Tag Archives: insurance application

SPECIFIED OR DESIGNATED OPERATIONS ENDORSEMENT – LIMITATION OF INSURANCE COVERAGE

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Your commercial general liability (CGL) policy may contain a specified or designated operations endorsement. This does not operate as an exclusion but as a LIMITATION of coverage.  The endorsement may provide that bodily injury or property damage ONLY applies to the operations or business described therein. Similarly, there may be a limitation of coverage for designated classifications or codes which has the same effect—limiting coverage to the classifications/codes listed therein. This is an important consideration, and you need to understand and watch out for such limitations of coverage. (These aren’t the only ones, but it’s important to appreciate that limitations of coverage operate to limit the coverage to which the CGL policy applies.)

The Eleventh Circuit Court of Appeal dealt with this exact issue under Alabama law (although the same analysis would apply in numerous jurisdictions).  In this case, a landscaper (the insured) had a CGL policy with a specified operations endorsement that limited coverage to landscaping operations.  The landscaper was hired to install an in-ground trampoline in addition to site and landscaping operations at a house. A person got hurt using the trampoline and the landscaper was sued. The CGL insurer denied coverage outright (and, thus, any duty to defend) because the complaint asserted that the injury occurred from the landscaper’s assembly and installation of the trampoline, which was not a landscaping operation. Furthermore, the Eleventh Circuit noted that the landscaper’s insurance application specified that the landscaper did not perform any recreational or playground equipment erection or construction, and the installation and assembly of a trampoline would constitute recreational or playground equipment.

Here’s the Eleventh Circuit’s noteworthy discussion on this limitation of coverage:

While the distinction between limits to coverage and exclusions from coverage may be murky in some cases, the policy here makes clear that the Specified Operations provision is a limit — not an exclusion.

To begin with, the Policy’s “Schedule of Forms and Endorsements” describes 27 different “exclusions” — and “Specified Operations” is not one of them. “Specified Operations” is instead described as a “Limitation of Coverage.”

But we need not rest on the policy’s description of the Specified Operations provision, because the operation of the policy confirms its status. Commercial general liability policies generally “give[ ] coverage through the general coverage provision, and ‘take[ ] away‘ coverage through the various exclusions.” Recall, the general coverage provision provides that

[United] will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. [United] will have the right and duty to defend the insured against any “suit” seeking those damages. However, [United] will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.

By those terms, the policy sets out an (albeit not-totally-fleshed-out) limit to coverage. However, this initial explanation does not provide the full scope of coverage because it very broadly tells us only that the insurer will pay damages “to which this insurance applies” but not for any suit “to which this insurance does not apply.” From there, the Specified Operations provision fills in the details by adding, to that same section, the following:

        1. This insurance applies to “bodily injury” and “property damage” only if:

(4) The “bodily injury” or “property damage” arises from one or more of the operations shown above; and [i]f also scheduled above[.]”

What “operations are shown” and “scheduled above”? The policy states simply that “[the] Insured performs landscaping.” In short, the Specified Operations provision (fitting into the gap left by the general coverage provision) describes the contours or boundaries of coverage — it does not purport to take away coverage already granted.

Thus, the Specified Operations provision is a limitation of coverage — not an exclusion….

***

The parties expend significant energy parsing the words of the policy, including whether the site work necessary to install the trampoline was “landscaping” and whether the trampoline injury “arises from” that work. We conclude we need not resolve those issues here. Even taking the term “landscaping” as ambiguous, construing it in [landscaper’s] favor, and applying Alabama law’s broad understanding of the causal term “arises out of,” Snell’s claim still fails. As the district court explained, under Alabama law, “[e]very insurance contract shall be construed . . . as . . . modified by any . . . application which is a part of the policy.” And the district court’s analysis of [landscaper’s] application under that statute was correct:

[Landscaper] was asked in the application whether his work included “any recreational or playground equipment construction or erection” and Snell answered “No.” It is undisputed that the trampoline is “recreational equipment.” If [landscaper] had answered “Yes” to that question or if he had informed United Specialty at some time later that his operations were going to include structural work for recreational equipment and the installation of recreational equipment, then United Specialty could have added that coverage and made any appropriate adjustments to [landscaper’s] rate.

