Module 2 - Policy Cover Flashcards

1
Q

What is a “standard” packaged policy?

A

There is no such thing

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2
Q

What types of cover are needed by all buisness’s that are always included in any commercial packages policy also know as core cover’s?

A
  • Employers’, public and products liability
  • Buisness Interuption
  • Property Damage
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3
Q

What are the main types of commercial packaged policys? They start with “o” “sh” “h and g” “sa” “su” “c h” “c l ince c”

A
  • offices;
  • shops;
  • hotels and guesthouses;
  • salons;
  • surgeries;
  • care homes; and
  • commercial liability (including contractors).
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4
Q

Under the core cover “property damage” what type of cover is always present?

A

Contents of the premises

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5
Q

Is buildings cover a core cover?

A

No - as many propertys are rented.

It can be added on though where the property is owned and not rented.

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6
Q

What basis is contents cover on?

A

Reinstatment/ replacemnent as new

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7
Q

What two ways to insurers help to mitigate inflation when covering contents?

A

The sum insurered is usually

  • Index-linked
  • day one reinstatment (automatic 15% uplift on the decared value day one)
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8
Q

Is fixtures and fiting covered under the core cover?

A

Yes - fixtures and fittings and internal decorations for which the insured is responsible as tenants.

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9
Q

What is the maximum contents sum insured on a packaged policy?

A

Between £200,000 - £500,000. Higher than this and they would need a more flexible commercial combined policy.

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10
Q

Explain automatic reinstatmnet of sum insured ?

A

If the sum insured is £200,000 and you have a small fire which required £50,000 there will be £150,000 left of your sum insurered. In order to retain the sum insured required it would need to be put back to £200,000.

The sum insurered will not be reduced by the amount of a claim unless the insured or insurer wishes to do so.

The insurer will generally reserve the right to charge an additional premium for reinstating the sum insured to the level prior to the claim.

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11
Q

How do professional fees come into the contents core cover?

A

Professional fees will be paid by your insurer in the even of a claim under the reinstatment of the property. Allowance for this must be considered and adequate under the sum insured on the policy.

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12
Q

What is debris removal covered under?

A

Property Damage

There will be additional costs incured when demoloishing/removing debris and this needs to be accounted for in the sum insured

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13
Q

What does the “european union and public authorities” clause under property damage mean?

A

It covers the additional costs resulting from the need to rebuild elsewhere or in a different way - specifically as required by:

EU legislation
Acts of Parliment
Bye-laws of any public authority

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14
Q

Waht does the capital additions clause cover and what does the insured need to do?

A

It automatically covers any additions or alterations to the building/tenants improvments/general contents limited to : 10% of the relavant sum insured up to £500,000.

The insured needs to proved the insurers with details of these items ASAP and atleast within 6 months.

Some insurers provide automatic cover untill the renewal date.

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15
Q

AWhat is all risks cover and when would an all risks claim be valid?

A

Usually any loss of or damage to property insured.

It must have occured accidentally (as far as the insurer is concened)

Cause must not be excluded in the policy wording.

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16
Q

How might All Risks cover be written into the policy if it is not under “all risks”?

A

Under what is effectivly the same cover but under the different perils, such as:

fire, lightning, explosion, earthquake, aircraft, riot, malicious damage, storm, flood, escape of water, impact, damage to underground pipes/cables, escape of oil, collapse of TV aerials and accidental damage.

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17
Q

What are the typical excess’s for the different perils under “All Risks”?

A

£250 - £500 applys to perils of storm, flood, escape of water, malicious and accidental damage

Subsidence £1000

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18
Q

What can you claim for under theft?

A

Contents are covered.

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19
Q

What requirments are there to have a successfull theft claim and how does this differ on an office policy?

A

If entry/exit to/from the premises is gained my forcible and violent means.

This does not apply to some office policys - they typically have wider cover when losses occured from open windows and doors.

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20
Q

What is a typical theft excess?

A

£250 - £500

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21
Q

When does a money claim fall under “all risks” and when does it fall under “money”?

