Summary:  ISO is introducing new and revised endorsements available to the Commercial Liability Umbrella Program and the Commercial Liability Excess Program, with a proposed effective date of August 1, 2021. The changes will primarily address the Auto Dealers Program, public or livery auto risks and exposures, and cannabis risks and exposures. Other endorsement revisions are editorial in nature or to maintain consistency with the coverage form. 

Topics Covered:

Cannabis Exclusion Endorsements

New Cannabis Endorsements

New and Revised Endorsements for Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

Revised Endorsements for Auto Dealers

Editorial and Consistency Revisions

Cannabis Exclusion Endorsements

In 2018, ISO introduced six optional cannabis exclusion endorsements for use with the Commercial Liability Umbrella Coverage Part and Commercial Excess Liability Coverage Part. With the introduction of new optional cannabis coverages being made available under these programs by endorsement, these six exclusion endorsements have been updated to a 12 20 edition date to make editorial changes and correct typographical errors as described below.

CU 34 22 Cannabis Exclusion (CX 21 79)

CU 34 23 Cannabis Exclusion With Hemp Exception (CX 21 80)

CU 34 24 Cannabis Exclusion With Hemp and Lessors Risk Exceptions (CX 21 81)

Analysis:

Each of the six endorsements have the same four revisions:

  1. A semicolon (;) has been added following paragraph A.2.(2), to read as follows:

(2) Any other person for whom you are legally responsible;

2.  The extraneous quotation (“) is deleted from “personal and advertising injury” in paragraph B.

3.  The word ‘or’ is changed to ‘of’ under paragraph B.2., to read … or invasion of the right of privacy… as follows:

  1. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.

4.  In the definition of “Cannabis” in paragraph C.2.b. the words by product have been corrected to by-product, to read as follows:

b.  Any compound, by-product, extract, derivative, mixture or combination, such as:

New Cannabis Endorsements

ISO has continued to monitor this emerging risk and as such, additional underwriting options are being offered to provide greater flexibility in addressing the cannabis-related exposures. 

The new cannabis endorsements being made available with this filing (all with 12 20 edition dates) are:

CU 23 01 Cannabis Activity Coverage Aggregate Limit

CU 23 02 Cannabis Exclusion With Hemp Exception Subject To Hemp Aggregate Limit

CU 23 03 Cannabis Exclusion With Designated Product Or Work Exception Subject To Cannabis Products/Completed Operations Aggregate Limit

CU 34 40 Exclusion – Designated Cannabis Products (CX 21 89)

CU 34 41 Exclusion – Cannabis Products (CX 21 90)

CU 23 01 Cannabis Activity Coverage Aggregate Limit

Analysis:

This new endorsement allows for a scheduled aggregate limit for injury or damage under Coverages A & B arising out of “cannabis activity”. The scheduled aggregate limit is subject to the policy’s aggregate limit. If provided and to the extent available, the Each Occurrence Limit and Personal and Advertising Injury Limit will continue to apply under the cannabis activity coverage aggregate limit.

Additional exclusions apply to the cannabis activity aggregate. The first exclusion pertains to any cannabis activity that occurs when a required license is not in effect; the second exclusion precludes coverage for any cannabis activity in violation of state law. The second exclusion will not apply however for injury or damage if state or local law holds the insured liable for the specific acts of causing or contributing to a person’s intoxication; or the selling, serving or furnishing cannabis to a person under the legal age for cannabis consumption, or a person under the influence of cannabis.

The exclusions read as follows:

  1. Cannabis License Not In Effect

“Bodily injury”, “property damage” or “personal and advertising injury” arising out of any “cannabis activity” occurring while any required license for such “cannabis activity” is not in effect.

  1. Cannabis Activity Not Permissible Under State Or Local Law

“Bodily injury”, “property damage” or “personal and advertising injury” arising out of any “cannabis activity” that is not permitted under the applicable state or local statute, regulation or ordinance in the state wherein such “cannabis activity” occurred.

However, this exclusion does not apply to “bodily injury” or “property damage” for which the insured may be held liable by reason of an applicable state or local statute, regulation or ordinance imposing such liability for:

  1. Causing or contributing to the intoxication of any person; or
  2. The selling, serving or furnishing of “cannabis” to a person who is under: 

(1) The legal age for “cannabis” consumption; or 

(2) The influence of “cannabis”.

“Cannabis” carries the same definition as in the ISO CGL forms and endorsements. An additional definition has been added to this endorsement for “cannabis activity”, as follows:

“Cannabis activity” means the design, cultivation, manufacture, processing, packaging, repackaging, handling, testing, storage, distribution, sale, serving, furnishing, use, possession or disposal of “cannabis”.

