1. Forms
2. CG
3. CG-28-04

Form CG 28 04: Higher Limits Excess Liability Endorsement

1. What the form is

The CG 28 04, titled "Higher Limits Excess Liability Endorsement," is a standard endorsement used in Commercial General Liability (CGL) policies. Its primary purpose is to provide increased limits of liability for specific coverages already present in the underlying CGL policy. This endorsement effectively allows an insured to purchase additional coverage amounts that sit on top of their existing policy limits for particular exposures or coverages, rather than increasing all policy limits uniformly. It functions as a way to selectively enhance protection where it's most needed, often to meet contractual requirements or to address specific high-risk aspects of the insured's operations without the cost of a full excess or umbrella policy, or when an umbrella policy might not cover a specific risk adequately.

2. Classes of business it applies to

This endorsement is versatile and can be applied across a wide range of industries and business types. However, it is particularly relevant in scenarios where specific activities or contractual obligations necessitate higher liability limits for certain coverages than what the standard CGL policy provides. Examples include:

• Construction: A contractor might need higher limits for ongoing operations on a specific large project, or for completed operations related to that project, to satisfy the project owner's insurance requirements. For instance, a general contractor working on a multi-million dollar commercial building might use this endorsement to increase their aggregate limits for that specific project.
• Manufacturing: A manufacturer of a product that carries a higher-than-average risk of causing bodily injury or property damage might use this endorsement to increase their products-completed operations hazard limits. For example, a company manufacturing industrial machinery might seek higher limits for potential liabilities arising from the use of their equipment.
• Real Estate: Property owners or managers leasing premises to tenants involved in higher-risk activities (e.g., a chemical storage facility or a large entertainment venue) might require those tenants to carry higher specific limits for liability arising from those premises. The tenant could use CG 28 04 to meet this requirement.
• Events and Entertainment: Businesses hosting large public events, such as concerts or festivals, may need to increase their liability limits for occurrences at the event location due to the significant exposure to third-party bodily injury claims.
• Businesses with significant contractual obligations: Any business that enters into contracts requiring specific, higher liability limits for certain aspects of their work (e.g., indemnification clauses requiring $5 million in coverage for a particular service provided) can utilize this endorsement.

3. Special considerations

Several important factors should be considered when using the CG 28 04 endorsement:

• Specificity is Key: The endorsement must clearly schedule the specific coverage(s) to which the higher limits apply. Ambiguity can lead to coverage disputes. For example, if higher limits are intended only for "Bodily Injury Liability" arising from a specific project, this must be explicitly stated.
• Underlying Policy Interaction: The increased limits provided by this endorsement are excess over the limits of the underlying CGL policy. The terms, conditions, and exclusions of the underlying policy generally still apply to the coverage provided by the endorsement, unless specifically modified by the endorsement itself.
• Not a Substitute for an Umbrella/Excess Policy: While it provides higher limits, the CG 28 04 is not a full umbrella or excess liability policy. Umbrella/excess policies often provide broader coverage, including "drop-down" coverage for claims not covered by the underlying policies (subject to a self-insured retention). The CG 28 04 typically only increases limits for coverages already provided by the CGL.
• Contractual Requirements: It's crucial to ensure that the increased limits provided by the endorsement meet the specific requirements of any relevant contracts. Agents should carefully review contractual insurance obligations to ensure compliance. For example, if a contract requires a $3 million per occurrence limit for a specific operation, the combination of the underlying CGL and the CG 28 04 must meet this.
• Aggregate Limits: Pay attention to how the endorsement affects aggregate limits. The endorsement might provide a specific, separate aggregate limit for the coverages it modifies, or it might contribute to the existing aggregate limits of the underlying policy. This needs to be clearly understood.
• Regulatory Considerations: While the form itself is applicable in all states, underlying state laws or regulations might influence minimum liability requirements for certain industries or activities, potentially impacting the need for such an endorsement.

4. Key information for agents and underwriters

Agents and underwriters should focus on the following when dealing with the CG 28 04:

• Pricing: Pricing for this endorsement will depend on the specific coverage(s) being increased, the amount of the increase, the nature of the insured's operations, their loss history, and the specific risks associated with the coverage being endorsed. It's a targeted increase, so the premium should reflect the specific additional risk being assumed by the insurer.
• Risk Assessment: Underwriters need to carefully assess the specific exposure for which higher limits are being requested. If a contractor wants higher limits for a particularly hazardous project, the underwriter must evaluate the risks of that project thoroughly. This may involve reviewing project details, safety protocols, and the contractor's experience with similar work.
• Coverage Gaps: Agents should ensure that using this endorsement doesn't inadvertently create coverage gaps. For example, if higher limits are provided for bodily injury but not property damage, and a claim involves both, the property damage portion will be subject to the underlying policy's original limits. It's important to align the increased limits with the actual exposures.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines regarding the maximum limits they are willing to offer via this endorsement for different types of risks and coverages. They may also have requirements regarding the financial stability and loss control measures of the insured. For instance, an underwriter might be hesitant to provide significantly higher products liability limits for a new, untested product without substantial safety data.
• Clarity of Intent: Both agents and underwriters must ensure the endorsement language clearly reflects the intended scope of the increased limits. The schedule section of the endorsement is critical for defining which coverages, locations, projects, or operations receive the higher limits. Vague wording can lead to E&O exposures for agents and unintended coverage grants for underwriters.
• Alternative Solutions: Consider whether a standalone excess liability policy or an umbrella policy might be a more appropriate solution, especially if the insured requires broader excess coverage over multiple underlying policies or for exposures not covered by the CGL. The CG 28 04 is a good solution for specific, targeted needs but may not be sufficient for overall high-limit requirements.