Gobernabilidad y estrategia del SNI en el periodo 2006-2014

Under any policy of insurance, the provisions setting out and defining the monetary limits for which the insurer will be responsible are of importance in setting the premiums. There will be monetary limits in the Declarations Page, and further constraints through, for example, the „Each Occurrence Limit‟ or „Medical Expenses Limit‟. It is the Aggregate Limit, however, which draws the final line beyond which the insurer will not exceed for indemnity. The Aggregate Limit establishes the ultimate monetary limit, for which the insurer is responsible under the policy to indemnify the insured during a specified time period notwithstanding the number of claims in that policy year. It is important to remember that the Aggregate Limit is constant; it applies regardless of how many claims are made, or regardless of who makes the claims. It applies regardless of how many individuals or entities are Named Insureds.

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The purpose of this section of the paper is to discuss how the New IBC CGL Form has substantially changed the Aggregate Limits by creating what is a second aggregate limit, which, in certain circumstances, may expand the total amount the insurer is liable to indemnify the insured under certain types of claims or occurrences.

2. Aggregate Limits Generally

The policy wording of the Former IBC CGL Form dealt with the issue of Aggregate Limits in the following manner:

Section III – Limits of Insurance

1. The Limits of Insurance stated in the Declarations and the rules below fix the most we will pay regardless of the number of:

a. Insureds

b. Claims made or “actions” brought; or

c. Persons or organizations making claims or bringing “actions”. 2. The Aggregate Limit is the most we will pay for the sum of:

a. Medical expenses under Coverage C; and

b. Compensatory damages under Coverage A, Coverage B, and Coverage D

The Limits of Insurance of this policy apply separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than 12 months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.

In essence, the Aggregate Limit establishes that no matter how many claims may be brought against the insured, under any or all of the various coverages available under the Former IBC CGL Form, the insurer is only liable to pay claims on behalf of the insured up to the Aggregate Limit as set out in the Declarations. As stated earlier, the Aggregate Limit applies regardless of the number of insureds, claims, or persons making the claims. The Aggregate Limit operates outside of the context of any other coverage limit in the policy in the sense that while ambiguity or dispute may arise in terms of a particular coverage limit, the Aggregate Limit always applies and establishes the upper limit that the insurer will pay.

The Aggregate Limit operates independently of the „Each Occurrence Limit‟, in that an insured may face many occurrences throughout the policy year which may be subject to

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their own limits, but “…once the Aggregate Limit is exhausted there are no further funds available regardless of the number of subsequent occurrences”.124

Finally, the Aggregate Limit only imposes a “cap” on the indemnity exposure of the insurer whereas the cost of any defence obligation is in excess of the Aggregate Limits and potentially unlimited in amount.

3. The New IBC CGL Form - Products-Completed Operations Aggregate Limit The New IBC CGL Form has introduced a second aggregate limit which operates in addition to, and exclusive of the Aggregate Limit provided for in the wordings of the Former IBC CGL Form. The wording for the New IBC CGL Form Aggregate Limits clause are as follows, with the new sub-section underlined for ease of reference:

Section III – Limits of Insurance

1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:

a. Insureds

b. Claims made or “actions” brought; or

c. Persons or organizations making claims or bringing “actions”. 2. The General Aggregate Limit is the most we will pay for the sum of:

a. “Compensatory damages” under Coverage A, except “compensatory damages” because of “body injury” or “property damage” included in the “products-completed operations hazard”;

b. “Compensatory damages” under Coverage B; and c. Medical expenses under Coverage C.

3. The Products-Completed Operations Aggregate Limit is the most we will pay under Coverage A for “compensatory damages” because of “bodily injury” and “property damage” included in the “products- completed operations hazard”….

…[T]he Limits of Insurance of this policy apply separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than 12 months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.

124 _{Snowden & Lichty, ibid., at p. 36-4.}

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The most significant change that in the New IBC CGL Form is the addition of the separate clause describing the „Products-Completed Operations Aggregate Limit‟. The fact that the New IBC CGL Form defines another aggregate limit suggests that this other limit should operate exclusive of the General Aggregate Limit, and therefore act as its own limit on the maximum liability for the insurer for that particular coverage. Indeed, the General Aggregate Limit explicitly states that it applies as a limit to all “compensatory damages” except those included in the “products-completed operations hazard”, which limits are referenced in the separate clause describing the Products- Completed Operation Aggregate Limit. In general, “Products-completed operations hazard” refers to liability arising out of the insured's products or business operations conducted away from the insured's premises once those operations have been completed or abandoned. It is intended to provide coverage for an insured for liability which arises out the insured‟s “faulty workmanship”.125

