Casualty Flashcards
(67 cards)
1
Q
COMMERCIAL GENERAL
LIABILITY (CGL)
A
General commercial liability insurance is a type of policy that protects your business from claims of bodily injury, property damage, or personal and advertising injury caused by your operations, products, or premises
2
Q
COMMERCIAL GENERAL LIABILITY POLICY (CGL) Exposures, premises and operations
A
- Premises – Operations: Focus is on the risk associated with a business location and operations,
whether on or off the premises. Examples are:
o A slip and fall in the store
o Damage to a customer’s property while installing a water heater - Products-Completed Operations: Exposure to a business due to a defect in a product or a
property damage claim that takes place one month after installation of the water heater. - Fire Legal: This is also known as damage to premises rented by the insured. The insured may
be held liable if the business is a tenant and a negligent act causes fire damage. - Independent Contractor Liability: A business, such as a home improvement company, may
contract with an independent company to do installation work for its customers, and if bodily
injury or property damage takes place during the installation, it could create legal liability for
the home improvement company. One way for the insured to protect itself would be to require
the installation company to purchase an Owner and Contractors Protective (OCP). - Contractual Liability: There are five insured contracts that are exceptions to the contractual
liability exclusion. They can be remembered as LEASE:
o Lease of premises
o Easement Agreement (right of way)
o Agreement to indemnify a municipality
o Sidetrack Agreement
o Elevator Maintenance Agreement
3
Q
COVERAGE A – BODILY INJURY AND PROPERTY DAMAGE LIABILITY
A
- The insurer will pay those sums that the insured becomes legally obligated to pay.
- The insurer will have the right and duty to defend the insured up to the policy limit of liability.
- The bodily injury or property damage is caused by an occurrence that takes place in the
coverage territory. - “Bodily injury” or “Property damage” occurs at the earliest time an insured (or any employee
authorized to receive such information) receives notice of a claim. The notice includes:
o Written reports;
o Written or verbal demands for damages for B.I. or P.D.;
o One who becomes aware by any other means such loss has occurred. For example, a
telephone call; and
o The loss also includes damages claimed by any organization for care, loss of services, or
death that results at any time from bodily injury. Damages because of “bodily injury”
include damages claimed by any person or organization for care, loss of services, or death
resulting at any time from the “bodily injury”. - Under Coverage A, there is an exclusion for property damage to property that you own, rent,
or occupy. However, this exclusion does not apply to damage caused by fire to the premises
that are rented to the insured. This coverage also extends to contents of said premises even
when rented to the insured for a period of seven consecutive days or less. A separate limit
applies to “Damage to Premises Rented to You,” which is referred to in the policy as Fire
Damage Legal coverage.
COVERAGE A – EXCLUSIONS - The following are exclusions that apply to Coverage A:
o Expected Or Intended Injury.
o Contractual Liability (Remember the exception to this exclusion) – LEASE.
o Liquor Liability.
o Workers’ Compensation.
o Employer Liability.
o Pollution Liability.
o Aircraft, Auto, Or Watercraft Liability.
o Mobile Equipment – Transportation of mobile equipment or its use while practicing for,
and being prepared for any prearranged racing, speed, demolition, or stunting activity.
4
Q
COVERAGE B – PERSONAL AND ADVERTISING INJURY
A
- Personal and Advertising Injury coverage is provided under Coverage B of the Commercial
General Liability policy. The insuring agreement states that the insurer will pay those sums the
insured is legally obligated to pay because of “personal and advertising injury” to which the
coverage applies.
o Personal Injury – Illegal detention, false arrest, or imprisonment.
o Malicious Prosecution, sometimes referred to as a frivolous lawsuit.
o Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy
of a room, dwelling, or premise.
o Libel or slander – Oral or written publication of material affecting a person or organization. - This coverage protects the insured against any claim or lawsuit an individual or organization
brings.
COVERAGE B – EXCLUSIONS - The following are exclusions that apply to Coverage B:
o Knowingly violating the rights of another.
o Knowingly publishing false oral or written material if done by the insured.
o Oral or written publication of any material whose first publication took place prior to the
effective date of the policy.
o Criminal Acts – Assault.
o Infringement of Copyright, Patent, Trademark, or Trade Secret.
o Any Injury as a result of activity by the insured who is in the business of advertising,
broadcasting, publishing, or telecasting.
o Designing or determining the content of websites for others.
5
Q
COVERAGE C – MEDICAL PAYMENTS
A
- Pay medical expenses as long as the accident takes place in the coverage territory and during
the policy period - Payments are made regardless of fault
- Accident tales place on your premises or ways next to your premises
- Medical expenses are incurred within one year of the date of the accident
COVERAGE C – EXCLUSIONS - The medical expenses of any insured except for volunteer workers
- The medical expenses of an employee or tenant of the insured
- The medical expenses of any individual eligible for Workers’ Compensation
6
Q
SUPPLEMENTARY PAYMENTS – COVERAGES A AND B
A
The insurer agrees under Coverage A and B to pay for any claim that is investigated or settled or to
any lawsuit brought against the insured. In addition to this commitment made in the insuring
agreement, the insurer will also pay:
* All expenses incurred by the insurer
* Up to $250 for the cost of a bail bond
* The cost of bonds to release attachments as long as the bond amount is within the applicable
limit of insurance
* Al reasonable expenses incurred by the insured to assist in the investigation or defense of the
claim or lawsuit including loss of earnings up to $250 a day
* All court costs except for attorney’s fees or expenses
* Prejudgment interest
7
Q
WHO IS AN INSURED
A
Any person or firm specifically named (first named insured) in the declarations section of the contract
meets the definition of an insured. This can include the following business entities:
* Sole Proprietorships – individuals who are personally liable for business activities, also includes
the spouse of the named insured but only if the insured is the sole owner;
* Partnerships – one or more individual owners personally liable for business activities, also
includes spouses;
* Corporations – owned by shareholders who are not personally liable for business activity;
* Limited Liability Corporation (LLC) – no personal liability to owners, does include managers and
members but only with respect to the business activities;
* Trusts – the insured plus trustees but only with respect to their duties as trustees;
* Joint Ventures;
* Any other qualifying organization; or
* Volunteer workers, but only when performing duties related to conducting the business of the
insured, but they are not insured for bodily injury or personal and advertising injury. This also
extends to:
o Partners, members while performing duties relating to the business of the insured or to a
co-employee;
o The spouse, child, parent, brother, or sister of that co-employee;
o Where there is any obligation to share damages or repay another because of injury to
partners, members, spouse’s children, etc.; and
o Arising out of providing or failing to provide professional health care services.
