All Terms and Subject Flashcards
What is HO-5 Comprehensive Form
Open peril for structures and personal property
What is HO-3 Special Form
Open peril coverage for dwelling and other structures.
Named Peril coverage for personal property.
Open Peril Approach
Covers damages caused by all perils except those specifically excluded.
HO-3 and HO-5
HO-8 Modified Coverage Form
Named Peril Coverage Covers fewer perils Covers at ACV Considers fair market value of home Cheaper
HO-6 Unit Owners Form
“Condo Form”
Covers owner’s belongings
Covers all finished surfaces of the individual condominium unit.
HO-4 Contents Broad Form
“Renter’s Insurance”
Against all broad form perils
Only covers personal property.
HO-2 Broad Form
Named Peril Policy
Insures against all 17 broad form perils
Broad Form Endorsement
Vandalism or malicious mischief
Theft
Falling objects
Weight of ice, snow, or sleet
Damage from steam or hot water system
Accidental discharge or overflow of water or freezing
Artificially generated electrical current
Extended Coverage
Covered: Windstorm, hail, explosion, riot or civil commotion, vehicles, aircraft, smoke
Named-Peril Approach
Covers losses caused only by perils named in policy.
Commercial Lines
For possessions included for business or corporate use.
Personal Lines
For possessions included for personal use.
Monoline Policy
An insurance policy that covers only one risk or type of risks
Line of Coverage
A particular risk or groups of risks covered by an insurance policy.
Negotiation Techniques
Humor, questions, demonstration, pleasant surprise, diversion, silence, have a back-up offer ready, flexibility.
Prior to Negotiations
Complete investigations
Complete estimate
Know circumstances
Be clear about objectives
Understand possible obstacles
Know maximum about insurer willing to pay
Have an idea of minimum amount claimant will accept
Settlement Options
Full release Scheduled Release Partial Release Advanced Payment No Release Structured Settlement
Dispute Resolution
Arbitration Mediation Appraisal Declaratory Judgement Action Litigation
Recorded Statements must include
Introduction Statement (including convo recorded) State names and locations of everyone Age and address of interviewee
Body Where, when, how loss occurred Description of injuries Where started where headed What happened after Explain interruptions Stay objective Avoid excessive empathy Don't discuss insurance or settlements
Conclusion
Interviewee must verify he understood all questions. Interviewee states again convo is recorded.
Written statements should include
Introduction
Identify interviewer and interviewee
Date, time, and place of interview
Body
Where, when, and how loss occurred
Description of injuries
Conclusion
Interviewee verifies in own handwriting
Signature below on right side
Witness signs left
Claims Investigation
Liability Claims Critical Evidence Official Reports Other Evidence Written Statements Recorded Statements
Investigation: Property Claims
Inspect damages Take photos Interview claimant and witnesses Review police report Consult w/ professionals
Determine Insurer’s Liability
Was policy active at time of loss?
Does claimant have insurable interest?
Does policy cover type of damage or injury being claimed?
Is there a history of similar claims?
Will any other policies cover loss?
Has insured met all requirements of the contract?
Claims Process Steps
Acknowledge claim Establish commmunication Prepare necessary paperwork Determine insurer's liability Investigate the losses Determine time and cost of repairs Apply all policy coverages and provisions Negotiate Settlement Prepare final report.
General Damages
Compensatory damages are determined by the court and awarded for intangible, emotional losses that are not quantifiable.
Special Damages
Compensatory damages awarded for tangible losses with a quantifiable value.
Diminution of Value
Total amount of all damages resulting from an occurence.
Compensatory Damages
Money awarded for tangible and intangible economic loss.
2 types:
Special and General
Categories of Harm
Physical
Financial
Physical and Financial
Emotional and/or Reputational
Types of Liability Policy Limits
Single
Split
Aggregate
Dangerous Instrumentality Doctrine
Holds a party strictly liable for damages caused during inherently dangerous activity.
Strict Liability
Holds a party 100% liable for damages when the activity or instrument they are performing is inherently dangerous.
Res Ipsa Loquitor
Circumstances of the injury make it obvious that the defendant is negligent, no proof is needed.
Defense to Claim of Negligence
Assumption of Risks
Contributory Negligence
Comparative Negligence
Vicarious Liability
The transfer of negligence from one party to another
Liable
Obligated according to law, responsible
Coinsurance Penalty
Actual Insurance / Coinsurance Requirement = Penalty
Coinsurance
Encourages the insured to purchase an adequate amount of coverage, typically at least 80% of a property’s value.
Requires 80% of property’s value
Types of Deductibles
Fixed
Percentage
Franchise
Constructive Total Loss
When the cost of repairing damaged property is higher than the property’s current value.
Actual Total Loss
When property is completely destroyed and unrepairable
Total Loss
When insured property is damaged so badly that it is not worth repairing.
Partial Loss
When insured property is only partly damaged, and repair cost fall within the policy limit.
Valued Policy
Agreed Value or Guaranteed Value
Valuation method that assigns a set value to each insured item.
Value determined prior to insurance policy.
Obsolescence
When something is no longer used or wanted, despite being in good working order.
Characteristics of Replacement Cost
No depreciation
Based on replacement cost at the time of loss
Higher premiums
Broad Evidence Rule
Takes into consideration any evidence available to determine value
Accumulated Depreciation
Annual Depreciation x Age =
Annual Depreciation
Replacement Cost / Item’s Useful LIfe
Actual Cash Value
Valuation method that takes into account and item’s depreciation
Replacement Cost - Depreciation =
Methods of Valuation
Actual Cash Value
Replacement Cost
Stated Amount
Agreed Value
Subrogation
The transfer of rights that allows the insurer to recover its losses after it has indemnified a policyholder.
Insurance Adjuster
Represents insurer responsible for evaluating the circumstance of a claim.
Claims Process
Filing a claim Acknowledgement Investigation Evaluation Adjustment
Claim
A demand for payment in accordance with the terms of an insurance policy.
Indirect Loss
An economic loss that results from a direct loss.
Direct Loss
Physical harm to tangible property.
Damages are covered:
Proximate Clause
If caused by a covered peril.
If their proximate cause was a covered peril.
Original Occurrence
Causes damage that then leads to more damage.
The proximate cause of all resulting losses.
Proximate Cause
When there is an unbroken chain of events between an occurrence and a loss, then the occurrence is the proximate cause of the loss.
Legal Hazard
Increased chance of loss due to legal action.
Physical Hazard
Physical conditions that increases the chance of a loss.
Morale Hazard
Takes place when insured acts differently because of the comfort that insurance protection provides.
Moral Hazard
Results from policy holder’s deliberate decision.
Involves reckless behavior because of financial security offered by insurance.
“Behavioral Hazard”
Estoppel
Legal principle that prevents an insurer from denying coverage if the insured has reasonably come to believe that he has such coverage, based on insurer’s practices.
Concealment
Deliberately withholding relevant information.
Warranties
Promises or guarantees that certain conditions will be met.
Specific Limits
Limits that apply to one specific type of property.
Blanket Coverage
“Blankets” more than one property, type of property, or coverage under a single limit.
Binder
Temporary coverage for an insurance applicant until the policy is issued.
Risk Retention
Acknowledging the risks and preparing to handle unexpected losses that may occur.
Risk Management Techniques
Avoidance
Reduction
Transference
Retention
Coverage D
Loss of Use
For indirect losses that result from direct losses.
Coverages for Loss of Use
Additional Living Expenses (ALE)
Fair Rental Value (FRV)
Prohibited Use (a.k.a Civil Authority)
Additional Living Expenses
Pays increase in expenses needed for the insured to maintain normal standard of living after a covered loss.
Only covers costs that exceed the insured’s normal living expenses.
Fair Rental Value
Indemnifies insured for lost rent if a tenant has to move out due to covered damages.
Pays lost rental income until unit is habitable.
Only pays net loss: subtracts any expenses that do not continue while the tenant is gone.
Coverage does not include losses due to cancelled lease or agreement.
Only pays up until the unit is repaired, not until the insured finds a new tenant, if applicable.
Civil Authority Coverage
Pays for ALE and FRV when a civil authority prevents the insured from using the home.
Coverage D - Limits
Measured in time rather than dollars.
ALE paid until premises is repaired or replaced, or until the insured’s household can settle elsewhere.
FRV is paid for the shortest amount of time needed to restore the rented area to rentable condition.
Civil Authority pays until access to the home is restored up to a maximum of two weeks.
Allow ALE and FRV to extend beyond the policy expiration date if needed.
Loss of Use Deductibles
ALE and FRV subject to the policy deductible.
Civil Authority NOT subject to any deductible.
Debris Removal
Additional 5% of policy/coverage limit.
Reasonable Repairs
Coverage reimburses homeowner for expenses to protect property from further damage.
Loss Assessment
For condo owners under HO-6
Pays when condo association charges an assessment after a loss.
Ordinance or Law
Pays up to 10% of the Coverage A limit as additional insurance.
Building Additions and Alterations
For HO-4 and HO-6 only.
Covers structural alterations made at renter’s or unit owner’s own expense.
Exclusions to HO Property Coverage:
Ordinance or law, earth movement, water damage, off-premises power failure, neglect, war, nuclear hazard, intentional acts, mechanical breakdown.
Deductible
If there are two or more deductibles under a policy, the highest deductible amount applies.
Suit Against Us
Insured cannot take action against an insurer unless the insured has fully complied with all terms of the policy and starts the action within two years of the date of loss.
Our Option
Insurer can repair or replace any part of a damaged property with material or property of like kind and quantity, as long as they give written notice within 30 days of receiving proof of loss.
Loss Payment
Clarifies how, when, and to whom a claim will be paid.
No Benefit to Bailee
Policy will not pay a third party who has custody or control of the insured’s property, even if it is with the insured’s granted permission.
Recovered Property
After the claimant has been indemnified, if either party recovers any property involved in the claim, they must tell the other party about it.
Volcanic Eruption Period
One or more volcanic eruptions that occur within a 72-hour period are considered one volcanic eruption.
Section 1 Conditions
Interest, deductible, duties, concealment, loss settlement, pair or set, appraisal, other insurance, suit against us, our option, loss payment, abandonment, mortgage, no benefit to bailee, nuclear hazard, recovered property, volcano, policy period.
Section II Conditions
Limit of Liability, Severability, Duties After “Occurrence,” Duties of an Injured Person, Claim Payment, Suit Against Us, other insurance, policy period, concealment or fraud
Section I and II Conditions
Subrogation, cancellation, nonrenewal, liberalization, waiver or change, assignment, death
Insurance to Value Requirement
If home is insured at 80% of value or more:
Replacement Cost
If home is insured at less than 80%: policy pays the higher of:
ACV
or
Replacement Cost minus the insurance to value requirement.
(Insurance Limit / 80% of property value) x Covered Damage
Coverage A
Dwelling, attached structures, material located near it
Coverage B
Other detached structures
Coverage C
Personal Property (Contents)
Coverage D
Loss of Use
Liability Coverage can pay for:
Medical Bills Lost Wages Pain and Suffering Inconvenience Property Damage
Coverage E - Personal Liability
Pays for bodily injury and property damage to third party if insured is found negligent.
Applies even if the insured’s property causes a third party damages.
Never pays the insured.
$100.000 minimum coverage
Pays for insured’s legal defense fees
Insurer pays fees all the way to the end of a lawsuit, even if limit is exceeded.
Insurer has the right to settle damages with the claimant however it wants.
Coverage F - Medical Payments
No fault coverage.
For medical expenses incurred by third party due to an accident on insured’s premises.
Only necessary, reasonable medical charges.
$1,000 minimum limit
Section II - Additional Coverages
Property of Others
First Aid
Claims Expenses
Loss Assessment
Coverage E Exclusions:
Bodily injury and property damage to the insured
Bodily injury to persons covered by Workers Compensation Insurance
Damage to property rented by insured, occupied or used by insured, or held in insured’s custody and care
Liability for contracts
Coverage F Exclusions:
The insured person
Anyone who lives on residence premises regularly
Anyone eligible for Workers Comp or Disability for the occurrence.
