As this edition of News Board goes to press, the new form hasn't been completed or approved, but we expect the highlights to include:

Overall aggregate limit

A new overall aggregate limit applies instead of the traditional aggregate limit, which applies only to product/completed operations hazards.

• Modern corporate governance demands that insurers be able to responsibly measure their exposure to multiple losses. Insurers recognize that the legal environment today is not as benign as it was when the present policy language was developed. Most insurance companies are no longer able to purchase reinsurance protection on an unlimited format, so the new language eliminates a massive uncertainty in the class of business with the longest loss-development tail.



• The overall aggregate limit means that the available policy limit is reduced by each successive loss until it is exhausted.



• This form offers the full face limit of the policy only for the first loss.



• For a client whose major exposures were previously not subject to an annual aggregate limit, this change may be meaningful. As a result, we recommend that when your primary carrier implements this new form, you negotiate higher aggregate limits to offset this coverage reduction.



• If your primary carrier is unwilling or unable to increase primary limits, our umbrella program can offer additional aggregate limit protection.



• To the extent that this change represents a coverage reduction in the GL policy, this risk may attract an additional premium in the umbrella policy.



• You must disclose any changes to the primary limits to your excess carrier and ensure that those changes are properly expressed in the schedule of underlying insurance.



• Please be aware that any feature in your primary program that is subject to an aggregate limit is subject to a similar aggregate limit in your umbrella or excess policy.



• Primary carriers have already announced the implementation of new forms containing an overall aggregate limit.

The menu of optional pollution exclusions introduced by the most recent IBC wording has been discontinued and replaced by an absolute pollution exclusion. The new exclusion incorporates several features that have been made to the ISO GL wording over the last decade. Insurers will likely offer alternative environmental covers such as hostile fire form on a "buy-back" basis. Clients with a significant environmental exposure will consider purchasing separate environmental cover on a stand-alone basis.

Sexual abuse exclusion

For the first time, an IBC GL policy wording will contain a sexual abuse exclusion. There is no IBC approved buy-back endorsement for sexual abuse cover, although some insurers may offer this on a negotiated basis. This exclusion does not appear in the U.S. ISO wording.

Compensatory damages

The term compensatory damages is now defined for greater certainty. Punitive, aggravated and non-compensatory damages are expressly excluded. This definition does not appear in the U.S. ISO wording. Canadian juries have established record punitive damages awards against insurers, and punitive awards against other industries will likely follow, so this gap between our clients' exposures and the cover afforded by the GL wording is widening.

We recommend that the broker should:

• Be aware of the implementation schedule of each of your major markets.



• Be aware of any differences between the new forms used by your major markets.



• Know which, if any, of your clients may be adversely affected by these different forms.



• Communicate material changes to your clients.



• Make policy limit and coverage recommendations where necessary.

In summary, these changes to the GL policy are reducing — rather than increasing — coverage, even though our commercial and institutional clients are facing increasing exposures on a broader range of fronts. As a result, it is important to explore a palette of separate specialty covers in order to satisfy your clients' GL coverage requirements.