1. Forms
2. CG
3. CG-34-02

What the form is

The CG 34 02 Additional Insured – Grantor Of Franchise – Liquor Liability endorsement is an Insurance Services Office (ISO) form used to modify a commercial general liability policy that includes Liquor Liability Coverage. Its primary purpose is to provide additional insured status to a franchisor (the entity granting the franchise) for liability arising out of the liquor-related operations of their franchisee (the named insured). This means that if the franchisor is sued due to the franchisee's sale, service, or furnishing of alcohol, this endorsement can provide coverage for the franchisor under the franchisee's policy.

Classes of business it applies to

This endorsement is specifically designed for businesses operating under a franchise model where the franchisee is involved in the liquor business. Real-world examples include:

• Restaurant franchises that serve alcoholic beverages.
• Bar or pub franchises.
• Hotel franchises with bars or restaurants serving liquor.
• Convenience store or gas station franchises that sell packaged alcohol.
• Liquor store franchises.

Special considerations

There are several important considerations when using the CG 34 02 endorsement:

• Scheduled Grantor: The specific person or organization to be recognized as an additional insured (the franchisor) must be listed in the Schedule of the endorsement.
• Scope of Coverage: Coverage for the franchisor is limited to their liability as a grantor of a franchise to the named insured. The liability must specifically arise out of the selling, serving, or furnishing of alcoholic beverages by any insured.
• Legal Limitations: The coverage afforded to the additional insured only applies to the extent permitted by law.
• Contractual Obligations: If the requirement for this additional insured status stems from a contract or agreement (e.g., the franchise agreement), the insurance coverage provided to the additional insured will not be broader than what is mandated by that contract.
• Limits of Insurance: The amount paid on behalf of the additional insured will be the lesser of the amount of insurance required by the contract or the applicable limits of insurance under the policy. This endorsement does not increase the overall policy limits.
• Underlying Coverage: This endorsement is used in conjunction with a standard Liquor Liability Coverage Form, such as CG 00 33 (Occurrence) or CG 00 34 (Claims-Made).

Key information for agents and underwriters

Agents and underwriters should be mindful of the following:

• Risk Assessment: The primary underwriting focus remains on the liquor liability exposure of the named insured (the franchisee). The endorsement extends coverage to the franchisor for vicarious liability, not their own direct operational exposures unrelated to the franchisee's liquor sales.
• Franchise Agreements: It is crucial to review the franchise agreement to understand the specific insurance requirements imposed on the franchisee, including any stipulations for additional insured status, primary and noncontributory coverage, and required limits.
• Pricing: The premium impact of adding this endorsement is typically driven by the franchisee's liquor liability risk profile.
• Potential Gaps: Clarify with the insured that the coverage is specific to the franchisor's liability stemming from their role as a grantor and the franchisee's liquor operations. It does not cover all potential liabilities of the franchisor.
• Interaction with Other Endorsements: Determine if other endorsements are necessary, such as the CG 20 01 Primary and Noncontributory – Other Insurance Condition, if the franchise agreement requires such terms. The CG 20 01 has been revised to allow its attachment to the Liquor Liability Coverage Part.