Harm to a resident employee who is not in the course of employment, or is not at premises at time of occurrence.
Coverages E and F Exclusions:
Intentional or malicious harm to third party by insured
Harm from war
Disease transmitted from insured to third party
Sexual molestation or abuse by insured
Drug, use, sale, manufacture, possession
Exclusion relating to vehicle use:
Harm or damage caused by insured’s automobile use
Exceptions: vehicles for property maintenance, handicapped persons, or those in storage. Recreational vehicles are covered under certain conditions.
Aircraft
Watercraft
Excluded from HO Liability Coverage:
Third party losses due to insured’s business
Third party losses from insured’s failure to render business services
Liberalization
Applies to changes made up to 60 days before the policy inception
Payment of Claim - Coverage F - Medical Payments to Others
Coverage F is voluntary coverage: if a claim is paid, it is not admission of insurer’s liability.
Lawsuit Against Insurer:
All Section II terms must be met
No one can join insurer in suit against insured
No suit pertaining to Coverage E can be brought until obligation of insured is agreed to
Homeowners Endorsements (typically):
Sinkhole Collapse Sewer Backup Earthquake Hurricane (coverage can be removed) Ordinance or Law Personal Property Replacement Cost Inflation Guard Scheduled Personal Property
Changing Limits and Valuation
For increased premium, endorsements can add:
Replacement Cost valuation rather than ACV
Inflation Guard to automatically increase limits
Scheduled Personal Property, such as jewelry, furs, collectibles
Georgia Notice of Cancellation or Non-renewal
During the first 60 days of policy: at least 10 days prior to cancellation.
After 60days: at least 30 days prior to cancellation
For non-payment of premiums: at least 10 days prior to cancellation
Notice of Non-renewal: at least 30 days before policy expires
(Georgia) When cancelling or non-renewing:
Insurer must:
Deliver notice in person or by first class mail
Refund any unearned premiums
Provide information about the Georgia FAIR Plan
Georgia Cancellation / Non-renewal
Must be for specific, approved reasons:
Non-payment of premiums
Fraud or misrepresentation
Violation of the terms or conditions of the policy
A significant change in the level of risk which increases the likelihood of a loss
Georgia Personal Liability
Covers the insured for any liability to someone else on or off the premises
Georgia Premises Liability
Only covers the insured for liability to someone else on the property’s premises
Georgia Mobile Home Coverage
Can be covered by endorsement or stand-alone policy
Must be used primarily as a residence
Endorsement covers: mobile home and any additions, items permanently installed or attached to the home
Mobile home policy (MHP): HO-7
Georgia Watercraft Policy
in addition to HO policy:
Covers physical damage and liability exposure
Eligible property: owned watercraft, trailers, outboard motors, watercraft accessories
Covered craft must stay within the US, its territories, Puerto Rico, or Canada, and within 12 miles of the coast.
Personal use only
Excludes: air-propelled crafts, modified crafts, experimental crafts, hovercraft, submarines
Georgia Watercraft Policy Structure
Part A - Liability
Part B - Medical Payments
Part C - Uninsured Boaters
Part D - Coverage for damage to your watercraft
Additional coverages under Part D:
Salvage expense, towing and assistance expense, personal effects
Part E - Insured’s duties after an accident or loss
Part F - General provisions
Georgia Watercraft Policy Conditions
Lay-up Period : No coverage if the watercraft is used during the lay-up period specified in policy; unless: the insurer consents in writing, the insured uses it in an emergency and reports the situation within 10 days.
Reduces premium
Total Loss Settlement
In case of total loss, the insurer considers the property’s physical condition and depreciation to determine ACV
Insured pays the difference if the replacement property has a higher value than the original property.
When more than one policy can cover the insured’s liability, the watercraft policy:
pays amount equal to its share of the total amount of insurance available
pays on an excess if: the insured is operating a non-owned watercraft ,the watercraft is being transported on land
Dwelling POlicy
For persons not eligible for homeowners insurance
Corporation not eligible for homeowners insurance
Persons or corporations who do not need HO options
Property only, not liability (unless an endorsement is added)
Dwelling Policy Property Types
Single-family homes
1-4 unit dwellings (duplexes, four-plexes, etc.)
No more than 5 occupants
Mobile homes, if permanently installed
Incidental business risks, if insurer allows
DP-1 “Basic Form”
Named-peril coverage
Covers only fire, lightning, internal explosions
DP-2 “Broad Form”
Same perils as the Basic Form, plus many more
+Extended Form Perils
+Broad Form Perils
DP-3 “Special Form”
If a peril is not excluded, it is covered
Named-peril coverage to personal property.
Includes all the perils that the DP-2 “Broad Form” covers
DP-3 Exclusions
General exclusions
Settling, cracking, shrinking, bulging of patios, foundations, etc.
Damage from birds, insects, vermin, domestic animals
Wind or hail damage to antennas, lawns, trees
Ice or snow damage to awning, fences, outdoor structures, foundations
theft of anything not part of structure
Pollutant damage
Gradual or expected loss from wear and tear, marring, or deterioration
Mechanical breakdown
Inherent vice: a characteristic of an item that causes it to damage or destroy itself
smoke form agricultural or industrial operations
Dwelling Policy Sections
Coverage A B C D E Additional Coverages Exclusions Conditions Endorsements (If any)
Coverage A - Dwelling
Principal dwelling
Attached structures: garages, apartments, etc.
Service machinery: furnace, A/C compressor, etc.
Not included: construction tools, damage to land itself
Coverage B - Other Structures (Dwelling policy)
Limit: 10% of Coverage A limit (per claim)
Under DP-1, the 10% is included as part of Coverage A limit
In DP-2 and DP-3, the 10% is added to the Coverage A limit
Coverage D - Fair Rental Value - Dwelling
Pays rental income lost due to damage
Coverage E - Additional Living Expenses - Dwelling
For the increase in the insured’s living expenses when a covered peril makes the dwelling uninhabitable.
Automatically included in DP-2 and DP-3
Not included in DP-1
Personal Auto Policy (PAP)
A policy that combines liability insurance with other optional coverages.
PAP - What is covered?
Will indemnify for:
Property damage
bodily injury
legal defense
Will not pay punitive damages
Insurer must defend policyholder against liability claims, in or out of court
PAP Sections
Declarations Part A - Liability Part B - Medical Payments Part C - Uninsured Motorist Part D - Coverage for Damage to Auto Part E - Duties after an Accident or Loss Part F - General Provisions Endorsements
Auto Insurance Deductible
Fixed on per claim basis
Typically only applies to collision and comprehensive coverages
Bodily Injury (Auto Insurance)
Does not include mental distress or psychological trauma
Covered Auto
Car specified on declarations page
Newly acquired auto
Trailer the insured owns
A temporary substitute for car or trailer listed on dec page due to:
breakdown, repair, servicing, loss, destruction
Newly Acquired Auto
my not be covered under another insurance
may not be sued for the transport of goods and materials
automatically get the broadest coverage provided to any one car listed in policy
Adding Newly Acquired Autos
Reporting (according to the standard PAP)
insured has 14 days to report newly acquired auto
Most states and insurers actually require that your report any new auto within 10 - 30 days.
Comprehensive and Collision coverage:
Can be added within 4 days of getting new car
Automatically applies for first 4 days with $500 deductible
Auto Insurance Medical Payments
Pays for covered medical expenses for up to three years from the date of an accident.
Part A - Auto Liability
Establishes
Pay liability costs, up to policy limits
Covers injury or damage caused by covered auto or any car the insured drives with permission
Settle or defend liability lawsuits
Part A - Auto Liability Limits
One Person’s Injury/Max for all Injuries/Property Damage
Primary and Secondary Coverage
Coverage is “primary” if it involves a car the insured owns
“Secondary” if it involves a car the insured does not own.
Part A - Auto Supplementary Payments
Assist policyholder with a variety of accident-related expenses.
Not subject to liability limits
May include: Lost wages - up to 250/day Expenses due to requests for documents Bail bonds - up to 250 Accrued interest after a judgement Premiums on appeal bonds and attachment bonds
Part A - Auto Exclusions
Does not include:
intentional damage or injuries
property owned or being transported by the insured
damages incurred under the scope of employment; except domestic employees ineligible for worker’s comp.
properties rented to or used by insured
hired vehicles
company-owned business vehicles
damages or injuries caused while repairing, servicing, parking, or storing vehicles
vehicles taken without permission
damages or injuries arising from or related to a flying car
Auto No-Fault Insurance
Designed to indemnify the insured for his own injuries, regardless of fault.
Covers bodily injury only
Mandatory in some states
Part B - Medial Payments Exclusions
Accidents where an insured is occupying a vehicle with fewer than four wheels
Autos rented or leased for hire
Autos used without permission
Commercial vehicles covered by a Business Auto Policy
Vehicles located for use as a residence
Injuries sustained under scope of employment (if covered by worker’s comp)
Begin only after Personal Injury Protection (PIP) coverage is fully exhausted.
Part C - Uninsured/Underinsured Motorist Coverage
Covers bodily injuries caused by people with insufficient or no insurance
Coverage for physical damage can be added by endorsement
Uninsured Motorist (UM)
Driver w/no liability insurance
Driver whose insurer won’t pay
Hit-and-run driver
Driver who does not have enough insurance to pay for all damages
Exclusions to UM/UIM Coverage
Insured’s own auto that is not listed in the policy
Government vehicles
Off-road vehicles (but only while not on public roads)
Vehicles used as a premises
Covered autos that are rented or used for hire
Cars used without reasonable belief that permission was granted
Part D - Collision Coverage
Pays for damage to insured’s vehicle caused by collision or rollover
Applies even when insured is at-fault
Included “your covered auto” and any “non-owned” car the insured is driving.
(unless the insured borrows it frequently: then it is not covered)
Auto Comprehensive Coverag
Theft
hail, water, or flood
Windstorm, fire, vandalism, explosion, earthquake, riot/civil unrest, missiles or falling objects, contact with birds or animals
Part D - Auto Exclusions
Normal wear and tear
Freezing
Mechanical or electrical breakdown
Tire damage
Government or civil confiscation
Losses to non-owned autos taken without permission
Losses involving any racing or speed event or facility
Stereo equipment and electronics (unless permanently installed, then subject to limits)
Personal Injury Protection (PIP)
Covers injuries to the insured et al caused by an accident , no matter who was at fault.
Farm Insurance
Combines both homeowners coverage for personal property and commercial coverage for business assets.
Rancher needs all and additional protection for livestock.
Farm Insurance Policy
Property insurance for dwelling and contents
Scheduled and unscheduled farm personal property insurance
Mobile agricultural machinery and livestock coverage
Farm liability insurance
Eligibility for Farm Insurance
Farmers must live and conduct business on the insured property
Properties not eligible:
Farms that manufacture or process goods
Farms raising race or show animals
Some vacant farm properties
Farm Property Coverage Forms
Cover direct losses to physical property on the insured’s farm.
List the types of property covered
Use attached Causes of Loss Forms to list covered perils
Coverage A - Dwelling Farm
For main dwelling, attached structures, and necessary materials
Not covered: trees, shrubs, plants, or lawns (except with endorsement)
Coverage B - Other Private Detached Structures Farm
Covers private structures not attached to main dwelling
Coverage C - Household Personal Property Farm
Covers theft or damage of personal property
Includes personal property of family and guests staying on the premises
Has a limit of 50% of Coverage A
Sets special limits for some items.
Cover G - Commercial Coverage Farm
Barns, outbuildings, and other farm structures covers:
Barns, silos, and granaries
Pens and Fencing (except for fields and pastures)
Corrals and livestock chutes
Feeding structures
Outdoor masts, towers, and antennae
Farming storage structures
Construction or repair materials kept on or adjacent to these structures
Inland Marine Forms
Two commonly added to farm policies:
Mobile agricultural machinery and equipment form
Livestock Floater
Mobile Agricultural Machinery and Equipment Form
Covers agricultural machines and their tools and equipment
Allows higher limits of insurance than other forms
Scheduled or unscheduled coverage
Requires coinsurance for full coverage to apply
Not covered:
Equipment for sale or on consignment
Machinery used in logging or forestry
Livestock Floater
Covers horses, mules, cattle, swine, sheep, and goats.