8
Q
first named insured
A
is the named insured that is listed first on the policy declarations page.
o Under a commercial policy, the first named insured is the only party the insurance company
will recognize as being authorized to exercise contractual rights or initiate changes to be
made to the policy
9
Q
LIMITS OF INSURANCE
A
The Limits of Insurance shown in the Declarations set forth the most the insurer will pay regardless
of the number of:
* Insureds
* Claims made or Lawsuits brought; or
* Persons or organizations making claims or bringing lawsuits
There a five Limits of Liability listed on the Declarations page of the CGL and they are:
* Coverage A - Bodily Injury and Property Damage Per Occurrence
* Coverage B - Personal and Advertising Injury per person or organization
* Coverage C – Medical Payments
* The General Aggregate- This represents the most the insurer will pay for the sum of coverages
A, B, and C for the policy period which is typically one year
* Products-Completed Operations Aggregate – A separate aggregate based on payments made
to settle these claims
10
Q
DAMAGE TO PROPERTY OF OTHERS
A
- Damage to Property of Others pays for damage to property owned by a third party in cases
where an insured may be liable for said damages. - Benefits are calculated based upon replacement cost and are subject to a maximum of $5,000
per occurrence.
11
Q
TYPES OF AUTO
A
- Owned auto is referred to as “your covered auto,” which is:
o Any four-wheel motor vehicle, pickup truck, or van owned or leased with a gross vehicle
weight under 10,000 pounds; and
o The vehicle is not used in one’s business except for farming or ranching. A vehicle that is
leased must be for a continuous term of six months or more - Non-owned auto means any private passenger auto, pickup, van, or “trailer” not owned by or
furnished or available for the regular use of the named insured or any “family member” while
in the custody of or being operated by the named insured or any “family member.” - Hired auto means a vehicle that the insured hires, rents, or borrows. Vehicle rentals for the
purpose of temporarily replacing the covered auto while down for repair or servicing are
covered and a vehicle borrowed by the insured, considered a non-owned vehicle, is covered.
A leased vehicle for 6 or more months is eligible to be a covered auto under the PAP. - Temporary substitute is any auto or trailer that is non-owned while used to replace any other
covered auto which is out of normal use due to:
o Breakdown;
o Repair;
o Servicing;
o Loss; or
o Destruction. - Newly acquired auto means:
o A private passenger auto.
o A pickup or van with a gross vehicle weight rating of 10,000 lbs. or less and is not used in
the delivery or transportation of goods or materials unless incidental to a business of
installing, maintaining, or repairing furnishings or equipment; or for farming and ranching. - Newly acquired auto coverage is subject to a time notice requirement. Once the time notice
requirement has elapsed any coverage provided by the insurer will begin at the time the
insured requests the coverage. For all coverages, other than Part D, physical damage to the
auto, any coverage provided will have the broadest coverage for any vehicle shown on the
Declarations. On both replacement and add-on vehicles, the insured must request coverage
within 14 days.
o Collision and other than collision coverage, the insured must request coverage within 14
days if this coverage applies to at least one auto currently insured. If there is no collision
and other than collision coverage that exists on a currently insured vehicle, then the insured
has 4 days to comply. If reported within 4 days and a loss occurs, a $500 deductible will
apply.
12
Q
COVERAGE FOR DAMAGE TO YOUR AUTO (PART D)
A
- The insurer will pay for direct and accidental loss to both the covered and non-owned auto,
including their equipment minus any applicable deductible as a result of a collision or other
than collision accident.
13
Q
LIABILITY COVERAGE (PART A)
A
Pays for bodily injury and property damage for which any insured is legally responsible because
of an auto accident.
* The insurer will settle or defend, as appropriate, any claim or suit asking for damages up to the
bodily injury limit.
* The insurer will pay all defense costs incurred up to the limit of liability stated in the policy.
* The insurer will pay on behalf of the insured supplementary payments of:
o Up to $250 for the cost of bail bonds.
o Premiums on appeal bonds and bonds to release attachments in any suit the insurer
defends.
o Interest that accrues after a judgment is entered, e.g., the insurer appeals a judgment to
a higher court for review.
o Up to $250 a day for loss of earnings because of attendance at a hearing or trials at the
insurer’s request.
o Other reasonable expenses incurred at the request of the insurer.
14
Q
MEDICAL PAYMENTS (PART B)
A
- Provides first-party coverage to an insured or family member while occupying a covered auto;
or as a pedestrian when struck by a motor vehicle designed for use on public roads or a trailer
of any type. - Insurer will pay for any other person while occupying the covered auto, i.e., passengers.
- Insurer will pay reasonable expenses incurred for necessary medical and funeral services.
