Why buy discontinued GL when you have occurrence policy?

[risky business]

I have a customer that is suspending operations and not renewing his Insulation Installation Business. Does he need to purchase a "discontinued operations" liability policy? Current policy is occurrence form. No know occurrences at this time.

 

[adjusterjack]

He shouldn't have to. If a claim is filed against him for something that happened during the policy period it will be covered.

What bothers me is the word "suspended" which, to me, implies temporary. Which means the business still exists but is temporarily inactive but that certain functions continue that could give rise to a liability claim.

What, exactly, does "suspended" mean? Is he shutting it down, closing his doors, lease expired, business contents sold, corporation or LLC dissolved, etc?

 

[risky business]

Yes, business is not dissolved. They are suspending work and suspending the insurance. They want to pickup insurance after the coronavirus passes.

 

[adjusterjack]

Then they still have a liability exposure. Tell me what kind of business and I'll give you examples.

And by "suspending" the insurance do you mean cancelling the policy, including the property section?

What about WC? Commercial?

 

[risky business]

they are not closing the business just not going to be working so decided that they did not need the insurance. They non-renewed all GL and WC. No property. They install spray form insulation in homes new and renovations.

 

[adjusterjack]

They install spray form insulation in homes new and renovations.

That certainly minimizes liability exposure since they aren't going elsewhere to do any work. But they still have a premises liability exposure at their HQ. And what if they get called out on warranty work? Will they refuse to go and risk getting sued for breach of warranty?

There is also a WC exposure for key employees and management who may suffer a job related injury just doing residual work at the HQ.

I think they are foolish to be without coverage while still being IN business.

Some people see the glass half empty, some see the glass half full. I'm a claims guy, I see the glass when it's shattered on the floor.

 

[risky business]

yes, they cancelled the work comp as well. Totally not a bright thing to do. i could not talk them out of it. they feel this is the best thing for their business at this time. The beginning of the depressed state of the US economy. Thanks for your imput.

 

[adjusterjack]

I'm sure a lot of business owners are going to do the same. The more businesses that go without insurance, the more uninsured losses there will be.

I hope you put your admonitions in writing, several times, to cover yourself if they have an uninsured loss and try to blame lack of coverage on you.

 

[InsCommentary]

The CGL policy they cancelled will not cover any occurrences after the termination date. If they have a completed operations exposure then, yes, they need discontinued operations coverage if they want to be insured for any claims that arise.

The worst case I was involved with was a contractor who built an elevated deck behind a home. After he retired and cancelled his CGL coverage, the deck collapsed during a party and dozens of people fell down a steep rocky incline. I believe there were two fatalities and a lot of significant injuries. So, of course, the contractor was sued and had no insurance coverage.

Sounds like they are being pennywise and pound foolish. When they begin operations again, they are going to be scrutinized for this coverage gap and may have trouble procuring coverage anywhere outside the E&S marketplace, if even that, and will likely pay a pretty penny for possibly lesser coverage.

 

[marindependent]

The CGL policy they cancelled will not cover any occurrences after the termination date. If they have a completed operations exposure then, yes, they need discontinued operations coverage if they want to be insured for any claims that arise.

The worst case I was involved with was a contractor who built an elevated deck behind a home. After he retired and cancelled his CGL coverage, the deck collapsed during a party and dozens of people fell down a steep rocky incline. I believe there were two fatalities and a lot of significant injuries. So, of course, the contractor was sued and had no insurance coverage.

Sounds like they are being pennywise and pound foolish. When they begin operations again, they are going to be scrutinized for this coverage gap and may have trouble procuring coverage anywhere outside the E&S marketplace, if even that, and will likely pay a pretty penny for possibly lesser coverage.

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