-
Loss Exposures of Commercial Insurance
- Property Loss Exposure
- Liability Loss Exposure
- Personal Loss Exposure
-
Steps of Risk Management Process
- Identifying loss exposures
- Analyzing loss exposures
- Evaluating the various techniques for treating the loss exposures
- Selecting the most effective technique(s)
- Implementing the selected technique(s)
- Monitoring the program and making needed corrections or adjustments
-
Noninsurance Risk Management Techniques
- Avoidance
- Loss control
- Retention
- Noninsurance transfer
-
Forms of Insurer Ownership
- Corporations: entity organized under state law and entitled to the same rights as a person, distinct from its owners, who are called stockholders or shareholders
- Partnerships: for-profit business entity jointly owned by two or more persons who share ownership and profits (or losses), although not necessarily on an equal basis
- Joint Ventures: business association formed by an express or implied agreement of two or more persons (including corporations) to accomplish a particular project
- Limited Liability Companies (LLC): form of business entity that provides its owners the limited liability of a corporation and the tax advantages of a partnership
- Unincorporated Associations: voluntary association of individuals acting together under a common name to accomplish a lawful purpose
-
Types of Commercial Insurance Policies
- Monoline (covers one line of business)
- Package policy (covers two or more lines of business)
-
Components Included in Commercial Package Policy (CPP)
- Common policy declarations
- Common policy conditions
- Two or more coverage parts
-
Commercial Property Coverage Part Consists of the Following Documents
- Commercial property declarations
- Commercial property coverage forms
- Cause-of-loss forms
- Commercial property conditions
- Endorsements
-
Types of Property (Comm)
- Real Property: land and whatever is growing or erected on or affixed to the land
- Personal Property: all property other than real property
- Tangible Property: all property that can be touched and that has physical existence, either real or personal
- Intangible Property: property that cannot be touched because it has no physical existence (eg patents, copyrights or trademarks)
-
Sections of Building and Personal Property Coverage Form
- Covered property
- Property not covered
- Additional coverages
- Coverage extensions
- Limits
- Deductibles
- Conditions
- Additional conditions
- Optional coverages
-
Reasons To Exclude Property from CGL Coverage
- May not be legal to insure some kinds of property
- Somer property may not be subject to loss by the perils insured against
- Excluded because they can be insured more advantageously under other forms
-
Additional Coverages of CGL
- Debris removal: addn $10,000 per location
- Perservation of property: up to 30 days
- Fire department service charge
- Pollutant cleanup and removal: $10,000 limit per location
- Increased cost of construction: less of 5% AOI or $10,000
- Electronic Data: $2,500 per year
-
Coverage Extensions of CGL
- Newly acquired of constructed property: $250,000 per building, $100,000 BPP per building
- Personal effects and property of others: $2,500 each location
- Valuable papers and records: $2,500 each location
- Property off-premises: $10,000
- Outdoor property: limit $1,000, no more than $250 per tree
- Non-owned detached trailer: $5,000
-
Causes-of-Loss Forms for Perils Covered in a Commercial Property Policy
- Basic Form
- Broad Form
- Special Form
-
Causes of Loss Under the Braod Form that are Not Covered Under the Basic Form
- Falling objects
- Weight of snow, ice or sleet
- Water damage
- Addn Coverage Collapse
-
Causes of Loss - Basic Form
- Fire and Lightning
- Explosion
- Windstorm and Hail
- Smoke
- Aircraft or Vehicles
- Riot or Civil Commotion
- Vandalism
- Sprinkler leakage
- Sinkholes
- Volcanic action
-
Items Covered by the Cause-of-Loss Special Form
- Causes of loss omitted or excluded under the broad form such as theft
- Unanticipated losses (any loss other than those specifically excluded)
- All accidental losses unless the insurer can prove and excluded peril caused the loss
-
Kinds of Property That Are Covered Only If It is Caused by a Specified Cause of Loss
- Valuable papers and records
- Animals in the event of death
- Fragile articles, not including building glass, containers of property held for sale and lenses
- Builders machinery and equipment owned or help by insured unless on or within 100 feet of the described premises
-
Theft Related Exlusions and Limitations of CGL
- Dishonest acts of the insured, partners, or employees of the insured
- Voluntary surrendering of possession of property as the result of a fraudulent scheme
- Loss by theft of construction materials not attached to building unless being held for sale by insured
- $2,500 limit for furs
- $2,500 limit for jewelry, watches, and precious metals
- $2,500 limit for patterns, dies, molds and forms
- $250 limit for stamps, tickets and letters of credit
- Theft of money
