Basics of Insurance Law

Question 1

What are loss runs?

Answer 1

Loss runs are a written report that provides a snapshot of a business’s past insurance claims. These reports are generated by the insurance carrier and include details such as the type of claim, when it occurred, and how much has been paid out by the carrier.

Question 2

Owner’s Interest Policy

Question 3

OSHA

Answer 3

Occupational Safety and Health Administration

Question 4

SSSP

Answer 4

Site Specific Safety Plan

Question 5

COI

Answer 5

Certificate of Insurance

Question 6

SUBROGATION

Question 7

MRI

Answer 7

Management Reports Software

Question 8

TTM P&L

Answer 8

Trailing Twelve Month Profit & Loss Statement

Question 9

HNW

Answer 9

High Net Worth

Question 10

PRO RATA

Question 11

“broom-clean” condition

Question 12

FF&E

Answer 12

Fixtures, Furniture & Equipment

Question 13

market value, agreed value, stated value

Question 14

negligence

Answer 14

Tort (civil wrongs) vs. Criminal Law

failing to act, or acting in a way that a reasonable person would not

Question 15

absolute and strict liability

Question 16

imputed liability

Question 17

perils

Question 18

direct, indirect loss

Question 19

proximate cause and its related concerns

Question 20

actual cause of a loss

Question 21

blanket insurance

Answer 21

covers all properties through one policy- saving time effort and money

Question 22

margin clause

Question 23

liability

Question 24

damages

Answer 24

money paid

Answer 25

tort is a “civil wrong.”

Question 26

Tort

Answer 26

The person who committed the act is called the tortfeasor

Question 27

Tort Law vs. Criminal Law

Answer 27

Tort Law vs. Criminal Law
Most of us are familiar with criminal law, which addresses wrongs against society (crimes), as we see on TV shows like Law and Order. On the other hand, tort law addresses wrongs between individuals, such as those which go to small claims court. Specifically, a tort is a “civil wrong.”

Tort is a legal term, meaning an action that causes harm to another. The person who committed the act is called the tortfeasor. When analyzing ethical systems, one finds that a major goal is to reduce and/or eliminate torts. Torts are a problem not just because they cause harm to society but also because they can be traced to an individual. Since torts can be traced to an individual, unlike other circumstances that can cause misfortune, the onus of preventing and/or correcting the tort is placed on the tortfeasor.

Torts can involve both criminal actions and civil actions. Criminal torts are actions that harm another and are punishable under criminal law, while civil torts are punishable under civil law. For example, consider a drunk driver who gets into a car and strikes a pedestrian while driving. These actions are both criminal (drinking and driving), as well as civil (when he struck the pedestrian), and the pedestrian will have a separate course of legal action if it’s decided to “go after” the drunk driver.

This is an important distinction to make because civil law has lower standards for conviction than criminal law. If your business is charged with a civil tort, the court needs only find that a “preponderance of evidence” indicates that your business committed the tort. Whereas, in a criminal case, they would have to prove “beyond a reasonable doubt” that your business committed the tort.

The primary type of tort that is relevant to the insurance industry is negligence.

Question 28

Special Damages

Answer 28

Special damages are awarded for tangible losses that have a specific dollar amount attached to them. Typical examples of special damages include medical costs, lost wages, transportation costs, if a person suffers a lost earnings capacity, and property damages. Special damages are easily determined as these damages have specific costs and are quantifiable.

Question 29

General Damages

Answer 29

General damages are more difficult to quantify as these damage awards are non-monetary losses that do not have specific dollar amounts attached to them, as opposed to special damage awards. General damages include pain and suffering, lower quality of life, loss of consortium/companionship, mental distress and anguish, and physical impairment and disfigurements.

Question 30

Compensatory vs. Punitive

Answer 30

Compensatory damages are damages intended to repay a party for damage or injury suffered by the damaged party. This money is intended to make up for the losses that were actually incurred by the damaged party.

Punitive damages are damages intended to punish a defendant and dissuade others from carrying out the same actions. Punitive damages are sometimes called excess damages since they exceed any compensatory damages.