- Insurer will pay only those expenses incurred for services rendered within 3 years from the date
of the accident.
15
Q
UNINSURED AND UNDERINSURED MOTORIST COVERAGE (PART C)
A
UNINSURED MOTOR VEHICLE DEFINITIONS
* Uninsured motor vehicle means a land motor vehicle or trailer of any type:
o Where no liability policy or bond applies at the time of the accident.
o Where there is liability coverage, but it is less than the minimum liability required by the
state.
o Which is a hit-and-run vehicle whose operator or owner cannot be identified, and the
vehicle hits the named insured or any family member or a vehicle that the named insured
or any family member is occupying or the covered auto.
o Where the insurer denies coverage or is or becomes insolvent.
REQUIRED LIMITS
* Uninsured and underinsured liability limits are required to meet the minimum amounts required
under each state’s financial responsibility law.
* In most states uninsured and underinsured motorist coverage is optional.
* Uninsured limit of liability represents the limit shown on the Declarations for each person for
Uninsured Motorist Coverage (UMC) and is the maximum limit of liability for all damages arising
out of bodily injury sustained by any one person in any one accident.
* The UMC limit of liability is stated as the maximum for all damages for bodily injury resulting
from one accident.
* Any claim presented under this coverage must establish that the uninsured motorist was at
fault for the accident.
UNDERINSURED MOTORIST COVERAGE
* Provides coverage when it is determined that the underinsured motorist was at fault and has
liability insurance that is less than the named insured, family member, or passenger’s bodily
injury.
* The underinsured motorist coverage allows a covered person to be paid the difference
between what the actual damages for bodily injury were and what the limit of the other driver’s
insurance was when the at-fault driver’s coverage was not sufficient to pay the entire claim of
the injured party.
REQUIRED LIMITS
* Underinsured motorist limits must comply with the minimum limit of liability mandated under
the financial responsibility law of each state.
* An insured may carry the minimum but may not carry underinsured motorist coverage in an
amount greater than the insured’s Part A, Liability Coverage.
* In most states, this coverage is added by an endorsement to the PAP and may be rejected if
the insured does not want the coverage.
16
Q
– COVERED AUTOS LIABILITY COVERAGE
A
- Section II of the policy provides liability coverage.
- The commercial auto policy provides coverage for bodily injury (including death) and property
damage to others arising out of the operation, maintenance, or use of the covered auto while
it is being used in the course of business. - Also covered under Section II is pollution clean-up costs or expenses.
17
Q
: PERSONAL AUTO POLICY (PAP)
A
The Personal Auto Policy (PAP) is designed for individuals and families.
* There are four coverage parts each with its own insuring agreement, exclusions, and conditions:
o Property Insurance:
Part D – physical damage coverage.
o Casualty Insurance:
Part A – liability insurance.
Part B – medical payments.
Part C – uninsured motorist.
18
Q
Bodily injury
A
means bodily harm, sickness, or disease, including death that results.
19
Q
Property damage
A
means physical injury to, destruction of, or loss of use of tangible
property
20
Q
SPLIT LIMIT
A
- Split limits are used to represent separate limits for different categories of liability losses.
- These are most commonly found in auto insurance policies, and the liability limits are split as
follows:
o A per person, per occurrence limit for bodily injury. This is the most that will be paid to
any one (1) person involved in an accident for bodily injury damages;
o A per occurrence/accident limit for bodily injury. This is the most that will be paid for any
one (1) accident for bodily injury damages, regardless of how many individuals are injured;
and
o A per occurrence limit for property damage. This is the most that will be paid for property
damages for any one (1) accident. - Split limits are expressed as three (3) numbers separated by forward slashes (e.g., 10/20/10
means $10,000/$20,000/$10,000)
21
Q
combined single limit
A
is a total policy limit per occurrence, which is expressed in the
declarations as a single dollar amount that will be paid for both bodily injury (including death)
and property damage, regardless of the number of victims, in a single accident
22
Q
MEDICAL PAYMENTS
A
- Provides first-party coverage to an insured or family member while occupying a covered auto;
or as a pedestrian when struck by a motor vehicle designed for use on public roads or a trailer
of any type. - Insurer will pay for any other person while occupying the covered auto, i.e., passengers.
- Insurer will pay reasonable expenses incurred for necessary medical and funeral services.
- Insurer will pay only those expenses incurred for services rendered within 3 years from the date
of the accident.
23
Q
SPECIFIED PERILS Auto
A
- Collision means the upset of the covered auto or a non-owned auto or their impact with another
vehicle or object - Limited collision is a modified coverage where the insurer will only pay for a collision loss if it is
determined that the insured was less than 50% at fault in the accident - Other than collision, also referred to as comprehensive coverage, is a loss not defined as a
collision such as:
o Missiles or falling objects.
o Fire.
o Theft or larceny.
o Explosion or earthquake.
o Windstorm.
o Hail, water, or flood.
o Malicious mischief or vandalism.
o Riot or civil commotion.
o Contact with bird or animal.
o Breakage of glass.
24
Q
Owned auto
A
o is referred to as “your covered auto,” which is:
o Any four-wheel motor vehicle, pickup truck, or van owned or leased with a gross vehicle
weight under 10,000 pounds; and
o The vehicle is not used in one’s business except for farming or ranching. A vehicle that is
leased must be for a continuous term of six months or more
25
Non-owned auto
means any private passenger auto, pickup, van, or “trailer” not owned by or
furnished or available for the regular use of the named insured or any “family member” while
in the custody of or being operated by the named insured or any “family member.”
26
Hired
auto means a vehicle that the insured hires, rents, or borrows. Vehicle rentals for the
purpose of temporarily replacing the covered auto while down for repair or servicing are
covered and a vehicle borrowed by the insured, considered a non-owned vehicle, is covered.
