The Hidden Value in “Stub” Policies
Businesses frequently purchase commercial general liability policies, which are also known as “litigation insurance.”
CGL policies cover businesses for the costs incurred defending and reasonably resolving suits seeking to hold them liable for, among other things, alleged bodily injury, property damage, and personal and advertising injury. The policies obligate the insurer to pay the amounts that the insured becomes legally obligated to pay as damages up to the policy’s aggregate limit. They also generally obligate the insurer to defend the insured against suits seeking those damages.
To trigger that coverage, however, there generally needs to be an allegation of damages caused by an occurrence “during the policy period.” A CGL policy can be generally described as either a one-year policy that has a policy period of one calendar year (e.g., Jan. 1, 2019, to Jan. 1, 2020), or a multiyear policy that has a policy period of more than one calendar year (e.g. Jan. 1, 2019, to Jan. 1, 2022).
In either scenario, it is generally agreed that the insured can anticipate having coverage up to the aggregate limit set forth in the policy’s declarations under a one-year policy and up to one aggregate limit for each year under a multiyear policy. For many reasons, an insured may request that the policy period be reduced to a period of less than one year or that the policy remain in effect for some additional period of time beyond that year(s) but for less than an additional full year (e.g., in the multiyear example above, Jan. 1, 2022, to Feb. 1, 2022). This is commonly referred to as a “stub” policy. Continue reading full article at pdf below.