Form CG 04 35: Knowledge Of Occurrence Or Offense
1. What the form is
Endorsement CG 04 35, titled "Knowledge Of Occurrence Or Offense," is a standard form developed by the Insurance Services Office (ISO) for use with Commercial General Liability (CGL) policies (CG 00 01 and CG 00 02). Its primary purpose is to modify the policy's conditions regarding when the knowledge of an "occurrence," offense, claim, or "suit" by certain individuals within an insured organization is considered to be the knowledge of the organization itself. This is crucial because CGL policies typically require the insured to provide prompt notice to the insurer of any such events. This endorsement clarifies that knowledge by any agent, servant, or "employee" of the named insured does not automatically constitute knowledge by the insured organization. For the organization to be deemed to have knowledge, an individual in a specifically listed position (e.g., an executive officer, partner, or insurance manager) must possess that knowledge or have received the information from the agent, servant, or "employee".
2. Classes of business it applies to
This endorsement is not limited to specific industries but is particularly relevant for larger organizations or those with complex internal reporting structures. In such businesses, lower-level employees or agents might become aware of an incident that could lead to a claim, but that information may not immediately reach the individuals responsible for notifying the insurer. Real-world examples include:
- A large retail chain where a store-level employee witnesses a customer slip and fall, but doesn't report it to corporate headquarters or the designated risk manager immediately.
- A manufacturing company where a floor supervisor learns of a potential product defect that could cause harm, but this information is not promptly escalated to executive management.
- A construction company where a site foreman is aware of an accident, but the main office or the individual responsible for insurance matters is not informed in a timely manner.
In these scenarios, CG 04 35 helps to define when the "clock starts ticking" for the insured organization's duty to notify the insurer, by linking it to the knowledge of specified managerial or executive personnel.
3. Special considerations
The use of this endorsement aims to prevent a situation where an insurer could deny coverage based on late notice, simply because a lower-level employee was aware of an occurrence but failed to report it appropriately within the organization. However, it also underscores the importance for insured organizations to have clear internal procedures for reporting incidents to the individuals listed in the endorsement.
Key considerations include:
- Designated Positions: The effectiveness of this endorsement hinges on the specific individuals or positions listed in the endorsement schedule. The insured must ensure these accurately reflect who within their organization has the authority and responsibility for handling insurance matters.
- Internal Communication: While the endorsement provides some protection, it does not absolve the insured of the responsibility to implement and maintain effective internal communication channels for reporting occurrences and claims. Failure to do so could still lead to disputes, even with this endorsement in place.
- State Law: While the form is listed as applicable in all states, state laws regarding imputation of knowledge (when an agent's knowledge is legally considered the principal's knowledge) can vary and might interact with the policy provisions.
- Claims-Made vs. Occurrence Policies: The timing of knowledge and reporting is critical under both occurrence and claims-made policies, but it has heightened importance under claims-made forms (like CG 00 02) due to their specific reporting requirements. This endorsement modifies a condition relevant to both types of forms.
For example, if a company has designated only its CEO in the endorsement and a significant incident is known by a regional manager for weeks without being reported to the CEO, the insurer might still argue late notice if the delay is deemed unreasonable, depending on the specific facts and policy language. The endorsement clarifies whose knowledge matters for the policy condition but doesn't eliminate the general duty of timely reporting once that designated person has knowledge.
4. Key information for agents and underwriters
For agents and underwriters, understanding the implications of CG 04 35 is important for proper risk assessment and policy structuring:
- Risk Assessment: The presence of this endorsement may indicate a larger, more complex organization. Underwriters should inquire about the insured's internal reporting procedures and the sophistication of their risk management practices. A well-structured organization with clear reporting lines might be viewed more favorably.
- Coverage Clarity: This endorsement helps clarify a potentially ambiguous policy condition, which can reduce disputes at the time of a claim. Agents should explain its function to insureds, particularly larger clients, to ensure they understand whose knowledge will trigger their reporting obligations.
- Underwriting Guidelines: While this is a standard endorsement, underwriters should be mindful of the individuals or positions listed in the schedule. If the listed individuals are too narrowly defined or not appropriate for the organization's structure, it could inadvertently create coverage gaps or disputes. For instance, if a very large company only lists the CEO, it might be impractical.
- No Premium Impact: Typically, this endorsement does not have a direct premium charge associated with it, as it is a clarification of a policy condition rather than a broadening of coverage per se. However, the underlying risk characteristics of the insured that lead to the use of this endorsement (e.g., size and complexity) will influence the overall premium.
- Interaction with "Your Duties In The Event Of Occurrence, Offense, Claim Or Suit": This endorsement directly modifies the standard CGL condition (found in Section IV – Commercial General Liability Conditions of forms like CG 00 01) that outlines the insured's duties after an loss. It specifies whose knowledge is deemed the insured's knowledge for the purpose of fulfilling those duties, particularly the duty to notify the insurer "as soon as practicable."
Agents should ensure that the schedule of the endorsement accurately reflects the insured's organizational structure and identifies the appropriate personnel responsible for handling and reporting claims. Underwriters should review this to ensure it aligns with their assessment of the insured's operational and management controls.