Montrose Endorsement—Shining A Light On the "Known Loss" Doctrine

Summary:   This article presents an analysis of the Montrose decision and the known loss doctrine that is related to that decision. Mr. Randy J. Maniloff is the author of this article. Mr. Maniloff is at time of writing, the Chair of the Insurance Coverage Group at Philadelphia-based Christie, Pabarue, Mortensen, and Young, P.C., where he concentrates his practice in the representation of insurers in coverage disputes. Mr. Maniloff handles a wide variety of insurance coverage matters in both the litigation and non-litigation arenas, including environmental property damage, toxic tort bodily injury/asbestos, construction defect, mold, general liability (products and premises), professional liability, directors and officers liability, media liability, public officials liability, homeowners, first-party property, and health care (including managed care and community associations).

The author expresses his sincere appreciation to Mr. Brad Mortensen for his invaluable assistance in the preparation of this article. The views expressed herein are solely those of the author and are not necessarily those of his firm, its clients, or the FC&S Bulletins.

Note: This article originally published on November 24, 2008, with interdocument links updated on October 21, 2020.

Topics covered:

Introduction

CGL form and known loss

Montrose decision and the CGL form

Does Montrose alter CGL coverage?

Known loss doctrine

Known loss provision in the CGL insuring agreement

Common law and the Montrose endorsement

Known loss and a non-continuous trigger claim

Notice of bodily injury or property damage to whom and when?

Conclusion

Introduction

Insurance is about one thing—claims. Many other aspects of an insurance company are critical to its success, but the fact remains that they are still only supporting characters. And no discussion about claims can start anywhere but one place—the words contained in the insurance policy, or coverage form. Of course, not all policy forms are equal in their significance. However, in the property-casualty world, there can be little doubt that, at or near the top of the forms food chain are Insurance Services Office, Inc.’s (ISO) commercial general liability coverage form—CG 00 01 and American Association of Insurance Services (AAIS) commercial liability coverage form—GL-200 Ed. 1.0. These two documents are the backbone of liability insurance in America . For a substantial number of policyholders, they set out what is covered (the insuring agreements), what is not (exclusions), for how much (limits of liability), how the parties” relationship shall be governed (conditions) and what certain terms mean (definitions).

Given the significance and prevalence of these forms, and relative infrequency in which they are altered, any change that is made to them is important—even if it will only have relevance for some claims.  But when a change in these forms has the potential to be in play for every claim, regardless of type, it is elephantine.  Such is the case with the latest version of ISO’s form CG 00 01 10 01 (“the current CGL form”) and AAIS’s amendment of form GL-200 Ed. 1.0 with the addition of form GL 09 50 12 99, which contain provisions addressing the concept of “known loss”—that one cannot insure against a loss that has already taken place.i (This article is written based on the ISO CGL form.)