-
Types of Costs Included in Liability Losses
- Costs of investigating and defending against the suit
- Potential medical expenses, lost wages, pain and suffering
- Costs incurred by the sued organization to reduce chance of additional, related losses in the future (generally not a covered loss)
- Hidden costs, including time consumed in defending against a claim and adverse publicity (generally not a covered loss)
-
Elements of Legal Liability
- Claimant must allege that the organization is legally liable to pay damages
- Accused organization must then incure expenses to investigate and defend agains the claimants allegation of legal liability
- If the claimant succeeds in probing legal liability, the loss will include the amount that must be paid as damages
-
Bases for Legal Liability
- Tort: civil wrong, other than a breach of contract, against another person; three broad types: negligence, intentional, strict liability
- Contract
- Statute
-
Negligence Tort
Occurs when a person exposes others to an unreasonable risk or harm because of failure to exercise the required degree of care
-
Basic Elements of Negligence
- Duty owned to another person
- Breach of that duty
- Occurrence of injury or damage
- Close causal connection betweeb the negligent act and the resulting harm
-
Intentional Tort
- Tort committed by a person who forsees that his or her act will harm another person
- Does not need to be performed with malicious or hostile intent
-
Strict Liability Tort
Liability that is imposed even though the defendant acted neither negligently nor with intent to cause harm
-
Contractual Liability Arises (Comm)
- Breech of contract
- Hold harmless agreement: contractual provision that obligates one of the parties to assume the legal liability of the other
-
Sources for Liability Exposures (Comm)
- Permises liability exposure
- Operations liability exposure
- Products liability exposure
- Completed liability exposure
-
Types of Injury or Damage Covered by Coverage A, B, & C in CGL Coverage Form
- Coverage A: bodily injury and property damage
- Coverage B: personal and advertising injury
- Coverage C: medical expenses and/or funeral expenses of persons injured on the insureds premises or injured from the insureds operations
-
Insurers Duty to Pay Damages Under Coverage A of Commercial Insurance if the Following are Met
- Insured must be legally obligated to pay damages
- Damages must result from BI or PD defined in the policy
- Policy must apply to BI or PD
- BI or PD must be caused by an occurence
- Occurence must take place in the coverage territory
- BI or PD must occur during policy period
-
Basic Types of Damage
- Special damages
- General damages
- Punitive damages
-
Coverage A Exclusions
- Expected or intended injury exclusion
- Contractual liability
- Liquor liability
- Workers compensation and employers liability exclusion
- Pollution
- Aircraft, auto and watercraft
- Mobile equipment
- War
- Damage to property
- Insureds products and work
- Personal and advertising injury
- Electronic Data
- File legal liability coverage
-
Exceptions to Pollution Exclusion of CGL Coverage A
- BI sustained in a building and caused by smoke, fumes, vapor or soot from the heating equipment
- BI or PD caused by heat, smoke or fumes from a hostile fire
- BI or PD resulting from the escape of fules, lubricants or other operationg fluids needed to perform normal functions of mobile equipment
- BI or PD sustained in a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations performed by insured
-
Exceptions to Aircraft, Auto and Watercraft Exclusion of CGL Coverage A
- Watercraft while ashore on the insureds premises
- Non owned watercraft if it is less than 25 feet long and not being used to carry persons or property for a fee
- Liability assumed under an insured contract from ownership, maintenance, or use of aircraft or watercraft (not autos)
- Operations of certain types of equipment attached to autos
- Parking an auto on or next to insureds premises if the auto is not owned by, rented to, or loaned to any insured (Valet parking service)
-
In Coverage A of CGL, the Damage to Property Exclusion Eliminates Coverage for the Following
- Property owned, rented or occupied by the insured
- Premises the insured has sold, given away or abandoned
- Property loaned to insured
- Personal property in care, custody or control of insured
- Particular part of any real property on which work is being done by insured or any contractor or subcontractor working for insured
- Particular part of any property that must be restored, repaired or replaced because insureds work was incorrectly performed
-
In Coverage A of CGL, Four Exclusins Relate to the Insureds Products and Work
- Damage to your product exclusion
- Damage to your work exclusion
- Damage to impaired property or property not physically injured exclusion
- Recalls of products, work or impaired property
-
Personal And Advertising Injury - Including BI Arising Out Of One Or More Of The Following Offenses
- False arrest, detention or imprisonment
