Managing the Split Between Domestic and International Commercial General Liability Insurance Policies
US-based multinational organizations’ global insurance programs could have coverage gaps and overlaps between domestic and commercial general liability (CGL) policies. Such inefficiencies could mean your organization retains more risk than necessary or leave it vulnerable to litigation and other potential exposures costing millions of dollars.
Unlike most countries, where structuring a multi-country casualty program is a truly global endeavor, domestic and international casualty is split in the US. But with insurers increasingly consolidating domestic and international casualty under singular leadership — and, in some cases, underwriting — the US is moving toward an environment in which truly global programs will be a common solution.
Here we review three situations in which US companies or their subsidiaries could face a gap in their CGL policies:
1. A large US-based hotel chain operates resorts and hotels in 50 countries. A French citizen staying in one of the chain’s New York hotels slips on a wet marble floor and is injured. The traveler returns to France, where he files a suit against the hotel.
2. A US manufacturer of electrical panels enters into a supply agreement with a contractor that separately wins a bid to construct a high-end boutique hotel in the British Virgin Islands. A fire breaks out at the hotel’s grand opening, destroying the hotel and neighboring villa. Several hotel guests also sustain injuries and lose their personal belongings. The cause of the fire is determined to be a fault in the electrical panels. The hotel guests and villa owner bring a large lawsuit in the US against the electrical panel manufacturer.
3. Before beginning a local project, the Canadian subsidiary of a US-based construction company procures local admitted coverage. The US parent’s domestic CGL policy also provides coverage for Canada, including all subsidiaries of the US parent. When a crane at the construction site topples over and damages another building, the question arises over which policy or policies should respond.
To structure a global casualty program, insureds need to work closely with both insurers and brokers. Yet even when the same carrier is underwriting both sides of the program, insurers and brokers often take a siloed approach to domestic and international casualty. Breaking down these siloes and aligning the resources of insurers’ and brokers’ domestic casualty, international casualty, and international regulatory and tax experts is critical to an organization’s success. By taking a global, holistic view on loss and retention analysis, compliance requirements, cost, and coverage needs, insureds can eliminate coverage gaps and overlaps and build an effective program that offers robust protection around the world.