Accordingly, the information [landscaper] provided in his insurance application conclusively shows he is not entitled to coverage.

***

Taking the application as part of the policy itself, we agree with the district court that [landscaper] expressly disclaimed doing any of the sort of work he did here — including the site work necessary to install the trampoline that he now claims is “landscaping” out of which the underlying injury “arises.”

In sum, the district court correctly held that [landscaper’s] insurance application — which Alabama law requires us to consider part of the policy — expressly disclaims the work he did here. Accordingly, we affirm the grant of summary judgment on [landscaper’s] duty-to-defend claim against United.

Snell v. United Specialty Ins. Co., 30 Fla.L.Weekly C1008a (11th Cir. 2024) (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

NO COVERAGE UNDER INSTALLATION POLICY WHEN READ TOGETHER WITH INSURANCE APPLICATION

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A recent case out of the Eleventh Circuit denied an underground contractor’s claim under what appears to be a commercial property installation floater policy (inland marine coverage) that covers the contractor’s materials. Whereas a builder’s risk policy is more expansive, an installation floater is narrower and can provide protection to a contractor for materials and equipment in transit, stored, or being installed subject to the terms of the installation floater policy. It can provide coverage to a trade subcontractor for materials that aren’t covered by builder’s risk.

In Travelers Property Casualty Company of America v. Talcon Group, LLC, 2023 WL 8798053 (11th Cir. 2023), an underground utility contractor that had a general contractor’s license had an installation policy that provided coverage “only for underground utility operations and the site development work tied to those operations.” Talcon Group, supra, at *1.  The utility contractor was constructing two residential homes that was on land owned by an affiliated family entity. During construction of the residential homes, a wildfire destroyed the homes prior to the issuance of certificates of occupancy. The utility contractor submitted a notice of loss to its insurance carrier that provided the installation policy. The carrier denied the claim because the construction of the homes was NOT the same type of work as the installation of underground utilities which was covered. An insurance coverage lawsuit ensued.

In analyzing the issue, the court look at the insurance application.  Under the “Installation/Builder’s Risk Section,” the contractor selected “Installation,” did not identify any value for residential projects, and was accompanied with an email identifying it predominantly performed water and sewer line work. It identified that 98%-99% of its work was underground utility and 1%-2% was site development, and 0% was residential.

The insurance application is important because “[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by an application therefore….” Talcon Group, supra, at *4 quoting Fla. Stat. s. 627.419(1).  This means “[t]he application becomes a part of the agreement between the parties and the policy together with the application form the contract of insurance.” Id. (citation and quotation omitted).

The insurance policy itself defined the term “Installation” as “[p]roperty described in the Declarations under ‘Installation’ owned by you or property of others for which you are legally liable, that you or your subcontractors will install, erect or fabricate at the ‘job site.’” Talcon Group, supra, at *3.  In the Declaration, nothing identified the residential homes or that it was performing work at the job site of the residential homes.  The insurance carrier moved for summary judgment and prevailed that there was no coverage under the installation policy for the residential homes.

The Eleventh Circuit Court of Appeals agreed: “When the Policy is read together with [the utility contractor’s] renewal application, the only reasonable interpretation is that the scope of coverage did not extend to the construction of the two residential homes.” Talcon Group, supra, at *5.  Moreover, the Eleventh Circuit found that the utility contractor’s reading of the installation policy was unreasonable:

[The utility contractor’s] reading would simply require [the insurer] to cover any one-off construction project wholly unrelated to [the contractor’s] underground utility or site development work – again, the only types of work disclosed or provided in the renewal application and Policy. … Coverage would follow if [the contractor] decided to install a skylight at a mall, repair the roof of a church, or construct a skyscraper from the ground up.  [The insurer] would be on the hook for any number of such projects, even though they were not disclosed in [the contractor’s] application, contemplated by [the insurer], or provided for in the Policy. Taken as a whole, the Policy [and the contractor’s] renewal application do not support such a reading.

Indeed, the only reasonable reading of the Policy and the renewal application is that [the insurer] provided coverage for [the contractor’s] underground utility and site development work. The construction of the two residential homes is neither of those items and is not covered by the Policy.

Talcon Group, supra, at *6.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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