A

Is is claimed on under all risks if the loss or destruction of or damage to money in transit and on the insured premises.

‘Money’ typically includes items such as cash, bank and currency notes, cheques, postal and money orders, postage stamps, national insurance cards and luncheon vouchers.

Money also normally includes damge to safes and loss or damage to clothing and personal effects belonging to the insured or their directors, partners or employees, and theft of postage stamps, postal orders and travellers’ cheques, subject to a limit of typically £250–£500 per person.

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22
Q

What are the typical policy limits under “money”?

A
  • non-negotiable money: £250,000;
  • during business hours, in a bank night safe or in transit: £2,500-£10,000;
  • out of business hours in locked safe: £1,000-£2,000;
  • out of business hours not in locked safe: £500;
  • at the residence of the principal or an authorised employee: £500; and
  • from a vending machine: £300.
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23
Q

What is covered under personal accident or assault?

A

This provides monetary compensation to the principle or employees if they are assualted by thieves.

By either a lump sump or weekly benefit.

Cover includes damage to clothing and personal effects of employees attacked during a robbery up to £500.

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24
Q

What is the age limit on a personal accidnet/assault policy?

A

16 - 65 or 70 years old.

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25
Q

What glass is covered on an all risks basis?

What excess?

What is not included?

A

All forms of fixed glass in windows, doors, signs and sanitary fittings.

The cost of temporary boarding up and damages to frames and lettering.

£500 sum insured

Not included is any broken glassware which is on sale in the shop.

£100 excess usually

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26
Q

When would no cover be provided when entry to a commercial premises has been gained?

A

If is has been gained by:

  • using a key
  • means of a trick
  • hiding on the premises while they are open for buisness
  • gaining entry to an unlocked premises

Any occasion where no force or violence has been used. If force or violence was used when leaving the premises you would be covered.

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27
Q

Is terrorism covered?

A

Not as standard however it is possible to buy back cover for political terrorism as a seperate section of the policy

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28
Q

Is loss, destruction or damage to computer or data processing equipment due to programing or operator error, virus or hacking covered?

A

No

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29
Q

Is wear and tear, gradual deterioration, faulty or defective design materials or workmanship, existing or hidden defect covered?

A

No

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30
Q

Is mechanical or electrical breakdown or derangement covered?

A

no

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31
Q

Is unexplained losses, fraud or dishonesty covered?

A

No

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32
Q

Is theft involving the principal, partners, directors, employees or household members covered?

A

No

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33
Q

Is escape of water, malicious damage and breakage of glass when the premises are unoccupied covered?

A

No

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34
Q

Is damage to moveable property in the open by theft, wind, rain, snow, sleet, flood or dust covered?

A

No

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35
Q

Is changes in the water table and frost damage covered?

A

No

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36
Q

Is money losses due to clerical or accountancy error, from unattended vehicles, and those due to the fraud or dishonesty of an employee not discovered within 7 working days covered?

A

No

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37
Q

Is money losses on the customer’s premises covered?

A

No

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38
Q

Is contents covered?

A

Yes

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39
Q

Is theft covered?

A

Yes is there is forcible or violent entry or exit to the premises

39
Q

Is theft covered?

A

Yes is there is forcible or violent entry or exit to the premises

40
Q

Would a claim from Nye’s following one of their directors helping a thief to steal goods by giving him information about how to get into the premises be covered?

A

No

41
Q

Would a claim from Bright’s who need a replacement photocopier as a defective part cannot be replaced be covered?

A

No - mechanical or electrical breakdown is excluded

42
Q

Would claim from Payne’s who desperately need new shutters to protect their business at night, as the old ones will not close due to rust be covered?

A

No as it is wear and tear which is excluded

43
Q

Would a claim from Dee for the glass in the front of her shop that needs replacing due to vandalism be cover?

A

Yes

44
Q

What does buisness interuption cover you for?

A

Losses that occur when a buisness is unable to trade because of physical damage to their premises

45
Q

Would loss of business income due to being unable to trade from existing premises be covered?

A

Yes under BI

46
Q

Would expenses that continue to be paid during a period of business interruption, e.g. rent and rates be covered?

