Property & Casualty Insurance/XCU ENDORSEMENT F-UP QUESTION
Hello Jay or anyone else that may be able to help!!,
This question was originally posted to Kristen Mulcahy (and I appreciate all her efforts). The issue at hand certainly raises some concerns and questions. As I have tried to look for answers on articles and books, with no definitive answer.
Main issue is that we are insuring a client (lessor risk) that has a historical building rented out to a lessee (landscaping materials shop). The carrier wants to insure it (the owner lessor) but does not want to provide coverage for BI/PD due to collapse of roof and damages thereof. They insist on using XCU CG 2142 declaring that it is the appropriate endorsement to use.
As a consultant on P&C myself (and for the benefit of this insured), I don't see this as an excluded exposure under the XCU endorsement from the standpoint of the lessor risk insured.
If XCU Endorsement is attached on a CGL policy, then the insured will have no coverage only if performing "operations" that may involve XCU exposures as defined in the endorsement. The endorsement states "Description of Location and Operations". So the exclusion is limited to a specified location and to "operations" exposure (as opposed to premises, products and completed operations).
From what I have read in the endorsement CG2142, I understand and infer that coverage will apply even with the referred XCU exclusion endorsement attached, if the cause for BI/PD is the insured's exposure to "premises", "products" and "completed operations".
It is my opinion that by referring to "Description of Location and Operations", this XCU exclusion endorsement's intention is to preclude coverage for XCU hazards to those insured's whose main business is as contractors or subcontractors and that due to the "operations" exposure at the described locations, an XCU (as per definition) has occurred causing third party BI/PD.
Major insurance articles, books and references always refer to contractor risks when talking about this XCU endorsement. But...what about those non-contractor risks??
Wouldn't a non-contractor business, as an insured under a CGL, still retain coverage for collapse of its building due to "premises" exposure? Wouldn't it be true, since said insured does not carry out "operations" as a contractor would as its exposure is "premises"?
What are your thoughts? Any references I could look up to?
Thanks for all your help!!
First, let me apologize for my delayed response. I was planning on researching this weekend and answering and then got involved in some other work related issues. This fell through the cracks.
I have downloaded the form and have reviewed it. Unfortunately, I no longer have access to IRMI or I would pull some info from there to help support this answer.
As i read the form, I have a tendency to agree with you. The "collapse" hazard has to do with operations performed by the insured relating to grading, backfilling, etc. As a landlord (lessor's risk), your insured has no such related operations. You're correct in your assessment that this endorsement is designed specifically for contractors that perform the very operations described in the definition of "structural property damage". Your customer does not perform these or any other operations beyond leasing the premises to their tenant.
I cannot, for the life of me, find any justification for this endorsement nor do I foresee any situations where it would actually apply.
I'll contact some fellow "insurance nerds" and see if I can get you some commentary from IRMI.