AAIS Farmowners Program: GL-90- Incidental Business Pursuits

AAIS FARMOWNERS PROGRAM: GL-90–INCIDENTAL BUSINESS PURSUITS

(October 2023)

INTRODUCTION

This endorsement broadens Personal Liability Coverage to include business activities but only those described on the endorsement schedule.

SCHEDULE

The name(s) of the insured(s) who conduct the business, the description of the business itself, and the business’ estimated receipts are entered in the spaces provided. The schedule can accommodate up to five entries.

A checkmark in the appropriate space is required to indicate if coverage for products and completed work is to be included or excluded.

Notes:

Including coverage for products and completed work coverage increases the premium significantly.

The amount of estimated revenue the business generates is a strong indicator of whether the business is incidental or something more significant.

COVERAGE

This endorsement extends the Personal Liability Coverage to the business activities described on the endorsement schedule conducted in conjunction with the insured premises.

Example: Sara “Granny” Smith owns a large apple orchard, but she is really an ardent custom doll maker. She made dolls as gifts for her children and grandchildren but now sells the dolls at local craft shows under the name “Granny’s Darlings.” This “hobby” generates about $7,000 in annual receipts. Sara’s cousin is also her insurance agent. She tells Sara that she does not have coverage for any damages that result from “Granny’s Darlings” unless she adds GL-90 to her policy.

As stated above, the named insured has the option to extend this endorsement’s coverage to include Products and Completed Work by placing a check mark in the appropriate space on the endorsement schedule.

Example: After processing the endorsement the next day, Sara contacts her again and advises that she decided she also wants the Products and Completed Work option. They are both very happy with that choice because Sara submits the following claims over the next two years:

· A neighbor slips and falls in Sara’s workroom while placing a custom doll order.

· A child, from a nearby town, chokes on a small piece of a doll she swallowed after she tore the doll apart.

EXCLUSIONS

Coverage does not apply to bodily injury or property damage that results from the following:

Any unscheduled business activity
Professional services rendered or that should have been rendered but were not

Example: Sara is a nurse. When her neighbor fell, she promptly applied a special concoction she had developed to treat cuts and bruises. Her neighbor claims that this medicinal compound caused severe irritation, resulting in her injuries being more serious than if Sara had not done anything. The insurance company denies any part of the claim related to Sara’s professional services.

Note: Of course, an insured may always challenge an insurance company’s interpretation of professional services.

Obligations that are only the insured’s responsibility because of any contractual obligation, regardless of if the named insured, its agent, or its employee is held responsible.

Note: This exclusion applies to either written or verbal contracts.

The following bodily injury or property damage is excluded when coverage for products and completed work is not selected:

That results to or from the named insured’s products. This exclusion applies whether the named insured manufactures the products or just sells, handles, or distributes them. This is in conjunction with using the named insured’s premises or any business operation on the endorsement schedule that the named insured conducts or that others conduct on the named insured’s behalf.
That results from the named insured’s operations or because a party relies on a representation or warranty concerning those operations. Operations are the work used to perform a job as well as materials, parts, or equipment furnished in conjunction with it.

Due to work the named insured performs or that other parties perform on its behalf if the damage or injury arises from any part of such work

This endorsement defines products as goods or products the named insured or other parties that trade under its name manufacture, sell, handle, or distribute. Containers for the products are considered products, but vehicles are not. Vending machines or other property the named insured does not sell, but either rents to others or places for others to use are also not considered products.

NAME OF INSUREDS

Coverage is provided for persons named as “insureds.” This means that any person(s) connected to the business must be identified and disclosed. This controls the activity so that it does not go beyond the original intent.

Example: GL-90–Incidental Business Pursuits lists Marjorie as the insured and the business as Lawn Care. There is no coverage for this business pursuit if Marjorie gets tired of it and turns it over to her brother Patrick, even though they both live in the same household.

PRODUCTS AND COMPLETED WORK

GL-90 lets an insured list more than one business pursuit. As a result, questions may arise concerning the optional coverage for Products and Completed Work. The option to include this exposure appears to be on an “all or nothing” basis. If this endorsement includes more than one business activity, it seems to be appropriate to have the option to select Products and Completed Work coverage for each activity. It appears that this option to select or reject coverage for each business pursuit is unavailable, which may create ambiguity if or when a loss occurs. It is possible that an insured may either desire or assume that the option applies differently to each activity.

CLARIFICATION NEEDED?

Considering the issues raised above with respect to insureds involved with business activities and the optional coverage for Products and Completed Work, it may be appropriate to suggest revising the endorsement wording to clarify the coverage intent.