A

Yes under BI

47
Q

Where does the need for BI arrise from?

A

When a commercial property is damaged and:

  • Earning may reduce or cease
  • Overheads still need to be paid
  • Some costs may temporarily increase
48
Q

What ways are BI claims calculated?

A
  • Gross profit basis
  • Gross fees or income basis
  • Increased cost of working basis
49
Q

What types of buisness is “gross profit basis” on a BI claim suitable?

A

Buisness’s whose operations incolve sales, purchase of goods and opening and closing of stock.

50
Q

How is gross profit normally calculated?

A

By deducting any “uninsured working expenses” (expenses that will reduce or even cease in the event of loss or damage at the premises)

from the turnover/income of the buisness.

51
Q

What are the main variable expenses for shops?

A

Purchase of stock

52
Q

How is gross profit usually worked out on shop policys?

A

On a “net sales” basis.

The difference between the sales and purchases rather than a full gross profit.

53
Q

What type of buisness is a “gross fees or income basis” suitable?

A

Where the buisness provides a serives rather than a pruduct and charges a fee for that service.

54
Q

What types of buisness’s is an “increased cost of working basis” suitable?

A

Offices or a buisness where it can continue to function as normal but would have an increased cost of hiring a tempory working space and sutable equipment while there space is being rebuild.

55
Q

T & J’s solicitors has been paid for the reduction in the amount of money coming in to the business. On what basis is their business interruption cover provided?

A

The gross fees or income basis is suitable as the business provides a service rather than a product and charges a fee for that service.

56
Q

P & B’s has been paid for the costs it incurred in renting temporary offices while its own were being repaired On what basis is their business interruption cover provided?

A

For office risks, there is usually the option to insure ‘increased cost of working’ only. This is appropriate where a business can continue to function as normal, but will incur extra costs in hiring a temporary office space and suitable equipment while its own premises are being rebuilt.

57
Q

Suresh’s shop has been paid based on a calculation involving opening and closing stock. On what basis is his business interruption cover provided?

A

The gross profit basis is suitable as their business operations involve sales, purchase of goods and opening and closing stock.

58
Q

What warranty is appticable on the BI section?

A

Material damage warranty

59
Q

What does the material damage waranty under the B
I sercion mean?

A

In order for there to be a valid claim:

  • There must be a policy in force which covers the physical damage which has led to the loss of income to the business; and
  • Liability must have been admitted under this for the property damage claim (other than due to the application of an excess).
60
Q

How does the material damage warranty under the BI section of the policy protect insurers?

A

By ensuring that there are enough funds to repair, rebuild or replace any property damaged, thus reducing the likely length and size of any BI claim.

61
Q

What “standard” BI sum insurered is typically provided?

A

A muliple of the contents sum insured.

Typically 3x or £250,000 whichever is greater.

Some policys have a fixed sum insurered which could be as high as £500,000

62
Q

Harry’s factory catches fire. He chose a maximum indemnity period of 36 months. His business is affected by the fire for 18 months. How long will his BI policy pay out?

A

18 months

63
Q

What is the maximum indemnity period or restoration period that usually applys under the BI section?

A

12-36 months

64
Q

What is the restriction on a BI claim in terms of how long they will pay out?

A

It is limited to the time the buisness is affected and not the maximum indemnity period chosen

65
Q

What is the typical waiting period on a policy before a BI claim will start paying out?

A

48-72 hours
It will be stated in the policy terms.

66
Q

Is “damage at suppliers’ premises” an extention or exclusion under BI?

A

Extension

67
Q

Is “damage at public utilities suppliers’ premises” an extention or exclusion under BI?

A

Extension

68
Q

Is “denial of access to the premises following damage to other premises in the vicinity” an extention or exclusion under BI?

A

Extension

69
Q

Is “murder, suicide or notifiable disease at the premises or within a specified radius of them” an extention or exclusion under BI?

A

Extension

70
Q

Is “damage to documents in transit” an extention or exclusion under BI?

