Author: Chris Boggs
Nearly 40 percent of Insurance Services Office's (ISO's) general liability class codes are, what some call, “dagger" codes. Currently, 474 of ISO's general liability class codes are “dagger" classes; however, ISO regularly reviews these codes for continued inclusion.
A “dagger class" or “plus sign class" indicates that Products and/or Completed Operations coverage is included as part of and not separate from the Premises/Operations coverage. For lack of a better way to explain it, when an operation is classed as a “dagger" or “plus sign" class, bodily injury (BI) and property damage (PD) claims resulting from the insured's legal liability are not segregated based on when or where they occur. All BI and PD claims are, in a sense, equal.
Additionally, there is no separate products/completed operations aggregate limit when an operation falls within a “dagger" classification. All liability losses are subject to the general aggregate limit.
Lastly, products or completed operations coverage is provided at no additional premium when the operation is a “dagger" class. In “standard" or “non-dagger" class codes, a separate loss cost (rate) applies to both premises/operations and products/completed operations coverage; but “dagger" class codes have only one loss cost (rate) which is based almost exclusively on the premises/operations exposure. If there is a perceived products and/or completed operations exposure, the “rate" is included in the premises/operations “rate."
Why Dagger Classes Exist
Understanding the “what" or effect of a “dagger" class is simpler when the “why" is known. The “why" is quite simple – actuaries and loss exposures.
Statistically, operations assigned a “dagger" class have a negligible or even nonexistent products/completed operations loss exposure. Following are a few of the “dagger" classes that demonstrate the lack of a products/completed operations exposure:
- Apartment buildings
- Archery ranges
- Day care centers
- Fishing piers
- Golf courses
- Insurance agents
Consider each of these examples. While a products/completed operations loss may be possible, imagining one is very difficult. A products and/or completed operations loss is statistically improbable. Nearly every imaginable loss involves the premises or the on-going operations.
Because a products/completed operations loss is statistically unlikely, there is no separate loss cost (rate) and no separate definition for a loss that might be considered a products/completed operations loss. In short, there is little relevant products/completed operations exposure. When there is such a negligible exposure, there is no need to define or provide a “rate" for the “exposure."
“Dagger" classes create confusion because of the seeming contradiction between policy wording and coverage rules.
On first reading, the unendorsed commercial general liability (CGL) policy appears to specifically exclude products and/or completed operations losses for “dagger" classes. “V.16.b.(3)" reads:
16. "Products-completed operations hazard":
b. Does not include "bodily injury" or "property damage" arising out of:
(3) Products or operations for which the classification, listed in the Declarations or in a policy Schedule, states that products-completed operations are subject to the General Aggregate Limit.
However, Rule 25.F.1. reads:
1. Plus Sign
A plus sign when shown in the Premium Base column under General Liability insurance in the Classification Table – means that coverage for Products and/or Completed Operations is included in the Premises/Operations coverage at no additional premium charge. When this situation applies, the classification described in the policy schedule or Declarations must state that:
"Products-completed operations are subject to the General Aggregate Limit" to provide Products and/or Completed Operations coverage(s).
While the policy seems to exclude products/completed operations coverage in “dagger" classed operations, the rule states that coverage for products and/or completed operations is included in the premises/operations coverage. What could be more contradictory than this? Further, since neither the insured nor the claims adjuster get a copy of the rule, it seems the most likely scenario is the denial of any loss that may be considered a product or completed operations loss.
However, a clear reading and interpretation of the policy language supports the rule rather than contradicts it. The supposed “exclusionary" wording serves only to remove any product or operation loss subject to a “dagger" class code from the definition of “Products-Completed Operations Hazard." Removing the ability to classify any loss as a products/completed operations loss allows all losses to be classified as either “bodily injury" (BI) or “property damage" (PD) - regardless when or where the loss occurs.
According to the CGL's Insuring Agreement, the CGL responds when the insured is legally liable for bodily injury or property damage. There is no mention of premises/operations or products/completed operations within the insuring agreement – only bodily injury or property damage. The premises/operations and products/completed operations concepts exist only to delineate exposures, exclusions and exceptions, aggregate limits, and loss costs (rates).
Further, because a loss can no longer be classified or defined as a product or completed operations loss (only a BI or PD loss), there is no need for a Products-Completed Operations Aggregate Limit. All losses become subject to the general aggregate when the “products-completed operations hazard" definition is nullified.
Lastly, this same policy wording that supposedly excludes products/completed operations losses specifically refers to wording found in all “dagger" class code descriptions. When an operation falls into a “dagger" class, the class code description specifies that products/completed operations coverage is included. This removes all questions of coverage.
CGL policy wording complements and supports “Rule 25.F." And “Rule 25.F." supports the CGL. When an operation is defined by a “dagger" class, products/completed operations coverage is included at no additional charge and all BI and PD losses are subject to the general aggregate limit. About these points, there is no debate.
A New Additional Insured Endorsement Specifically for “Dagger" Classes
When there is no separate products/completed operations coverage, extending additional insured status for products and/or completed operations coverage is impossible. However, ISO learned that named insureds are often required to add another party as an additional insured for completed operations, even when the named insured is classed under a “dagger" classification (meaning there is no separate completed operations coverage).
Attempting to explain to the additional insured that products/completed operations coverage is included in a policy for an insured in a “dagger" class even though a separate coverage is not shown is like arguing with a stump. They don't understand insurance, so saying, “Trust me, products/completed operations IS covered," won't get it done. The additional insured wants to see that it has coverage for completed operations.
To meet the “needs" or “desires" of additional insureds and end the arguments, ISO introduced the CG 20 41 Additional Insured – Owners, Lessees Or Contractors – Completed Operations Subject To The General Aggregate endorsement. Modeled on the CG 20 10 and CG 20 37, this new additional insured endorsement grants additional insured status to the named party for both premises/operations, similar to the CG 20 10, and products/completed operations, similar to CG 20 37. However, the defined term “products-completed operations hazard" is not used within the endorsement because it is designed for use with “dagger" classifications which no longer utilize the term.
Without this endorsement, there is no way for the policy to extend additional insured status for completed operations when the named insured is in a “dagger" class. All other additional insured endorsements extended products and/or completed operations coverage (i.e. CG 20 37, CG 20 39, and CG 20 40) depend on the defined term “products-completed operations hazard" to extend additional insured protection. Because this definition is effectively “removed" from a policy written on a “dagger" class operation, no completed operations protection is extended to the additional insured. The new CG 20 41 remedies this gap.
ISO filed the CG 20 41 for use effective 12/1/19.
Scabbarding the Dagger
“Dagger" classes are basically actuarial creations. Yes, products and/or completed operations losses – if the insured has any – are still covered when the operation is in “dagger" classes, but because the products and/or completed operations exposures presented by these operations is negligible at best, ISO chose to include the products-completed operations coverage without charging a separate premium, classify all losses as either bodily injury or property damage, and include all BI and PD losses in the general aggregate limit.
Simply being a “dagger" class does not reduce the breadth of coverage provided to the insured. All a “dagger" classification does is rearrange where the products and/or completed operations coverage is found.
Last Updated: January 17, 2020