Scheduled or unscheduled
Includes animal injured or killed while in transit
Provides named-peril coverage.
Requires coinsurance
Farm Property - Causes of Loss Basic Form
Fire, theft, lightning, aircraft, smoke, vehicles, wind, sinkhole collapse, hail, volcanic activity, explosions, loss of livestock by flood, riot, vandalism, loss of livestock by earthquake, civil commotion
Farm Property - Causes of Loss Broad Form
Basic form plus: Falling objects weight of ice, sleet, or snow glass breakage sudden and accidental tearing apart accidental discharge or leakage of water or steam sudden and accidental discharges of electricity collapse electrocution of covered livestock attack of covered livestock (excluding sheep) by wild animal drowning of covered livestock loading and unloading accidents accidental shooting of covered livestock
Farm Property - Causes of Loss Special Form
Exclusions:
Normal wear and tear, or purposeful neglect
rust, corrosion or decay
settling, cracking or shrinking of structures
infestation by rodents, vermin, or birds
mechanical breakdown
disappearance of farm property, unless stolen
voluntary, fraudulent parting of farm property
unauthorized instructions to transport property
vandalism or glass breakage, if vacant 30 days
dishonest or criminal acts by the insured
Farm Liability Insurance
protects the farmer against liability for harm caused to others
Coverage H - Farm LIability
Bodily injury and property damage liability
Covers damage or injury caused by normal business operations
Applies to damages that occur on insured premises
Coverage I - Farm Liability
Personal and advertising injury:
Pays for claims not involving property damage or personal injury
Includes malicious prosecution, wrongful entry or eviction, and libel or slander
Coverage J - Farm Liabilty
Medical payments coverage
Covers medical injuries suffered on farm property or because of farmer’s activities.
Includes medical, dental, hospital, and funeral costs
Farm product Liability
Covers injury or illness caused by eating the farmer’s products
Farm Pollution Liability
Covers pollution damage caused by farm property and operations.
Includes animal waste overflow, chemical spill
Does NOT include chemical over-spray from aircraft (separate endorsement required)
Custom Farming Liability
Covers farmers doing contract work.
Will not apply if a farmer makes more than 5,000 a year as a contractor.
Farm Employees Liability
Available via endorsement
Covers employee injuries not allowed under Workers’ Comp
Agritainment
Refers to farm-based entertainment
Excluded from farm form
Endorsements can add this coverage back in:
Agritainment - Property: adds coverage for damage to the farmer’s property caused by agritainment
Agritainment - Liability: covers the farmer’s liability for injuries that occur during agritainment activities on his farm.
Agricultural producer
A business that grows and sells crops for a profit
Crop Insurance
Insurance that covers losses to a crop’s profitability
Two Types:
Crop-yield insures against losses to actual crops
Crop-revenue insures against losses to crop value when prices change or the crop is damaged
Crop-Yield Insurance
Covers physical losses to the insured crop
2 common forms:
Crop-Hail Insurance
Multi-Peril Crop Insurance (MPCI)
Crop-Hail Insurance
Covers more perils than just hail.
Typically available through private insurers.
Not reinsured or government subsidized
Rated on an acreage basis
Coverage can be a percentage of expected crop value
Policies sometimes have a minimum amount of losses required before they will pay anything.
Crop-Hail Insurance
Perils Covered
Hail Fire Lightning Wind (by endorsement) Transit to storage after harvest Wildfire
Crop-Hail Insurance Exclusions:
Failure to harvest a mature crop
“Unit normal visible stand” (crop must be up to be covered)
Before effective hour (damage prior to start of policy)
Crops that can be recovered by harvesting
Crop not owned by the insured (shared drops)
Damage to trees, bushes, fruit, or nut crops
Damage to leaves or plants, unless affecting the actual crop
Multi-Peril Crop Insurance (MPCI)
Covered Perils: wind, drought, excessive moisture, frost, flood, lightning, tornado, hurricane, hail (by endorsement), volcano, earthquake, disease, insects and wildlife, insect infestation (if unavoidable), irrigation failure (if unavoidable), low/poor quality yields, prevented planting, late planting/replanting.
Government subsidizes it with the Federal Crop Insurance Corporation and regulates it through the U.S. Department of Agriculture
MPCI Rules for Policy Changes
Policy changes and increases only allowed before sales closing date
Requires planting to be done by set planting dates
No changes during growing season: must remain in effect for an entire crop year
After the first crop year, a farmer may change or cancel policy, but only before the cancellation date
MPCI Exclusions
Neglect or malfeasance
Failure to reseed
Failure to follow good farming practices
Federal Jurisdiction of Crop Insurance
All crop insurance is supervised by the National Crop Insurance Services
Risk Management Agency (RMA)
Promotes sound risk management practices
Subsidizes the premiums of crop growers for federal crop insurance policies
Sets critical production dates
Assigns commodity market prices to protect the producer’s revenue
Crop Policy Changes and Pilots
Pilot program lets the RMA test policies in small areas before releasing o the rest of the country
New policies are typically pilots for several years
MPCI: APH Policy
Actual Production History (APH): history of a farm’s crop yield over several years (requires at least 4 years of records)
Protects against low yield.
Guarantees the crop will produce a set percentage of its APH
Crops typically insured at 50% to 85% of the APH
Yield Guarantee:
Minimum amount of yield that the policy guarantees for the insured crop
Coverage kicks in if the crop produces less than this amount.
Yield Guarantee Formula:
APH Yield per Acre x Percentage of Coverage =
Percentage of Projected Price: Insured chooses a percentage of the expected price of insured crop
Expected price is determined by the RMA
How much the insurer pays regardless of how much the crop is actually worth at harvest time
How to calculate indemnity: (Yield Guarantee - Actual Production) x Percentage of crop price x Crop price (set by RMA) x Insured's share in the crop =Total Indemnity
Crop Revenue Insurance
Insurance that protects against loss of crop value
Includes losses from:
Decline in prices during the growing season
Low crop yields
A combination of both
Crop Revenue Insurance Guarantee
Sample Formula:
(corn yield guarantee) x (expected sell price at harvest-time)
Policy establishes a guaranteed dollar amount
Farmer gets indemnity if crop-yield and selling price combined are less than guarantee
MPCI Policies
APH Policy - Crop yield policy
Actual Revenue History - Pilot Policy, guarantees a percentage of average revenue not yield
covers lost revenue due to low yield, falling prices, bad quality, or any combination of these
Yield Protection
Revenue Protection: covers revenue losses due to low yield, low prices, or a combination of both.
Uses two prices: projected price to set coverage; harvest price to determine if indemnity is due
Calculated Revenue = actual production x harvest market price
Revenue Protection with Harvest Price Exclusion - Same as RP, but revenue guarantee does not go up if the harvest price goes up
Whole Farm Revenue Protection (WFRP) - Insures entire farm revenue, not individual crops.
Uses info from Schedule F tax forms and yearly reports to establish approved farm revenue
Farmer sets coverage at a percentage of this number (50% - 85%)
Policy pays indemnity if farm’s actual revenue falls below the insured revenue
Area Risk Protection Insurance (ARPI) - Area-based coverage. Triggered if entire county experience a loss.
Three option: area revenue protection, area revenue protection with harvest price exclusion, area yield protection
Dollar Plan - Covers loss in value caused by damaged crops. RMA sets maximum dollar amount of insurance per acre. Insured chooses a percentage.
Policy pays an indemnity if actual value per acre is lower than dollar amount of insurance
Margin Protection (MP) - Pilot policy that insures farmer’s operating margin.
Expected Margin = Expected Revenue - Expected Costs
Area based plan
Coverage set according to how much margin the country as a whole expects
Policy pays indemnity if the county’s margin is lower than expected.
Livestock Policies - Available for swine, cattle, lambs, and milk.
Protect against declining market prices
Uses prices from the Chicago Mercantile Exchange Group
Two Types: Livestock Risk Protection and Livestock Gross Margin
Rainfall Index (R) Policies - pay an indemnity if the area gets less rainfall than usual.
Vegetation Index (VI) Policies - pay an indemnity if there is less vegetation growth in the area than usual.
Pasture, Rangeland, Forage (PRF) - Currently pilot policy.
Covers acres used as pasture, rangeland, or forage.
Based on the area’s average precipitation
Triggered when there is less rainfall than usual.
Helps offset costs of buying feed and other risk management measures.
Small and Corse Grains Provisions - Cover both crop yield and reduction in crop value Grains must be grown on “insurable acreage”
Small grains: wheat, barley, oats, flax, rye, buckwheat
Coarse grains: corn, grain, sorghum, soybeans
Catastrophic Risk Protection Endorsement (CAT Coverage) - covers losses exceeding 50%
Pays 55% of the price of the crop (according to RMA)
Premiums paid by government
Administrative fee paid by farmer for insured crops
High-Risk Alternate Endorsement (HR-ACE) - For farmers with some crops on high-risk land and some crops on non-high-risk land
Adds coverage for high-risk land that is lower than coverage for the rest of his crops.
Supplemental Coverage Option (SCO) - Area-based coverage that can help pay deductibles on underlying policy.
Follows coverage of underlying policy, except in what triggers coverage:
triggered by county-wide losses; premiums are 65% subsidized
Small/Course Grains - Covered Perils
Hail Drought Excessive Moisture Fire Wildlife Failure of irrigation (if unavoidable) Insect damage and plant diseases (assuming good farming practices)
Small/Course Grains - Insurance Period
The period between when the crop is planted to when it’s harvested.
Other events that can set end of insurance period: end of crop's season complete destruction of crop final adjustment of a claim abandonment of the crop
Crop Policy Provisions - Duties of Insured
File a claim within 72 hours
Protect crops from further damage
Leave samples of the damaged crop intact in each field, so adjuster can inspect item
Acreage Reporting:
every crop year, farmer must submit acreage report, due by the acreage reporting date.
Insured must:
plant correctly
maintain the crop correctly
Use required fertilizers, pesticides, soil additives, etc. (does not apply to organic farming)
Crop Policy Provisions - Site Assessment
During claims site assessment, the adjuster records:
location: latitude and longitude
plant samples
soil samples
normal yields for the region
comparison with similar crops in the same area
Crop Policy Provisions - Loss Payments
Usually made at actual cash value
Can be made in multiple payments
Crop Policy Provisions - Cancellation/Nonrenewal
Insurance applications must be signed before the closing date specified by the NCIS.
Policies may not be canceled during the first crop year.
Insurance coverage:
continuous
cancellation only allowed in writing and before the cancellation date specified in the policy
Crop Policy - Important Dates
Sales closing Production Reporting Final Planting Acreage Reporting Notice of Crop Damage Payment Due Cancellation Debt Termination End of Insurance
Crop Insurance
Usually does not have deductibles
Crop insurance uses thresholds instead of deductibles
threshold is a percentage of insured crops
Losses above threshold have full policy coverage.
Crop Insurance Notes
Forms are “non-standard
Coverage usually limited to the growing season
Annual policy form is the most common.
