ch 6 commercial insurance products Flashcards
What is the Standard Fire Cover made up of
Its covers three ares
- Fire
- Lightning
- Explosions
The fire cover of the standard fire cover excludes which cover
- Explosions resulting from fire
- Earthquake/subterranean fire
- Own Spontaneous Fermentation/heating
The Explosion cover of the standard fire cover only includes which cover
It covers explosions of boiler/gas for domestic purpose only
The special perils offered with standard fire cover are preceded by what
They are preceded by “damage to the property by”
What are the special perils offered with standard fire cover
- Explosion
- Aircraft
- Riot and Civil Commotion
- Malicious Damage
- Earthquake
- Subterranean Fire
- Spontaneous fermentation/heating
- Storm and flood
- Escape of Water
- Impact
- Sprinkler Leakage
- subsidence ground heave and landslide
The special peril of Explosion excludes
Damage caused by bursting of boilers and other equipment that are under the control or belong to the policyholder where internal pressure is due to steam only (this is covered in engineering policy)
The special peril of Aircraft excludes
Sonic Bags
How does the Public Order 1986 define riot
A group of 12 or more people gathered for or carrying out a common purpose with the intent and force to alarm a person of reasonable firmness and courage
Riot and Civil commotion only cover which geographical location
Riots in England, Scotland and Wales,
The gov’t has its own scheme with Northern island
How long do insurers give for riot claims to be notified to them
Within An agreed period of usually 7 days
Why do insurers give an agreed period for which a riot claim can be reported
-This is because insurers can claim damages from the local police authority for damages incurred due to the riot activity and this needs to be lodged with the police within 42 days
Which Act replaced the Riot Damages 1886
The Riot Compensation Act 2016 after the 2011 August Riots,and the riot Compensation regulation 2017
What did the Riot Compensation Act 2016 and The Riot Compensation Regulation 2017 state about Riot and Civil commotion
They limited amount that insurers can recover from the policy ,the highest amount being 1 million pounds
What restrictions did the Riot Compensation Act 2016 and the Riot Compensation Regulation 2017 place
- They won’t cover any consequential loss
- Replacement of goods and property will exclude motor vehicle/b’ness stock.second hand stock and other items subject to depreciation
The Riot Compensation act 2016 and Riot Compensation Regulation of 2017 extended the number of days in which claims can be brought to the police
From within 42 days and now to within 90 Days so as to provide supporting evidence
The Riot Compensation act 2016 and Riot Compensation Regulation of 2017 stated that replacement of goods and properties will
The replacement of goods and properties(items that don’t depreciate) are permitted on a new for old basis
The Riot Compensation act 2016 and Riot Compensation Regulation of 2017 provides limited cover for motor vehicle and trailers
It provides cover for motor vehicle and trailers for where the motor insurance policy does not include cover for damages resulting from riot. It doesn’t apply to uninsured vehicles
The Riot Compensation act 2016 and Riot Compensation Regulation of 2017 applies to whom
It applies to insurers on their recovery process and uninsured claimant
The special peril of Subterranean fire cover
Also known as underground fire, it important if you live in areas with former mining activity
The special peril of Storm and flood for standard fire cover
These two perils are usually written together, as storm is often proximate cause for flood
The special peril of Storm and flood excludes
Property that is vulnerable to such losses e.g gates and fences
Changes in water table levels
The special peril of Sprinkler Leakage for standard fire cover
It is offered to companies with sprinkler fire protection in their premises provided the systems are maintained
How are standard exclusion in a standard fire cover divided to
Exclusions because they are fundamental risks and Exclusions because they are more properly insured under other types of commercial insurance policy
What are the main exclusions for standard fire and special perils cover
- War Risks
- Radioactive contamination/explosive nuclear assemblies
- Terrorism
- Northern Ireland excluded perils
- pollution/Contamination unless cause by an insured peril or it causes the insured peril to occur
- Marine Policies
- More specifically insured clauses
- Consequential loss
- Sonic Bangs
- E-risks
What type of cover is provided by an All Risk Insurance
It covers all loss,destruction of or damage to the property insured is recoverable as it is if it has occurred accidentally in respect of the insured and the cause is not specifically excluded
Are there optional extensions in All Risk covers
No they are no optional extensions unless specifically excluded
Exclusions for All Risk Insurance are divide into how many groups
- Absolute Exclusions i.e. War/Pollution/Contamination
- Gradual Operating Exclusion i.e corrosion/rust/wind/rain damage to property in the open
- Aspects of cover which can be written in other policy
- Property or risks more appropriate for another class of business
How does the theft Act 1968 states that a person is guilty of theft if they
