CSR: Commercial GL Flashcards
Occurance
An accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Occurance-Based Policy
A policy covering claims that arise out of damage or injury that OCCUR during the policy period, REGARDLESS OF WHEN CLAIMS ARE MADE. Most commercial general liability insurance is written on an occurrence form (aka on a per-occurrence basis).
Claims-Made Policy
A policy providing coverage that is triggered when a claim is MADE against the insured DURING THE POLICY PERIOD, regardless of when the wrongful act that gave rise to the claim took place.
Third Party Liability Claim
Liability claims brought by persons allegedly injured or harmed by the insured. The insured is the first party, the insurance carrier is the second party, and the claimant is the third party.
Tort
A wrongful act which causes harm to someone else.
Intentional Tort
When a person intends to perform a wrongful act which causes harm to someone else.
Named Insured
Any perso, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy.
Automatic Insured
Individuals and/or companies that are covered automatically because they have a business relationship with the named insured.
Policy Limit and name the 6 Limites
Highest amount the insurance carrier will pay for a loss in a given policy term. Limits under a CGL policy are interrelated and payment of damages on one limit will affect another limit. There are 6 limits:
1) each occurrence
2) Damage to premises rented to you
3) Medical expense
4) Personal and advertising injury
5) General aggregate
6) Products/completed operations aggregate
1) Each Occurrence Limit
The most that an insurance carrier will pay for damages under Coverage A, Coverage B or Coverage C due to ONE occurrence. Regardless of the number of individuals or organizations who suffered a loss due to the occurrence, this limit will still apply.
Coverage A: bodily injury and property damage
Coverage B: Personal and advertising
Coverage C: medical payments
2) Damages to Premises Rented To You Limit
This limit is the most that an insurance carrier will pay for PROPERTY damages under Coverage A to a premises rented to the insured.
3) Medical Expense Limit
Most that an insurance carrier will pay for MEDICAL expenses under Coverage C for third-party bodily injuries. This limit applies separately to each third-party with bodily injury, but is a sub-limit of the ‘each occurrence limit’ and, as with the ‘damage to premises rented to you limit’, payments made under medical payments will reduce the ‘each occurrence limit’ for that same occurrence and will also reduce the ‘general aggregate limit’
4) Personal and Advertising Injury Limit
Most that an insurance carrier will pay for damages under Coverage B for third-party. Personal and advertising injury. THe limit is applied separately to each third-party sustaining the personal and advertising injury. Independent of the each occurrence limit’ meaning an insurance carrier might be required to pay both the ‘personal and advertising injury limi’, as well as, ‘each occurrence limit’ until the ‘general aggregate limit is reached.
5) General Aggregate Limits
Most that the insurance carrier will pay for all occurrences during the policy period. Once an insurance carrier pays the full amount of the aggregate limit, the carrier has no further obligation to pay claims or dense costs for the insured.
Most the insurance carrier will pay for damages under Coverage A and B
6) Products/Completed Operations aggregate Limit
Most that the insurance carrier will pay for damages under Coverage A for those claims, suits and hazards specified by the products-completed operations hazard.
The specific hazards are limited to a third-party’s bodily injury or property damage:
That occurs away from the insured premises AND
Arises out of the insured’s products no longer in the insured’s possession or the insured’s work that has been completed
Endorsement
Amendment to an insurance policy which adds, modifies, or eliminates coverage. Becomes a part of the legal insurance contract. Unless a specific term is noted, it will typically remain part of the policy even through policy renewals.
Endorsement Form Number
CG 24 04 0413
Form Number: CG 24 04 0413
CG= Commercial General
24 04 = the type of endorsement (Waiver of transfer…)
0413= version date of the endorsement (April 2013)
Additional Insured Endorsements
Individuals or entities not normally covered under the CGL policy, but for which the insured desires or is required by contract to provide coverage and so are added via additional insured endorsements.
Example: managers or lessors of premises
Club members
Church members and officers
Metaphor for CGL Limits: Water Tanks
Aggregate limits can be imaged as two separate water tanks. Piping from each tank flows into smaller tanks, each of which represents the four other CGL limits. Presume at policy inception the aggregate tanks are completely full, the other tanks (limits) completely empty.
Any time a claim is paid, the smaller tank from which the claim is paid must first draw the water from the large aggregate tank, reducing the water level in the aggregate tank. Claims are paid on the policy until the aggregate tank is empty- in which case the aggregate is exhausted as nothing is left. Any further attempt to draw from that aggregate tank during the policy period will come up dry. That is until the policy renews and the aggregate tank is refilled.
Waiver of transfer of rights of recovery against others to you (waiver of Subrogation) endorsement
Can be equeated to the workers’ compensation waiver of Subrogation endorsement where one party agrees to waive its right to pursue reimbursement from the at fault party in the case of a loss. There are also two versions of this endorsement: scheduled and blanket.
Employee benefits liability endorsement
Used to add coverage for damages the insured may incur due to error or omission committed in the admin of employee benefits.
Describing benefit plans and eligitibiliyt rules to employees, other eligible family members, and beneficiaries
Maintaining files and records related to employee benefits, whether electronic or paper
Enrolling, maintains and terminating employees, eligible family members or beneficiaries in benefit plans
Designated COnstruction Project General Aggregate Lmit Endorsement
Aggregate limits are typically applied on a ‘per policy’ basis. This endorsement changes the aggregate limits to be applied on a ‘per project’ basis. The aggregate limits will then pay for the total of all claims during each project and will essentially reset with each new project throughout the policy term. Most often, the endorsement calls for each project to be listed by name within the policy.