Also available are three-season, five-season, and continuous-until-cancelled forms
Commercial Property Insurance
Covers direct and indirect losses related to business property
Does not include farms and 1-4 family dwellings
Insures on a ACV basis
Replacement Cost is available as an endorsement
Commercial Property Policy Sections
- Declarations Page
- Conditions
- Coverage Forms
- Causes of Loss Forms
Commercial Policy Conditions
Cancellation/Non-Renewal Changes to Policy Concealment, Misrepresentation, and Fraud Control of Property (breach in policy conditions only affects the property where the actual breach occurred) Other Insurance (usually the two policies will split the loss based on how much coverage each policy provides.) Liberalization Legal Action Against Insurer Subrogation No Benefit to Bailee Vacancy
Commercial Property Coverage Forms
Building and Personal Property Coverage Business Income Coverage Contingent Business Interruption Coverage Builders Risk Coverage Condominium Coverage Leasehold Interest Coverage Legal Liability Coverage Difference in Conditions Coverage Other Coverage Forms and Endorsements
Building and Personal Property Forms - Commercial
The basis for all commercial property policies
Coverage A - Buildings and Structures
Coverage B - Business Personal Property
Coverage C - Personal Property of Others
Commercial Coverage A
Covers building and structures listed on the “Dec Page” as well as:
additions, additions under construction, any construction equipment within 100ft of insured property, machinery and equipment inside the building, maintenance property.
Commercial Coverage B
Covers property of the business that is not affixed to the structure, such as:
Business owned personal property used for business purposes
Labor, services, and material furnished on the personal property of others
Inventory or products held for sale
Leased business personal property
Property within 100ft of the business premises
Commercial Coverage C
Applies to property owned by another party when it is in the care of the insured business.
Commonly $2,500 of coverage
Applies to locations listed on the “Dec Page”
Common Additional Commercial Coverages:
Debris Removal Pollution Clean-up and Removal Preservation of Property Fire Department Service Charge Increased Construction Costs Electronic Data
Commercial Debris Removal
Limit: 25% of total claim for property damage
Additional $25,000 of coverage is available if:
property damage plus debris removal exceeds policy limit
Debris removal expense exceeds 25% limit
Commercial Pollution Clean-Up and Removal
Pays up to $10,000 for pollution damages caused by a covered peril.
Insured must report the loss within 180 days
Commercial Preservation of Property (Removal Coverage)
Applies when the insured removes property to protect it from a covered peril.
Property is covered for any cause of loss during removal and storage at another location.
Coverage lasts up to 30 days.
Commercial Construction Costs
Applies when insured has to pay extra in order to conform to new building ordinances when repairing or replacing a covered loss
Limit is the small of two amounts:
$10,000
5% of Coverage A limit
Only applies to building insured on RC basis
Commercial Electronic Data
Covers costs of replacing or restoring electronic data lost or damaged by a covered loss
Includes losses caused by viruses or malicious code, unless introduced by employees of the insured
Limit: $2,500 per year
Limit does not apply to data used to operate:
elevator, lighting, heating, ventilation, air conditioning, security system
Commercial Coverage Extensions:
Only for insureds who maintain the coinsurance requirement of 80% of the property’s value
Not subject to policy limits
Commercial Coverage Extensions
Newly Acquired Property
includes new buildings under construction on insured premises and newly acquired properties off premises
30 days of coverage
$250,000 coverage for building and structures
Property Off-Premises:
$10,000 for covered property that is temporarily located off the premises
Excludes property off-premises if it’s being sold
Personal Effects and Property of Others:
up to $2,500 in coverage for damage or destruction of personal belongings
loss must occur on the insured premises
Valuable Papers and Records:
up to $2,500 towards the recovery or replacement of valuable papers and computer records
does not cover money and securities
Outdoor Property:
covers damage to television and radio antennae, detached signs, and trees, plants or shrubs
limit: $1,000
limit for trees, plants, and shrubs: $250 per unit
covered perils: fire, lightning, explosion, riot, civil commotion, and damage by aircraft
Non-Owned Detached Trailers:
covers damage to non-owned trailers being used on the premises
limit: $500
only applies if trailer is not attached to a vehicle
only if insured is contractually responsible for damages to the non-owned trailers
Commercial - Business and Personal Property Conditions
Abandonment Appraisal Duties in the Event of a Loss Loss Payment Recovered Property Vacancy Valuation Coinsurance Mortgagee Clause
Commercial Property: Optional Coverages and Endorsement
Agreed Value Coverage
Inflation Guard
Replacement Cost
Value Reporting
Commercial Optional Coverage - Agreed Value Coverage Option
Policyholder and insurer agree on a specific value for the property before the policy is written
Coinsurance requirement is waived
Often applies to rare property or high-value collector items
Commercial Optional Coverages - Inflation Guard
Policyholder can increase the limit of insurance by a specified percentage periodically throughout the policy term
Keeps the amount of coverage consistent with rising prices
Commercial Optional Coverages - Replacement Cost
Changes loss settlement terms from ACV to RC
Requires coinsurance minimum
Does not apply to property of others on the insured premises
When covered damages occur:
pays ACV up front
pays the remaining difference between ACV and RC once property has been repaired.
Commercial Optional Coverages - Value Reporting
For businesses whose property values fluctuate or who buy and sell multiple properties throughout the year:
Insured purchases a limit of insurance to cover the highest property value expected that year
Every month, insured submits “value report” of the actual property value
If insured fails to submit a report, insurer uses the numbers from the previous month
There is a percentage penalty for under-reporting the value of a property
Commercial Optional Coverages - Other Coverage Forms
Business Income Contingent Business Interruption Builders Risk Condominium Leasehold Interest Legal Liability Difference in Conditions
Commercial Business Income Coverage Form
“Business Interruption Form”
Provides protection for loss of income due to a covered loss
Period of Restoration:
time frame within which business income coverage indemnifies the policyholder for loss of income
begins exactly 72 hours after damage occurs
ends the date that either the damaged property is restored or that business resumes at a new location
What does it pay for?
Loss of net income on a Profit and Loss statement
Any continuing operating expense incurred during the period of restoration (rent, salaries, payments to the bank, utilities, taxes, administrative costs)
Business Income Coverage Form
provides protection for loss of income due to a covered loss
Period of Restoration: time frame within which Business Income Coverage indemnifies the policyholder for loss of income.
begins exactly 72 hours after damage occurs
Pays for loss of net income on a profit and loss statement
any continuing operating expenses incurred during the period of restoration
Business Income: Profit and Loss Statement
Determines loss of Net income
Relies on: total revenue, cost of goods sold, operating expenses
Equation: Total Revenue - Cost of Goods Sold = Gross Income
Gross Income - Operating Expenses: Net Income from Operations
Business Income Coverage Exclusion
Excludes Cost of Goods Sold
Means any expenses that go into making or selling a product, including:
inventory, labor, material, supervision
Business Income: Extra Expense Coverage
Covers the costs of getting a business running again after a covered loss.
Must be:
necessary
incurred during the period of restoration
type of expense that would not have been incurred had there been no loss to the covered property.
Extra Expenses: Two Categories
“Ture Extra Expenses”: necessary to avoid or minimize the halt in business operations
“Expediting Expenses”: the cost of repairing or replacing property in order to get the business going again.
Business Income: Extra Expense Coverage
Period of Restoration:
Begins immediately after damage occurs (no 72 hour waiting period before coverage begins)
Ends when damaged property is repaired or replaced
Period of Restoration never subject to the policy period.
Business Income Coverage with Extra Expense
Loss of business income
Costs associated with getting the business running again
Business Income Coverage without Extra Expenses
Loss of business income
“expenses to reduce loss” - but only to the extent that the extra expenses reduce the original loss
Extra Expense Coverage without Business Income Coverage
For companies that must continue business regardless of loss of income, such as: banks, hospitals, newspapers, utilities
“Limit of Loss Payment”: limits the total amount of recovery available to the insured based on 30-day increments
Business Income and Extra Expense: Additional Coverages (Order of Civil Authority)
Order of CIvil Authority
Provides coverage when a civil authority restricts a business from being occupied due to a pending covered loss.
Coverage lasts for up to 4 consecutive weeks
72-hour window before benefits apply
Business Income: Coinsurance
Businesses have the option of establishing a level of coinsurance at 50, 60, 70, 80, 90, 100, or even 125% of the business’s normal income
Business Income: Maximum Period of Indemnity
Takes away coinsurance requirement and the Period of Restoration lasts up to 120 days after the 72hr window. If the policy maxes out, coverage will end before 120 days.
Business Income: Monthly LImit of Indemnity
Removes coinsurance requirement, but the policyholder parcels his stated limit of coverage. into a fractional maximum available each month (i.e. 1/3, 1/4, 1/6)
Business Income: Agreed Value
Waives coinsurance requirement
Insured submits two reports:
Financial data from the previous year
Financial data for the upcoming year
Insured and insurer set an Agreed Value of coverage.
Losses are paid in full
Contingent Business Interruption Form
Covers a business for loss of income caused by damages to a key supplier or key customer.
Indemnifies the dependent company, not the key supplier
Has nothing to do with the supplier’s insurance
Builders Risk Coverage FOrm
Provides protection for buildings, materials, and equipment under construction or renovation
100% coinsurance is required on the building
Builders Risk Extensions
Debris Removal Fire Department Service Charges Pollutant Cleanup and Removal Preservation of Property Scaffolding, Construction Forms, and Temporary Structures (Only while property is on the insured premises) Property at other locations (10,000 limit) Property in Transit (25,000 limit) Sewage Backup (5,000)
Condominium Coverage Form
Condo Buildings and complexes
Common areas of the condo building
Infrastructure essential to function of the condo as a whole (piping, ductwork, electrical and wiring units, etc)
Business personal property used y the condo as a whole
Leasehold Interest Coverage Form
Favorable Lease
A lease that is acquired below market value
Leasehold Interest Coverage Form
Pays for the difference in cost between the old rental and the new
Legal Liability Coverage Form
Property damage to personal property of others caused by negligence
Expenses for legal defense when claims are brought against the business
Theft of other’s personal property
Differences in Conditions “All-Risks” Form
Bridge coverage gaps left by typical policies
Only covers perils that could lead to catastrophic losses
Excludes risks that are already covered under a different policy
Does not require coinsurance
Usually requires a very large deductible
Can be purchased as a separate policy or added as an endorsement to an existing policy.
Commercial Property Endorsements
Earthquake and Volcanic Eruption
(Percentage deductible at limit of liability)
(Single Occurrence = Within a single 168hr or 1 week period)
(Excludes tidal waves and tsunamis)
Ordinance
Peek Season (Temporarily increases coverage limits at specified intervals over the course of the year in order to account for increased inventories)
Protective Safeguard
(Insurer offers lower premiums if the insured agrees to use certain safety precautions)
Spoilage
(Adds perishable stock to covered property, so if it spoils, the insurer will purchase the stock based on the following formula:)
(indemnification = market selling price - any discounts the insured would expect)
Causes of Loss Forms: Exclusions
Loss due to enforcement of building ordinances
Earthquakes or Land Movements
Seizure or destruction by government authority
Nuclear reaction, radiation
Loss resulting from utility service failure
War
Flood, rising water, mudslides, and the backup of water through sewage pipes
Damages to wiring or devices caused by artificially generated electrical currents
Explosion of boilers, steamers, pipes, and engines
Commercial Basic Cause of Loss Form
Covers only named perils:
fire, lightning, explosions, windstorm or hail damage, smoke damage, aircraft or vehicles, riot and civil commotion, vandalism and malicious mischief, sprinkler leakage, volcanic events and shock waves, sinkhole collapse.
Commercial Basic Cause of Loss Form
Covers only named perils:
fire, lightning, explosions, windstorm or hail damage, smoke damage, aircraft or vehicles, riot and civil commotion, vandalism and malicious mischief, sprinkler leakage, volcanic events and shock waves, sinkhole collapse.
Commercial Broad Cause of Loss Form
Named peril policy, covers Basic Form perils, plus:
breakage of glass, falling objects, weight of ice snow and skeet, water damage from sources other than sprinkler,
additional coverage for collapse, if cause by: any covered perils, hidden decay, hidden insect or vermin damage, weight of people personal property or rain collecting on rooftop, use of defective materials or construction methods.
Commercial Special Cause of Loss Form
Open peril policy that covers all known perils except for those listed in the exclusions sections, such as:
Commercial Property Insurance
Provides coverage against direct and indirect losses resulting from damage to business property.