- Malicious prosecution
- Wrongful eviction, wrongful entry or invasion of the right of private occupancy committed by or on behalf of its owner
- Oral or written publication of material that slanders or libels a person or organization or disparages a persons or organization goods, products or services or violate a persons right of privacy
- Use of anothers advertising ideas in your advertisement
- Infringing upon another companys copyright or slogan in your advertisement
-
Supplemental Payments of CGL Consist of the Following
- Expenses incurred by the insured
- Up to $250 for the cost of bail bonds required because of accidents or traffic violations involving covered vehicles
- Cost of bonds to release any property of the insured held by plaintiff to ensure payment of any judgment that may be rendered against the insured
- Reasonable expenses incurred by the insured at the insurers request, including loss of earnings of the insured must miss work to assist in defense
- Court cost or other costs assessed in a suit against the insured
- Interest in judgment awarded against the insured
- Cost of defending a person or organization that the insured has agreed to hold harmless or indemnigy under an insured contract applies only if no conflict appears to exist between interests
-
Coverage C of CGL Exclusions Does Not Apply to BI for the Following
- Any insured other than a volunteer worker
- Anyone hired to do work for insured or tenant of insured
- Person injured on that part of named insurers premises that the person normally occupies
- Person entitled to workers compensation benefit for injury
- Person injured while taking part in athletics
- BI included with the products-completed operations hazard
- BI excluded under Coverage A
- BI caused by war
-
Persons or Organizations Insured Under the CGL Coverage Form
- Named insured and related parties
- Employees and volunteer workers of the named insured
- Other persons and organizations
-
An Employee or Insured is Not Insured for the Following
- BI or personal and adverising injury to the named insurer, to partners or members or to a co-employee or other volunteer
- BI or personal injury arising out of providing or failing to provide professional healthcare services
- Property damage to property owned, occupies or used by named insured, the named insureds employees or volunteer workers
-
CGL Limits of Insurance
- General aggregate limit
- Products-completed operations aggregate limit
- Personal advertising injury limit
- Each occurence
- Damage to premises rented to you
- Medical expenses
-
CGL Conditions
- Bankruptcy condition
- Duties in the event of occurence, offense, claim or suit
- Legal action against us condition
- Other insurance condition
- CGL is excess
- CGL is primary
- Methods of sharing condition
- Premium audit condition
- Representation condition
- Separation of insureds
- Transfer of right of recover against others to us
- When we do not renew condition
-
Methods of Sharing When 2 or More Policies Apply at Same Level
- Contribution by equal shares: each insurer pays an equal amount until the claim is fully paid or until an insurer exhausts its limits
- Contribution by limits: each insurer pays that proportion of the claim that the insurers limit bears to the total of all applicable insurance
-
According to the Representation Condition, the Insured Agrees to the Following
- Statements in the declarations are accurate and complete
- Statements in the declaration are based on representations made by the insured to the insurer
- Insurer has issued the policy in reliance on the insureds representations
-
Features of Claims-Made CGL Coverage Form
- Claims-made coverage trigger
- Retroactive date
- Extended reporting period
-
Claims-Made Coverage Trigger
- Event that triggers coverage under the claims-made CGL form
- The 1st making of a claim during the policy period
-
Categories of CGL Endorsements
- State endorsements
- Exclusion endorsements
- Classification endorsements
- Miscellaneous endorsements
-
Miscellaneous Liability Coverage Forms Filed By ISO in Addition to CGL Coverage Form
- Liquor Liability
- Products/Completed operation liability
- Owners and contractors protective liability
- Railroad protective liability
- Pollution liability coverage forms
-
Types of Benefits Provided By Workers Compendation Statutes
- Medical Benefits
- Disability Income Benefits
- Rehabilitation Benefits
- Death Benefits
-
Types of Disability Income Benefits for Workers Compensation Statutes
- Temporary partial disability
- Temporary total disability
- Permanent partial disability
- Permanent total disability
-
Noted Federal Legislative Acts Regarding Workers Compensation
- US Longshore and Harbor WC Act (LHWCA): provides exclusive remedy for injured maritime workers engaged in longshoring and shipbuilding
- Jones Act: federal statute that permits injured workers to sue their employer for damages due to employers negligence
- Federal Employers Liability Act: provides exclusive remedy for injured railroad workers