A leased vehicle for 6 or more months is eligible to be a covered auto under the PAP
27
Temporary substitute
is any auto or trailer that is non-owned while used to replace any other
covered auto which is out of normal use due to:
o Breakdown;
o Repair;
o Servicing;
o Loss; or
o Destruction.
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Newly acquired auto means
A private passenger auto.
o A pickup or van with a gross vehicle weight rating of 10,000 lbs. or less and is not used in
the delivery or transportation of goods or materials unless incidental to a business of
installing, maintaining, or repairing furnishings or equipment; or for farming and ranching.
* Newly acquired auto coverage is subject to a time notice requirement. Once the time notice
requirement has elapsed any coverage provided by the insurer will begin at the time the
insured requests the coverage. For all coverages, other than Part D, physical damage to the
auto, any coverage provided will have the broadest coverage for any vehicle shown on the
Declarations. On both replacement and add-on vehicles, the insured must request coverage
within 14 days.
o Collision and other than collision coverage, the insured must request coverage within 14
days if this coverage applies to at least one auto currently insured. If there is no collision
and other than collision coverage that exists on a currently insured vehicle, then the insured
has 4 days to comply. If reported within 4 days and a loss occurs, a $500 deductible will
apply.
29
TRANSPORTATION EXPENSES
* As an additional payment, the insurer will pay without imposing a deductible, a maximum of
$900 for:
o Temporary transportation expenses not exceeding $30 per day in the event of loss to the
covered auto and the insurer will pay if the loss is caused by collision and other than
collision as long as those coverages are provided in the policy.
o Temporary transportation coverage will cover expenses for which you become legally
responsible in the event of loss to a non-owned vehicle at the rate of $30 per day.
o If the loss is caused by total theft of the covered auto or non-owned auto, the insurer will
pay only expenses incurred during the period beginning 48 hours after the theft and
ending when the vehicle is returned.
o Any loss to a covered auto or non-owned auto that is other than total theft, the insurer will
pay only expenses beginning when the auto is withdrawn from use for more than 24 hours,
and payment will be limited to a period of time reasonably required to repair or replace
the covered auto or non-owned auto
30
AUTO DEALERS
The Auto Dealers or Garage Coverage form is available for businesses who wish to be covered
for damages arising out of garage operations. Businesses that sell, service, repair, park, or store
autos use the garage coverage form to cover risks that cannot be covered under a Business
Auto Policy alone.
31
SECTION III – GARAGEKEEPERS COVERAGE
This coverage section provides bailee coverage that pays for damages caused to the property
of customers while that property is in the care, custody, or control of the insured.
* Specifically, Section III states that the insurer will pay all sums the insured legally must pay as
damages for loss to a customer's auto or customer's auto equipment left in the insured's care
while the insured is attending, servicing, repairing, parking, or storing it in the insured’s garage
operations. Payment for these damages is paid under either:
o Comprehensive Coverage for any cause except:
The customer's auto is involved in a collision with another object; or
The customer's auto overturns; or
o Specified Causes of Loss Coverage when damage is caused by:
Fire, lightning, or explosion;
Theft; or
Mischief or vandalism; or
o Collision Coverage when caused by:
The customer's auto’s collision with another object; or
The customer's auto's overturn.
32
EXCLUSIONS
The insurer will not pay for:
o Loss to your “your covered auto” or any “non-owned auto” located inside a facility
designed for racing, for the purpose of competing in or practicing or preparing for any
prearranged or organized racing or speed contest.
o Loss to your covered auto or any non-owned auto when it is being used as a taxi to
transport persons for a fee (public livery conveyance). Excluded uses include vehicles
carrying passengers for transportation networks such as Uber or Lyft. The exclusion is
effective whenever the driver is logged into the transportation network platform. Share
the ride expense or carpools are covered.
o Damage due and confined to wear and tear, freezing, mechanical, electrical breakdown or
failure, and road damage to tires. (This exclusion does not apply if this cause of loss is due
to theft).
o Loss due to or as a consequence of radioactive contamination and nuclear weapons.
o Loss due to war, civil war, insurrection, rebellion, and revolution.
o Any loss when the vehicle is destroyed or confiscated by civil authorities or local
government.
o Loss when any non-owned or temporary substitute auto is being used and there is no
reason to believe that the user has permission to use the vehicle.
o Any non-owned auto damage where the auto is being used by an insured while they are
employed or otherwise engaged in the business of selling, repairing, servicing, storing, or
parking vehicles.
o Sound and communications systems that are later installed into an automobile (does not
apply to sound equipment that was permanently installed in the vehicle by the
manufacturer or authorized dealer).
o Any equipment used in the detection or location of various radar and laser devices by law
enforcement officials.
o Any custom furnishings or equipment in pickups or vans including special carpeting,
insulation, furniture, bars, cooking apparatus, body engine, exhaust, or suspension
enhancers, sleeping materials, and any custom murals, decals, or graphics placed on the
body of the van. In the 2005 PAP edition, the policy stated that the exclusion does NOT
apply to a cap, cover, or bedliner in or upon any “your covered auto” which is a pickup. In
the current version of the PAP, these three items will now be excluded.
o A camper or trailer that the named insured owns but has failed to include in the policy
declarations, including any newly acquired camper during the coverage period after the
first 30 days of ownership, unless the insured asks the company to insure it.
o Awnings, cabanas, or equipment designed to create additional living facilities.
o Coverage for personal effects is usually covered under a homeowner’s policy and as such
is not covered under Part D
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DRIVE OTHER CAR COVERAGE
The DOC endorsement of a Business Auto policy (BAP) is designed to extend the liability
coverage of the BAP to the employee’s use of a non-owned vehicle, e.g., a rented or borrowed
car.
