When reviewing a Commercial General Liability (CGL) policy, most condominium associations focus on the liability limits, deductible, and premium. While those are certainly important, one endorsement that is often overlooked is the Cross Liability Exclusion.
Depending on the carrier, you may also see it called a Cross Suits Exclusion or Separation of Insureds Exclusion.While the names vary, these endorsements all modify the standard General Liability policy by limiting coverage for certain claims between insureds. The title of the endorsement is less important than the actual wording, as the scope of the exclusion can vary significantly from one carrier to another.
The Standard ISO General Liability Policy
Most Commercial General Liability policies are written using the standard ISO Coverage Form. Under Condition 7 – Separation of Insureds, the policy states:
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned to the first Named Insured, this insurance applies:
- As if each Named Insured were the only Named Insured; and
- Separately to each insured against whom a claim or “suit” is brought.
In simple terms, the policy is designed to evaluate coverage separately for each insured. Although multiple parties may qualify as insureds under the same General Liability policy, each insured is generally treated as though they have their own policy, subject to the policy’s terms, conditions, and exclusions.
Why Is This Important?
This isn’t just standard ISO language. It’s also an important requirement for many condominium associations.
Under Fannie Mae’s General Liability Insurance Requirements for Project Developments, condominium General Liability policies are required to include a Separation of Insureds (or Severability of Interests) provision, or equivalent wording. The purpose is to help ensure that coverage for one insured is not automatically affected by the actions of another insured.
Where Coverage Can Change
While many admitted carriers use the standard ISO language without modification, some carriers, particularly in the excess and surplus (E&S) lines market, add a Cross Liability Exclusion, Cross Suits Exclusion, or Separation of Insureds Exclusion by endorsement.
One example states:
This policy does not apply to “bodily injury,” “property damage,” or “personal and advertising injury” arising out of “suits” brought by any Named Insured against another Named Insured.
It doesn’t look like a significant change, but it is a departure from the standard ISO policy.
Under the standard Separation of Insureds provision, coverage is generally evaluated separately for each insured. This endorsement creates an exception by removing coverage for lawsuits between Named Insureds.
For many condominium associations, this may never become an issue because there is only one Named Insured. However, it can become important when a policy insures multiple entities, such as a master association and one or more sub-associations, multiple associations insured under the same policy, or other related legal entities.
It’s also important to understand that not all of these endorsements are written the same way. The example above is relatively narrow because it only applies to lawsuits between Named Insureds. Other carriers use much broader wording that applies to any insured, including directors, officers, employees, affiliated entities, or additional insureds. Those endorsements can significantly reduce the protection that the standard ISO Separation of Insureds provision was intended to provide.
Don’t Assume Every Policy Is the Same
Two General Liability policies may have the same liability limits, deductibles, and even similar premiums, yet provide very different coverage because of the endorsements attached to the policy.
This is especially true in Florida’s condominium insurance market, where surplus lines carriers frequently modify the standard ISO policy form. Those changes often aren’t obvious unless someone is reviewing the actual policy language.
Final Thoughts
Not all General Liability policies are created equal. While the declarations page tells you the limits and premium, it doesn’t tell the whole story.
As part of every renewal, condominium associations should review the policy endorsements to determine whether the carrier has modified the standard ISO Separation of Insureds provision with a Cross Liability Exclusion, Cross Suits Exclusion, or Separation of Insureds Exclusion. Understanding these differences before a claim occurs can help avoid unexpected coverage gaps and ensure your association is purchasing the coverage it expects.
If your association hasn’t had its General Liability policy reviewed in several years, now is a great time to have your insurance advisor compare the actual policy language, not just the price.