-
Alternative Methods for Meeting the Employers Obligations Regarding Workers Comprensation
- Private Insurance
- Assigned Risk Plans
- State Funds and Employers Mutuals
- Self Insurance
- Pools
-
Types of State Funds and Employers Mutuals
- Competitive state fund: owned and operated by state; competes with other private insurance in the state
- Monopolistic state fund: owned and operated by state; other insurers are not allowed to write in the state
- Employers mutual insurance companies
-
Sections of the Standard WC and Employers Liability Policy Form
- Information Page General Section
- Part One: WC Insurance
- Part Two: Employers Liability Insurance
- Part Three: Other States Insurance
- Part Four: Your duties if Injury Occurs
- Part Five: Premium
- Part Six: Conditions
-
Exclusions to Employers Liability Insurance
- Aimed at eliminating coverage for claims that would be covered under various other statutes
- Injury outside of US or Canada unless the employee is temporarily outside of US or Canada
- Liability assumed under contract (covered by CGL)
- Punitive damages for injury or death to illegally employed person
- BI to employees employed in violation of the law with the knowledge of the insured
- BI intentionally caused by the insured
- Damages arising out of employment practices
- Fines or penalties imposed for violation of federal and state law
-
Types of Limits of Liability Defined in Employers Liability Insurance
- BI by accident limit
- BI by disease - policy limit
- BI by disease - each employee
-
Types od Premium Adjustments in WC Ratemaking
- Experience rating plan
- Retrospective rating plan
- Premium discount
- Merit or schedule rating factors
- Rate deviations
- Expense constants
- Deductibles
- Dividend plans
-
Experience Rating Plan
Plan that increases or reduces the premium for a future period based on the insureds own loss experience for a period in the recent past
-
Retrospective Rating Plan
Plan that increases or decreases the premium for a policy period based on the insureds own losses during the same period
-
Forms of Excess Liability Policies
- A following form is subject to the same terms as the underlying policy limits on if the loss is covered by the underlying insurance
- A self-contained policy is subject to its own terms where coverage applies to a loss that exceeds the underlying limits only if the loss is covered under the terms of the excess policy
- A combination of the following form and the self-contained policy
-
Three basic characteristics of liability insurance that are not shared by property insurance
- Difficulty in estimating probable maximum loss (PML) for liability exposures
- Layering of liability coverages
- Effect of aggregate limits
-
Basic Functions of the Umbrella Liability Policy
- Provide additional limits above the occurence limits of the insureds primary policies
- Takes the place of the primary insurance when primary aggregate limits are reduced or exhausted
- Covers some claims that are not covered by primary policies (subject to retention)
-
Drop Down Coverage
Coverage for claims that are not covered by an underlying policy due to: type of claim not being covered; underlying policys aggregate limits being depleted by previous claims
-
Self-Insured Retention
Amount that is deducted from claims that are payable under and umbrella policy and that are not covered at all by the primary policy
-
When Self-Insured Retention Does Not Apply
- When paying in excess of a claim covered by the primary policy
- Dropping down to pay a claim because the primary policys aggregate limit has been exhausted
-
Common Differences Between Professional Liability and CGL Policies
- Claims made trigger: PL prefers CM. ISO CGL uses a 5 year extended reporting period
- Consent to settle requirements: PL insured is frequently given right to participate in decisions to settle a claim
- Selection of defense counsel: PL gives the insured right to select counsel subject to insurers approval
- Deductibles: PL is usually subject to a deductible
-
Exclusions Common to Most Professional Liability Policies
- Contractual liability
- Punitive damages
- Insureds dishonest, criminal, or malicious acts
-
Examples of Wrongful Acts Usually Covered Under Employee Practices Liability Insurance
- Sexual harassment
- Wrongful termination
- Unlawful discrimination
-
Examples of Insurance agents and brokers errors and omissions liability
- Failure to properly advise the client regarding insurance needs
- Failure to obtain insurance for a client in a timely manner
- Failure to renew a policy at expiration wihtout giving prior notice to client
- Failure to properly adivse the client regarding appropriate limits
-
Directors and Officers Liability
Covers corporation's directors and officers against liability for their "wrongful acts" that would not be covered under a CGL or auto policy. Also covers the sums that the insured company is required or permitted by law to pay to the directors and officers as indemnifications. Written on a claims-made basis.
|
|