Commercial Property Policy Sectins
- Declarations Page
- Conditions
- Coverage Forms
- Causes of Loss
Commercial Property Coverage Forms Available:
Building and Personal Property Coverage Form
Business Income Coverage Form
Contingent Business Interruption Coverage Form
Builders Risk Coverage Form
Condominium Coverage Form
Leasehold Interest Coverage Form
Legal Liability Coverage Form
Differences in Conditions Coverage Form
Other Coverage Forms and Popular Endorsements
Building and Personal Property Coverage Form (Commercial)
Coverage A - Buildings and Structures
Coverage B - Business Personal Property
Coverage C - Personal Property of Others
Commercial General Liability (CGL) Insurance
Protects a business from a wide variety of financial hazards associated with normal business operations
CGL Covers
Bodily injury/property damage
Damage to a premises
Products and completed operations
Acts of others
Contracted responsibilities
Personal and advertising injury
2 Different Forms of CGL
Occurrence
Claims-made
Occurrence Form (CGL)
Coverage triggered by occurrence or accident
Claims-Made (CGL)
Coverage triggered by claim
Occurrence Form (CGL)
Triggered by when the actual injury or damage occurred.
Covers events that happened during policy period, no matter when the claim is made.
Claims-Made Form (CGL)
Triggered when the claim is filed.
Covers any claim filed during the policy period, no matter when the damage or injury occurred.
Insurers can price premiums to reflect current risks of lawsuit awards.
Insurers will specify a retroactive date which says how far back an occurrence will be covered.
Claims-Made and Reported: insured must report claim or possibility of a claim within the policy period.
Pure Claims-Made: Insured must inform insurer of a claim as quickly as possible (not necessarily within the policy period.)
Pros and Cons of Each Coverage Form:
Occurrence Form: lower risk for businesses, higher risk for insurer, higher premiums
Claims-Made Form: higher risk for businesses, lower risk for insurer
Tail Coverage Overview (Claims-Made)
Claims-made coverage can be extended by tails, or tail cover.
Occurrence coverage last forever for damage or injury during the policy period. Tails last only for a relatively short period.
Tails require premiums from the insured as long as the policy is extended.
2 Kinds of Tails: basic extended and supplemental extended
Basic Extended Tail - Claims-Made
Automatically applies to every canceled or expired claims-made policy. Extends coverage for occurrences 60 days past policy period.
Extends window for making a claim for 5 years past occurrence.
Supplemental Extended - Claims-Made
Extends coverage for occurrences 60 days past policy period.
Extends window for making a claim forever
Insured must request coverage and pay the premium within 60 days of the policy period.
CGL Coverage Forms:
Coverage A: Bodily Injury and Property Damage, Premises and Operations Liability, Products and Completed Operations Liability, Contractual Liability for Insured Contracts
Coverage B: Personal and Advertising Injury Liability
Coverage C: Medical Payments to Others
Damage to Premises Rented by You
CGL Coverage A
Protects the insured from liability for bodily injury and property damage.
Covers 3 Kinds of Hazards:
Premises and Operations
Products and Completed Operations
Contractual Liability for Insured Contracts
CGL Premises Liability
Covers bodily injury and property damage on premises owned, rented, or leased by insured including the ways immediately adjoining.
CGL Operations Liability
Covers bodily injury and property damage when working outside premises
CGL Product Liability
Insured’s liability for bodily injury and property damage caused by the use of products made or sold by insured.
3 Types of Product Liability Claim:
- Strict Liability: any defect in safety is manufacturer’s fault.
- Negligence: manufacturer did not exercise a reasonable amount of caution.
- Breach of Warranty: Insured failed to notify public of a known safety hazard, or failed to deliver the quality of item advertised.
CGL Completed Operations Liability
The insured’s liability for work completed away from the insured premises.
Work is “completed” the moment that:
the insured has fulfilled the terms of an agreement, or
any portion of the work is used for its intended purpose.
(whichever is earlier)
CGL Insured Contracts
Lease of premises
Sidetrack agreements
An obligation to indemnify a municipality
Elevator maintenance contracts
Any contract in which the policyholder assumes the tort liability of another party for bodily injury or property damage
CGL Libel and Slander (Personal and Advertising Injury)
Coverage protects insured against claims of personal injury.
Libel: written words that falsely damage another’s reputation.
Slander: spoken words that falsely damage another’s reputation.
CGL False Arrest (Personal and Advertising Injury)
False arrest, detention, or imprisonment
Malicious prosecution
CGL Wrongful Entry or Eviction (Personal and Advertising Injury)
Wrongful Entry: when a landlord uses improper means to repossess real estate or rented space. May also involve invasion of privacy.
Wrongful Eviction: when a landlord or shop-owner evicts a person from public space without cause.
CGL Advertising Injury (Personal and Advertising Injury)
protects insured against claims of advertising injury.
Advertising Injury means a third party suffered damages as the result of the insured party advertising their good and/or services in a public arena.
May take the form of: libel and slander, copyright infringement, stealing and advertising ideas.
Supplementary Payments
Supplementary Payments - Coverages A and B
Assist policyholder with a variety of claim or lawsuit expenses.
Not subject to liability limits.
Covers litigation expenses for a third party named in the same suit as the insured. (insured must have assumed liability for the other party through an insured contract; liability is covered under the policy; there is no conflict of interest; third party must agree in writing to cooperate with the insurer)
May include:
lost wages; expenses due to insurer’s request such as retrieving official reports or record, copy fees; bail bonds (up to $250); accrued interest after a judgement is entered; premiums on appeal bonds and attachment bonds
CGL Coverage C: Medical Payments
No-fault coverage that pays: medical, dental, hospital, nursing, funeral costs
Resulting form an occurrence on insured’s premises or form its business operation.
CGL Damage to Premises Rented by You
Coverage A usually excludes loaned or rented properties.
Damage to Premises Rented by You lifts this exclusion (adds coverage)
Applies to properties that the insured rents for 7 or fewer consecutive days.
CGL Conditions Page
Contains provisions the policyholder must meet as a condition of coverage.
Highlights the rights and duties of insured and insurer.
States the rights of each regarding cancellation, changes, lawsuits, etc.
CGL Conditions
Policies cover occurrences in US, Puerto Rico, and Canada.
Products Liability is worldwide, as long as the product was made or sold in US, Puerto Rico, or Canada.
Limits of CGL Insurance - Aggregate Limits
Maximum amount a policy will pay for certain specified types of claims over the course of the policy period.
Products-Completed Operations Aggregate: maximum amount the policy will pay to satisfy claims regarding Products and Completed operations only.
General Aggregate: maximum amount the policy will pay out over the policy period for Coverage A, B, and C except for Products and Completed Operation.
Products and Completed Operations has separate aggregate limit from all other coverages.
Limit of CGL Insurance - General Aggregate Limit
Payments under these coverages are all under one aggregate:
Coverage A: Premises and Operations Liability only
Coverage B: Personal and Advertising Injury Liability
Coverage C: Medical Payments to Others
Damage to Premises Rented by You
Limits of CGL - Per Occurrence Limit
How much an insurer will pay for any one occurrence.
Always subject to aggregate limits
Limits of CGL - Per Occurrence Sub-Limits
General Aggregate Limit
Per Occurrence Limit
Personal and Advertising Injury Limit: the maximum amount the insurer will pay for personal and advertising injury to any one person or organization.
Medical Payments Limit: maximum amount the insurer will pay for bodily injury sustained by any one person.
Damages to Premises Rented by You
Limits of CGL - Legal Defense
No limit on Legal Defense
CGL covers all legal expenses, without limit, up until judgement or settlement.
CGL Endorsement: Owners and Contractors Protective Liability
Responds to all liability claims filed against the hiring business arising out of work performed by the independent contractor.
protects the hiring business from losses due to contractor’s work.
Vicarious Liability: a company can be held responsible for the actions of a hired contractor.
Purchased by the contractor, but the hiring business is the insured.
Specific to a single project and place.
Expires when project is completed.
CGL Laser Beam Endorsement
Allows an insurer to exclude specific types of accidents, products, work, or locations from CGL coverage.
CGL Liquor Liability Coverage Form (or Endorsement)
Alcohol-related occurrences are excluded in regular CGL policy.
And added liquor liability coverage endorsement fills this gap.
Coverage includes cases involving over-service or illegal service to minors.
CGL Pollution Liability Coverage
Covers bodily injury or property damage caused by pollutants released into air, water, or land.
Covers pollution normally excluded by CGL.
“Pollution Incidents” include release of pollutants at insured site, off-site due to pollutant emanating from site, during transportation, at non-owned disposal sites.
Pollution Liability Coverage Broad Form: Bodily Injury and Property Damage and Clean-up Costs
Pollution Liability Limited Coverage Form: Bodily injury and property damage only
Professional Liability Coverage
Covers lawsuit and settlement costs when a claim is made because of alleged wrongful acts.
Professional Liability Coverage: Malpractice Insurance
Medical Professional Liability
Lawyers’ Professional Liability
Both covers claims of act or omission if professional service differs from accepted standard.
Professional Liability Coverage: Errors and Omissions (E & O)
Protects the insured form consequences of failure to perform.
Excludes coverage for libel, slander, punitive damages.
Protects persons and organizations
Exclusions: Bodily injury, property damage, fraudulent or criminal acts
Professional Liability Coverage: Claims Made Policy
covers claims made during policy period
does not cover a claim filed after policy period expires.
can apply retroactive dates to policy period.
Professional Liability Coverage: Occurrence Policy
covers liability for occurrences happening during policy period.
covers after term expires if occurrence was during policy period.
Professional Liability Coverage: Unique Provision “Consent to Settle”
clause protects the insurer if the insured does not approve a recommended settlement.
insurer pays expenses up to the date the insured refuses, but is not required to continue lawsuit expenses afterward.
Defense cost not included in policy limits
Professional Liability Coverage: Other Specialty Liability Coverages
Directors and Officers; Fiduciary; Employment Practices; Cyber; Liquor
Professional Liability Coverage: Directors and Officers Liability
Available to: private companies, educational institutions, non-profit organizations; corporate officials
Pays for: legal defense, damages awarded in lawsuits
Excludes: criminal/fraudulent acts
Professional Liability Coverage: Fiduciary Liability
protects fiduciary from: mistakes in handling funds, omissions in communicating plan information to employees
Professional Liability Coverage: Employment Practices Liability Insurance (EPLI)
Provides legal defense for businesses and pays for damages awarded in court when employees claim violations
Professional Liability Coverage: Cyber and Privacy Insurance
Coverage for losses in the event of a data breach.
Can be written to include costs related to privacy breach
Professional Liability Coverage: Liquor Liability
covers cost of alcohol-related: bodily injury and property damage.
Includes protection for losses related to serving minors.
Surety Bonds
Not insurance
May be sold by insurance companies
Suretyship: An arrangement between three parties, in which one party promises to perform for another party, and a third party guarantees that they will fulfill that promise.
Principle: agrees to fulfill on obligation
Obligee: party to whom the principal owes the obligation.
Surety (Guarantor): guarantees to pay obligee if principal defaults.
Surety Bond: Indemnitor
Fourth party to a surety bond who agrees to reimburse the surety for losses sustained if the principal defaults.
Terms related to Surety Bonds
Penal Sum: specified amount that a surety might have to pay if the principal fails to perform as promised.
Collateral: surety usually requires, which is a principal’s cash or valuable property kept in reserve by the surety. In a case of default it is forfeit to the surety.
Joint Control: The surety may reserve the right to regularly audit all disbursements, or even co-manage actual work.
Types of Surety Bonds
Contract Bonds
Judicial Bonds:
fiduciary bond: guarantees work of someone appointed to take financial responsibility for others
court bond: often required of litigants in civil suits to protect opposing parties
bail bond: court bond that guarantees appearance of a defendant in court
Public Official Bonds:
protects the public form a public official’s lack of performance
Customs Bond:
guarantees that an importer/exporter will pay all customs taxes and fees, and obey all regulations and laws.
Financial Guarantee Bond:
guarantees that principal and interest will be paid per the terms of the contract or promissory note.
