3 TYPES OF CASULTY POLICIIES, BONDS, AND RELATED TERMS Flashcards
Commercial general liability
- operations at both its own premises and elsewhere.
- if a business or anyone there causes bodily injury.property damage, the bussiness may be legally liable.
- provided for insureds legal liability for bolidy injuy and property dmaage arising.
- covered occurines must take plae during policy period.
EXPOSURE
- a product manufcated/sold by the insured or aynone under the insureds name. real propety like busines sor land are not considered a product. ‘
- goods not considered until after their sale by the insured.
coverage applies to bi/pd the product causes injures or damages mmust occur away from the premises.
COMPLETED OPERATIONS EXPOSURE
coverage will pay for bi/pd caused by negiglent or faulty workmanship by an insured but will pay to reeplace the work that caused the loss.
CONTRCTUAL LIABILITY
may be held liable if actions failure to complete based on contract. this is called ^. - ex: a lease of presmuses, a service contract.
2 forms (offers same coverage.
- occurrene form: occurence occured during policy period. doesnt matter when reported.
- claims made form: occurence takes places AFTER retroactive date and reported within policy period.
coverage a: bodily injjury
Section I – Coverages
Coverage A – Bodily Injury and Property Damage Liability
Insuring Agreement – The insurer will pay those sums the insured becomes legally obligated to pay as damages because of bodily injury and/or property damage to which coverage applies, provided the occurrence took place during the policy period and in the coverage territory.
The coverage territory includes the United States of America including its territories and possessions, Puerto Rico, and Canada.
If the insured’s products are made or sold in the coverage territory and a suit is brought in the coverage territory, the policy would then respond to a product-related claim worldwide.
The insurer has the right and duty to defend the insured against any suit seeking damages. There is no duty to defend any claim or suit to which insurance does not apply.
Exclusions – Coverage A doesn’t cover bodily injury or property damage arising from:
Expected or Intended Injury – Expected or intended injury is the result of the insured’s intention to cause injury. The intentional act is only excluded when the insured should have expected or intended to cause injury. An exception exists for bodily injury resulting from the use of reasonable force to protect persons or property.
Contractual Liability – Liability assumed by the insured under a contract with two exceptions:
Liability that would exist whether the contract was in place or not.
A contract that is specifically listed as being covered under the policy.
Liquor Liability – This exclusion only applies to insureds who are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
Liquor Legal Liability Insurance, or Dram Shop Liability Insurance, is available under a separate policy for businesses who need coverage to fill the coverage gap created by the exclusion.
This exclusion does not apply to a building owner who leases space to a bar. Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won’t apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.
Workers’ Compensation – No liability coverage is provided if the insured has a legal obligation to provide workers’ compensation insurance, disability benefits, unemployment compensation, or any similar type of insurance. This exclusion applies whether or not the insured actually purchased any coverage required by law. The CGL policy excludes these perils because they may be insured elsewhere and, in many jurisdictions, the insured is required by law to provide coverage.
Employer’s Liability – No liability coverage is provided for bodily injury to an employee of the insured that arises out of and during the course of employment by the insured or while performing duties related to the insured business. In addition, no liability coverage is provided to the spouse, child, parent, or sibling of any employee who’s injured while on the job. The exclusion applies regardless of the reason for the employers legal liability.
Pollution – No liability coverage is provided for bodily injury and property damage arising out of actual, alleged, or threatened pollution or the escape of “pollutants.” The exclusion also applies to the cost of clean-up. This coverage may be purchased with a Pollution Extension Endorsement.
Aircraft, Auto, and Watercraft – No liability coverage is provided for bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment to others of aircraft, autos, and watercraft IF such crafts and vehicles are owned by, operated by, rented to, loaned to, or being loaded or unloaded by any insured. This coverage may be purchased on a separate policy or under a business auto coverage part.
Transportation of Mobile Equipment – No liability coverage is provided for bodily injury or property damage arising out of the transportation of “mobile equipment” by an auto that’s owned by, operated by, rented to, or loaned to any insured. Neither is liability coverage provided for the use of “mobile equipment” in, or while practicing or preparing for any prearranged racing, speed, demolition, or stunting
Coverage A Exclusions (continued)
War Exclusion – No liability coverage is provided for bodily injury or property damage resulting from war—regardless of how caused and whether damage is a direct or indirect loss. War includes undeclared and civil war, warlike action by a military force, insurrection, rebellion, revolution, usurped power, etc.
