ATLANTA. Ga. -- State insurance departments should reject the Insurance Services Office's (ISO) Commercial General Liability (CGL) filing "pass through" defense cost coverage, because it would adversely impact commercial insurance consumers, said Richard L. Katten CPCU, AAI, of the Independent Insurance Agents of America (IIAA).
Katten's announcement was released December 9 after the National Association of Insurance Commissioner's (NAIC) Commercial Lines-Property and Casualty Insurance (D) Committee did not fully endorse a working group's finding that the filing was "defective and ambiguous." Instead, the full committee decided that individual state insurance departments should consider the filing without NAIC intervention. The commissioners' decision came during the NAIC's annual winter meeting here.
"In effect," Katten said, "the NAIC decided the CGL issue was too hot to handle at the national level and left it up to each state to make their own ruling on the filing.
"Consequently. IIAA urges each state to reject this filing because it is not in the public's best interest." explained Katten, a member of IIAA's Technical Conference Committee. "IIAA's position on the filing is that it is a dimunition of coverage from what is happening in the real world.
Since ISO filed the new CGL form in 1988. Katten explained, the issue has been whether the current policy provides "pass through" defense-cost coverage for individuals or companies who sign a contract with a named policyholder "if the contract assumes liability coverage for the individual or company."
ISO says the new filing is needed because the current CGL policy does not provide pass-through defense-cost coverage. Katten said, adding that IIAA contends that it does and says that a reduction in coverage will result if the new filing is adopted.
Katten said that ISO agreed all along that the accepted business practice was to defend indemnities and that the payment of defense costs are treated as a supplementary expense. The ISO filing, however, will reduce the limits of the policy available to pay claims as defense costs will be deducted from policy limits, he asserted.
"IIAA believes that it is as onerous to consumers today as it was on the day it was filed despite the fact that ISO has agreed to adjust the loss costs to reflect a diminution of coverage," said Katten. "A small reduction in loss costs, which are used to develop rates, will not alter the fundamental flaws in the filing," he...