• Capell Insurance

Designated Premises Limitation Gets Revised, For The [MUCH] Worse

Businesses operations are not confined within the walls of an address, whether it's a home-based business or a large corporation. For this reason, the Commercial General Liability coverage language was drafted to follow the business.

The standard Insurance Services Office (ISO) CG 00 01 has no restriction for location and is crafted to protect against otherwise covered claims anywhere within the coverage territory. Some insurance companies - Admitted and Excess & Surplus Lines - will remove one of the CGL's inherent and most critically positive components by attaching a Designated Premises endorsement. The underwriting purpose of the designated premises endorsement (ISO form CG 2144) is to limit coverage only to a listed location.

A long surviving edition of this restrictive endorsement is CG 21 44 07 98 (July 1998). Although undesirable, the form provides tie-in language for operations necessary or incidental to the identified premises. This tie-in wording has been heavily litigated resulting in varied interpretations of what constitutes 'necessary or incidental'. The result, in some circumstances extending policy protections beyond the insurer's intention and in others falling short of the policyholder's expectation. The insurance industry's response was to revise the endorsement, clarifying it's intent. The quest for clarification birthed an eviler and uglier version to be the standard ~ CG 21 44 04 17.

The 2017 edition removes the tie-in provision for necessary or incidental operations and requires the injury or damage to occur on the identified location or grounds and structures appurtenant thereto. This takes the CGL and shifts it into a premises liability policy. Products? HNOA? Offsite meeting? Contractual obligation for indemnity and additional insured that extends beyond your premises?

In general, this endorsement should be avoided where possible. Of course a sweeping claim of the negative impact would be narrow-minded... this endorsement can hold value in situations where a policy is intended to exclusively serve identified location(s) and another policy fills the gaps of lost coverage. Be extremely careful in these situations.

As in all cases, keep in mind insurers may have their own non-ISO version of the Des Prem limitation and should always be reviewed.

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