Marx Bros.: Occurrence Trigger, a Following-Form Umbrella, and an Unlicensed Producer

Trigger. The CGL is occurrence-based, so the question is when the property damage occurred, not when suit was filed. The 2019 policy is triggered if property damage - physical injury to tangible property - took place during 2019. Water intrusion beginning after the mid-2019 installation and continuing into the policy period satisfies that. If damage progressed across multiple policy years, most courts apply a continuous or injury-in-fact trigger and allocate across the policies on the risk. The 2021 suit does not revive a lapsed policy; it triggers the 2019 policy.

'Your work' exclusion, step by step:

1. The exclusion bars property damage to 'your work' arising out of it, and bars damage to other property arising out of the impaired work in certain formulations. Read the actual exclusion wording - the two versions behave very differently.
2. Damage to the roof itself: arguably excluded as the insured's work product.
3. Interior finishes and the organ: these are 'other property,' not Marx's work. If the form's exclusion reaches other property only through the impaired-property/recall language, and the church's claim does not fit that language, coverage holds for the interior.
4. The subcontractor exception is the key fact. The standard exception restores coverage for damage to work that was performed on the insured's behalf by a subcontractor. The flashing detail - the likely source of the water intrusion - was the roofer's work. That pulls the roof damage back inside coverage, and the roofer's absence of insurance does not change the analysis; it only means the carrier cannot subrogate effectively.
5. Mold: property damage, but check for a fungi exclusion or sublimit. Many CGL forms limit mold remediation.

Bottom line: tender immediately, demand a written coverage position addressing each item (roof, interior, organ, mold) separately, and do not accept a blanket denial.

Following form means the umbrella adopts the underlying's terms - definitions, exclusions, conditions - plus whatever broader terms the umbrella itself contains. It is written as excess over the underlying limits, not as a substitute for the underlying policy.

Three scenarios:

1. The denial is wrong (most likely here). If the loss is covered by the underlying, the umbrella is pure excess and pays nothing until the underlying's $1 million each-occurrence limit is exhausted. Marx's first job is to force the underlying carrier to defend and indemnify.
2. The denial is correct because a true exclusion applies. If the 'your work' exclusion validly removes the loss from the underlying, the umbrella generally follows that exclusion and also does not respond. Following-form umbrellas do not fill every gap.
3. The loss falls into a gap the umbrella was written to cover. Some umbrellas drop down for specified exposures (e.g., certain non-owned auto or employers liability gaps). If the umbrella's own terms cover the loss, it responds, but the $25,000 self-insured retention applies first - Marx pays the first $25,000 and the umbrella pays above that, up to $5 million.

Practical consequences:

• The SIR is not a small nuisance at $25,000 - it also imposes defense obligations and cooperation duties on Marx during the retention layer.
• The umbrella carrier will not act until the underlying's position is resolved or exhausted. Get the underlying's denial in writing, appeal it in writing, and give the umbrella carrier notice so it cannot later claim late notice.
• Any defense cost the umbrella advances within the SIR erodes nothing but Marx's own pocket.

Verdict: do not count on drop-down here. The 'your work' exclusion is not a gap the umbrella was designed to fill, and the subcontractor exception means the loss should be inside the underlying anyway.

Late notice. Marx gave notice about 45 days after receiving the complaint. For an occurrence policy, the modern rule in the District and most jurisdictions requires the insurer to show material prejudice before denying on late notice. A 45-day delay in forwarding a suit, with no default, no lost evidence, and no missed deadline, is very hard to convert into prejudice. The carrier's position is weak and should be contested in writing, with a timeline and a prejudice argument.

The 90-day silence. A carrier that takes three months to respond and then issues a denial resting on a contested exclusion is exposed on two fronts:

• Unfair claim settlement practices. District law and regulations prohibit unreasonable delay and require a written explanation of the basis for denial, with a reasonable investigation. A generic citation of 'late notice and the exclusion' without itemizing which damages are excluded is a regulatory risk.
• Bad faith exposure. If the denial is wrong, Marx has a claim for defense costs and potentially more.

The licensing problem - this is the agency's biggest problem:

• A person must hold a District producer license, and the agency and carrier must have the proper appointment, before soliciting, negotiating, or selling insurance. Quoting and binding is the core of licensure.
• Paying a commission share to an unlicensed person is itself prohibited.
• Regulatory exposure runs to Jordan, to the agency, and potentially to the carrier; penalties, license discipline, and restitution are all on the table.
• The policy is not void for the insured. An innocent insured generally keeps the coverage he bought; the producer's licensing failure is the producer's problem, not the client's.
• E&O exposure: if any gap in coverage traces to Jordan's handling, the agency's E&O carrier should be notified now, alongside the licensing investigation.

Action list: written appeal of the denial with a prejudice argument; separate notice to the umbrella carrier; internal audit of every account Jordan touched; self-report to the regulator before it finds the agency; and immediate correction of the licensing and commission-sharing arrangements.