For example, an accountant that defrauded his clients is subject to a lawsuit by his former clients. The court finds in favor of the injured clients and orders the accountant to pay one sum that compensates his former clients for their losses and a second sum designed to punish the accountant for his actions.

The punitive damages are also intended as a warning to any other professionals that are considering defrauding clients.

Question 31

E&O Insurance

Answer 31

Errors and Omissions

Question 32

What are seven issues you will want to understand when comparing different policies?

Answer 32

who and what is covered; the conditions under which you are covered; the costs, limits and deductibles of coverage; and how your office policies can impact your insurance.

Question 33

the named insured

Answer 33

the person or entity in whose name the policy is obtained

Question 34

Exceptions to the coverage

Answer 34

will be listed in the policy and must be read and understood

Question 35

exclusions

Answer 35

negotiate and ask for coverage if anything is important to your specialty.

It is possible to negotiate with the insurance provider and many, although not all, of the exclusions listed in the policy can be reinserted into the policy for an additional premium.

Question 36

Before selecting any carrier’s policy…

Answer 36

It will be necessary to compare the policy’s coverage with that of the state’s requirements.

Question 37

What is the difference between claims-made and occurence insurance policies?

Answer 37

“claims-made” policy
“occurence” basis

. A claims-made policy only covers claims that are filed during the term of the policy and for a relatively short period of time following the policies expiration. If an event occurs during the term of the policy, but the claim is not made until after the expiration of the policy and the post expiration window for filing claims, then there is no coverage under a claims-made policy.

Most E&O insurance will be sold as a “claims-made” policy. This is in contrast to most other insurance policies with which brokers are familiar that are sold on an “occurrence” basis. A claims-made policy only covers claims that are filed during the term of the policy and for a relatively short period of time following the policies expiration. Often there is a special provision dealing with coverage for claims which arise from events that occurred prior to the effective date of the policy. The event must have occurred during a specified period of time prior to the initial effective date of the policy and the insured must not know of the potential claim at the time the policy is issued. The policy may then provide coverage if a claim does arise from such an event during the specified time period prior to the effective date and the claim is filed during the term of the policy. Similarly, at the end of the policy there is usually a period of time during which claims can be filed if the event giving rise to the claim occurred during the policy period. However, if an event occurs during the term of the policy, but the claim is not made until after the expiration of the policy and the post expiration window for filing claims, then there is no coverage under a claims-made policy.

Question 38

What is the statute of limitations for bringing lawsuits?

Answer 39

While the face amount of the policy may be obvious, the insurance buyer should ascertain whether the policy includes a “per claim” limit and/or an “aggregate” limit for all claims during the policy term

Answer 40

Control over the coverage is another important aspect of the insurance policy. Many brokers believe that although settling “frivolous” complaints for their nuisance value may make economic sense in the short run for the insurance company, in the long run it may encourage more lawsuits to be filed against the brokerage. That would cost the brokerage more money in deductibles and could even end up making the brokerage look like a bad risk for the insurance company resulting in either higher premiums or even cancellation of the insurance. For brokerages where this is an issue, brokers are going to want to investigate a special endorsement to the policy which requires that the broker consent to any settlement proposed by the insurance company.

Answer 41

If you use multiple insurance brokers, make sure to know who (which insurance companies) the insurance broker is planning on working with to place the insurance. This will enable you to avoid making your company look desperate by having your information sent multiple times to the same insurer.

Question 42

Negligence

Answer 42

plaintiff must prove harm

Question 43

Special Damages

Answer 43

awarded for actual tangible losses .

Question 44

General Damages

Answer 44

awarded for losses like trauma

Question 45

Compensatory & Punitive Damages

Answer 45

Make up for the loss actually felt.
Punish as deterrent.

Question 46

Policy Structure & Contracts

Answer 46

“DICE” is a common acronym used in the industry to describe the four main components of a property and casualty insurance policy.