CU 23 02 Cannabis Exclusion With Hemp Exception Subject To Hemp Aggregate Limit

Analysis:

Endorsement CU 23 02 provides a coverage exception within the cannabis exclusion to provide coverage for hemp, subject to the Hemp Aggregate Limit stated in the endorsement schedule. If providing coverage for hemp, this endorsement will replace endorsement CU 34 23 on the policy. Otherwise, the exclusion for cannabis, other than hemp, remains excluded under the endorsement. 

As with the CGL endorsements with hemp exception, this endorsement providing the hemp exception does so by adding a separate paragraph excepting liability arising out of goods or products containing or derived from hemp, including but not limited to seeds, food, clothing, lotions, oils or extracts, building materials, or paper. The exceptions do not apply to the extent they are in prohibition or violation of any applicable state statute, regulation or ordinance.

The exception mirrors that of the CGL endorsements and reads as follows:

B.  The exclusion in Paragraph A. does not apply to:

  1. “Bodily injury”, “property damage” or “personal and advertising injury” arising out of goods or products containing or derived from hemp, including, but not limited to:
  1. Seeds;
  2. Food;
  3. Clothing;
  4. Lotions, oils or extracts;
  5. Building Materials; or
  6. Paper.
  1. “Property damage” to goods or products described in Paragraph B.1. above.

However, Paragraphs B.1. and B.2. above do not apply to the extent any such goods or products are prohibited under an applicable state or local statute, regulation or ordinance in the state wherein:

(1) The “bodily injury” or “property damage” occurs;

(2) The “occurrence” which caused the “bodily injury” or “property damage” takes place; or

(3) The offense which caused the “personal and advertising injury” was committed;

  1. “Personal and advertising injury” arising out of the following offenses:
  1. False arrest, detention or imprisonment; or

  2. The wrongful eviction from, wrongful entry into, or invasion of the right or private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.

CU 23 03 Cannabis Exclusion With Designated Product Or Work Exception Subject To Cannabis Products/Completed Operations Aggregate Limit

Analysis:

Endorsement CU 23 03 contains the same cannabis exclusion language that is in CU 34 22 Cannabis Exclusion; however it also adds an option to schedule specific products or specific work from the exclusion at a Cannabis Products/Completed Operations Aggregate Limit at the limit shown in the endorsement schedule.

The exception to the cannabis exclusion will apply to bodily injury or property damage included within the products-completed operations hazard arising out of the designated products or work shown in the schedule, subject to the Cannabis Products/Completed Operations Aggregate Limit. Otherwise, the exclusion will apply in the same manner as in CU 34 22.

B.  The exclusion in Paragraph A. does not apply to “bodily injury” or “property damage” included in the “products-completed operations hazard” and arising out of any of “your products” or “your work” as shown in the Schedule of this endorsement. Note that the coverage does not extend to personal and advertising injury liability.

C.  The following provisions are added to Section III – Limits Of Insurance:

  1. Subject to Paragraph 2. of Section III – Limits Of Insurance, the Cannabis Products/Completed Operations Aggregate Limit shown in the Schedule of this endorsement is the most we will pay for the sum of all “ultimate net loss” under Coverage A for damages because of all “bodily injury” and “property damage” arising out of “your product(s)” or “your work” shown in the Schedule of this endorsement and included in the “products-completed operations hazard”.

  2. Paragraph 3., the Each Occurrence Limit, of Section III – Limits Of Insurance continues to apply to “bodily injury” and “property damage” arising out of “your product(s)” or “your work” shown in the Schedule of this endorsement and included in the “products-completed operations hazard”, but only if, and to the extent that, a limit of insurance is available under the Cannabis Products/Completed operations Aggregate Limit.

New and Revised Endorsements for Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

New Endorsements

The following new endorsements are introduced for Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages, all with 12 20 edition dates:

CU 24 53 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies – Excess Auto Dealers Acts, Errors or Omissions Liability Coverages

CU 34 38 Total Bankruptcy Or Insolvency Exclusion For Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

CU 34 39 Changes To The Bankruptcy Or Insolvency Exclusion For Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

CU 24 53 Automatic Insured Status For Newly Acquired Or Formed Limited Liability Companies – Excess Auto Dealers Acts, Errors or Omissions Liability Coverages

Analysis:

In the past, a newly acquired or formed limited liability company (LLC) could not be granted named insured status, even if the named insured maintained ownership or majority interest, thus leaving many LLCs without coverage. This endorsement will only apply if endorsement CU 04 23 Excess Auto Dealers Acts, Errors or Omissions Liability Coverages is on the policy.

