General Liability

A general liability policy covers the Insured’s liability to third parties arising out of Injury or Damage caused by the Insured in the course of its business activities. Although this is a very broad explanation, the cover is subject to exclusions many of which are covered under the optional sections and extensions of the policy.

Question: What is the difference between the Camargue General Liability policy and a standard Multimark-type liability policy?
Answer:

The Operative Clause

In order for the MM policy to respond, the Insured has to establish that the third party loss occurred as a result of an accident. The word accident appears in the operative clause and means that the onus of proof lies with the Insured.

 

The CGL policy responds where the Insured is legally liable. The cover is referred to as non-accidental. The word accident does not appear; this means that if the Insurers wish to repudiate based on the fact that an intentional act caused the loss, the onus of proof rests with them, rather than the Insured. This can be of great benefit to the Insured when submitting a claim. There can be many different legal interpretations of the word accident so avoiding such an operative clause is prudent.

Conclusion: CGL provides a wider trigger that is less likely to lead to a claims dispute

The definition of Property Damage

In the MM wording, Damage is defined only as “loss of or damage to tangible property”

 

In the CGL wording

Damage is defined not only as

  1. Loss of or damage to tangible property, but also as
  2. Loss of control of property
    (as may be the case if the property is not damaged, but is simply inaccessible)
  3. Loss of use of the property
  4. Prevention of access

Conclusion: CGL provides a broader definition of Damage. This means that the third party property need not be physically damaged, merely unable to be used. This could be a consequential loss where no actual damage has occurred.

The definition of Injury

MM provides for death, injury or illness to a person

 

CGL defines injury as:

  1. Bodily injury
  2. Death
  3. Illness
  4. Disease
  5. Mental anguish

Conclusion: Mental anguish is the key differentiator.

Territorial Limits

MM restricts coverage to RSA, Namibia, Botswana, Lesotho, Swaziland, Zimbabwe and Malawi.

CGL provides worldwide but with limitations on USA and Canada.

 

Conclusion: Many companies trade with foreign partners and undertake contracts beyond the MM borders. CGL moves across internationally with the Insured.

Pollution

MM covers sudden and accidental seepage, pollution or contamination

 

 

CGL covers sudden and unforeseen pollution.

Pollution is defined as:

  1. Release of liquids, gases, contaminants or pollutants
  2. Smells
  3. Noise, light, vibrations, electricity
  4. Temperature changes

Conclusion: MM cover may have been adequate in the past but disputes over what is accidental often negated the cover. Further to this, many Insured are often faced with nuisance-type law suits (especially in respect of noise, smells and light pollution). CGL provides much more comprehensive pollution cover.

 

Products Liability and Defective Workmanship

MM excludes losses caused by defective design

 

CGL covers losses caused by products designed, manufactured, constructed, installed, repaired, and/or altered by the Insured.

Conclusion: CGL avoids uncertainty of cover where the claim may arise due to design fault

 

Negligent Advice

Some MM policies provide limited Gratuitous Advice cover as part of the product liability section

 

CGL provides specific Negligent Advice cover supplied with products and work performed. The cover can also be extended to cover full Errors and Omissions cover.

Conclusion: With the advent of Consumer Protection Legislation governing advice rendered, wider Errors & Omissions-type cover and advice protection are becoming critical. CGL delivers this.

 

Extensions of Cover

Extension

Multimark-type

Camargue General

Statutory Defence Costs

 

Multimark only covers:

  • OHS Act
  • Mines and Works Act
  • Electricity legislation

CGL covers all statutes except:

  • the Companies Act
  • labour law
  • the use of vehicles, aircraft, watercraft

Defamation and Wrongful Arrest

MM generally sub-limited to R50,000 or R100,000 per Period of Insurance

CGL covers each separately and limits are never less than R250,000 per Period of Insurance.

Employer’s Liability

 

This is generally a separate section in MM but does not cover employee to employee liability.

MM cover is limited to South Africa

CGL covers employee injury and employee-to-employee liability.

Cover is worldwide, excluding the USA and Canada.