Lost Instrument Bond:
guarantees that an insurer of a copy of a lost financial instrument will not suffer and economic loss if the owner of the instrument later finds and transacts the original.
Reclamation Bond:
Guarantees the health, safety, and welfare of the public during and after mining operations, and guarantees land will be restored to original condition.
Self-Insurance Worker’s Compensation Bond:
Pays workers’ comp claims filed by the self-insurer’s employees when the self-insurer itself cannot meet this obligation
Faithful Performance of Duty Bond:
Guarantees a principal will faithfully perform his duties as prescribed by law or the bylaws of the obligee
Fidelity Bonds
Guarantee the principal (employee) will not do something
Principal = employee Obligee = employer Surety = insurer
Cover all dishonest acts committed by a covered employee, including: larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, willful misapplication
Scheduled or blanket basis
Public Employee Dishonest Coverage
covers losses resulting from government employee dishonesty.
Coverage Form O = per occurrence
Coverage Form P = per employee
Commercial Package Policies
Benefits to policyholders: simplicity (one policy for all needs, interline endorsements); elimination of gaps in coverage, reduced premiums
Benefits to Insurers: less diverse selection of lines, customer loyalty strengthened
Commercial Package: Representative Lines of Coverage
Commercial Property Commercial General Liability Employment Related Liability Professional Liability Commercial Crime and Employee Dishonesty Commercial Inland marine Business Auto Boiler and Machinery Equipment Breakdown
Business Owner Package Policy (BOP)
Bundles property, liability, and income protection in a single package
Insurance to value requirement, works in the same way as coinsurance.
Policy pays RC if coverage is at least 80% of property’s value
If coverage is less than 80% of property's value policy pays the higher of: ACV or RCV x (Amount of Insurance/80% Property Value
Features of Typical BOP
12 months business income coverage
12 months extra expense coverage
inflation guard for buildings and structures
liability protection for lawsuits from accidents or products
slander and copyright protection
deductibles on most claims
RC valuation (ACV endorsement option)
Open-peril coverage (named-peril endorsement option)
Not typically covered: coverage for company owned vehicles; professional liability coverage; malpractice coverage
BOP Eligibility
wholesaler and Distributors: Retail sales account for 25% or less of gross income; 25% or less of floor space is available to the general public
Processing and Servicing: Annual sales under $3 million; no more than 25% of sales occur off-premises
Limited Cooking and Fast Food Restaurants: 7,500 sf or fewer; max seating: limited cooking - 75, fast food - 150; beer and wine sales no more than 25% annual income; no liquor sales; maintenance of fire extinguishing equipment.
Convenience Store: Gasoline sales less than 75% annual income; no auto repair or car wash; no propane or kerosene sales
Self Storage Facilities: maximum of two stories (floor space not limited); no storage of pollutants, waste, chemicals, or industrial materials.
Specialty Contractors: annual payroll no more than $300,000; annual sales no more than $3 million; subcontracted work no more than 10% total sales; no heavy construction; no working on buildings over 3 stories
Motels: maximum of 3 floors; no bars or cocktail lounges; not seasonal; not closed more than 30 days per year
Apartment Building and Condominium: occupancy must be residential or office; incidental occupancy no more than 25,000 sf; incidental occupancy by contractors not exceeding 7,500 sf or 15%;
Office Buildings: less than 100,000 sf; no higher than 6 stories; tenants occupy no more 25,000 sf; contractors occupy no more than 7,500 sf or 15% of total sf
Businesses CANNOT Qualify for a BOP
car dealerships, service stations, repair shops: parking lots, garages; amusement parks; bars, nightclubs, and the like; banks and similar financial institutions; manufacturing, processing, servicing businesses (except those eligible); condominium associations (except residential and office)
National Flood Insurance Program (NFIP) Dwelling Form
Coverage A:
1 to 4 family dwellings
Attached additions
Coverage B:
Personal Property
Coverage C:
Debris Removal
Loss Avoidance Measures
Property Removed to Safety
Coverage D:
Increased Cost of Compliance
Three Loss Settlement Options
Actual Cash Value:
2, 3, or 4 family dwellings; units NOT used solely as single-family dwellings; detached garages; personal property; appliances, carpets, and carpet pads; outdoor awnings, outdoor antennas or aerials, and other outdoor equipment attached to dwelling; abandoned property that, after a loss, remains as debris at the described location.
Replacement Cost:
single family dwelling; owner occupied; insured’s principal residence; insured at 80% of replacement value
Special Loss Settlement:
for mobile homes or travel trailer: at least 16 feet wide; at least 600 sq. feet inside; insured’s principal residence
policy pays the lowest of two amounts: replacement cost of dwelling (or 1.5 x ACV0; coverage limit
Mechanical Breakdown: Coverage
Covers losses due to breakdown of motor vehicles
Cover: engines; transmissions; drive trains; steering mechanisms; electrical and electronic systems; a/c systems; front suspension
Require:
proof of regular maintenance
full inspection before the policy is issued
repair costs cannot exceed the car’s ACV.
Exclusions:
due to neglect or delay in maintenance; covered by regular auto insurance; due to racing or reckless driving; on vehicles with altered odometers; occurring while towing with or overloading the vehicle.
Common Conditions:
owner must take reasonable care to minimize repair costs
vehicle may be subject to inspection before repairs are done
subject to subrogation
Excess Liability
Coverage comes into effect only after limits of base policy are reached.
Excess Liability and the Base Policy
Follow Form and Stand Alone excess liability policies rely on the base policy.
Operate only after liability limit of base policy is exhausted.
Cover only what is also covered by base policy.
Excess Liability: Follow Form
Follows base insurance policy to the letter.
Uses all the same provisions, exclusions, and coverages as the base policy; easier to underwrite and less expensive than other Excess Liability policies; claims tend to be simpler
Excess Liability: Stand Alone
Covers what base policy covers, but sets own exclusions and limitations to coverage.
Adjuster must carefully review policy provisions to ensure a loss is covered.
Umbrella Policies
May cover risk and exposures NOT included in underlying policy.
(non-owned aircraft; marine craft; property in insured’s custody; personal injury; pollution; professional liability, product recall)
Umbrella policy can operate in several ways: can operate like stand alone; also works as primary policy; provides broadest coverage
Umbrella Policies: Self-Insured Retention (SIR)
A type of deductible.
Equal to the limits on base policy.
If limit of base policy is paid, this pays the SIR
Nationwide Marine Definition
Model regulation that defines six categories of eligible marine risks
Ocean Marine: imports and exports
Inland Marine: domestic shipments; instrumentalities of transportation or communication; personal property floater risks; commercial property floater risks
Ocean Marine Insurance
Ocean Marine Policies are “Utmost Good Faith” contracts: difficult to investigate all the risks involved; ships are required to adhere to certain Implied Warranties in order to receive coverage.
Implied Warranties of Ocean Marine Contract
Seaworthiness
Condition of Cargo: owner must guarantee cargo is sound and everything is properly loaded.
Legality: voyage must be legal
No Deviation in Voyage: rout of the voyage must be clearly stated prior to departure; captain must adhere to this route throughout voyage, with no change in destination or unnecessary delays.
Ocean Marine Premiums
Policyholder has 45 days to pay the premium in full or develop a payment option that is acceptable to the insured and the insurer.
Upon cancellation premium will be paid on a pro-rata basis
Ocean Marine Insurance Policies
Types: Hull Coverage; Cargo Coverage; Freight Insurance; Protection and Indemnity
Coverage: Loss of Vessel; Loss of Cargo; May extend to property stored on docks and piers
Policy Valuation:
valued basis - full amount of policy is paid in the vent of a total loss
unvalued basis - amount of payment is determined after the loss
agreed value basis (valued policy); value of the vessel is determined when policy is issued
Hull Policy: Coverage
Covers damages to, and loss of, a marine vessel
Policy period: 1 year
Establishes a defined geographic area
Hull Policy: Deductibles
Average: standard, flat-rate deductible
Franchise:
if damage amount exceeds deductible, the insurer pays the full cost for damages
if damage is less than deductible, the policyholder pays for all damages
Cargo Policy
The good or property being moved in a shipment
Cargo Coverage: Insures good in transport
3 Types of Cargo Coverage:
Single Risk Form - insures the cargo on a single shipment only
Floating, Open, or Long Term - insures multiple trips over a specific period of time
Warehouse-to-Warehouse - insures cargo from point of origin to point of destination
Freight Insurance
the charge for transporting goods, paid to the owner of the vessel
Freight Insurance:
protects the vessel owner in the event that the freight costs are not paid
often combined with Hull coverage
Protection and Indemnity Insurance
Liability insurance that protects the ship owner in the event that the ship causes damages or injuries to a third party.
Often included as part of hull coverage
Covers carrier’s liability for bodily injury or property damage to crew, passengers, and sometimes cargo.
Does not cover claims that fall under state or federal compensation acts
Actual Total Loss
Insured items that have disappeared or are not salvageable
Constructive Total Loss
Insured items that have been damaged beyond repair, or the cost to repair exceeds the cost to replace
Cost, Insurance, and Freight (CIF)
Term of sale in which the seller or exporter is responsible for the cargo throughout shipment
Seller must insure the cargo until it reaches its destination.
Cost and Freight ( C&F)
Term of sale in which the buyer or importer is responsible for the cargo throughout the shipment.
Free on Board (FOB)
Term of sale in which the seller is responsible for the cargo until it reaches a certain point, such as a specific ship or port.
If followed by a city name, means the seller is only responsible for the cargo until it arrives in that city.
At this point, the buyer becomes responsible for the goods.
Ocean Marine Provisions
Sue and Labor: the insured party is required to attempt to prevent further losses once damage occurs
General Average: when the captain of a vessel decides to make a voluntary sacrifice of a part of the ship or its cargo in order to save the whole, all insurers for that ship must participate in the indemnification process
Particular Average Clause: appropriates the loss to a particular company rather than each cargo owner sharing the loss
Free of Particular Average Clause: excludes coverage for all partial or accidental losses, except those caused by stranding, sinking, burning, or collision;
acts like a deductible - insurer is only liable for losses that exceed a set percentage of the value
percentage is usually 10%
Inland Marine Insurance
Covers property in transport (other than ocean transport)
Covers property involved in transportation
Policies typically known as “floaters”
Eligible Property:
movable; in transit; instrumentalities of transportation or communication, including - roads, bridges, tunnels, radio towers, power lines
Actual means of transport NOT eligible
Inland Marine Categories
Domestic Shipments
Instrumentalities of Transportation or Communication
Personal Property Floater Risks
Commercial Property Floater Risks
Domestic Shipments
Transportation Forms: protect against losses occurring during shipment or transport of goods; includes travel by truck, train, ship mail, or plane
Annual Transit: uncontrolled forms that covers loss of goods in transit; applies to all of the insured’s shipments during the year; choice of open-peril or named-peril coverages against fire, windstorm, or theft.
Trip Transit: uncontrolled similar to annual transit, but which only insures a single shipment; coverage applies from the trip origination point to destination.