A

Extension

71
Q

Is “losses caused by notifiable/infectious diseases, including COVID-19” an extention or exclusion under BI?

A

Extension

72
Q

Is “broken items resulting from a covered event or loss” an extention or exclusion under BI and property?

A

Exclusion

73
Q

Is “undocumented income that is not listed in a business’s financial records” an extention or exclusion under BI and property?

A

Exclusion

74
Q

Is “loss of the value of supplied utilities” an extention or exclusion under BI and property?

A

Excluded

75
Q

Why is loss of the value of supplied utilities excluded under property and BI?

A

Because they are usually turned off when your business closes due to damage

76
Q

Is “communicable diseases that cause a shutdown in your operation” an extention or exclusion under BI and property?

A

Excluded - this will depend on the policy terms for cover arising under a pandemic

77
Q

What was the judgment on the sample cases the FCA provided in relation to whether a BI claim should be paid for due to the Covid-19 pandemic?

A

That most, but not all, of the disease clauses in the sample provide cover.

It also stated that certain denial of access clasues in the sample do provide cover but it depends on the wording and how the buisness was affected by the goverment response.

This includes whether the buisness was subject to a mandatory closure order ect.

78
Q

What was the FCAs aim in the court cast in regards to the covid 19 pandemic and the resulting BI claims?

A

It brought forward the test cases to clarify key isssues of contractural uncertainty for policyholders.

79
Q

What is liability claims covering ina general sense?

A

Everyone has a legal duty to behave in a reasonable manner toward others including buisness’s.

If they fail to do so and someone is injured or property is damaged they are legal obliged to pay compensation.

80
Q

How can liabilities arrise?

A

Through negligent acts

81
Q

What three types of liability covers are automatically included in a commercial packaged policy?

A
  • Employers’ Liability
  • Public Liabilty
  • Products Liability
82
Q

What is covered under Employers’ Liability cover?

A

Any sum which they may be legally liable to pay any employee in respect of injury, disease, illness or death caused during employment of the buissness insured.

It will also cover claimant costs and expensess assosiated with the claim and any legal costs incurrect by the insured in defending the claim with the insurer’s concent.

83
Q

Does the insured need to specify the number of employees or any other details such as wages or duties?

A

No they are all covered

84
Q

Who is classed as an employee?

A

Anyone who:

  • Has an NI contribution and paying tac from their salary
  • Location, hours and conditions are controlled by their employer
  • Cannot be replaced by their employer if they are unable to work
85
Q

Under who is classed as an employee under Employers’ Liability cover - who should the cover extend to?

A
  • all permanent employees;
  • contract, casual and seasonal employees;
  • labour-only subcontractors;
  • temporary staff, including students and people on work placements; and
  • volunteers, advisers, referees and marshals.
86
Q

What is the usually EL limit?

A

£10,000,000
Terrorism limited to £5,000,000

87
Q

What is the standard exculsion on EL cover?

A

Offshore work

88
Q

What buisness’ are not required to have EL insurance?

A
  • Companies with no employee’s
  • Unincorportated familty buisness’s who only employ family
    -Public organisation, health service bodies
89
Q

What does public liability cover?

A

Legal liabilities in respect of claims by third parties for injury suffered or property damage arising out of buisness, including the legal costs of both the claimant and the insured.

90
Q

Does the insured need to specify wages or turnover details?

A

No

91
Q

What is the usual limit of indemnity on the PL cover?

A

Between £2,000,000 and £5,000,000 for any one occurance

92
Q

Cover is included for legal costs and expenses in defending prosecutions under what?

A
  • health and safety legislation
  • the Consumer Protection Act 1987
  • and the Food Safety Act 1990
93
Q

Is loss or damage to premises rented or hired by the insured covered under PL?

A

Yes

94
Q

What is the typical excess on a PL policy?

A

£100 - £300 to TP property damage

95
Q

What work away is normally covered?

A

Clerical, collection or delivery

96
Q

If any work takes place away from the insurers premises other than clerical, collection and delivery - is this covered under PL?

A

Not usually as standard depending on the trade.

It may require specific underwriting and payment of an AP.