue in CGL litigation in the past 10 years--the so-called "trigger of coverage" and the allocation method used by the court when multiple insurers and a multi-year risk are in view. I will begin here with a few historical comments about the CGL.
Introducing the CGL
As we have seen with other standard-form policies, the ISO office puts out revisions/updates of the standard forms every decade or so, with minor changes being made as the need arises. There have been three major iterations of the CGL, with a minor one in 1973, which you should know about. While Jerry says that "the most significant change in the standard form in its sixty years of usage is the growth of the number and specificity of exclusions to coverage" (Understanding Insurance Law, p.541), our focus here will be on what is covered.
The heart of the policy in the pre-1966 version was the definition of "accident." Only an "accident" was a compensable loss, and accident was defined as "a sudden and unforseeable event." The 1966 revision saw a replacement of the word "accident" with "occurrence" and a corresponding broadening of coverage. An "occurrence" was defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." As you see, the phrase "continuous or repeated exposure," broadens the coverage immensely. It would cover "slow and seeping" disasters.
One of the ironies of life then occurred. Just as the insurance industry broadened coverage (and 1966 was perhaps one of the most "liberal" years in American history, in my judgment, with "little people" and formerly excluded people beginning to feel that they could share the stage of American life with the dominant culture), we "discovered" environmental catastrophe which had been lurking in our waters and ground for decades. By 1970 we celebrated the first Earth Day; the 1970s saw the enactment of major environmental legislation; the 1980s were the time of CERCLA and SARA (the cleanup legislation). In addition, we discovered all the ways that harmful chemicals were "in the air" and entering into our lungs and bodies in potentially fatal ways. But, we realized in all of these circumstances that these disasters didn't happen at once. They were "slow and seeping" disasters, whose effect was only seen years, if not decades, after the conditions for disaster were first set (e.g., the asbestos lodged in the lungs, the underground storage tank burst). When we became aware of these disasters, we wanted insurance to cover them and, if we were in business, we wanted the CGL to cover it.
The insurance industry was then in a bind. They just had expanded coverage by broadening the definition of a covered claim. They could not go back to the former definition of accident. It just wouldn't have been politically possible. But they HAD to do something. They were sitting ducks, waiting for the hunters to descend on them. In 1973, then, the industry hastily cobbled together the first pollution exclusion, but it was so confusing and so inconsitently explained that it really did not function in a way to lessen the coverage under the broad definition of occurrence. As a result, they had to do something more drastic: the "absolute pollution exclusion," which became part of the ISO standard-form policy beginning in 1983. Read the exclusion and the definition of pollution in the policy. I will give the definition here, so that you can see how ironclad it is in excluding pollution of any kind from coverage.
"Pollutants" mean any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed." ISO Standard Policy V.15 (p.406).
Even though this pollution exclusion was written into the 1983 form, and serves as an exclusion for years subsequent to 1983, we are still very much in the "cleanup" mode for hazardous waste, much of which was dumped early in the 20th century to 1983. So, even though the insurers are seemingly "off the hook," for pollution that was released after its insureds had the new forms (and this didn't happen until the late 1980s, since most insureds were under multi-year policies when the new one was issued), litigation under former policies will continue for the foreseeable future.
Well, that is a little history. Let's look at the trigger and allocation issues in the next essay.
Copyright © 2004-2007 William R. Long