If CU 04 23 is attached, this endorsement amends the Who Is An Insured provision to automatically include limited liability companies (LLCs) the named insured newly acquires or forms, and over which the named insured maintains ownership or majority interest, if there is no other similar insurance available to that limited liability company. The same limitations that currently apply to newly acquired or formed organizations will apply to these LLCs, including affording coverage for the earliest of either the 90th day after the LLC is newly acquired or formed, or the end of the policy period. Further, no coverage will apply to prior occurrences before the LLC was acquired or formed.

If the Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages Endorsement is attached, Paragraph B. Who Is An Insured of that endorsement is amended as follows:

  1. Paragraph 6. is replaced by the following:

  1. Any “auto” dealership that is acquired or formed by you, other than a partnership, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that “auto” dealership.

However:

  1. Coverage under this provision is afforded only until the 90th day after you acquire or form the “auto” dealership or the end of the policy period, whichever is earlier; and

  2. Coverage does not apply to “acts, errors or omissions” that were committed before you acquired or formed the “auto” dealership.

  1. The last paragraph of the Who Is An Insured provision is replaced by the following:

No person or organization is an insured with respect to the conduct of any current or past:

  1. Partnership; or

  2. Limited liability company, unless Paragraph 1. of this endorsement applies; that is not shown as a Named Insured in the Declarations. 

CU 34 38 Total Bankruptcy Or Insolvency Exclusion For Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

Analysis:

This endorsement, as well as endorsement CU 34 39 described below, is designed to amend the bankruptcy or insolvency exclusion under CU 04 23 Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages.

Currently CU 04 23 provides coverage for the ultimate net loss in excess of the retained limit because of any act, error or omission of the insured to which the insurance applies and arising out of the conduct of the named insured’s auto dealer operations. The bankruptcy or insolvency exclusion excludes damages if the insurer goes bankrupt or insolvent, except if such insurer had a B+ or higher A.M. Best’s rating at the time the insurance was placed for a customer.

This endorsement amends the bankruptcy or insolvency exclusion within CU 04 23 to remove the exception for insurer’s with B+ or higher A.M. Best’s rating. In this manner, all damages arising out of a bankrupt or insolvent insurer will be excluded, without exception..

If the Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages Endorsement is attached, Paragraph j. Bankruptcy Or Insolvency of A.2. Exclusions is replaced by the following:

  1.  Bankruptcy Or Insolvency

Damages arising out of the:

(1) Bankruptcy;

(2) Financial inability to pay;

(3) Insolvency;

(4) Liquidation; or

(5) Receivership;

of any insurance company, reinsurer or other risk-assuming entity in which the insured has placed or obtained insurance for a customer.

CU 34 39 Changes To The Bankruptcy Or Insolvency Exclusion For Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

Analysis:

This endorsement is similar to the underlying commercial auto dealers endorsement CA 25 62, Changes to the Bankruptcy or Insolvency Exclusion for Acts, Errors or Omissions Liability Coverages. This new endorsement amends the exception to the bankruptcy or insolvency exclusion. With this change, the exception for insurers with an A.M.Best’s rating of B+ or higher is replaced with a fill-in entry to allow the insured to establish another rating bureau and credit score for the exception, with such credit rating bureau and credit score to be shown in the endorsement schedule. 

If the Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages Endorsement is attached, Paragraph j. Bankruptcy Or Insolvency of A.2. Exclusions is replaced by the following:

  1.  Bankruptcy Or Insolvency

Damages arising out of the:

(1) Bankruptcy;

(2) Financial inability to pay;

(3) Insolvency;

(4) Liquidation; or

(5) Receivership;

of any insurance company, reinsurer or other risk-assuming entity in which the insured has placed or obtained insurance for a customer.

However, this exclusion does not apply if the insurance company, reinsurer or other risk-assuming entity achieved at least the minimum financial rating score shown in the Schedule by the credit rating bureau named above at the time the insurance was placed or obtained.

Revised Endorsements for Auto Dealers

The Auto Dealers Coverage Form for Bodily Injury and Property Damage Liability, Personal And Advertising Injury Liability, and Acts, Errors Or Omissions Liability Coverages already contains within the coverage document an exclusion for Access or Disclosure of Confidential or Personal Information. This exclusion precludes coverage for damages arising out of any access to or disclosure of any person’s or organization’s confidential or personal information, including  patents, trade secrets, processing methods, customer lists, financial information, credit card  information, health information or any other type of nonpublic information. While not intended to be an exhaustive list, the exclusion does contain some specific examples of such confidential or personal information. The exclusion applies even if damages are claimed for notification costs, credit monitor expenses, forensic expenses, public relations expenses or any other loss, cost or any other expenses pertaining to the exclusion.