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Mobile equipment
: Includes all of the following types of land vehicles including those attached
to equipment or machinery:
o Bulldozers, farm machinery, forklifts, and all other vehicles not designed to be used on
public roads
o Any vehicles the insured maintains for use only on or next to the premises the insured owns
or rents
o Any vehicles that travel on crawler threads
o Self-propelled or not self-propelled vehicles primarily maintained to provide mobility to
permanently mounted:
Power cranes, shovels loaders, diggers or drills, or road construction/resurfacing
equipment like graders, scrapers, or rollers
o Vehicles not described directly above under this definition that are not self-propelled and
whose maintenance is primarily to provide mobility to permanently attached equipment
of the following types:
Air compressors, pumps, and generators including spraying, welding building
cleaning, geophysical exploration, lighting, and equipment that services wells; or
Cherry pickers or any other devices designed to lower or raise workers.
o Vehicles other than Bulldozers, farm machinery, forklifts, and all other vehicles not
designed to be used on public roads, any vehicles the insured maintains for use only on or
next to the premises the insured owns or rents, or any vehicles that travel on crawler
threads maintained mostly for purposes other than transporting people or cargo
o Furthermore, all vehicles that are self-propelled with the following types of permanently
attached equipment are not defined as mobile equipment but instead will be considered
as an auto:
Equipment mostly used for removing snow, maintaining roads (but not construction
or resurfacing), or cleaning streets
Cherry pickers or any other devices designed to lower or raise workers.
Air compressors, pumps, and generators including spraying, welding building
cleaning, geophysical exploration, lighting, and equipment that services wells
35
WORKERS' COMPENSATION
INSURANCE
* Covers the benefits the employer must pay on behalf of an injured employee per state law.
* Benefits are paid on an unlimited basis.
* Medical benefits are the same in all states and include physical and mental rehabilitation.
* Lost wages are subject to a waiting period, sometimes called a retroactive period.
* Once the waiting period is met, wages are paid from Day One.
* An eligible employee is paid payments for a disability. Disability categories are:
o Permanent Total Disability – The type where an employee will never be able to work again.
The most severe disability and benefits are paid weekly for the employee's life.
o Temporary Total Disability – Under the disability category, an employee cannot work at
all. Still, the employee can return to his usual work after some time. (employee breaks both
arms and can't work. After both arms heal, the employee resumes his regular work.)
o Permanent Partial Disability – This disability type results in an employee being permanently
disabled but will be able to work again. (An employee loses an arm, and he will be able to
return to work, though he has lost the use of an arm.) The employee receives a lump-sum
scheduled payment.
o Temporary Partial Disability – The type of disability where an employee is partially disabled
(breaks a foot) but can continue to work in a reduced capacity until the disability ends. The
policy pays the difference between regular and temporarily reduced pay. This type of
disability is the least severe of the four.
* Disability payments are income-tax-free; therefore, employees receive a percentage (66%) of
their total wage.
* Disabilities usually are paid weekly.
* An employee may receive vocational rehabilitation benefits when the employee must be
retrained for a new job and can no longer perform the old work. Benefits are usually paid for
one or two years.
* A death benefit covers funeral costs if an employee dies from work-related injuries. Income is
paid to the surviving spouse and children for some time, remarriage, or life. A death benefit is
paid for dependent children until age 18.
* For no additional premium, supplementary benefits are paid for:
o Reasonable expenses incurred by the insurer and to the insured at the insurer's request.
o Premiums for court bonds (insurer does not get the bond).
o Employer's litigation costs.
o Interest
o Other insurance – the insurer only pays for their portion of a claim.
* The insured must pay for costs that exceed those paid by workers' compensation, including:
o Liability assumed under contract;
o Injured workers hired illegally;
o Injury intentionally made worse by the employer;
o Damages from the employer's employment practices (discrimination, harassment,
discipline, humiliation, etc.);
o Punitive damages;
o Failure to follow safety laws; and
o Reimburse the insurer for excess claims paid.
36
PART TWO – EMPLOYERS' LIABILITY
* Employers' Liability is protected when a third party may sue an employer due to an employee's
injury. Employees are barred from suing an employer in exchange for the guaranteed
protection under Part One, Workers' Compensation.
* A third party is often a family member of the injured or killed employee. A family member may
sue for Loss of Consortium (Association) or affection.
* Employers' Liability also applies to dual-capacity lawsuits. Under dual-capacity, an employee
may sue as both employer and a customer of the employer.
* The liability limits are shown on the Declarations page and listed as per accident, per policy,
and employee. The most common standard limits are $100,000/$500,000/$100,000, and
higher limits may be purchased.
* Workers' Compensation, Part Two exclusions include:
o Liability assumed under contract;
o Injured workers employed under violation of the law (illegal immigrant);
o Injury intentionally made worse by the employer;
o Damages arising from actions taken by the employer relating to employment practices,
i.e., humiliation, harassment, discipline (Employment Practices Liability)
o Punitive damages
37
work-related
injuries, and Nonwork-related injuries would be covered by an employee's personal or group health insurance.
* Standard exclusions from coverage include:
o Intentional (self-inflicted) injuries
o Non-work-related activities at work
o Employee intoxication or drug use
o Injuries while commuting to and from work
* An accident is a sudden, unforeseen event causing a loss. It is definable as to its time and
place.
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PART THREE – OTHER STATES
The states covered by a workers' compensation policy are listed on the Declarations page.
* The primary state covered is the one in which the business is located.
