Chapter 5 - Pecuniary Insurance Flashcards
Legal Expenses Insurance
Provides indemnity for costs arising out of the need to seek legal advice or to pursue or defend a civil action.
Can buy standalone cover, but many legal expenses policies are added to home or car insurance.
Policies bought before the event protect policyholders in case legal action has to be fought or defended in the future.
Policies bought after the event insure the policyholder when they have already decided to take or defend a legal action and provides cover against paying the other side’s costs. usually a standalone policy.
Group Legal Benefit Policies
4 sections which the proposer may choose cover:
Employment cover:
• Defence of any legal proceedings brought against a member arising out of and in the course of employment
• Defence and compensation awards resulting from actions brought under specific legislations
• Costs of claiming for compensation arising out of the member’s employment
Personal cover:
• Cover costs of pursuing personal rights or defending a personal action against the member
Motor cover:
• Covers costs of defending claims arising out of the ownership or use of a motor vehicle
Conveyancing cover:
• Covers legal costs involved in buying or selling a house
Commercial Legal Protection Policies
5 main sections of cover to choose from:
Employment cover:
• Covers costs of defending an action of an employee against the firm for unfair dismissal or racial or sexual discrimination
Criminal prosecution defence cover:
• Covers costs of defending an action brought against the company
Property disputes cover:
• Covers costs incurred in disputes between landlord and tenant
Motor cover:
• Pursuing uninsured loss recoveries after a motor accident
• Pursuing or defending actions brought in connection with the purchasing, lease, or repair of vehicles where a dispute has arisen
• Pursuing damages following a road accident
• Defending motoring prosecutions
Patents, registered designs, copyright and trademarks cover:
• Covers costs incurred in pursuing an action against any person alleged to be guilty of infringing the insured’s interest in patents
Legal Expenses Insurance Optional Extensions
- Contract disputes
- Debt recovery
Many companies have exposure to legal costs peculiar to their particular type of business: • Defending libel and slander charges • Involvement in public enquiries • Investigations by professional bodies • Taxation proceedings
Legal Expenses Insurance Limitations
Does not cover any legal action where indemnity in respect of costs is recoverable elsewhere.
Is usual for losses incurred prior to written acceptance of the claim by the insurer to be excluded.
Cover is not provided where a legal action is pursued by the insured against the advice of the insurer’s nominated solicitor.
Business Interruption Insurance Basic Features
Cover has 2 dimensions to it. The monetary amount and the time the interruption will affect the business.
Time is the indemnity period and is defined as; the period beginning with the occurrence and ending no later than the maximum Indemnity Period thereafter, during which time the business is affected by the interruption occasioned by the damage.
Business Interruption Insurance Turnover
This insurance is designed not to replace the whole turnover.
Net profit and standard charges, known as the gross profit, are insurable. Variable charges will reduce in direct proportion to the turnover, so if the turnover reduces the insured does not suffer a loss under this. The insured will work on a difference basis of cover, which works by deducting the variable charge from the turnover.
Business Interruption Insurance Basis of Fixing Sums Insured
There are 2 methods used for fixing the sum insured.
First takes the projected turnover for the forthcoming years and assumes the claim incident may arise on the last day of the period of insurance. This is worse case scenario as the interruption period would last the whole indemnity period. At the end of the period of insurance, when the actual gross profit is known and the insurer will allow a rebate.
Second is more straightforward known as a declaration linked policy. The policyholder is only required to estimate the figures for the forthcoming year. Insurers then apply a one third uplift automatically to take into account of any future growth in turnover.
Business Interruption Insurance Extra Costs
Certain expenses will actually increase following loss. New premises may need to be rented, more staff, advertising and work may need to be sub-contracted. It will be covered but insurers will not give a blank cheque for money to be spent extravagantly. Accountants' or auditors' fees will be incurred in preparing a claim. This is the only class of business that allows for the preparation of the insured's claim to form part of the claim itself.
Business Interruption Insurance Material Damage Warranty
A requirement is that there must be in place a policy which covers the physical damage leading to loss of earnings. This requirement is known as the material damage warranty. Main reasons for the inclusion is:
• Insurer knows that there are funds for completing the rebuilding and this may limit the length of the interruption period.
• Insurer will obtain the benefit of any warranties that may apply to the material damage cover.
Business Interruption Insurance Fire and Special Perils
ABI has issued standard policy wording.
Standard perils:
Standard perils covered for business insurance is the same as the material damage policy. Extending to include the explosion of any other boilers or economisers on the premises.
Special perils: Special perils covered for business insurance is the same as the material damage policy with the same exclusions. May extend to include engineering related perils: • Explosion and collapse of steam pipes • Explosion of vessels • Explosion and collapse of vessels • Collapse of boilers • Overheating of tubes • Overheating of boilers and economisers
Business Interruption Insurance All Risks
ABI has produced standard policy wording.
As material damage warranty applies, cover is the same under each policy.
Insurers usually issue a combined material damage and business interruption all risk policy.
Business Interruption Fire and Special Perils, and All Risks Optional Extensions
Standard policy only covers damage at the insured's own premises. The Insured's business may also be dependant on the continued existence of suppliers or customers. These extensions are subject to an AP but not to the material damage warranty. • Specified suppliers • Unspecified suppliers • Specified customers • Transit • Prevention of access • Public utilities • Notifiable disease, vermin, defective sanitary arrangements, murder, suicide
Business Interruption Insurance Engineering
No standard policy wording.
Perils usually fall under:
• Failure of the public supply of gas, electricity, water or telecommunications at the supplier’s feed to the premises
• Sudden and unforeseen damage from any accidental cause
Excludes:
• Perils covered under by Fire and Special Perils policy
• General market exclusions
• A scheme which rations supplies by a supply authority
• Deliberate act of supply authority