Errors and Omissions

 

Not available in MM

 

CGL covers losses arising out of the professional services

Breach of Copyright

 

Not available in MM

 

CGL covers alleged breach of copyright or patent

Advertisers’ Liability

 

Not available in MM

 

CGL Covers losses caused by the advertising activities of the Insured

African Territories

 

Not available in MM

 

CGL Provides umbrella coverage if the Insured has been forced by law to take out primary insurance in an African country

Warehousemen’s Liability

 

Not available in MM

 

CGL Provides cover for goods in the Insured’s custody and control in a warehousing operation

Warehouseman’s Consequential loss

Not available in MM

 

Covers only the financial loss a customer might sustain if his goods were destroyed whilst in storage. It does not cover the intrinsic value of the goods.

Carriers Liability

 

Not available in MM

 

CGL Covers goods transported on behalf of third party

Carriers Consequential Loss

Not available in MM

Covers only the financial loss a customer might sustain if his goods were destroyed whilst being transported. It does not cover the intrinsic value of the goods.

Custody and Control

 

Often excluded by MM

 

CGL covers goods temporarily in the Insured’s custody

Pure Economic Loss

 

Not available in MM

 

CGL Covers pecuniary/consequential losses where no physical damage has occurred.

Products Inefficacy

 

Often excluded by MM

 

CGL covers losses caused where products fail and cause a loss in expected value of third party property.

Contractors’ Liability

 

Not available in MM

 

CGL Covers construction work undertaken by the Insured

Lateral Support

Not available in MM

 

CGL Covers losses where lateral support structures have been damaged or interfered with

Claims Preparation Costs and Professional Fees

Sometimes offered in MM

 

Available in CGL

 

Incidental Medical Malpractice

Some first aid cover available in MM

Covers medical malpractice allegations against the Insured’s medical staff or first aid employees

Exhibitors’ Liability

Not available in MM

Covers losses associated with the erection of stands at exhibitions

Extended Reporting Period

 

36 months available in both MM and CGL

36 months available in both MM and CGL

Excess of loss motor and passenger liability

Not available in MM

Covers top up motor exposures up to R100m

Conclusion: The extensions of cover available in the CGL policy provide a wide range of extensions to suit almost any company. Very few of these extensions are available on Multimark-type policies.

 

Question: What is the difference between a Pure Economic Loss and a Consequential loss?
Answer:
  • Although a consequential loss is typically a pecuniary (monetary) loss, it is the consequence of Injury or Damage.
  • Example: A fire spreads from the Insured’s premises to a neighbour. The neighbour sues the Insured for the damaged property as well as their loss of income while their premises were unusable. The loss of income is a consequential loss.
  • Where the loss is only pecuniary in nature, without any underlying Damage or Injury, it is referred to as a Pure Economic Loss (PEL) or a pure financial loss.
  • Examples of pure economic losses include Breach of Copyright and unfair labour practices. 
Question: Compare the Pure Economic Loss extension to the Pollution Section.
Answer:

The following example highlights the difference between the Pollution Section and the pure economic loss cover provided by the Pure Economic Loss extension.

  • The Insured’s receptionist sprays too much insecticide and as a result the neighbouring businesses need to be evacuated. The neighbours sue the Insured for loss of income during the evacuation. This claim would fall under the:
    • Pollution Section if the wind did blow the insecticide towards the neighbours and posed a potential health risk.
    • Pure Economic Loss extension if the wind did not blow the insecticide towards the neighbours, but the mere threat that it could happen caused the evacuation.
Question: What is the difference between E&O and Defective Workmanship?
Answer:

 

Defective Workmanship

Errors & Omissions

Similarities

  • They both cover liability which is arises when the Insured’s work is not up to standard.