* Suppose a business expands to conduct business in other states with employees traveling or
working there. In that case, those states can be covered without having to write a separate
policy for each state by endorsing the policy and listing those states on the Declarations page
under Part Three.
* If the other state is monopolistic, it cannot be added to the existing policy, and the business
has to write a separate policy from that state.
* If the exposure begins in another state before the employer notifies the insurer, then coverage
is automatic, provided the insurer is notified within 30 days.
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PART TWO – EMPLOYERS' LIABILITY
Employers' Liability is protected when a third party may sue an employer due to an employee's
injury. Employees are barred from suing an employer in exchange for the guaranteed
protection under Part One, Workers' Compensation.
* A third party is often a family member of the injured or killed employee. A family member may
sue for Loss of Consortium (Association) or affection.
* Employers' Liability also applies to dual-capacity lawsuits. Under dual-capacity, an employee
may sue as both employer and a customer of the employer.
* The liability limits are shown on the Declarations page and listed as per accident, per policy,
and employee. The most common standard limits are $100,000/$500,000/$100,000, and
higher limits may be purchased.
* Workers' Compensation, Part Two exclusions include:
o Liability assumed under contract;
o Injured workers employed under violation of the law (illegal immigrant);
o Injury intentionally made worse by the employer;
o Damages arising from actions taken by the employer relating to employment practices,
i.e., humiliation, harassment, discipline (Employment Practices Liability)
o Punitive damages.
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PART FIVE – PREMIUM
* Premiums are determined by correctly classifying employees based on their work position.
* Classification codes are found using a rating organization, now called an advisory organization.
The NCCI (National Council on Compensation Insurance) is the most widely used organization.
* Rates are determined by multiplying the rate per code by every $100 payroll. The process is
called remuneration.
* Rates are based on payroll, though the actual payroll for an upcoming policy term is unknown.
A business pays a deposit premium as an initial premium based on an estimate of the payroll.
* A payroll audit is conducted at the policy term's end to determine the earned premium. The
insurer charges or credits the difference between estimated and actual payroll.
* If the insurer cancels a workers' compensation policy before the end of a policy term, any
unearned premium is refunded on a pro-rata basis. The insurer may only cancel under a specific
condition with proper notice.
* The insured may cancel a policy at any time. The insurer may refund any unearned premium
when canceled using a short-rate table.
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EMPLOYEE THEFT / EMPLOYEE DISHONESTY
* Employee theft is the insuring agreement that pays for a covered loss to money, securities, and
other property (not money and securities) directly due to theft committed by an employee.
However, data and computer programs are specifically excluded and not included in the
definition of other property.
* Employee theft covers regardless of whether the employee can be identified or whether the
employee acted alone or cooperatively with other employees. Loss from forgery is also
included.
* The form can be written in three ways:
o Named schedule – Each covered employee is listed by name (Tom, Patty, Barbara, and
Steve);
o Position schedule – Covered employees listed by position (all cashiers, all accountants); or
o Blanket – All employees are covered without naming each one.
* In addition to the exclusions that apply to all insuring agreements, the employee theft form has
a few additional exclusions:
o Losses are only provable by a profit/loss statement or inventory;
o Trading one type of property for another (barter);
o Warehouse receipts (must have a competent and honest warehouse person; therefore, any
loss relating to fraudulent warehouse paperwork is not covered);
o Due to government action;
o Business interruptions; and
o Volunteers.
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– ROBBERY OR SAFE BURGLARY OF OTHER
PROPERTY
Inside the Premises – Robbery or Safe Burglary of Other Property coverage is for a custodian's
robbery or attempted robbery (a janitor is not covered, however, because this is not the
intended definition of “custodian” under the policy form). A custodian is an individual that has
care, custody, and control of property inside the premises. Coverage includes the taking of
covered property from locked safes or vaults or taking the vault or safe from the premises
completely.
* Damage to a building's exterior due to a loss covered under this form is also insured, as are
vaults or safes that are damaged
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FORGERY OR ALTERATION
* The insuring agreement in the Commercial Crime form covering forgery and alterations is
worded as follows:
o "We will pay for loss resulting directly from forgery or alteration of checks, drafts,
promissory notes, or similar written promises, orders, or directions to pay a sum certain in
"money" that are:
Made or drawn by or drawn upon you; or
Made or drawn by one acting as your agent; or purported to have been so made or
drawn."
* Other points of consideration for forgery and Alteration are:
o Financial institutions are not liable for an insured's loss when the forgery or Alteration was
due to the insured's negligent acts;
o The instrument or document must be attached to the claim when filing proof of loss;
o Signature includes handwritten signatures and signatures produced by other means; and
o Coverage is provided on a world-wide basis.
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Mysterious disappearance
mean property is missing, but in unknown what caused it to go
missing. Most crime policies exclude loss due to mysterious disappearance.
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SURETY AND FIDELITY BONDS
* Three major differences between surety and insurance are:
o Surety agreements are non-cancelable;
o Surety agreements are a three-party agreement where insurance is only a two-party
contract; and
o In the event of a loss, a right of recovery exists against the principal.
* A surety is a party that guarantees one party's debt (promise) to another party. If the party
making the promise defaults, the Surety assumes the responsibility for the debt.
* There are three parties to a bond:
o The principal;
o The obligee; and
o The surety.
* The principal, also known as the obligor, is the company or person making the promise and
required to perform the obligation.
* The obligee, or insured, is the party requesting a guarantee to whom the promise is made.
* The surety, or Guarantor, is the insurance company financially backing the promise made by
the principal.
* The surety's obligation is to guarantee the debts of one party to another. The surety agrees to
step in and takes responsibility for the lack of responsibility on the part of the obligor.
