Standard commercial general liability policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

Commercial general liability (CGL) policies typical to the Austrian market usually define bodily injury as including death, injury and damage to health and all consequences of these health impairments, such as medical expenses, loss of earnings, pension entitlements and compensation for pain and suffering.

Property damage

What constitutes property damage under a standard CGL policy?

Property damage, on the other hand, usually includes the destruction or damaging of a thing and the manipulation of the physical substance resulting in a reduction of serviceability. As with bodily injury, the financial consequences of these impairments are also covered (consequential pecuniary losses).

Occurrences

What constitutes an occurrence under a standard CGL policy?

Most CGL policies define the occurrence of an insured event as an incident in connection with the insured risk. That is, the event directly causing the bodily injury or property damage for which the policyholder, other insured companies or their staff are or could be liable.

How is the number of covered occurrences determined?

The occurrence of an insured event is to be determined based on the wording of the relevant insurance policy or conditions. Although the definitions of an insured event vary in detail, most will contain at least three elements.

The first element concerns the specification of the event triggering the insurance (eg, the occurrence of the relevant misconduct, negligence or damage itself). The second element defines how this event is to be connected with the insured risk. Lastly, the third element divides the claims asserted by the third party into justified claims (thus triggering the insurer’s duty to satisfy) on the one hand and unfounded claims (triggering the insurer’s duty to defend) on the other.

Most CGL policies not only limit the maximum insurance payout per occurrence and in total per period of insurance but also contain a clause on serial loss. The latter deems multiple claims stemming from one and the same cause as one single occurrence (see ‘Update and trends’).

Coverage

What event or events trigger insurance coverage?

As indicated above, there are no statutory provisions defining when a certain event triggers insurance cover in a standard CGL policy. Therefore, only the policy itself and the corresponding insurance conditions determine when the insurer is required to provide cover (if and insofar as the insurance conditions withstand judicial review; see ‘Ambiguities'). The trigger most commonly stipulated by CGL policies on the Austrian market is the actual occurrence of loss, while the claims-made principle, for example, is more common for D&O policies (see ‘Directors’ and officers’ insurance: Scope’).

How is insurance coverage allocated across multiple insurance policies?

When determining the allocation of coverage, two scenarios must be distinguished.

The first scenario encompasses cases when the insurer is, at least initially, unaware of the additional supplementary or overlapping coverage taken out with another insurer. In Austria, these situations are referred to as double insurance. The second scenario concerns cases when the insurer decides against insuring the risk on its own but rather opts to allocate the insured risk between multiple insurers, each bearing the liability pro rata. The insurers will then designate one lead insurer while the remaining insurance companies involved act as co-insurers.

While, when it comes to drafting the relevant provisions, the parties involved are relatively free as far as the co-insurance scenario is concerned, relevant case law and a number of statutory rules and requirements must be observed regarding double insurance. In this context, the Austrian Insurance Contract Act stipulates, inter alia:

  • a duty of the insured to notify the involved insurers of the coverage under the other policy without undue delay;
  • that the insured cannot apply for and make use of the insurance coverage under multiple policies, when the granting of this coverage would lead to insurance payouts surpassing, in total, either the insured value or the overall loss suffered;
  • that the insurers involved in a case of double insurance are jointly and severally liable for the coverage to be granted under their respective policies; and
  • that, when an insured intentionally and in bad faith brought about the double insurance scenario solely to gain an unlawful pecuniary advantage, all these contracts are void.

Insurers are well advised to include subsidiarity clauses in their respective insurance conditions to avoid, to the degree possible, the downsides of double insurance scenarios. In effect, these subsidiarity clauses provide that an insurer is merely liable on a secondary tier. This means that coverage must be granted only when the insured amounts of all policies taken out before the conclusion of the policy at hand are already used up.

Double insurance scenarios are common, for example, in the area of D&O insurance (eg, when an insured person is also insured under criminal defence insurance or general legal expense insurance).

Law stated date

Correct on

Give the date on which the information above is accurate.

5 December 2019