Archive for February 2013

New Commercial General Liability Forms and Endorsements Coming in April 2013

February 26, 2013

The Insurance Services Office, Inc. (“ISO”) will release new standard Commercial General Liability (“CGL”) forms and endorsements on April 1, 2013.  The changes will expand coverage in certain areas, restrict coverage in others, and also introduce new requirements.  The following bullet points highlight some of the most significant changes and their potential impact on the construction industry.

Additional Insured (AI) Endorsements

  • ISO’s AI endorsement (CG 20 38 04 13) seeks to eliminate uncertainty over AI/privity of contract requirements.  A new paragraph was added to (CG 20 38 04 13) broadly requiring AI status for “any other person or organization you are required to add as an AI under the contract or agreement described in [the initial AI endorsement paragraph].”
  • To avoid unintended application of anti-indemnity statutes, ISO will incorporate a “savings clause” into all of its standard form AI endorsements in an effort to preserve the AI requirement even where related indemnity provisions would otherwise fail.
  • The AI endorsements will contain language that caps the limits of liability available to the AI to either (1) those required by contract, or (2) those prescribed on the Declarations page – whichever is less.
  • The new AI endorsements will contain language that insurance afforded to the AI will not be broader than that which the named insured is required by the contract or agreement to provide.

Adjustments to the “Other Insurance” Clause

  • ISO removed “by attachment of an endorsement” language from CGL insurance provision to achieve its intent of making the AI carrier primary.
  • ISO also added language stating that coverage provided to AIs will be “primary and noncontributory” so long as (1) the AI is a named insured on another policy of insurance, and (2) there is a written contract between the named insured and AI indicating that the policy will be primary and will not seek contribution from any other insurance available to AI.

Narrowing the Professional Services Exclusion

  • ISO modified the exclusion by specifically including the following as “professional services:” “hiring, employment, training, supervision, and monitoring” decisions.

Restricting Personal & Advertising Injury Coverage

  • To decrease the scope of coverage, an endorsement drafted by ISO removes the following from the definition of personal and advertising injury:  “oral or written publications, in any manner, of material that violates a person’s right of privacy.”

“Insured Contract” Definition Revised

  • The proposed change to the ISO definition of “insured contract” will limit the insured contract exception to circumstances where the tort liability assumed by the insured is for property damage or bodily injury that is caused in whole or in part by such insured.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

 

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HB 3636 Overrules Cypress Creek

February 15, 2013

On February 11, 2013, Illinois Governor Pat Quinn signed HB 3636 which, among other things, overrules the Illinois Supreme Court’s decision in LaSalle Bank N. A. v. Cypress Creek I, LP, 242 Ill.2d 231 (2011).  In a 5-2 decision, the Illinois Supreme Court in Cypress Creek decided that mortgage lenders would have a priority interest over secured lien claimants in a financially troubled project to the extent that its loan proceeds paid for improvements to the real estate.  In particular, where foreclosure funds were insufficient to satisfy the mortgage lender and lien claimants, the court ruled that the lender had priority for the value of the property when the contract was entered into and the value of the improvements on the property that were paid for by the lender’s loan.  The court held lien claimants are entitled to priority only over the value of their improvements erected on the property not otherwise paid for by loan proceeds.

A few months after the Cypress Creek decision, HB 3636 was filed in the General Assembly to reverse the court’s ruling.  Proponents of the bill claimed that it restored the original intent of the Illinois Mechanic’s Lien Act as it restores the priority of contractors with secured mechanic’s liens over lenders in the allocation of sale proceeds attributable to the improvement of a property.

Opponents contended that HB 3636 unjustly enriched mechanic’s lien claimants by granting a priority to improvements that had already been paid for by construction loan proceeds.

Where the proceeds of a foreclosure sale are insufficient to satisfy all claims, HB 3636 now gives lien claimants priority to the value of improvements even if such improvements were paid for with the lender’s loaned funds. The bill takes effect immediately.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.


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