Declarations: Commonly called the “dec page,” this is typically the first page or pages of the policy. The dec page lists a number of different things:
The named insured and the insurance company;
The address of the insured location(s) and mailing address, if different;
The policy period and the policy’s limits of insurance; and
The premium and the deductible (if any);
Insuring Agreement/Clause: This is the agreement to provide the insurance, assuming the premium has been paid and the loss is covered. The policy itself will provide the specifics as to what is insured and to what level of coverage. The insuring agreement is the section of the insurance policy where the insurer’s promises to the insured party are detailed;
Conditions: Conditions are provisions inserted in an insurance policy that establish conditional requirements related to the insurer’s and insured’s obligations under the policy. They most commonly deal with the conditions required in the event of a loss and also contain requirements such as keeping the property in a habitable condition, notifying the company of any material changes in the use of an insured property, and other conditions. The conditions often relate to loss reporting, valuation of property, subrogation rights, cancellation, nonrenewal, and more. The policy itself will detail the conditions required to be met.
Exclusions: Exclusions are losses that are not covered by the policy and will be detailed in the contract of insurance. Typical exclusions include intentional losses, losses outside of the insured territory, criminal acts, catastrophic losses (like war), predictable losses, losses covered by another insurance policy, and more. Once again, the policy will list all of the exclusions.

Question 47

Endorsements

Answer 47

Endorsements, known as “riders” in Life and Health insurance policies, are attached to the policy, either at issue or at a later date. Their purpose is to alter the basic insurance document in some method, by either adding additional coverage for certain risk exposures, or conversely, decreasing or eliminating coverage for other risk exposures. Do not think that all endorsements add coverage to a policy; there are many that actually decrease coverage or eliminate it altogether.

Question 48

Supplemental Coverage/Payments

Answer 48

Supplemental coverage, often known as supplemental payments, is a special provision in an insurance policy. This provision states that the insurer has agreed to pay for costs associated with the investigation and resolution of an insurance claim. The term “supplemental” is used because these costs are usually in excess of limits on what the insurer will pay to the insured party that are outlined in the policy. In rare occurrences, defense and other costs are included within the limit of liability shown in the policy.

To put it another way, supplemental coverage represents an agreement, on the part of the insurer, to pay for some costs associated with resolving a claim beyond the maximum amount the insurer would pay as reimbursement for the loss.

For example, an insurance policy states that the insurer will pay a policyholder up to $10,000 if the insured car should be damaged or destroyed. The supplemental coverage section states that the insurer will also pay for the insured’s court costs associated with resolving the claim. Additionally, our court system allows the injured party to be represented on a “contingency basis,” which allows them to pay nothing upfront for representation and use part of the awarded damages to pay after the fact.

Supplementary payments also include money paid out to cover the costs of defending a named insured from a lawsuit related to a loss a named insured is alleged to be liable for. The costs to defend the named insured are paid out regardless of the decision of the court and in addition to the policy limits. There generally is no stated policy limit for defense costs, but they can be limited in the policy, depending on the policy’s language.

Question 49

CGL Policy

Answer 49

Commercial General Liability

Question 50

TRIA

Answer 50

The Terrorism Risk Insurance Act (TRIA) created a temporary federal program that provides for a transparent system of shared public and private compensation for certain insured losses resulting from a certified act of terrorism.

Question 51

Owner’s Interest Insurance

Question 52

CV

Answer 52

coverage?

Question 53

$240k for P + $15M

Question 54

1/2/2

Question 55

10 x P

Question 56

5 x 10

Question 57

NC statute of repose (6 years)

Question 58

Excess tower is Flat, non-auditable

Question 59

primary GL 1/2/2

Question 60

Builder’s Risk

Question 61

.55 annual premium

Question 62

stand-along T3 policy

Question 63

BMS

Question 64

COIs

Question 65

Owner’s Interest coverage

Question 66

Builder’s Risk

Question 67

Liquor liability Insurance

Answer 67

Liquor liability is only required for sale of alcohol and not for serving of alcohol.

Question 68

designated premise endorsement

Question 69

contingent liquor liability coverage

Question 70

ironclad

Question 71

hold harmless agreement

Question 72

indemnification

Question 73

general liability insurance

Question 74

per occurance limit
aggregate limit
products/completed operations limit
personal / advertising limit
fire legal limit
medical expense limit
liquor liability limit
assault and battery
umbrella limit
workers compensation

Question 75

additional insureds