The “Montrose” Exclusion

The Problem With a Loss in Progress

The ISO endorsement, CG 00 57, addresses the issue of “loss-in-progress” without reference to known loss or known events or known liability. Instead, the endorsement imposes coverage restrictions with respect to known injury or damage. Under CGL forms issued before CG 00 57, the policy’s insuring agreement places two conditions on how and when covered bodily injury and property damage must occur. First, the injury or damage must be caused by an occurrence that takes place within the coverage territory. Second, the bodily injury or property damage itself must occur during the policy period.

CG 00 57 adds a third condition to section b of the Coverage A insuring agreement.

Prior to the policy period, no insured listed under Paragraph 1. of Section II-Who Is an Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part.

To be covered under the CGL, bodily injury or property damage must occur during the policy period. Any injury or damage that has occurred in whole and is known to the insured prior to the policy period would not be covered in the first place, even without this paragraph. The point of the new language becomes clearer, however, when the rest of paragraph is read. The issue is not injury or damage that occurs “in whole” and is known before the inception of coverage. Rather, it is injury or damage that occurs “in part” before the policy period begins. The rest of the new paragraph reads as follows:

If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.