Insurance 101:
General Liability Insurance

Although many public entities buy special public entity liability insurance policies, these policies are all more or less related to the commercial general liability (CGL) policy (also known as casualty insurance). Whereas property insurance claims are termed first-party claims because the insured has suffered the loss, liability losses are called third-party claims because the insured is legally obligated to pay some injured third party. In other words, this insurance refers to coverage mainly for bodily injury and property damage to third parties caused by, or arising out of, our operations or the use of our facilities.

This insurance provides protection for all sums we are legally obligated to pay, including legal expenses associated with the occurrence in question. (For example, just because someone is injured on our premises does not always mean that we are legally responsible for that person's injuries.) It also covers losses arising from personal injuries, which include false arrest, defamation, invasion of privacy, wrongful eviction, discrimination and civil rights violations, and other intentional torts. Other liability insurance coverages may or may not be included with general liability. This includes liability for automobiles, public officials, malpractice, environmental impairment, professional practices, and employee benefit programs. Additionally, this coverage extends beyond the entity itself and covers employees as individuals while acting in the course and scope of their employment.

Coverages and Exclusions

The insurer has the "right and duty" to defend any claim. It also has the right to settle any claim as it sees fit, sometimes irrespective of our wishes. The insurer pays legal fees and defense costs until it has paid out the policy limits.

Coverage applies only to an occurrence in the coverage territory which takes place during the policy period. Occurrence is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Coverage territory is typically the U.S., its territories and possessions, Puerto Rico, and Canada.

CGL insurance is issued in two versions: the occurrence form, which covers all claims, whenever made, arising from occurrences during the policy period; and the claims-made form, which only covers claims made during the policy period. Some common exclusions include:

• Intentional acts; willful violation of the law
• Contractual liability other than an insured contract
• Workers' compensation or similar laws
• War
• Faulty workmanship
• Publishing known false statements
• Breach of contract

Our current CGL insurer is United Educators (UE)-a risk retention group that specializes in insurance for colleges and universities. UE provides two separate towers of liability with $1 million in limits: General/Automotive Liability and Educators Legal Liability. This policy is written on both occurrence and claims-made forms. As a result, it is extremely important that all potential claims be reported to the District Risk Manager as soon as practicable after a potential loss becomes known.

Notice of Claims

A third party who requests to recover monetary damages for bodily injury or personal property, (including automobile claims) allegedly caused by the District or its employees, officers, agents, or volunteers, must do so within 180 days after the date of the occurrence. District employees are to neither accept liability nor furnish information on incidents or accidents, and should refer the claimant to the risk manager immediately after knowledge of a potential or actual claim.

A.R.S. 12-821.01 defines the requirements for filing a claim against a public entity in the state of Arizona. The statute requires, in part, that a claim against a public entity or public employee:

• Be filed with the appropriate party within 180 days after the cause of action accrues.
• Contain sufficient facts to permit the public entity or public employee to understand the basis upon which liability is claimed.
• Contain a specific dollar amount for which the claim can be settled and the facts supporting that amount.

Statute of Limitations

A claim not filed within 180 days after the cause of action accrues is barred and no action may be maintained thereon. In order to file a suit against a public entity or public employee, a valid notice of claim must be filed. A lawsuit generally must be filed within one year after the cause of action accrues.

Please note that failure to comply with this statute can prejudice the District's rights to accept or deny a claim. Therefore, it is imperative that anyone seeking monetary damages from the District submit a valid notice of claim. (Notice of Claim forms, which can help facilitate the claims reporting process for claimants, are available from the Legal Services Department.) Once a valid claim is received, the risk manager will facilitate the investigation and final disposition (denial or settlement) of the claim.

Published in the Winter 2003 Edition of In Brief