Supplemental Information. CREC has procured a business owner policy (BOP) that contains a commercial general liability policy (CGL) with each occurrence limit of $1 million, a personal and advertising injury limit of $1 million, a general aggregate limit of $2 million, and a products completed operations aggregate limit of $2 million. Damage to premises rented to CREC - $100,000 on any one premise and medical expense of $5,000 for any one person. Any and all other incidental coverages contained within the CGL are established at minimum levels. CREC has also procured a commercial excess liability (umbrella) – following form with each occurrence limit (liability coverage) of $1 million; personal and advertising injury limit (any one person or organization) of $1 million; and aggregate limit (liability coverage – except with respect to “covered autos”) of $1 million.

What dollar amount, if any, will CREC’s BOP insurer (including umbrella carrier) pay for each of the following losses that occurred during the policy period and why will it pay the loss? If the loss is not covered, or not fully covered, explain why. Assume that each loss would be paid in the order presented.

CREC placed an advertisement in the local newspaper that made inaccurate and unfavorable statements concerning a real estate developer’s senior assisted living facility project because CREC was not awarded the electrical contract portion of the construction. The real estate developer sued CREC and Jones individually for libel and was awarded $1,500,000 after a 2-week jury trial that was later affirmed by the Iowa Supreme Court. 

CREC participates in a lease arrangement for a storage shed located on a construction site to secure contractors’ equipment when it is not being used. One of CREC’s employees negligently leaves a lighted cigarette in the storage shed while putting away his tools for the night. The subsequent fire destroys the storage shed and the equipment stored in it. The value of the storage shed was $5,000; the value of the contractors’ equipment (other than CREC’s) was $25,000. 

CREC installed a new circuit breaker in an apartment complex. A tenant of the apartment complex is injured when he attempts to restore power to his apartment unit as a result of the circuit breaker failing. The tenant suffers severe burns on his right hand, causing the loss of a finger and his thumb. The tenant settles out of court for $250,000. 

CREC hosts a holiday party at its place of business. One of CREC’s guests becomes intoxicated at the party and kills a pedestrian while driving home in a vehicle owned by the guest. A jury awards the pedestrian’s surviving family members $1,500,000 from CREC and the verdict is ultimately affirmed by the Iowa Supreme Court.