Damage to Property – This exclusion applies to the insured’s own property and any property in the care, custody, or control of the insured. The Commercial Property Part and the Commercial Inland Marine Part of the Commercial Package Policy provide this coverage.
Damage to Insured’s Product – No coverage is provided for damage to the insured’s own product. Also excluded is damage that arises out of the product or any of its parts.
Damage to Insured’s Work – No coverage is provided for damage to the insured’s work that is included in the Products or Completed Operations Hazards. An exception exists for damage caused by the work performed by a sub-contractor.
Damage to Impaired Property or Property Not Physically Injured – No property damage liability coverage is provided for “impaired property”—which is property that has not been physically injured—IF the damage arises out of a defect, deficiency, inadequacy, or dangerous condition in the insured’s product or work.
Product Recall – Coverage is excluded when the product, work, or property is withdrawn or recalled from the market, or from use, by a person or organization because of a known or suspected defect, deficiency, inadequacy, or dangerous condition. In addition to the loss of use being excluded, the withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the insured’s product, work, or any impaired property is also excluded. This is sometimes called the Sistership Exclusion.
Personal and Advertising Injury – This coverage is provided under Coverage B.
Electronic Data – No liability coverage is provided for damages arising out of the loss of electronic data, including loss of use, corruption of data, and the inability to access or manipulate electronic data. The exclusion defines electronic data as being information, facts, and programs that are stored as or on; created or used on; or transmitted to or from computer software.
The Commercial General Liability Coverage Part of the Commercial Package Policy is available in two forms of coverage:
Occurrence Form
Claims-Made Form
The forms are identical in all respects, except for the way coverage is activated, or triggered.
Occurrence Form
In the occurrence form, insurance coverage is triggered when an “occurrence” takes place during the policy period and within the coverage territory. Essentially, determining the coverage trigger is a single-step process.
Step 1. Did the loss occur during the policy period? If the answer is yes, coverage is triggered.
Claims-Made Form
In a claims-made form, coverage is triggered if an “occurrence” takes place AFTER the retroactive date AND is REPORTED within the policy period.
Determining the coverage trigger in the claims-made form is a two-step process:
Step 1. Did the loss occur AFTER the retroactive date?
Step 2. Was the loss REPORTED during the policy period?
If the answer to both questions is yes, then coverage is triggered.
Occurrence Form
An occurrence form provides coverage for losses that take place during the policy period. It doesn’t matter when the loss is reported; what matters is when the loss occurred. The key in this form is the date the loss actually happened and if it happened when the policy was in effect.
Claims-Made Form
A claims-made form provides coverage for losses that take place after the retroactive date and before the end of the policy period, and for which claims are made during the policy period or an extended reporting period. The Claims-Made Form offers the same coverage as an Occurrence Form, but is the preferred form of coverage for insurers issuing coverage on risks that have the potential to generate claims long after an occurrence that caused injury or damage. Provisions that are unique to the Claims-Made Form include:
Retroactive Date
A date specified in the Declarations, after which an occurrence must take place to be covered. If an occurrence takes place before the retroactive date, it’s not covered, even if a claim is made during the policy period.
The retroactive date may be the policy’s effective date or any date in the past that the insurer agrees to, such as the effective date of the first claims-made policy issued to the insured.
Extended Reporting Period (Tail Coverage) – If a claims-made policy isn’t renewed or replaced, the claims-made form contains a provision for the extension of time during which claims must be reported. This time frame is called an extended reporting period or tail coverage. The policy provides for two different options: one is included in the policy at no charge and the other requires the addition of an endorsement and the payment of an additional premium.
Basic Extended Reporting Period (BERP)
This extended reporting period is a provision in a claims-made form and allows claims to be reported after the policy term for a specific period of time, such as 60 days after the policy’s expiration or cancellation date.
Supplemental Extended Reporting Period (SERP)
An optional reporting period of unlimited duration may be purchased by endorsement if requested within 60 days of the end of the policy term. The SERP isn’t available for purchase after 60 days beyond policy expiration.
The SERP covers claims arising from occurrences that took place after the retroactive date and before the end of the policy term, regardless of when the claim is made.
Cost may be up to 200% of the CGL’s annual premium.
Premium for this optional coverage is a one-time charge and is fully earned at issuance.
The SERP can’t be cancelled and no refunds are made.
