Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceMedium
A Florida construction company has purchased a Commercial General Liability (CGL) policy. A subcontractor hired by the company accidentally damages a third party's property while performing work on-site, and the third party sues the construction company. If the construction company's CGL policy includes coverage for 'Contractual Liability for Insured Contracts,' which of the following would be an 'insured contract' that would likely extend coverage to this situation?
- AA contract for the sale of the construction company's used equipment.
- BAn agreement to provide legal defense services to the subcontractor.
- CA lease agreement for the construction company's office space.
- DA written agreement where the construction company assumes the liability of the subcontractor for property damage.
Show answer & explanationAnswer & explanation
Correct answer: D. A written agreement where the construction company assumes the liability of the subcontractor for property damage.
An 'insured contract' under a CGL policy typically includes contracts where the insured assumes the tort liability of another party, such as a subcontractor, for bodily injury or property damage. This is a common way for a general contractor to protect themselves from a subcontractor's negligence.
Why the other options are wrong
- A. A sales contract for equipment does not involve the assumption of tort liability for others' actions.
- B. Agreements for legal defense are not typically 'insured contracts' under CGL for liability assumption.
- C. A lease agreement for office space is a common contract but does not typically involve the assumption of tort liability for others' property damage in this context.
CGL Insured Contracts
Under CGL, 'insured contracts' are specific types of agreements where the insured assumes the tort liability of another party, extending coverage for certain contractual obligations.
- Transfers liability for BI/PD to the insured.
- Common examples include sidetrack agreements, easement agreements, and agreements to indemnify a municipality.
- Exclusions may apply, so specific contract wording is crucial.
Memory trick: CGL handles 'contracts' when you 'assume' another's 'liability'.