* Personal surety bonds are used when an individual is required to make a financial guarantee to
a third party and employs the help of a friend or family member to post the money on their
behalf.
* Corporate surety bonds utilize a company, such as an insurance company, to guarantee the
bond, and the company is sometimes called a corporate suretyship.
* A surety bond is a promise by a party to do something for the benefit of another party.
* A fidelity bond is a promise by a party "not to do something" to another party.
* A bond period is the time needed to guarantee the party's performance in making the promise.
* With some bonds, the discovery period is the time for an insured to discover a loss after
contract cancellation that would have been recoverable if the contract had continued in force.
* The limit of liability is a dollar amount stated on a bond that the surety is responsible for paying
in case of default by the principal. It is sometimes called the bond penalty.
* A broker or agent who will sign bonds on behalf of a surety company must be granted power
of attorney, making them an attorney-in-fact for that company.
TYPES OF FIDELITY COVERAGE
* Employee Theft
* Public Official/Employee
* Financial Institution
* Fiduciary
* Crime Bonds
TYPES OF SURETY BONDS
* Bid Bonds
* Performance Bonds
* Completion Bonds
* License Bonds / Permit Bonds
* Judicial Bonds
* Court
* Public Official
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PROFESSIONAL LIABILITY INSURANCE
A legal liability occurs when professionals fail to use the level of care and skill expected from
members of that profession.
* There are two categories of professional liability insurance, Errors and Omissions and
Malpractice
* Professional liability policies do not cover personal injury, property damage, or bodily injury.
* Professional liability policies defend claims of financial loss incurred because the insured failed
to meet acceptable performance standards.
* Unlike a CGL policy, defense costs DO reduce the coverage limits.
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ERRORS AND OMISSIONS (E & O)
* Errors & Omission (E&O) insurance is for insurance agents, real estate agents, attorneys,
engineers, architects, stockbrokers, and other non-medical professionals
* These policies protect insureds from liability arising from their errors, and
* When a loss is created because of their omissions.
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MEDICAL MALPRACTICE
Medical Malpractice insurance protects people who work in the healthcare industry
o A hospital professional liability plan pays the legal losses when malpractice, professional
error, or property damages occur because of a doctor, another staff member, or a member
of the hospital board or committee.
o Physicians, Surgeons, and Dentists Professional Liability Insurance can cover individuals
and group practices, often with separate liability limits for each.
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DIRECTORS AND OFFICERS (D & O) LIABILITY
The directors of a company are answerable to the shareholders when management fails.
* Directors and Officers liability protects individuals that serve either as officers or on boards of
directors.
* D & O protects officers or directors if they are sued by third parties for engaging in “wrongful
acts” related to their organizational role.
o It protects the personal assets of those insured and the assets of their spouses
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EMPLOYMENT PRACTICES LIABILITY (EPLI
* Employment Practices Liability Insurance (EPLI) provides protection for an employer against
employment-related claims involving discrimination, wrongful termination, and sexual
harassment, among others.
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Computer Fraud and CYBER COVERAGE
covers the theft of money or securities that result from an individual’s
fraudulent use of a computer. In addition to the standard crime exclusions, computer fraud
does not cover the following:
o Inventory Shortage (cannot prove a theft occurred);
o Fund transfer fraud; or
o Credit card transactions, including loss caused by the use of credit or debit cards and loss
caused by the information on such cards.
This coverage can protect a business from the expenses associated with a data breach.
* A data breach is created when information is stolen or removed from the property of another
without the permission or knowledge of the property owner. l
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FUNDS TRANSFER FRAUD
insuring agreement covers money or securities loss due to funds
transferred from an account in a financial institution belonging to the insured based on
fraudulent instructions given to the financial institution.
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LIQUOR LIABILITY (DRAM SHOP LIABILITY)
* The Liquor Liability Coverage Form insures establishments that sell alcoholic beverages against
potential claims arising from doing so.
o Arising from the subsequent behavior of intoxicated customers
o Liquor being sold to an underage individual, or
o Liability due to other regulatory violations.
* The Dram Shop Liability form can also be endorsed to cover those businesses that allow
customers to bring their own alcohol and consume it on the insured premises.
* Enterprises that only need Host Liquor Liability coverage can add it to their CGL with an
endorsement.
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COMMERCIAL UMBRELLA (CU 00 01)
* Added as excess coverage in addition to existing insurance coverage, with limits ranging from
one to five million dollars
* They cover bodily injury and personal and advertising injury.
* The underlying coverage must first be exhausted before the umbrella insurance applies to any
claim
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EXCESS LIABILITY POLICIES
* Excess Policies give the insured coverage limits that are greater than the coverage amounts
offered in the underlying coverages.
* This increase in coverage is available when the first line of insurance is not large enough.
* Excess policies differ from umbrella policies in that excess policies provide additional limits
without affecting the underlying policies.