Motor Truck Cargo: uncontrolled form; protects carrier of shipped goods while the shipment is in transit.
common carrier legal liability: free on board shipping point (ownership of/responsibility for cargo transfers to buyer as soon as cargo leaves shipper); free on board destination point (ownership of/responsibility for cargo transfers to buyer after buyer accepts cargo when it arrive sat the buyer’s destination)
Mail Coverage: controlled form; provides open peril coverage for property sent by registered mail; shipper must report property value accurately
Instrumentalities of Transportation and Communication
uncontrolled form
pays for direct damage or loss of revenue due to covered loss
covers property directly related to transportation and communication
Personal Property Floater Risks
Personal Articles Floater: open-peril coverage; coverage is worldwide; no deductible; valuation is determined using the lease of the following (actual cash value, cost to repair or replace, coverage limits); subject to “pair and set” provision
Exclusions: war; nuclear hazards; wear and tear; insects and vermin; spoilage; gradual deterioration
Specific Personal Articles Floater Coverages
Jewelry Coverage: eligible items include items of personal adornment containing precious metals or jewels; pens; flasks; smoking equipment; trophies
each item must be individually scheduled
newly acquired property automatically covered for 30 days at 25% of coverage limit, up to $10,000
Furs Coverage: includes both genuine and imitation fur; each must be individually scheduled; newly acquired covered for 30 days
Cameras Coverage: eligible items include photography equipment; binoculars; telescopes; microscopes
each item individually scheduled, but blanket coverage available for accessories
30 day automatic coverage for new items
Musical Instruments: each item individually scheduled, but blanket coverage available for accessories
30 day automatic coverage for new items
Silverware Coverage: includes silver; silver plate items; gold; gold plate items
items may get blanket or scheduled coverage
Golfer’s Equipment Coverage: items include clubs, equipment, and clothing
blanket coverage
Fine Arts Coverage: individual items must be scheduled, but blanket coverage available for small items or collections
agreed value coverage
newly acquired property automatically covered for 90 days at 25% of total limit of scheduled items
no coverage for property on exhibit away from insured premises
unique application of pair and set provision (insurer pays full scheduled amount for pair or set; insured must surrender any remaining pieces of set to insurer.
Stamps and Coin Collection Coverage: items include postage stamps; rare and current coins; paper money; banknotes
can provide blanket or scheduled coverage
special limits - ($1,000 for any unscheduled coin collection; $250 for any individual item)
Commercial Inland Marine Policies
include: domestic shipment; instrumentalities of transportation and communication; commercial property floater risks
two types of conditions: general and loss
Can be written on controlled or uncontrolled forms; includes:
bailee forms; equipment floaters; business floaters; dealer policies
Commercial Property Floater Risks: Bailees
Bailee: individual who holds someone else’s property for a specific purpose and then returns it to the owner.
Bailee Coverage:
reimburses a bailee’s customer for damage to the customer’s property while in the bailee’s control
provides coverage for Confusion of Goods (a loss makes it impossible to identify damaged property)
Commercial Property Floater Risks: Equipment Floaters
Uncontrolled Form
May be open peril or named peril
Covers heavy machinery and equipment
(Physicians and Surgeons Equipment; Theatrical Property; Contractors Equipment; Commercial Articles)
Commercial Property Floater Risks: Business Floaters
Accounts Receivable:
controlled; open peril; reimburses insured for money that cannot be collected because company records have been destroyed.
Valuable Papers and Records:
controlled; covers losses to important documents, manuscripts, or records; does NOT cover money and securities
Installation:
controlled; often open peril; covers items that have been sold while they are being moved or installed, being accepted by the buyer
Electronic Data Processing:
covers hardware, data, media, recorded information, software
liability coverage also available
Signs:
controlled; covers all types of signs owned by insured and those belonging to others that are in the insured’s care
Commercial Property Floater Risks: Dealer’s Policies
Open peril
Versatile Coverage:
reporting or non-reporting; property covered while on or off premises; property covered while controlled by employees or in transit; covers property of others in insured’s custody
Covers dealers of:
jewelry; stamps; art; coins; furs; cameras; musical instruments; equipment
Jewelers Block
Bailee Form
For jewelers with up to $250,000 in stock
Covers:
insured’s merchandise; property of others in insured’s care; property in transit and in showcases
Covers: insured’s stock in trade; jewelry sold, but not yet delivered; similar property of others in the insured’s care (if such property is in jewelry trade, it is only covered up to the insured’s financial interest in the property); damage to building housing merchandise when damage is caused by theft, attempted theft, and collapse
Optional Coverages:
(Show Windows: covers theft from a show window by cutting or smashing glass)
(Money: covers theft of money from a vault or safe on insured premises)
Exclusions:
on exhibition in showcases not on the premises
at exhibition that is promoted by a trade association or public authority
sold on a payment plan after its leaves the premises
being worn by the insured or an employee (or a family member either)
in the mail, in express carriers, or motor carriers
Jewelers Block: Loss Settlement
Determining Value:
value is determined at the time of loss
historical or antique value have no bearing on valuation
Policy Pays the Least of:
actual cash value
cost to restore damaged property to pre-loss condition
cost to replace damaged property
lowest dollar value listed on the company’s books
Jewelers Block: Insured’s Duties
Insured Must:
maintain safeguards in place at policy inception
take yearly inventory
keep records for 3 years of: purchases, inventory, sales, property off premises, property of others on premises
Inland Marine Insurance Review
indemnifies an insured party for losses to property in transport or property that is involved in the transportation of goods.
Controlled Line Floaters:
standardized forms filed with the state
Uncontrolled Line Floaters:
non-standard forms tailored to meet needs of each insured
4 Categories: Personal Property Floater Risks (personal articles floater) Domestic Shipments (annual transit, trip transit, motor truck cargo, mail coverage) Instrumentalities of Transportation and Communication (bridges, tunnels, roads, dams, piers and docks, pipelines, power lines, antennas and towers for radio and TV) Commercial Property Floater Risks (bailees, equipment floaters, business floaters, dealer's policies)
Aviation Insurance
Involves:
huge potential for losses
The Problem with Risk Pool in Aviation:
insurance pool is small
potential risk is huge
Insurers and re-insurers often pool risk with underwriting groups specializing in aviation.
Aviation Insurance Policies
No standard policies
In general, all policies contain Hull Coverage and Liability Coverage
Aviation Insurance: Hull Coverage
Insurance for the aircraft itself.
2 Types of Coverage:
All Risks- Ground and Flight: this is the broadest aircraft coverage
All Risks - Not in Motion: covers physical damage to the aircraft while the aircraft is not moving by its own power.
Deductibles:
usually percentage or fixed deductible
separate deductibles for “in motion” and “not in motion”
deductible does not apply to losses from (fire, lightning, explosion, theft, robbery, vandalism, transportation of aircraft)
Exclusions:
wear and tear
freezing
mechanical or electrical breakdown
war risks
losses to tires, unless caused by theft, vandalism, or malicious mischief
embezzlement by someone who is legally in possession of the aircraft
Aviation Insurance: Aircraft Liability Coverage
3 Types of Aircraft Liability Coverage=
Bodily Injury Excluding Passengers:
covers anyone injured by the use, maintenance, or ownership of the aircraft who is not a passenger on the place
includes bodily injury, sickness, disease, mental anguish, death
Passenger Bodily Injury:
applies only to passengers
Property Damage Liability:
covers damage to property (or loss of use of property) caused by the use, ownership, or maintenance of the aircraft
has a single, per occurrence limit
Aviation Insurance: Aircraft Liability Coverage
Limits of Liability
passenger bodily injury liability and bodily injury excluding passenger are subject to per person and per accident liability limits
property damage liability has a single, per occurrence limit
or, an insured could choose a single limit liability policy
Aviation Insurance: Aircraft Liability Coverage
Medical Payments Coverage:
no-fault coverage
covers injuries that occur on, or while boarding or exiting aircraft
pays for medical and even funeral costs
Admitted Aircraft Liability (Guest Voluntary Settlement)
Guest signs release form that:
allows a payment of predetermined amount for bodily injury
releases insured from further liability
Helps avoid lawsuits
Insured can choose when to rely on this coverage
Hangarkeepers Liability Coverage:
form of bailee insurance
covers damage to planes in custody of insured
War, Hi-Jacking and Other Perils Coverage:
Adds by endorsement coverage for perils typically excluded
Airport Liability Coverage:
for those who own, operate, lease, or use space in airports
Available coverages include:
personal injury, contractual, premises, products and completed operations, premises medical payments
Cargo Liability Coverage:
Indemnifies for lost or damaged: baggage and/or cargo
Worker’s Compensation
covers work-related injuries and protects employers from their liability when injury occurs.
Covers an employee’s medical bills and lost wages following a work-related injury.
purchased by the employer
primary coverage: pays before other policies
“exclusive remedy” keeps employee from suing employer for covered injuries
“no-fault” policy: applies no matter who is at fault for the injury
Always primary coverage.
Worker’s Compensation State Specific Laws
Most states require WC
Monopolistic: the state provides WC coverage
Competitive: state has fund in direct competition with private insurers, employers choose which they prefer
Georgia: no state fund
only private companies offer WC
all WC insurers must follow the same state laws
Worker’s Compensation: Compulsory vs. Elective
Compulsory: WC is required
Elective: employers and employees may opt out of workers’ comp
Worker’s Compensation: Georgia - Compulsory
All employment relationships must be covered.
Some Exceptions: companies with fewer than 3 employees independent contractors taxicab drivers prison inmates doing community service farm laborers domestic servants real estate agents amateur sports officials
Worker’s Compensation: Employer Benefits
the sole responsibility of the employer is to pay premiums or, in the case of self-insurance, pay benefits to an injured employee
Worker’s Compensation Coverage
Injuries and death occurring in a normal course of work
Infections or diseases caused by work-related injury
Occupational diseases caused by hazardous jobs
Workers’ Comp only covers injuries and death when: work performed is major contributing cause of injury
Worker’s Compensation Exclusions
injuries inflicted by a third party for personal reasons
alcoholism or disability arising from alcoholism
drug addiction or disability arising from drug addiction
heart disease, heart attack, failure of coronary blood vessels, stroke, thrombosis
Workers’ Compensation Policy
Part One describes the benefits available to an injured employee.
Benefits fall into 3 categories: disability and impairment benefits; medical expenses; and death benefits
3 Kinds of Disability/Impairment Benefits:
total disability; temporary partial disability; and permanent partial disability
Worker’s Compensation: Average Weekly Wage
the employee’s average weekly income in the 13 weeks leading up to the injury
Maximum Medical Improvement:
in cases of permanent injury, the point in which doctors determine that a worker has made as much medical progress as possible.
Worker’s Compensation: Disability and Impairment Benefits
Income Benefits:
based on the employee’s Average Weekly Wage
subject to certain limits
waiting period: 7 days (covered if the disability lasts over 21 days)
Maximum Benefit Amounts:
total disability: 2/3 of AWW for 400 weeks
permanent partial disability: 2/3 of AWW according to rating schedule
temporary partial disability: wage loss formula for 350 weeks
Worker’s Compensation: Temporary Total Disability Benefits (TTD)
Pay 66 2/3% of employees AWW
Time Limit: 400 weeks
Worker’s Compensation: Catastrophic Injuries
includes the following:
Spinal cord injuring involving severe paralysis of arm, leg, or trunk
Amputation of arm, hand, foot, leg
Severe brain or close-head injury
Secord or third degree burns to 25% of body or third degree burns to 5% of face and hands
Total blindness or industrial blindness
Any other injury that prevents employee from being bale to perform available work
Worker’s Compensation: Change in Condition
For Catastrophic Injuries:
TTD are paid unless there is a change in condition of the injured worker
Change in condition could be:
change in wage-earning capability
change in physical condition
change in status
Only the WC board has the authority to determine that an injury is no longer catastrophic and only after holding a hearing
Worker’s Compensation: Temporary Partial Disability Benefits (TPD)
Amount: 2/3 the difference between pre- and post-injury AWW
Limit: $350
Time Limit: 350 Weeks
Worker’s Compensation: Permanent Partial Diasbility
Loss of function of a member or members of the body, or of the body as a whole
Benefits: for permanent disability due to work-related injury paid regardless of wage loss pay 2/3 of employee's AWW amount of time depends on injury
Worker’s Compensation: Schedule of PPD Benefits
Paid according to disability schedule listed in GA workers’ compensation law
Duration of benefits based on severity of impairment
Benefits expire at the earlier of the following: completion of scheduled payment period; death of impaired person
WC Policy: Medical Benefits
Pay for all medical expenses incurred because of work-related injury:
doctors visits; surgery; emergency room visits; x-rays; medicine; necessary medical equipment (e.g. crutches, leg braces); rehabilitation services (for catastrophic injuries)
Time Limits:
for injuries that occurred on or before June 30, 2013, and for all catastrophic injuries: no time limit
for injuries occurring on or after July 01, 2013: 400 weeks
WC Policy: Death Benefits:
66 2/3% of the employee’s AWW for up to 400 weeks
Paid upon employee’s death from injury arising out of or in the course of employment
Maximum of $230,000 to a single dependent
Funeral expenses up to $7,500
WC Policy: Liability
Covers employers in the event of:
suits by employees claiming negligence
claims by others for liability of employees
claims by relatives of injured employees
WC Policy: Employer’s Liability Exclusions
liability assumed under contract
damages for employment that is unlawful
injuries to employees knowingly working in violation of the law
obligations under any compensation law
injuries intentionally caused or aggravated by insured
injuries outside US or Canada
claims arising from unlawful discrimination, coercion, or discharge
obligations under federal acts
penalties imposed for breaking state or federal law
Georgia Employers: 3 WC Options
Option 1: Purchase WC
Option 2: Self-Insure
employer must get authorization from State Board of WC and Georgia Self-Insurers Guaranty Trust Fund
requires proof of ability to pay benefits
Option 3: Join a Self-Insurance Group
employers pool resources to insure their collective risks
WC Policy - Georgia Employers: Out of State Coverage
Conditions:
employer must let insurer know about out of state work
state where work is taking place must be listed on policy
WOC Policy: Employer’s Duties
Provide necessary medical care for injured employee
Report injury to insurer and cooperate with insurer’s investigations
Utmost integrity is expected of all parties, including employer
WOC Policy Risk Classification
Premiums
Employee Rate Classification:
“High-risk” and “Low-risk”
Factors that Affect Premiums:
size of payroll
risk level of work done
location, safety records, etc.