Coverage B – Personal and Advertising Injury
Insuring Agreement – The policy provides protection for liability arising from “personal and advertising injury” offenses that are committed in the coverage territory and during the policy period.
Personal and advertising injury offenses include:
False arrest, detention, or imprisonment
Malicious prosecution
Wrongful eviction from wrongful entry into, or invasion of privacy of the right of private occupancy
Libel or slander
Violation of privacy
Use of another’s idea in the insured’s “advertisement”
Infringement of copyright, trade dress, or slogan in the insured’s “advertisement”
The policy will pay those sums the insured becomes legally obligated to pay as damages because of personal and advertising injury to which the insurance applies. The insurance company has the right and duty to defend the insured against any suit seeking damages because of personal and advertising injury. The policy doesn’t provide defense coverage to anyone else, including anyone named in a contract or hold harmless agreement, unless they are also an “insured.”
Coverage B – Personal and Advertising Injury
Insuring Agreement (continued)
Coverage B excludes a number of offenses. Neither coverage nor defense applies to the following types of offenses that cause damage:
The insured’s knowledge that an act will violate another’s rights and would inflict personal and advertising injury
The oral or written publication of material by the insured, or at the insured’s direction, when knowing the material is false
Criminal acts committed by, or at the direction of, the insured
Contractual liability unless the insured would be liable for the act in the absence of the contract
Breach of contract
The failure of the insured’s goods, products, or services to conform to advertising statements
Damage that arises out of the wrong description of goods, products, or services
Coverage C – Medical Payments
Insuring Agreement – The insurer will pay for medical expenses, due to the bodily injury, caused by an accident on the insured’s premises or because of the insured’s operations. The accident must take place in the coverage territory and during the policy period. Expenses include first aid administered at the time of the accident, and expenses that have been incurred and reported within one year of the date of the accident. These payments are made regardless of fault.
Exclusions – No payments is made under Coverage C for the following:
Any insured (other than a volunteer worker)
Any person hired by the insured or the insured’s tenant
A person who normally occupies any portion of the insured premises
Injuries that should be covered by Workers’ Compensation and similar laws
Athletic activities
Injuries within the products-completed operations hazard
Coverage A exclusions
Supplementary Payments – Coverages A and B
Supplementary Payments apply only to Coverages A and B, are paid in addition to any applicable limit of liability, and include:
All claim-related expenses incurred by the insurance company
The cost of bail bonds, up to $250
The cost of bonds to release attachments
All reasonable expenses incurred by the insured, at the insurer’s request, including actual loss of earnings up to $250 per day to the insured for time off from work
All court costs taxed against the insured in a suit
Payments for prejudgment interest, which is the amount of interest that accrues on a judgment from the time of the accident or loss until the insurer makes payment or offers to make payment
Payments for post-judgment interest, which is the amount of interest that accrues on a judgment after it’s entered and before the insurer has paid or offered to pay
Supplementary payments do NOT reduce the limits of insurance provided by the policy
Section II – Who is an Insured
The Declarations indicates who is an insured; certain other parties are also an insured based on that designation.
The following persons are an insured based on the designation on the Declarations–but only with respect to the conduct of the insured business:
If an individual is designated, the individual and his or her spouse are insureds.
If a partnership or joint venture is designated, the partnership, joint venture, and members, partners, and their spouses are insureds.
If a limited liability company (LLC) is designated, the LLC, its members, and its managers are insureds.
If a trust is designated, the trust and its trustees are insureds.
If any other type of organization is designated, the organization, its executive officers, its directors, and its stockholders are insureds.
Even if not designated on the Declarations, the following parties are also insureds when performing duties related to the conduct of the insured’s business:
The insured’s volunteer workers and employees who are not executive officers, directors, or managers.
Any other person while acting as the insured’s real estate manager.
Any person or organization having temporary custody of the insured’s property if the insured dies.
The insured’s legal representative if the insured dies, but only with respect to duties as legal representative.
Newly acquired or formed organizations are also insured EXCEPT partnerships, joint ventures, or LLCs. The named insured must maintain ownership or majority interest for the organization to be an insured and no other similar insurance must be available to that organization. Coverage for newly acquired or formed organizations is only provided for 90 days after acquisition or establishment or until the expiration of the policy, whichever occurs first.
Section III – Limits of Insurance
The Limits of Insurance shown in the Declarations are the most the insurer will pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits.
The General Aggregate Limit shown is the most the insurer will pay, during the policy period, for medical expenses under Coverage C, damages under Coverage A (except damages that are included in the Product and Completed Operations Hazard), and damages under Coverage B.
