Washington State Rewrites CGL
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Claims Made CGL Turned Into an Occurrence Policy on Public Policy Grounds.
In a certified question from a federal court the Washington state Supreme Court was asked whether a contractor’s commercial general liability (CGL) insurance policy that requires the loss to occur and be reported within the same policy year and that provides neither prospective nor retroactive coverage violates Washington’s public policy.
RCW 18.27.050, requires registered contractors to carry at least $100,000 in financial responsibility for bodily injuries.
Certification In Preferred Contractors Insurance Company, Risk Retention Group, LLC v. Baker And Son Construction, No. 100466-4, Supreme Court of Washington, En Banc (August 11, 2022)
Chapter 18.27 RCW Provides a Statutory Basis for Washington Public Policy to Promote Contractors’ Financial Responsibility for Bodily Injuries Insurance policies are private contracts, and parties are ordinarily free to exercise their freedom of contract to limit the liability covered in the policy.
Nonretroactive Claims-Made Policies That Provide No Prospective or Retroactive Coverage Violate Public Policy
Having established that Washington has a public policy requiring contractors to be financially responsible to members of the public injured by their negligence,
The insurance policies PCIC issued to Baker fail to provide prospective or retroactive coverage and create limited one-year windows for claims to occur and be reported to qualify for coverage. Such restrictive coverage violates Washington’s public policy. Therefore, the Supreme Court answered the certified question in the affirmative.
The Supreme Court of the State of Washington has spoken from both sides of the bench. It claims that an insurer and insured have the right to contract as they please including the right to issue a claims made policy. However, in this situation the Court decided that because a statute requires a contractor to be financially responsible a claims made policy is in violation of the public policy of the state and required the insurer PCIC to protect the insured as it it was an “occurrence” CGL. It did not, however, consider requiring the insured to pay the premium for the more extensive coverage. This decision has changed a public policy into a forced rewriting of an insurance policy both parties agreed to and relied upon up to the limits of the coverage
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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