Actuarial Notes

CGL Coverage C

Study guide: Exam DISC-IA

CGL Coverage C is the medical payments coverage of the ISO Commercial General Liability Coverage Form (CG 00 01, 04 13 edition). It pays reasonable medical expenses for bodily injury caused by an accident on premises the named insured owns or rents, on the ways next to them, or because of its operations, regardless of fault, provided the accident happens in the coverage territory during the policy period and the expenses are incurred and reported within one year. Unlike Coverages A and B, it requires no proof that the insured is legally liable.

\text{Paid}_i = \min\left(E_i^{(1)},\ M\right)

\sum_{i} \text{Paid}_i + D_A \le L_{\text{occ}}

  • Symbols: E_i^{(1)} is person i's reasonable covered expenses incurred and reported to the insurer within one year of the accident, M is the Medical Expense limit per person, D_A is any Coverage A damages from the same occurrence, and L_{\text{occ}} is the each occurrence limit. Coverage C payments also reduce the general aggregate (CGL Limits of Insurance).
  • Where the accident must happen: Coverage C pays for bodily injury caused by an accident (1) on premises the named insured owns or rents, (2) on ways next to those premises, or (3) because of its operations. It is a premises and operations coverage; injury within the products-completed operations hazard is excluded.
  • The three provisos: The accident must take place in the coverage territory and during the policy period; the expenses must be incurred and reported to the insurer within one year of the accident; and the injured person must submit to examination, at the insurer's expense, by physicians of its choice as often as it reasonably requires.
  • What is paid: Payments are made regardless of fault and cannot exceed the applicable limit. The insurer pays reasonable expenses for first aid at the time of the accident; necessary medical, surgical, X-ray and dental services, including prosthetic devices; and necessary ambulance, hospital, professional nursing and funeral services.
  • Exclusion a, any insured: No expenses are paid for bodily injury to any insured, except "volunteer workers". A partner, an employee or an executive officer injured on the premises is not paid under Coverage C (CGL Who Is an Insured).
  • Exclusion b, hired person: No expenses are paid for a person hired to do work for or on behalf of any insured or a tenant of any insured, such as an independent contractor.
  • Exclusion c, normally occupied premises: No expenses are paid for a person injured on the part of premises the named insured owns or rents that the person normally occupies, such as a tenant in the apartment it rents from the insured.
  • Exclusion d, workers compensation: No expenses are paid for a person, whether or not an employee of any insured, if benefits for the injury are payable or must be provided under a workers compensation or disability benefits law or a similar law.
  • Exclusion e, athletics activities: No expenses are paid for a person injured while practicing, instructing or participating in physical exercises or games, sports or athletic contests.
  • Exclusion f, products-completed operations hazard: No expenses are paid for injury within the products-completed operations hazard.
  • Exclusion g, Coverage A exclusions: Anything excluded under Coverage A is excluded under Coverage C too, so an auto accident or an injury from expected or intended acts is not paid here either (CGL Coverage A Exclusions).
  • Alongside Coverage A: A Coverage C payment does not stop the injured person from claiming damages under Coverage A, but the two share the each occurrence limit for the accident and the general aggregate. The personal auto policy's Part B is a different coverage with different rules (Medical Payments Coverage).

Three Visitors Hurt in One Accident A shelving unit collapses in a hardware store during the policy period, injuring three customers. The store's CGL has a $10,000 Medical Expense limit and a $1,000,000 each occurrence limit. Within a year, reasonable expenses are reported of $2,600 for the first customer, $9,800 for the second and $14,500 for the third. A store employee was also hurt and received workers compensation benefits. What does Coverage C pay?

Answer Each customer is paid regardless of fault, up to the per-person limit.

\begin{align*}
\text{Paid} &= \min(2{,}600,\ 10{,}000) + \min(9{,}800,\ 10{,}000) \\
&\quad + \min(14{,}500,\ 10{,}000) \\
&= 2{,}600 + 9{,}800 + 10{,}000 \\
&= 22{,}400
\end{align*}

The employee is excluded twice over: as an insured (exclusion a) and because workers compensation benefits are payable (exclusion d). The $22,400 counts toward the $1,000,000 each occurrence limit for the collapse and reduces the general aggregate. If the third customer later sues for her remaining $4,500 and more, that is a Coverage A claim, and it must be proved.

Is It a Coverage C Claim? An apartment building owner's CGL includes Coverage C. During the policy period: (a) a tenant slips in her own kitchen; (b) a visitor trips on the building's front steps; (c) a plumber hired by the owner falls from a ladder in the boiler room; (d) a resident twists an ankle in a pickup basketball game in the building's gym; (e) the visitor in (b) reports more physiotherapy expenses fourteen months after the fall. Which are paid?

Answer

  • (a) Not paid: Exclusion c removes injury on the part of the premises the person normally occupies.
  • (b) Paid: An accident on premises the named insured owns, to a member of the public, regardless of fault.
  • (c) Not paid: Exclusion b removes a person hired to do work for an insured.
  • (d) Not paid: Exclusion e removes injury while participating in games or sports.
  • (e) Not paid: Expenses must be incurred and reported within one year of the accident.

How it appears on the exam

  • DISC-IA: Section 10's Coverage C objective gives an injury and asks whether medical payments are owed: where the accident happened, who was hurt, which exclusion applies, and whether the one-year window is met.
  • Limits: Combined questions apply the Medical Expense limit per person and then the each occurrence limit and general aggregate that Coverage C shares with Coverage A.

Exam traps

  • No fault needed, but limits shared: Coverage C pays without proof of liability, yet its payments use up the each occurrence limit and the general aggregate.
  • One year, not three: The CGL requires expenses incurred and reported within one year of the accident. The three-year window belongs to the personal auto policy.
  • Insureds are excluded, except volunteers: Employees, partners and officers get nothing under Coverage C. Volunteer workers are the one exception.
  • No products claims: Injury from a product sold by the insured, away from its premises, is in the products-completed operations hazard and outside Coverage C.