The Products-Completed Operations Aggregate Limit is the most the insurer will pay, during the policy period, for losses payable under Coverage A included in the Product and Completed Operations Hazard.
The Personal and Advertising Injury Limit is the most the insurer will pay under Coverage B for the sum of all damages because of all personal and advertising injury sustained by any one person or organization.
The Per Occurrence Limit is the most the insurer will pay for damages under Coverage A and medical expenses under Coverage C because of bodily injury or property damage arising out of any one occurrence.
The Medical Expense Limit is the most the insurer will pay under Coverage C for all medical expenses because of bodily injury sustained by any one person.
Section IV – Commercial General Liability Conditions
These conditions apply in addition to the Common Policy Conditions:
Bankruptcy – Neither bankruptcy nor insolvency of the insured or of the insured’s estate will relieve the insurer from its obligations.
Duties in the Event of Occurrence, Claim, or Suit – The insured must see that the insurer is notified as soon as practicable, in writing, of an occurrence or an offense that may result in a claim. The notice should include when and where the occurrence or offense took place, the names and addresses of injured persons and witnesses, and the nature of any injury or damage.
Legal Action Against the Insurer – The insured cannot sue the insurer until all terms have been fully complied with, such as notice of occurrence, etc.
Other Insurance – Coverage may be written as primary or as excess. When written on a primary basis and other collectible primary insurance is also available, the loss is shared either on a contribution basis or by limit of liability.
Premium Audit – The advance premium is only a premium deposit, and the earned premium will be based on an audit at the end of the policy period. The insured must maintain records necessary for the insurer to compute the premium, as premiums are based on sales, receipts, payroll, or some combination thereof. An additional premium is required if the earned premium is greater than the premium deposit.
Representations – The named insured agrees that all statements made in the application are accurate and complete, that the statements are based on representations made by the named insured to the insurer, and that the insurer has issued the policy based upon such representations.
Separations of Insureds (Severability) – The term insured is used severally and not collectively in the policy, and it is to be applied as meaning the insured against whom claim is made or suit is brought. The insurance afforded applies separately to each insured. Multiple suits against multiple insureds do not increase the amount of insurance for that occurrence or policy period.
Transfer of Rights of Recovery Against Others to the Insurer (Subrogation) – The insured agrees to transfer to the insurer any rights to recover any payment the insurer has made on behalf of the insured.
When the Insurer Does Not Renew – If the insurer decides not to renew, the First Named Insured is to be notified, in writing, 30 days before the expiration date.
The Insured’s Right to Claim Information (Claims Made Form only) – The insurer will provide, upon cancellation, non-renewal, or written request of the First Named Insured, a summary of paid claims, claims for which the insurer has established reserves, and notices received by the insurer of occurrences that could give rise to claims.
Section V – Definitions
Common Commercial General Liability Definitions
Advertisement – A notice broadcast or published to the general public or specific market segments about the insured’s goods, products, or services to attract customers or supporters.
Coverage Territory – The coverage territory of the CGL is the United States, its territories and possessions, Puerto Rico, and Canada. International waters and airspace are included in the coverage territory, but only if injury or damage occurs in the course of travel or transportation between any places included in the coverage territory.
Occurrence – An accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Insured Contract – Insured individuals and organizations often enter into legal contracts and, many times, the insured assumes liability in those contracts. An insured contract is such a contract that is insured by the policy. In other words, if the insured assumes liability under an insured contract, that liability is transferred to the insurance company according to the terms of the insurance policy.
Bodily Injury – Includes bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
Impaired Property – Tangible property, other than an insured’s product or work, which cannot be used because it is thought or known to be defective, inadequate, deficient, or dangerous.
Property Damage – Physical injury to tangible property, including all loss of use of the damaged property. “Property damage” is also loss of use of tangible property that is not physically injured. (Electronic data is not tangible property.)
Employee – Employee includes a leased worker. A leased worker is a full or part-time employee who has contracted with an employee leasing service (also known as a professional employer organization). Employee does not include a temporary worker. Temporary workers are employees of the supplying company.
Volunteer Worker – A person who is not an employee of the insured, but who donates his/her work and acts at the direction of the insured. A volunteer worker is not paid a fee, salary, or other compensation by the insured for work performed for the insured.
Your Product – Any goods or products (other than real property) that are manufactured, sold, handled, distributed, or disposed of by the named insured, others trading under the named insured’s name, or a person or organization whose business the named insured has acquired.
