Standard commercial general liability policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

Bodily injury means physical damage to a person or to the health of a person that is not caused by a disease. In practice, bodily injury does not include mental damage unless otherwise stipulated in the standard CGL policy.

The purpose of liability (casualty) insurance is to cover bodily injury resulting from the negligence or omissions of an insured.

Property damage

What constitutes property damage under a standard CGL policy?

CGL policies generally define property damage as follows: physical damage to tangible property, including but not limited to damage to its shape, contents and parts, and how long the damage lasts; and loss of use of tangible property.

Occurrences

What constitutes an occurrence under a standard CGL policy?

Occurrence under a standard CGL policy means an event that results in bodily injury or property damage or any loss to a third party caused by the insured. In a claims-based policy, an occurrence means that the third party makes a claim to the insured.

An insurer may, in accordance with the provisions of the law or the terms of an insurance contract, directly indemnify a third party for loss or damage caused by the insured under liability insurance. When an insured under liability insurance causes damage to a third party and the liability of the insured for indemnity to the third party has been determined, the insurer must directly pay insurance benefits to the third party according to the request of the insured. When an insured is negligent in making a request, the third party will have the right to directly request that the insurer pay the insurance benefits for the damage.

How is the number of covered occurrences determined?

The following factors determine the number of occurrences:

  • agreements about the number;
  • the definition of occurrence in the CGL policy: CGL policies frequently define occurrence as ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions’. The limit of liability provisions can play an important role in determining how many occurrences are implicated by the underlying claim. A common limit in a liability provision states that ‘Our total liability for all damages resulting from any one “occurrence” will not be more than the limit of liability’;
  • the proximate cause: generally speaking, the same proximate cause leads to the same insurance occurrence and different proximate causes lead to different insurance occurrences; and
  • the four unities test: the responsible persons, causation, timing and location are considered.
Coverage

What event or events trigger insurance coverage?

There are four theoretical events that trigger insurance coverage:

  • exposure: a policy is triggered upon the first exposure to the injury-causing or damage-causing event;
  • manifestation: a policy is triggered upon the first manifestation of injury or damage;
  • injury in fact: a policy is triggered when the first injury or damage takes place; and
  • continuous: all policies between the date of first exposure and the date of manifestation are triggered.

How is insurance coverage allocated across multiple insurance policies?

In China, double insurance is when an insurance applicant enters into separate insurance contracts with two or more insurers on the same subject, the same insurable interests and the same insured incident, and the total insured amount exceeds the insurable value.

In the event of double insurance, an insurance applicant must notify all concerned insurers of relevant information with respect to the double insurance.

For double insurance, the total amount of indemnity paid by all concerned insurers must not exceed the insurable value. Unless specified otherwise in the insurance contract, the concerned insurers must undertake their respective obligations for indemnity according to the proportion of the sum insured by each of them to the total amount of the sum insured.

An insurance applicant for double insurance may require the insurers to pro rata refund the insurance premium for the excess of the total insured amount over the insurable value.

In other jurisdictions, when facing the double insurance scenario, a judge will take the intention of the policyholder into account and make differentiated decisions accordingly. However, in China the law addresses double insurance without considering the intention of the policyholder and whether the policyholder intentionally or negligently bought double policies.