A severe rainstorm damages the roof of a premises an insured has been renting for a number of years. While the insured’s employees are removing the contents from the property to save it from damage, they hit the steel-roll doors with a forklift, damaging them.
The insured has commercial general liability form CG 00 01 12 07. Is there coverage for this type of claim?
See Section I Coverages, Coverage A Bodily Injury and Property Damage, Exclusion 2.j. Damage to Property. Subparagraph j.(1) specifically addresses the insured's situation, excluding property damage to:
(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property.
There is a specific exception to this exclusion:
Paragraphs (1), (3) and (4) of this exclusion do not apply to "property damage" (other than damage by fire) to premises, including the contents of such premises, rented to you for a period of 7 or fewer consecutive days. A separate limit of insurance applies to Damage To Premises Rented To You as described in Section III – Limits Of Insurance.
However, since the insured has rented the space for more than seven days, there is no coverage.
Since the insured has been renting the premises for a number of years and the damage was not by fire, there is no coverage.
Coverage only applies to fire damage, unless the premises is rented for seven days or less. The insured needed property coverage—either a legal liability coverage form or building and personal property coverage form.
A Big “I” Virtual University article, "CGL Fire Damage Legal Liability vs CP 00 40," discusses the broader issues of damage to commercial property.
If the premises are rented for more than seven consecutive days, the insured only has coverage for fire damage to the premises as a result of negligence. The insurer is correct in denying coverage for damage done by a forklift. To cover this loss, the insured could have purchased legal liability coverage, form CP 00 40, with special form CP 10 30.
Damage to rented premises of seven days or less is on an all-risks basis, but otherwise, it’s for fire damage only. This is something normally covered in licensing school and something agents should be aware of when insuring rented premises, but it is often misunderstood.
The terms of the lease are important to know and understand. Is there a waiver of subrogation? It's not totally clear if the lessor has made any claim against the lessee, since apparently no civil action has been instituted.
Exclusion j(1) certainly seems to address the loss described, but perhaps the rented premises have been explicitly described, and damage to it thus prescribed by the limit expressed per Section III.
There is no coverage for this loss under the unendorsed ISO CG 00 01 12 07. I have seen proprietary coverage enhancement endorsements from some carriers that may have covered such a loss, but not the unendorsed ISO CGL.
There is no coverage for the loss. The commercial property form, legal liability or tenants liability business owners policy endorsement could provide coverage for the loss.
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