dishonestly appropriate property that belongs to another person with the intention of permanently depriving the other of it
For theft insurance what do insurers include
They include a phrase that it must include force and violence either breaking in or out of the insured premise
What are the common extensions under theft cover
- breakage of glass
- replacement of locks,if keys are lost/misplaced
- Temporary removal-covers theft damage while chattels are being cleaned restored/repaired, temporarily away from the premises
- index linking
- extended/full theft i.e forcible and violent entry is removed requested when items of plant or stock are left overnight
What are Theft Insurance exclusions
- collusion i.e plotting and agreement between thief and employee
- fire and explosion
- cash/bank notes
- livestock
Theft Cover for much smaller risks will require
The insured will have to comply with an intruder alarm warranty and a minimum standard of security warranty
How is theft insurance prices/rated
Using the theft estimated maximum loss as a rating factor(EML)
What is an EML
This is an amount expressed as a % of the sum insured which is considered by the insurer to be accurate reflection of the worst financial effect that the maximum foreseeable loss would have
How do underwriters apply the ratings for theft insurance
It will depend on the type of goods at risk
In what insurance cover can you find glass insurance
Fire or Theft policy
A Standard glass insurance covers
It covers destruction or damage to all fixed glass, including windows/doors/fanlights/showcase/mirrored glass/glazed partitions
What extension is in the glass insurance
Extension to provide the cost of boarding up damaged glass until replacement can be effected
Glass insurance is what type of cover
It’s an all risk cover
Glass Insurance excludes
It excludes scratching/chipping
-damage by fire/lightning and explosion
What additional premium cover can be provided under glass insurance
damage to storefront content because of broken glazing
-damage to washbasins and sanitary fittings in hairdressing salons
Since money is non-negotiable how are limits set
i.e Crossed Cheques Non-negotiable means difficult to convert into cash values, thus have relatively high limit
What about other items that are negotiable in money insurance
like Bank notes/currency notes these items limit of liability are modest and will depend on the locality and time
In respect to negotiable items what are the money limits specified in the policy
- Any other Money limit
- Money in safe
- In the insured’s premise out of working hours i.e up to 250 pounds
- private residence of a director/employee i.e up to 250 pounds
What is any other money limit in Money Insurance
It limits the money while in the premises during working hours and while in transit
In respect to money in transit what do insurers stipulate
Insurers may stipulate an escort warranty depending on the amount carried , a specified number of able-bodied people may be present. For large risks limit is 10,000 pounds and could be as low as 1,000
For Money put in safe, what will insurers mostly require
They often require a security safe to be installed if money exceeds a specific limit
For Money put in safe what is the risk surveyors job
There job is to determine whether a safe is required or assess whether an existing safe is suitable
Money Insurance covers
It covers risks of loss/damage to/destruction of money on an all risks basis and includes damage to safes or strong rooms cause by theft or attempted theft
Money insurance can be extended to include
- personal accident/assault
- credit cards
Money Insurance specifically excludes
Loss due to
- error/commissions in the accounting and book-keeping
- dishonesty of an employee not discovered within 7 days
- damage arising outside the UK, isle of man /Chanel islands
- safe/strongroom being opened by a key left on the premises while closed for b’ness
What are pecuniary Insurance
These are insurances that cover direct financial losses of a business
What is the Business Interruptions
This covers actual/potential loss of earning and additional expenses incurred as a result of a material loss cover under property insurance
What other costs do Business interruption cover
- earnings that may reduce/cease following property damage
- certain overheads that need to be paid in full
- certain increase in costs incurred in order to keep the b’ness operating
- accounting charges incurred in presenting the claim
What is the indemnity period
The maximum time the income of the business could be affected due to damage
Business interruption sum insured represents
IT represents the Gross Profit
What is the Gross Profit
IT is calculated as Turnover (adjusted for Opening and Closing Stock) less uninsured working expenses
What are Uninsured working expenses
These are those costs which vary direct proportion to the level of turnover.like electricity/raw materials
How is the payroll element insured in BI
It is insured in full but a lower rate may apply
What are the main items insured under Business Interruption policy
- Loss of Gross Profit
- increased cost of working incurred in order to reduce the loss of gross profit following the insured event
What is the Material damage proviso in BI
It requires a property policy covering physical damage for the incident before business interruption policy comes into operation. The two policies are linked