4. Exhausting the Aggregate Limits

As a result of the additional wordings in the New IBC CGL Form, the key issue is how each of these aggregate limit categories are exhausted. Subject to the insurance limits as set out in the Declaration and as defined by the “Each Occurrence Limit”, the “Personal and Advertising Injury Limit” and the “Medical Expense Limit” (all contained in the same section), the insurer is only liable to indemnify the insured to the General Aggregate Limit for “compensatory damages” under the four different coverages offered by the New IBC CGL Form. Those four coverages are Coverage A – Bodily Injury and Property Damage Liability, Coverage B – Personal Injury and Advertising Injury, Coverage C – Medical Payments and Coverage D – Tenants Legal Liability. The Aggregate Limit created by the New IBC CGL Form is significant because an insurer could be liable to indemnify an insured to both the General Aggregate Limit and the Products-Completed Operations Aggregate Limit. The Products-Completed Operations Aggregate Limit may be exhausted by payments made pursuant to Coverage A for “compensatory damages” because of “bodily injury” and “property damage” included in the “Products-completed operations hazard”.

“Products-completed operations hazard” is a defined term in the New IBC CGL Form:

a. Includes all “bodily injury” and “property damage” occurring away from premises you own or rent and arising out of “your product” or “your work” except:

(1) Products that are still in your physical possession; or

125 _{“Insurance Recovery Seminar Paper”, Washington, D.C., Morgan, Lewis & Bockius LLP, January 17,}

© Dolden Wallace Folick LLP 119 (2) Work that has not yet been completed or abandoned. However, “your

work” will be deemed completed at the earliest of the following times: (a) when all of the work called for in your contract has been

completed.

(b) When all of the work to be done at the job site has been completed if you contract calls for work at more than one job site.

(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

b. Does not include “bodily injury” or “property damage” arising out of:

(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the “loading or unloading” of that vehicle by any insured; or

(2) The existence of tools, uninstalled equipment or abandoned or unused materials.

In essence then, the “Products-completed operations hazard” carves out a specific portion of Coverage A, subject of course to the exclusions in Coverage A – Bodily Injury and Property Damage Liability, and makes that one particular portion subject to its own aggregate limit.

“Bodily injury” or “property damage” which would otherwise be afforded coverage under the New IBC CGL Form, Coverage A, but which falls within the “products- completed operations hazard” defined term, will not be subject to the General Aggregate Limit. The result is that the New IBC CGL Form provides that an insured has two aggregate limits to claim indemnity from, though only in a defined way for indemnity falling within the Products-Completed Operation Aggregate Limit.

Of interest, American courts faced with similar wording in terms of policies with either a products or operations completed aggregate limit have noted that by the nature of being an aggregate limit the clause must be treated in the form of a coverage clause, and not an exclusion.126 _{The importance of this characterization arises in situations where}

an insured faces claims which in the aggregate will exceed the Products-Completed Operation Aggregate Limit and the insured wants to bring it under the General Aggregate Limit. By characterizing the limit as a term of coverage, the burden of showing that the claim falls under the General Aggregate Limit and not the Products-

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Completed Operation Aggregate Limit lies on the insured.127 _{Thus, one can foresee}

potential litigation in the future in Canada under the New IBC CGL Form where insureds face a situation where the “Products Completed Operation Aggregate Limit has been exhausted and they seek to define the claim in such a way so as to receive coverage under the General Aggregate Limit.

5. Conclusion

To summarize, the New IBC CGL Form has been modified to include a second aggregate limit from which an insured may claim. Losses paid which are subject to either the General Aggregate Limit or the Products Completed Operation Aggregate Limit reduce the amounts that are available to be paid out for future claims arising during the term of the policy. These claims remain subject to the other limits imposed in the policy, such as the „Each Occurrence Limit‟. The Products-Completed Operation Aggregate Limit applies only to “bodily injury” and “property damage” included in the “products-completed operations hazard” and will not expand the available aggregate limit for any remaining claims subject to the General Aggregate Limit.

An unintended consequence of the wordings in the New IBC CGL is the potential for future litigation over this new aggregate limit, where the insured has exhausted the Products Completed Operations Aggregate Limit and makes a claim for coverage under the General Aggregate Limit for losses which arguably are now specifically excluded from that limit. The door may be open to insureds to make a claim under both limits of insurance now potentially offered under the New IBC CGL Form.

C. Reporting and Co-operation Clause Requirements