Question

Herb owns a processing plant outside of town that services all the local farmers. He's been using over-the-road transportation but wants to streamline his business by using the railroads. He contacts ABC Railway Transport and the two come to an agreement: ABC Railway will run a sidetrack onto Herb's business premises, if Herb agrees not to hold ABC Railway responsible for certain liabilities that could result from the sidetrack's use. This agreement would fall under __________ in Herb's Commercial General Liability policy.

Option 1: Liability Exclusion Clause
Option 2: Business Interruption Coverage
Option 3: Indemnity Endorsement
Option 4: Perilous Premises Rider

Answer 1

Herb's agreement with ABC Railway to not hold them liable for certain damages would be categorized under a Liability Exclusion Clause in his Commercial General Liability policy. Thus, the option 1 is the correct answer.

Step-by-step explanation:

The agreement between Herb and ABC Railway would likely fall under a Liability Exclusion Clause in Herb's Commercial General Liability policy. These clauses are designed to outline specific scenarios or risks that the insurance policy will not cover, essentially exempting the insurer from paying for certain liabilities. In this case, Herb is agreeing not to hold ABC Railway responsible for particular liabilities, which implies that his insurance policy has to account for this exemption. It's important for businesses to negotiate contracts carefully and understand how their liability insurance will interact with these agreements.