When Santa Claus comes to town do not get caught holding the bag with coverage issues.
You better watch out, better not cry
Better not pout, I’m telling you whySanta Claus is coming to town
When Santa and or his helpers deliver gifts to homes and businesses potential coverage issues exist. During this holiday season I wanted to share a little Christmas cheer and provide some insight into one potential coverage issue.
Here is a hypothetical claims scenario.
Mr. Bailey has ordered a new sofa and love seat to be delivered to his home in Bedford Falls, to surprise his wife Mary for Christmas. Santa’s helpers load the sofa and love seat onto their sleigh (i.e. delivery truck), and head off to the Bailey’s for their delivery. As the elf’s (i.e. Santa’s employees aka misfits) are bringing the sofa into the house, the sofa proves to be too heavy for Herby. Herby drops one end of the sofa scratching the Brazilian Cherry hardwood floor in the foyer. The elf’s realized they scratched the floor and are anxious to leave, however in their haste they banged into the wall causing a hole in the drywall in the hallway and knocking off a Norman Rockwell painting in the living room, causing damage to the frame. The sofa and love seat are finally placed in the living room leaving Mrs. Bailey with a scratched floor, damaged wall and damaged painting.
Mr. Bailey returned home from a bad day at the office and called screaming at Santa indicating his delivery crew was a bunch of misfits and should be fired. Santa explained to Mr. Bailey that he would notify his insurance company, Polar Express, of the damage to their home and he is very confident that they will have the damage taken care of immediately.
I am sure we have all had a claim with similar circumstances as outlined above. The goal of this article is merely to bring to light some potential coverage issues that could arise during the handling of this claim.
The first person the insured is going to call is his agent and report the claim. The agent may see this as a casualty loss covered under the CGL, the agent will advise the insured not to worry and that this is exactly what his CGL policy covers. The agent then will notify the CGL carrier of the loss and the claim is turned over to the adjuster to handle to conclusion.
Is this the correct course of action? Is the damaged caused by the misfits covered under the CGL? How should the adjuster handle the claim?
The insured’s action by notifying the agent immediately is the proper course of action in accordance with the Conditions of the policy. The claim is now in the hands of the adjuster. So where does the adjuster go from here? The adjuster will contact the claimants and schedule an inspection of their home to inspect the damage. In this case the damage is estimated at $10,000.00 for the floor, walls and painting. The question remains should the adjuster recommend payment for the $10,000.00 under the CGL policy. This looks like it may be an easy file to move off your desk, pay the ACV, secure a release and move on to the next file. The adjuster’s investigation revealed the damage was clearly caused by the misfits who were employees of the insured and the damage was caused in the process of delivering the sofa and love seat.
The purpose of this article is to remind us of the Exclusion in the CGL policy for Aircraft, Auto, or Watercraft. For discussion purposes I am referencing the CG 00 01 10 01 policy form.
- Exclusions
This insurance does not apply to:
- Aircraft, Auto Or Watercraft
“Bodily injury” or “property damage” arising out
of the ownership, maintenance, use or entrustment
to others of any aircraft, “auto” or
watercraft owned or operated by or rented or
loaned to any insured. Use includes operation
and “loading or unloading”.
This exclusion applies even if the claims
against any insured allege negligence or other
wrongdoing in the supervision, hiring, employment,
training or monitoring of others by
that insured, if the “occurrence” which caused
the “bodily injury” or “property damage” involved
the ownership, maintenance, use or
entrustment to others of any aircraft, “auto” or
watercraft that is owned or operated by or
rented or loaned to any insured.
The key language in this exclusion is “Use includes operation and “loading or unloading”” As you are aware phrases in “ “ are always defined in the policy. I have included the definition as outlined below for “loading or unloading”..
11.“Loading or unloading” means the handling of property:
- After it is moved from the place where it is
accepted for movement into or onto an aircraft,
watercraft or “auto”;
- While it is in or on an aircraft, watercraft or
“auto”; or
- While it is being moved from an aircraft, watercraft
or “auto” to the place where it is finally
delivered;
but “loading or unloading” does not include the
movement of property by means of a mechanical
device, other than a hand truck, that is not attached
to the aircraft, watercraft or “auto”.
In conclusion given this claims scenario the claim would be excluded under the CGL policy. I can hear the screams, especially after you notify the agent and the insured that there is no coverage under the CGL policy for this loss. THERE MUST BE COVERAGE SOMEWHERE!,
Yes, coverage for this loss can be found under the auto policy. The commercial auto policy would provide coverage for this loss. I will be referencing the Commercial Auto Form CA 00 01 10 01, Business Auto Coverage Form for this portion of the discussion.
SECTION II – LIABILITY COVERAGE
- Coverage
We will pay all sums an “insured” legally must pay
as damages because of “bodily injury” or “property
damage” to which this insurance applies, caused
by an “accident” and resulting from the ownership,
maintenance or use of a covered “auto”.
- Exclusions
This insurance does not apply to any of the following:
- Handling Of Property
“Bodily injury” or “property damage” resulting
from the handling of property:
- Before it is moved from the place where it is
accepted by the “insured” for movement
into or onto the covered “auto”; or
- After it is moved from the covered “auto” to
the place where it is finally delivered by the
“insured”.
The damage was caused as a result of the use of the motor vehicle, i.e. delivery truck in the process of delivering the items to their final destination and therefore coverage under the auto policy would apply.
Be careful during the investigation of these claims to understand exactly when the damage occurred. If the damage occurred after the item was delivered to the final point of delivery the CGL will then pick up the claimant’s damages.
When reviewing the coverage for these types of claims it is also important to consider your venue as there may be different interpretations of when an item is actually delivered, i.e. when an item comes to rest or the completed operations doctrine. This additional analysis will come into play on those claims involving installation of the product such as a dishwasher or refrigerator.
Each adjuster should check with their defense counsel for a clear understanding on how each venue will interpret and apply coverage in these instances.
Merry Christmas!, Have a safe and happy holiday season.