WOC Policy: National Council on Compensation Insurance (NCCI)
Rating bureau that develops the rules for setting worker’s compensation premiums that are used by most states
WOC Policy: Conditions
Outline the rights of the insurer
Insurer has right to inspect workplace at any time
Insured cannot transfer rights or duties without written consent of insurer
Explain how a policy may be cancelled
Require first-named insured to act on behalf of all insureds with respect to policy transactions
WOC Policy: Federal Programs
Federal programs can provide coverage outside of state WC programs.
Some circumstances where state WC doesn’t apply, because the workers are protected under a different law. Workers usually protected by one of several federal laws or WC programs.
WOC Policy: Federal Employees Compensation Act (FECA)
Provides WC benefits for civilian federal employees
Pays medical expenses, plus 2/3 of normal monthly salary
Additional payments available for permanent injuries or to dependents
Includes compensation for survivors in the event of death
WOC Policy: Federal Employers Liability Act (FELA)
Covers interstate railroad workers and their families
FELA Provisions:
railroad workers not covered by state WC laws may sue employers
worker must show legal negligence of employer
WOC Policy: Jones Act
“Merchant Marine Act”
Allows injured seamen to sue before a jury
insurers usually require maritime coverage endorsement under liability section to protect employer
some employers choose Voluntary Compensation Maritime endorsement to provide workers’ compensation benefits without requiring a lawsuit.
WOC Policy: Longshore and Harbor Workers’ Compensation Act
Protects employees working on navigable waters or on shore in navigation-related industries
Covered employees receive medical expenses and 2/3 weekly salary while injury continues
Injury includes occupation-related illness
Employers have 2 options:
buy insurance form licensed insurer, or
self-insure with permission of US Dept. of Labor
WOC Policy: Black Lung Benefits Act
Provides monthly payments and medical treatments to coal miners who become totally disabled from black lung disease
Employers must secure funding for benefits one of 2 ways:
qualify as self-insured
buy insurance from state or commercial insurer
Payments must begin within 30 days of determination of liability
Health Insurance
A plan that covers and shares expenses associated with health care.
Health Insurance Contract = Evidence of Coverage
Deductible
the amount the policyholder pays before insurance policy benefits activate
Copayment
the amount the policyholder pays each time she accesses the benefits of a health insurance policy
coinsurance payment
a percentage of the total health care expenses that the insured must pay
out-of-pocket expenses
any deductibles, copayments, and coinsurance that a policyholder pays
network provider
member physicians and healthcare facilities contracted to treat an insurer’s policyholders
capitation
an insurer’s practice of paying a healthcare provider up front in return for the agreement to treat all members of the insurer
Group Health Insurance
lower health insurance costs for the employer and employee
all employees included, regardless of current health status
helps eliminate or reduce policy waiting periods
coverage often continues even after employee leaves the group
Typically managed by:
HMO-Health Maintenance Organization
PPO-Preferred Provider Organization
Individual Health Insurance
Comprehensive and/or Catastrophic Insurance:
purchase directly from an insurance provider
purchase through HMO, PPO, or POS
Insurance Health Insurance Drawbacks
individual health insurance can be extremely expensive.
Health Maintenance Organization (HMO)
managed care insurer providing health insurance through a provider network
broad range of comprehensive medical care
few exclusions and minimal deductibles
restricts members from choosing care providers outside of the network
promotes health programs in hopes of minimizing their healthcare costs
Preferred Provider Organization (PPO)
members may choose healthcare outside of the Network Provider
members pay the difference between network coverage cost and non-network costs
Access to PPO network care at a very low cost
flexibility of choosing own medical care
Point of Service Plans (POS)
combines qualities of HMO and PPO plans:
plan can cover visits in or out of network, based on the primary physicians recommendation
Major Medical Plans
high medical coverage limits
does not restrict the insurer to a network
risk of major out-of-pocket costs
high deductible, and significant coinsurance percentage requirement
Surgical and Hospital Insurances
Surgical Expense Insurance:
compensation for physician costs associated with surgical procedures
Hospital Indemnity Insurance:
coverage providing a flat amount of indemnification per day for hospitalization
Hospitalization Expense Insurance:
coverage for various hospital expenses (room and board, medical supplies, lab fees, nursing care, etc.)
Accident Insurance
can pay expenses caused by a covered accident, including:
medical care for injuries ambulance fees hospital costs, including emergency room/intensive care loss of income death benefit
exclusions: self-inflicted injuries; injuries occurring while under the influence; injuries received in commission of a crime; disease and bacterial infections
waiting periods
prevents applicants and insured’s from seeking health insurance only after they become ill
non-cancelable policies
guarantees continuous health coverage, at a set premium price for as long as the policyholder desires
Renewable Policies
Conditionally Renewable:
insurer may cancel under specific, stated conditions
Optionally Renewable:
insurer chooses whether to renew the policy when the policy period expires
insurer may cancel coverage on the expiration date for any reason
Guaranteed Renewable
insurer guarantees coverage until the insured is a certain age
insurer may increase the premiums over the life of the policy
Residual Market Programs
state-run programs that provide insurance to high-risk individuals who cannot qualify for private insurance
also known as “shared markets” or “involuntary markets”
usually operate at a loss - meaning payouts exceed premiums collected
state-licensed insurance companies fund shortfalls by “sharing their pool” of premiums with Residual Market
Residual Market Programs: Consumer’s Last Resort
last-resort option for consumers
consumer must prove rejection by a certain number of private insurers
minimal and highly restrictive coverage at expensive rates
Residual Market Programs: Georgia
The Georgia Automobile Insurance Plan
Workers’ Compensation Assigned Risk Plan
The Georgia FAIR Plan (Fair Access to Insurance Requirements)
Georgia Automobile Insurance Plan (GAAIP)
administered by governing committee and regional manager
policyholders and insurers can appeal rulings to commissioner
sold by an agent with property and casualty license in Georgia
Georgia Assigned Risk Reinsurance Pool
Georgia WC Insurance Plan
also called the “assigned Risk Plan”
provides high-risk WC coverage for Georgia businesses
operates by spreading costs between all WC insurers in the state
Georgia FAIR Plan
Administered by Georgia Underwriting Association
Coverages Available:
personal lines (homeowner, ho-8; dwelling, dp-1; wind and hail only; residential crime)
commercial lines (commercial fire; wind and hail only; commercial crime)
Coverage Limits:
maximum coverage limits set by commissioner
for any building (personal or commercial): $2,000,000
for a set of buildings: $20,000,000
homeowners section 2: personal liability: $100,000 per occurrence; medical payments: $1,000 per person
Policies effective 1 year
Adjusting Code of Ethics: Disclosure
Adjusters shall disclose all direct or indirect financial interest they have in adjusting a claim
Adjusting Code of Ethics: Equal Treatment
adjuster shall treat all claimants equally:
do not favor nice clients
do not disfavor your rude clients
Adjusting Code of Ethics: Avoid Prejudice
must never be prejudiced in their investigations, adjustments, or settlements
Adjusting Code of Ethics: Truthfulness
adjuster shall make truthful and unbiased reports of the facts after making a complete investigation
Adjusting Code of Ethics: Integrity
shall handle every adjustment and settlement with honesty and integrity
Adjusting Code of Ethics: Diligence
should act with speed and care in completing the adjusting process
every claim is important
failure to settle a claim in a timely manner can result in disciplinary action by the insurance commissioner
Adjusting Code of Ethics: Reporting Violations
shall promptly report licensed insurance representatives whose conduct violates any insurance laws, rule, or order
Adjusting Code of Ethics: Elderly Claimants
shall exercise extraordinary care when dealing with elderly clients:
take extra precautions to ensure an elderly claimant gets a complete and fair settlement
do not let failing memory or impaired cognitive processes disadvantage the claimant
Adjusting Code of Ethics: Attorneys
Claimant has the right to representation by an attorney
Adjusters strictly prohibited from dealing directly with a claimant who has hired an attorney, in order to circumvent the advice of that attorney.
Adjusting Code of Ethics: Witnesses
adjuster is permitted to interview any witness, or prospective witness, without the consent of opposing counsel or party
must avoid any attempt to influence witnesses
witnesses have the right to a copy of any signed or recorded statements
Adjusting Code of Ethics: Right to Attorney
adjuster shall not advise a claimant to refrain from seeking legal advice, nor advise against the retention of counsel to protect the claimant’s interest
Adjusting Code of Ethics: Traumatized Claimants
shall not attempt to negotiate with, or obtain any statements from, claimants or witnesses who appear to be in shock or under severe emotional distress
Adjusting Code of Ethics: Advising of Rights
adjuster must advise claimants of all their claim rights in accordance with the terms and conditions of the contract and of applicable laws.
must make it clear to the claimant what losses are covered in a particular situation
Adjusting Code of Ethics: Release Forms
adjuster shall not draft any form of release, unless approved in writing in advance by the insurer.
Adjusting Code of Ethics: Competence
adjuster should not deal with a claim that he is not trained to take on
Unfair Claims Settlement Practices
Forbidden by State Law
Misrepresenting Policy Coverage
Failing to acknowledge communications regarding claims promptly
adjuster often responsible for promptly contacting claimant
in Georgia, an insurer has 15 days to respond to a claim
Failing to implement procedures for claims investigation and settlement
insurer responsible for adopting and implementing procedures for proper investigation of claims
Failing to pay legitimate, undisputed claims
Low-balling claim estimates
Refusing to pay claims without having conducted reasonable investigation
Failing to affirm or deny coverage of claim within reasonable time frame
insurer must make decision within reasonable amount of time after receiving all information needed for investigation
insurer must notify claimant if extra time is needed
if insurer rejects claim, must provide a written statement explaining why
Making claims payments without explanation of coverage providing for them
all claims payments should be accompanied by a statement specifying which coverage was used to make payment
Delaying settlement process by requiring both formal proof of loss form and subsequent verification
Failing to provide prompt, reasonable, and accurate explanation for claim denial, when requested by insured in writing
Failing to provide claims forms promptly to claimant
insurers must provide all necessary paperwork to claimant within 15 days of claim being filed, along with clear explanation of their use
Failing to implement standards assuring good workmanship in company repair shops
Indicating payment is final or releases insurer form claim unless:
policy limit has been reached
compromise settlement has been agreed to by first-party claimant and insurer
Issuing payment under one coverage that includes language releasing insurer from its entire liability
State Commissioners and Departments of Insurance
responsible for maintaining insurer solvency
regulating rates
protecting consumers
making insurance available for all individuals