For use with the Umbrella program, two additional endorsements are available to address damages arising out of access or disclosure of confidential or personal information, including such damages as might occur in a data breach.

CU 21 86 Exclusion – Access Or Disclosure Of Confidential Or Personal Information And Data-Related Liability – With Limited Bodily Injury Exception

CU 21 87 Exclusion – Access Or Disclosure Of Confidential Or Personal Information And Data-Related Liability – Limited Bodily Injury Exception Not Included

Analysis:

The above-referenced endorsements are revised to incorporate the same Access or Disclosure of Confidential or Personal Information exclusion that exists in the underlying Commercial Auto within these endorsements. These revisions also correspond with the electronic data exclusion contained within the Commercial Liability Umbrella Coverage Form, to maintain consistency.

Remember that endorsement CU 21 86 is a mandatory exclusion endorsement under the Commercial Liability Umbrella Coverage Part, and the exclusion applies to both Coverages A and B; however, CU 21 86 may be replaced by either CU 21 87 or CU 21 88.

CU 21 87 differs in that it does not include the limited exception for bodily injury under Coverage A that is contained within CU 21 86. 

Endorsement CU 21 88 only applies to Coverage B, personal and advertising injury. 

Note that one, but only one, of the endorsements CU 21 86, CU 21 87, or CU 21 88 should be attached to a policy.

The below paragraph is added to the exclusion in both endorsements, as it applies to Coverage A Bodily Injury and Property Damage Liability for damages under paragraph (2), which excludes damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data:

 

Paragraph (2) does not apply if valid “underlying insurance” for the electronic data risks described above exists or would have existed but for the exhaustion of underlying limits for “bodily injury” and “property damage”. The insurance provided under this Coverage Part will follow the same provisions, exclusions and limitations that are contained in the applicable “underlying insurance”, unless otherwise directed by this insurance.

Editorial and Consistency Revisions

CU DS 01 Commercial Liability Umbrella Declarations

CU 24 03 Waiver Of Transfer Of Rights Of Recovery Against Others To Us (Waiver of Subrogation) (formerly Waiver Of Transfer Of Rights Of Recovery Against Others To Us)

CU 04 23 Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

CU 22 37 Motor Carrier Endorsement

CU 22 39 Driving Schools – Non-Owned Autos

The above referenced Declarations and endorsements are being revised to make the following changes:

Declarations

The Endorsements table is revised to replace “Endorsements Attached to the Excess Policy” with “Endorsements Attached To This Policy”.

Waiver Of Transfer Of Rights Of Recovery Against Others To Us (Waiver of Subrogation) (formerly Waiver Of Transfer Of Rights Of Recovery Against Others To Us)

For consistency with the underlying General Liability Endorsement CG 24 04 Waiver Of Transfer Of Rights Of Recovery Against Others To Us, we are revising CU 24 03 Waiver Of Transfer Of Rights Of Recovery Against Others To Us (Waiver Of Subrogation) to add a provision that the waiver of the insurer applies only to the extent that the insured has waived its right of recovery, and that the insured’s waiver occurred prior to loss.

Excess Auto Dealers Acts, Errors Or Omissions Liability Coverages

Several revisions are made to the endorsement to maintain consistency with the Commercial Liability Umbrella Coverage Form, as follows:

  • Paragraphs A.1.b. And D.2. replace the term “damages” with “ultimate net loss”, and replace the singular term ‘Limit’ with the plural ‘Limits”. Also, in paragraph D.2. the word ‘are’ is replaced with ‘is’; and
  • Paragraph D.3. is revised to remove the word ‘damages’.

Motor Carrier Endorsement

The language used in the lead-in to the endorsement is revised to more closely reflect the corresponding ISO Rule 26 (Risk-Specific Endorsements). The rule is that the Motor Carrier Endorsement should only be used when either the Motor Carrier Coverage Form or a Business Auto Coverage Form with a Motor Carrier Endorsement is on the underlying insurance.

Driving Schools – Non-Owned Autos

The table in the Schedule of this endorsement is revised to remove the rating information from the form’s Schedule for uniformity with ISO standards. Therefore, the columns for Number of Driving Instructors and Number of Owned Autos Used for Driver Training are removed.

Revised Excess Endorsements

CX 21 22 Auto Dealers Exclusion – Designated Products

CX 21 25 Auto Dealers Exclusion – Designed Work

The header in each of these endorsements is revised to add a field for entry of the policy number.