What are the most common policies business interruption arises from
- Fire and Special Perils
- All Risks
- Engineering
Fire and Special Perils with Business Interruption leads to
The standard peril will extend to non domestic boilers and the special peril contains 6 engineering special perils not covered under material damage policy
For Engineering with Business Interruption what does it cover
The perils covered are either
- failure of public utilities supply
- sudden and unforeseen damage from any accidental cause not specifically excluded
What are other optional extensions for Business Interruption policy
- Specified Suppliers
- Unspecified Suppliers
- Specified customers
- Transit
- Prevention of access
- Public Utilities
- Notifiable disease/murder/suicide
- Contract sites
The optional extension for BI of Specified supplier indemnifies
Provides an indemnity to the insured if the supplier suffers a serious loss and can’t supply the insured’s goods
Where is unspecified supplier included in BI
It is included under most BI wordings and provides a pre-set limit i.e.10% of the gross profit sum insured, for loss of profit as a result of loss at a suppliers premises
The optional extension for BI of Specified customer indemnifies
Provides indemnity to the insured if their specified supplier suffers a loss, the loss must occur at a customers premise,making them unable to purchase the insured’s goods
The optional extension for BI of Prevention of access indemnifies
It covers customers being unable to access the insured’s premises following damage to premises with the vicintiy of their own could lead to loss of profit
The optional extension for BI of Notifiable disease/murder/suicide indemnifies
Covers for loss following the occurrence of one of the events and therefore preventing the insured from conducting their b’ness activities at their premises
The optional extension for BI of Contract Sites indemnifies
It covers when an insured may incur a loss if there is damage on a contract site where they are working
Increased cost of working (ICOW) is also known as
Additional Cost of Working (ACOW)
Increased cost of working is designed for which types of companies
Companies that don’t necessarily experience large scale/if any loss if they suffer a serious fore or other loss at their premises
What is the main difference between the ICOW under loss of profits and a stand alone ICOW policy
The ICOW stand alone policy will cover uneconomic loss, where as the ICOW under loss of profit covers economic losses
ICOW stand alone polices cover uneconomic losses meaning
The insured can allocate the money as they wish according to the policy terms
ICOW under loss of profit polices cover economic losses meaning
The additional cost need to serve to reduce the size of the profits claim
Legal Expenses insurance under commercial insurance covers
Covers firms/companies costs arising out of the need to take action in the courts or to defend an action brought against the insured, also covering the costs of the insured and their employees time spent in curt
A Standard Legal expense insurance for commercial insurance will include
- Employment Disputes-
- Criminal prosecution defense cover
- Propriety disputes cover
- Patents/registered designs.copyrights and trade mark over
- Taxation proceedings
Under Legal Expense insurance,employment disputes cover
The cost of defending unfair dismissal/racial/sexual discrimination claims plus any awards made against the insured if unsuccessful
Under Legal Expense insurance,Criminal prosecution defense cover
Covers the cost of defending an action against the insured under health and safety legislation, however fines are not covered
Under Legal Expense insurance Patents/registered designs.copyrights and trade mark cover
This covers defending claims against alleged breach of copyright
What drives liability and liability insurance
Negligence
In general terms negligence can be defined as
Doing something which the reasonable/prudent person wouldn’t do or omitting to do something which a reasonable person guided by those consideration which ordinarily regulate the conduct of human affairs would do
The employers’ Liability Act 1969
This Act required every employer in the great Britain to be insured against liability for bodily injury/disease sustained by their employees arising out of and in the course of their employment
The Employers Liability (Compulsory Insurance)Regulation 1998 extended to
- minimum limit increased from 2 m pounds to 5 m pounds
- certificate of insurance must be kept for 40 years
Employers liability has a standard market wording
No, it follows the same form with wordings being broadly similar
The employer liability policy provides coverage for
- The insured
- The Employer
- And against damages they are legally liable to pay to an employee
Changes in Enterprise and Regulatory Reform Act 2013 resulted to
It is now a requirement for negligence to be proven when a claimant brings forth a claim
The Employer’s Liability Damages cover
It pays damages to the employee injured including loss of (and future) earnings,pain and suffering. Claimants costs and expenses plus any award of cash and damages by the court
What is the definition of an employee in employer liability over
Any person who is under contract of service or apprenticeship with the insured. Defined by the EL(Compulsory Insurance) Act 1969