Your Work – Work or operations performed by the named insured or on the named insured’s behalf. Your work includes materials, parts, or equipment furnished in connection with such work or operations. Your work also includes warranties or representations made at any time with respect to the fitness, quality, durability, performance, or use of “your product” and also includes the providing of, or failure to provide, warnings or instructions.
ROBBERY VS BURGLARY
- Robbery
Burglary is the taking of property from a premise that is closed and locked tight. There must be
evidence of forced entry or exit. Burglary also includes the robbery of a guard or watchperson…
forcing a mall security guard to open a locked store would be considered burglary. - Burglary
Burglary is the taking of property from a premise that is closed and locked tight. There must be
evidence of forced entry or exit. Burglary also includes the robbery of a guard or watchperson…
forcing a mall security guard to open a locked store would be considered burglary.
B. Automobile: personal auto and business auto 1. Liability
a. Bodily Injury
b. Property Damage
c. Split Limits
d. Combined Single Limit
2. Medical Payments
3. Physical Damage (collision; other than collision; specified perils)
4. Uninsured motorists
5. Underinsured motorists
6. Who is an insured
7. Types of Auto
a. Owned
b. Non-owned
c. Hired
d. Temporary Substitute
e. Newly Acquired Autos
f. Transportation Expense and Rental Reimbursement Expense
8. Garage Coverage Form, including Garagekeepers Insurance
9. Exclusions
10. Individual Insured and Drive Other Car (DOC)
C. Workers Compensation Insurance, Employers Liability Insurance, and Related Issues
(This section does not deal with specifics of state law, which are addressed elsewhere in this outline.)
1. Standard policy concepts
a. Who is an employee/employer
b. Compensation
2. Work-related vs. non-work-related
3. Other states’ insurance
4. Employers Liability
5. Exclusive remedy
6. Premium Determination
D. Crime
1. Employee Dishonesty
2. Theft
3. Robbery
Burglary is the taking of property from a premise that is closed and locked tight. There must be
evidence of forced entry or exit. Burglary also includes the robbery of a guard or watchperson…
forcing a mall security guard to open a locked store would be considered burglary.
- Burglary
Burglary is the taking of property from a premise that is closed and locked tight. There must be
evidence of forced entry or exit. Burglary also includes the robbery of a guard or watchperson…
forcing a mall security guard to open a locked store would be considered burglary. - Forgery and Alteration
- Mysterious disappearance
E. Bonds - Surety
- Fidelity
F. Professional liability - Errors and Omissions
- Medical Malpractice
- Directors and Officers (D&O)
- Employment Practices Liability (EPLI)
- Cyber liability and data breach
G. Umbrella/Excess Liability
Theft
Theft is the unlawful taking of property−money, securities or other property. Typically, the peril of
theft covers loss by burglary, robbery, and larceny.
Mysterious Disappearance
Mysterious disappearance is simply an unexplained loss of property. You are not sure how the loss
occurred and there is no evidence that it was actually stolen.
Certificate of Insurance
This is a document that serves to provide evidence that you have purchased certain types of
insurance coverages and limits. These may be required as proof of coverage in certain situations.
Exclusions
This is the part of the policy that states what perils are not covered. It eliminates coverage for certain
acts, property, types of damage or locations. There is no need to memorize them all; just become
familiar with the most common exclusions.
Conditions
TheConditions are provisions in the policy that qualifyorplace limitations on the insurer’s promise
topayorperform.Ifthepolicyconditionsarenotmet,theinsurercanrefusetopayaclaim.Common
conditionsinapolicyincludetherequirementtofileaproofoflosswiththecompany,howtoprotect
Propertyafteraloss,andhowtocancelthepolicy,
Endorsements
Most insurancepoliciescontaincertainexclusionsand/orlimitations.Forexample, if your
homeowners’ policy excludes yachts and you don’t own a yacht, you don’t fret the exclusion,
however if your policy limits jewelry to $1,500 for theft and you have $25,000 worth of jewelry, you
may be concerned.
To ensure coverage you have two options: (1) p u rch a se an e n d orse me n t t o yo u r
h o me o wn e rs’ co ve rag e or, (2) purcha s e a sepa rat e je welry poli cy to increase the
limits for your jewelry. So basically, an endorsement is a written modification that either adds or
deletes one or more provisions of the standard policy to serve particular needs.