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a Business Owner Policy
Residential Apartment and Condo buildings, subject to limits on the number of stories and
number of units. Incidental commercial occupancies are limited to offices, eligible
wholesale, mercantile, or service processing business. The combined maximum floor space
for these types of businesses can be no more than 35,000 square feet;
o Office buildings with less than 100,000 square feet in total floor area;
o Buildings occupied principally for eligible wholesaler, mercantile, service, or processing
purposes and contractors that do not exceed 35,000 square feet in total floor area;
o Contractors may be eligible if they are not general contractors but primarily work in a
single specialty such as carpentry or plumbing. They also have limitations on payroll and
the times of jobs they do:
Annual payroll may not exceed $300,000;
Eligible contractors may not work at a height over three stories;
The total cost of subcontracted work may not exceed 10% of total annual gross sales;
Contractors may not lease or rent their equipment to others; and
Transactions unrelated to installation, repair, or service cannot exceed 25% of gross
annual sales.
o Mercantile risks are eligible for coverage. Mercantile risks refer to retail stores within
allowed limits of revenue and space restrictions;
o Processing and Service risks are eligible unless they derive more than 25% of their sales
from off-premises operations;
o Wholesale risks, but not those with:
More than 25% of annual gross sales from retail operations; and
More than 25% of their total floor area open to the public.
o The ISO standard restricts restaurants to a maximum of 7,500 square feet of total floor
area, and no license to serve alcohol. There are two categories:
Limited Cooking Restaurants are restaurants in which food is prepared cold or
cooked with appliances that do not require an exhaust system. These are limited to
a 75-seat maximum capacity; and
Casual Dining, Fast Food, Fine Dining Restaurants, which do prepare hot, cooked
food and are limited to a maximum seating of 150;
o Convenience food stores, gasoline stores, grocery stores, or supermarkets are eligible if
the store has no auto service/repair operations, car wash, or propane/ kerosene tank filling
stations. The store must have a minimum of 3,000 square feet in total floor area if the store
or restaurant sells gasoline;
o Motels with or without an eligible restaurant are eligible as long as they do not exceed 3
stories:
However, seasonal operations closed more than 30 consecutive days, and motels
with bars or cocktail lounges are ineligible.
o Self-storage facilities not over two stories in height (except those permitting cold storage
or storage of industrial materials, pollutants, chemicals, or waste
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LIABILITY
* When a person (the first party) causes injuries or damage to another person (the third-party) or
their property through negligence, they are said to be legally liable for the losses the other
person has incurred.
* Liability insurance (also referred to as casualty insurance) is insurance that protects an insured
from claims resulting from injuries or damages the insured inflicts upon a third party.
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DUTIES FOR OCCURRENCES, OFFENSES, CLAIMS, OR LAWSUITS
Below are duties of the insured when liability claims or lawsuits are involved:
o The insured must notify the insurer as soon as practicable of any event or occurrence that
could result in a claim. The insurer needs the following information:
Details such as where and when the occurrence took place and how it happened;
Identification and contact information for anyone who was injured as well as any
witnesses; and
Details regarding any injuries or property damage that occurred.
o In the case of a claim or a lawsuit, the insurer requires the insured to take down the details
of the claim or the lawsuit as well as the date it was filed and notify the insurer;
o The insured also needs to authorize their insurer to act on their behalf to obtain records
and other information needed for the insured’s defense;
o The insured needs to cooperate with the insurer in the investigation and defense of any
claim. This includes forwarding any relevant documents such as demands and summonses
or other legal papers. This could mean helping to enforce the insured’s rights against other
third parties, which might relate to any claim or suit; and
o Finally, the insured agrees not to make any voluntary payments or take on responsibility
for anything, (except for providing first aid) without the consent of the insurer.
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A binder
is temporary coverage which allows that coverage to be put in force by agents who
have a binding authority from an insurance company. A binder is the acknowledgment that
immediate coverage is in effect pending the future issuance of a policy.
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IMPLIED WARRANTIES
The insured is bound by three implied warranties in any ocean marine policy:
o Seaworthiness – This warranty states the insured ship is seaworthy.
o Legality – The insured warrants that the insured vessel’s voyage is legal
o Warranty Against Deviations – There will be no changes to the destination or route
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A representation
is a statement made by an applicant that is considered to be true and accurate
to the best of the applicant's knowledge
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deposit premium and audit
All workers' compensation policies are subject to an insurer's audit.
* Audits determine actual payroll at the end of a policy term.
* The initial policy payment is called the deposit premium.
* Premium adjustments are charged or credited to the insured.
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certificate of insurance
is evidence that insurance has been issued in the amount shown as of
the date indicated on the certificate.
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Insurance endorsements
(also called riders) are amendments made to an existing insurance
contract that change the terms of the original policy, typically by adding or removing
coverages.
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DUTIES AFTER LOSS
The following are common duties of an insured after a loss:
o Immediate Notice of Claim to the company in writing is specified, but telephoning the
insurer’s agent is also deemed to meet this criterion under modern interpretation;
o Prevent Further Loss of property from damage under reasonable conditions;
o Damaged and Undamaged Property must be separated to determine loss. There is no
duty by the insurer to pay for or replace property that is not damaged or destroyed;
o Inventory the Loss means compiling a complete list of destroyed, damaged, and
undamaged property;
o Claim Verification through verification of bank statements, receipts, and records of the
insured. These items must be made available to the company for inspection, if requested.
It is always a good idea to store such materials off site or in a fireproof container;
o Police Reports are required in theft loss or a situation where a criminal act involving the
loss has been committed;
o Cooperation by the Insured is required, and the insured must assist the company in the
claims process to properly assess and settle a loss; and
o Proof of Loss means the insured must submit a written and signed proof of loss form to
the insurer within a time specified in the policy from the date of loss or insurer’s request.
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CANCELLATION AND NONRENEWAL
Cancellation means a policy ends early, before the expiration date stated in the declarations.
* Insurers earn their premiums as the policy period progresses toward the policy expiration date.
* The insurance company will refund unearned premiums either on a pro rata or short-rate basis,
depending on whether the cancellation was initiated by the insured or the insurer.
* If the insurance contract is rescinded, then the insurer must issue a flat-rate refund.
* When the insurance company cancels a policy, the insured receives a pro rata refund.
* If an insured initiates a policy’s cancellation, then the insurer is only required to pay a short-rate
refund
Nonrenewal occurs if an insurance company decides it will not continue to provide coverage
to an insured after the current policy period expires
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