What are the optional extensions of Employers Liability
- Defense Costs and Expenses
- Additional person insured
- Compensation for court attendance
- Unsatisfied Court Judgment
What does the Defense Cost and Expense optional extension of employers liability cover
Those incurred by the insured themselves, they cover legal costs not following an accident
What does the additional person insured optional extension of employers liability cover
any director/partner/employee of the insured in their personal capacity for action bought against them, for which insured will be entitled to indemnify the policy
What does the unsatisfied court judgment optional extension of employers liability cover
This happens if an employee has won an award against third party but the settlement has not been met by third party, upon the insured’s request payment for the amount of damages/settlement can be made to the employee provided it was in connection with work-related activity
What does it mean when you say public liability policy is open
It covers all legal liability that is not excluded
Public Liability policy covers
Provides indemnity to the insured for legal liability to third parties for damages( including claimants cost and expenses) in respect to bodily injury/death/disease/illness and for any loss or damage to property which happens in connection with the business insured under the policy and occurring during the period of insurance
In order for Public Liability insurance to be valid
There must be some sort of negligence/breach of statutory duty
What are some of the exclusions of public liability policy
- injury to employees
- property belonging to the insured
- product liability
- contractual liability
- professional negligence
- Deliberate acts
- Motor Vehicle
- Vessels and craft
- War Risks
- Lifts/elevators/boilers
- Radioactive contamination
- Cost of rectifying a defective work
Product Liability Insurance covers
It covers legal liability for bodily injury/property damage which arises out of goods/products manufactured, constructed,altered.repaired,serviced,treated,sold,supplied or distributed by the insured
How is Product Liability most often sold
It is usually sold in conjunction with Public Liability policy as a combined PL/Product cover
What are important facts about product liability
- Cover is for consequential loss following actual injury/damage
- Financial loss is not usually covered unless accompanied by bodily injury/loss of/damage to property
- The basic cover is dependent to an element of accident
- The injury/damage must occur during the period of insurance
- a yearly aggregate limit of indemnity is usually specified
What are the exclusions under product liability
- Contractual Liability
- Damage to the actual goods supplied, as insurers are not looking to replace damaged products
- Faulty designs,formula
Pollution Liability provides cover for
It’s provided to the insurred in respect of pollution/contamination caused by a sudden identifiable/unintended and unexpected incident which takes place in entirely at a specific moment in time and place and during any period of insurance
How are pollution/contamination claims handled
If the event arises out of one incident it is treated as one claim, regardless of any separate parties are affected or whether damage spans mote than one policy period
Professional indemnity insurance covers
It covers a professional person liability for injury/damage/financial loss to client/public due to breach of professional duty/negligent acts/errors/omissions in their professional capacity
Professional Indemnity provides award for what type of financial loss
They award damages for pure financial loss,something that courts usually don’t allow claim if there is no injury/damage as well
On what basis is professional indemnity covered
It’s covered on a claims made basis. Thus PI policies contain retroactive date
Claims made basis policy means
this applies to claims made against the insured during the period of insurance
Claims occurring basis policy means
this applies to claims/losses occurring during the policy period
What is a retroactive date
This is date usually predates the inception of an insurance contract which is normally an annual policy
When are retroactive dates normally applied
They are applied from the first date you have held uninterrupted insurance
Why do insurers use retroactive date
So as to exclude claims relating to work which predates the retroactive date for which cover has been in place
Under Professional Indemnity what is excluded
Insured’s Dishonesty
How does ABI define Cyber Insurance
It is defined as losses resulting to damage/loss of information from IT systems and networks
What can cyber insurance covers
It covers both damage to physical property and data on it,pecuniary loss following interruption and liability to third parties in respect of loss/damage to third party property or third party data
What are some of the examples of cover provided by cyber insurance
- loss of data or software
- theft of money through electronic systems
- loss of b,ness following interruption to electronic system
- reputation risk following loss of data
- cost of paying for damages to third parties
- defense cost in the event of any action brought against a company following loss of customer data
- cost of paying damages arising from torts
