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Vol. 5, Iss. 12
December 7, 2016

ISO Adopts A New Designated Premises Endorsement To Respond
To Recent Insurer Losses


Loyal readers of Coverage Opinions know that I have been harping on some recent cases giving very broad interpretations to a “Designated Premises Endorsement.” In general, the courts concluded that, if the insured’s headquarters are a designated premise, a policy provides coverage for injury or damage at a non-designated premise, if the negligent corporate decision, leading to the injury or damage, was made at the corporate headquarters.

The two decisions that I pointed to, giving this overly broad interpretation, were the Hawaii Supreme Court’s in C. Brewer and Co., Ltd. v. Marine Indemnity Ins. Co. (included as a “Top 10” case of 2015) and Western Heritage Ins. Co. v. Cyril Hoover dba Okanogan Valley Transportation (W.D. Wash. Mar. 30, 2016) (which cited to C. Brewer extensively). Newman v. United Fire & Casualty Company (9th Cir. Sept. 16, 2016) also applied this overly broad interpretation of the Designated Premises Endorsement.

In addressing these cases I pointed out that I have never been one of those people who believes that, any time an insurer is told by a court that it must provide coverage, that it didn’t believe was owed, the insurer needs to amend its policy language. However, I concluded that insurers were losing too many cases, involving the DPE, to not take action to ensure that the intent of the policy is achieved.

ISO announced in a September 26, 2016 Circular that it is making state filings to revise the Limitation of Coverage to Designated Premises or Project endorsements. In support of its decision to seek the revisions ISO cited the Hawaii Supreme Court’s decision in C. Brewer [Alo-HA] and the Washington federal court’s decision in Western Heritage. [How do you like them apples?] What’s more, the change is being made in the Insuring Agreement. Yes, the Insuring Agreement. The biggest of all stages in a CGL policy.

While not a judicial “decision,” ISO’s decision will have a significant impact on the coverage landscape going forward. This Designated Premises Endorsement issue arises frequently (as these recent decisions demonstrate and no doubt other instances arise that do not get litigated). And since the potential for impacting the coverage landscape is at the core of judicial decisions that make the Top 10 Coverage Cases list, I included it here.

According to ISO, for purposes of “bodily injury” and “property damage” coverage, an endorsement would be available, that amends the Insuring Agreement, to specify where in the “coverage territory” such injury and damage must occur. The revised language would state that “bodily injury” or “property damage” must occur on the premises shown in the Schedule or the grounds and structures appurtenant to those premises, or must arise out of the project or operation shown in the Schedule.

The endorsement also includes changes to the “personal and advertising injury” Insuring Agreement to specify that the offense must arise out the insured’s business performed on the premises shown in the Schedule or in connection with the project or operation shown in the Schedule. There are also amendments to specifically address where false arrest and wrongful eviction (and related offenses) must have been committed.

The proposed effective date for the endorsements is April 1, 2017.

As for the “impact” of these changes, ISO’s explanation is what you would expect: “In circumstances in which individual insurer claims settlement practices or state law are reflective of the Brewer and Western Heritage decisions, certain revisions, in the context of a schedule premises, may be a reduction in coverage.”

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