Differences

  • Only covers liability arising out of or in connection with Products
  • Excludes liability arising out of Products

 

  • Covers Injury or Damage
  • Excludes Injury & Damage

 

  • Excludes pure economic loss
  • Covers pure economic loss

 

  • Excludes advice of a professional nature given for a fee
  • Covers advice of a professional nature given for a fee

Example

  • Blank paper is stolen when the courier company delivers it to the wrong address
  • An examination question paper must be reset when the courier company delivers it to the wrong address. The paper is recovered undamaged.
Question: What is the difference between Products Inefficacy and Pure Economic Loss?
Answer:

 

Products Inefficacy

Pure Economic Loss

Similarities

  • Both provide for losses where there was no damage or injury

Differences

  • Only applies to products which do not perform as promised
  • Covers a wider range of scenarios, mostly arising out of a denial of access.

 

  • Only covers liability arising out of products
  • Mostly excludes liability arising out of products
Question: What is the difference between EU Liability and EEC Liability?
Answer:

 

EU Liability

EEC Liability

Similarities

  • Both are extensions to the general liability policy

Differences

  • Applicable to exports
  • Applicable to tour operators

 

  • Extends the territorial limits of the Multimark policy to liability arising from exports to Europe
  • Provides a form of PI cover for tour operators who misrepresent some aspect of the tour

 

  • Typically only found on Multimark policies. It is not necessary on the Camargue policy
  • Typically not available on Multimark policies, but is available on the Camargue policy
Question: What is the difference between Employer’s Practice Liability (EPL) and Employer’s Liability (EL)?
Answer:

Employer’s Practice Liability

Employer’s Liability

  • Covers claims of unfair labour practice
  • Covers injury to employees at work
  • Damages usually awarded by the CCMA and the Labour Court
  • Damages typically awarded in the Magistrate’s Court or the High Court
  • The Insured will be liable to pay the full amount. The government provides no assistance.
  • In South Africa, these Damages are normally paid by the government in terms of the Compensation for Occupational Injuries and Diseases Act. For that reason this extension excludes cover provided by COID.
Question: What is the difference between Public Liability, General Liability, and General and Tenants Liability?
Answer:
  • They are different names for the same thing. The term Tenants Liability refers to the fact that there is cover for the damage that the Insured may do to premises that the Insured is renting. Tenants Liability is automatically included under the General Liability section.
Question: What is the difference between an Each and Every limit and an Annual Aggregate limit?
Answer:

Annual Aggregate

Each and Every

The combined amount of all claims during the Period of Insurance for that extension must not exceed the indemnity limit applicable to that extension.

The full indemnity limit is available for each claim (or series of claims arising from one event) under that section – regardless of any previous claims/events.

Applies to most sections and extensions of the policy except Section A – Public Liability

 

Applies to Section A – Public Liability

  • Although the policy wording does not necessarily state that a specific extension is on an Annual Aggregate basis, the policy schedule invariably applies this restriction.
  • Where multiple losses occur out of a single cause, these will be treated as one claim. For example, a fire at the Insured’s premises may spread to surrounding properties giving rise to multiple law suits against the Insured. All these losses will be treated as one claim – with a single indemnity limit.
Question: What is the difference between Legal Defence Costs and Statutory Defence Costs?
Answer:

Legal Defence Costs

Statutory Defence Costs

  • The Insured’s legal costs in defending a civil matter
  • The Insured’s legal costs in defending a criminal action
  • Automatically covered by policy
  • Optional extension
  • The court would award Damages to compensate the victim in civil matters
  • The court would impose fines and penalties to punish the offender in criminal matters
  • The court award is typically covered by the policy (subject to the policy conditions)
  • The court award is not covered by the policy (fines and penalties are excluded)
  • E.g. A visitor’s medical bills after being injured at the Insured’s premises
  • E.g. Fine for contravening the Occupational Health and Safety Act – had no balustrade for staircase
  • The policy’s indemnity limit applies to the combined amount of the claim plus the legal defence costs
  • This extension has its own separate limit (but this limit does not increase the overall indemnity limit)
Question: What is the difference between Damage and Damages?
Answer:

Damage

Damages

The policy defines Damage as loss of possession or control of, or physical damage to tangible property

Damages is an amount awarded by the court or the amount of the settlement of the injured party’s claim