Exclusion
instead of adding or modifying covering, this removes coverage form the policy. Sometimes built into the policy language itself, but often times by endorsement. If the excluded overage is necessary for the insured, the insured can sometimes negotiate for the exclusion to be removed from the policy. Standard Coverage A Exclusions: expected or intended injury, contractual liability, liquor liability, worker’s compensation and similar laws, pollution, war, damage to property, damage to your product, damage to your work, damage to impaired
Coverage B: knowing violation of rights of another, material published with knowledge of falsity, material published prior to policy period, criminal acts, contractual liability, breach of contract, quality or performance of goods-failure to corm to statements
Coverage C: miscellaneous type, public or livery conveyance, residence or premises, workser’s compensation, autos owned by or crushed or available for you regular use, business, war, nuclear, racing
Premium basis
The basis to which rates are applied to determine premium.
Exposure
An insured’s level of risk to a loss or claim represented as actual/estimated figures.
Determining the correct premium basis
The class code is tied to a premium basis which can be an insured’s payroll, gross sales, total cost and/or a variety of other business information.
Claimant
The third- party making the claim or responsible for a loss.
Indemnity
The coverage amount provided to the claimant for damages incurred due to the occurrence.
Claim Number
A unique identifier that attaches an in surname claim/loss to a specific claimant.
Deductible
An amount the insured is responsible to pay to an insurance carrier for each covered loss.
Policy Limit
The highest amount of damages the insurance carrier will pay for a claim that the insured’s insurance policy covers.
Term
The period of coverage provided by an insurance policy.
Paid
Losses paid to claimant during the reported period.
Reserve
An estimated amount set aside to cover an open claims potential future expenses.
Incurred
The total amount of paid and reserve losses for a claim or policy period.
Date of Loss
Date for when the loss event occurred.
Location of Loss
Location of where the loss event occurred.
Date Reported
Date for when the loss event was reported to the insurance carrier.
Loss Description
Description of the loss event/occurrence.
Paid
Losses paid to claimant during the reported period including any deductibles paid to the insurance carrier for said claim.
incurred
The total amount of paid and reserve losses for a claim or policy period including any deductibles paid to the insurance carrier for said claim
Status
The current state of the claim (open claim vs closed claim)
Agent of Service Authorization Letter
The insurance carries need to receive this from the insured in order to release the loss run report. This letter provides permission for the insurance carrier to release the insured loss run data, most often, to the insured’s current agent of record. The carrier is bound by law to provide the loss run report within a certain period of time.
What ACORD forms are used when placing a GL insurance
125 General- considered to be the foundation of all commercial applications, provides detailed info regarding the insured not duplicated on any other ACORD commercial application forms
126 GL- this document details an insured’s exposure, loss history, and other necessary business operations. Cannot be submitted by itself
829 forms and endorsement schedule- this form can be attached with any other ACORD form. It provides insurance carriers with additional policy info needed by the insured and/or carriers
Submission and what forms are included
Specific collection of documents provided to an insurance company allowing them to write an insurance policy. Important that the submission is both accurate and complete as it is what determines the premium or even whether or not they will even consider releasing a quote. Forms: estimated annual exposure figures Supplemental applications Currently valued loss run reports Completed ACORD forms
Quotes
Provides an accurate summary of pricing and coverage from the insurance company. Quotes are made viable to a CSR 14-30 days prior to the insured’s daily current policy expiration date.
Base Rate
Rate the insurance carrier has filed with the state for a class code that is the starting point for premium calculations.
Estimated Policy Premium
= exposure figure / 1,000 X base rate
Coverage Form: Occurrence
A form of policy that will provide coverage for events which “occur” during the policy period, regardless of when a claim is filed. It will respond to claims that come in during and after the policy has been canceled (if the incident occurred during the period in which coverage was in force).
A.M. Best Company Rating
A global credit rating (provided by the A.M. Best rating agency) indicating an insurance carrier’s financial strength and credit worthiness. THe insurance carrier is also assigned a Financial Size Category (FSC) to enhance the usefulness of the A.M. Best credit rating.
Inspection and Audit Fee
Can be equated to an “expense”, it is a fee an insurance carrier charges the insured to cover the expected costs of a policy inspection and/or audit.
Total Amount Due Upon Binding
Can be equated to a “Deposit”, it is the amount the insured needs to pay upfront in order for the insurance carrier to bind coverage
Minimum Earned Premium at Binding
Typically presented as a percentage, it is the lowest amount the insurance carrier will charge after coverage has been bound should the insured cancel the policy. Think of the short rate table used to calculate the short rate cancellation penalty. The percentage provided for ‘minimum earned premium at binding’ would be the starting percentage for the short rate table.
Subjectivities (aka contingencies)
Forms required by the insurance carrier in order for them to bind coverage with a insured.
Self-Insured Retention
A dollar amount that must be paid by the insured before the insurance policy will respond to a potential claim.
Admitted/Non Admitted
Status for an insurance carrier determining whether or not they are filed to do business in the state or country in which the insured’s exposure is located.
Note: Policies are often written on Non-admitted paper. This is not necessarily a bad thing, but may come with limitations.
Binding Coverage
Means that an insured has agreed to an insurance company’s quote and is requesting that the coverage begins on the policy’s effective date. This bind coverage request is referred to as a bind order.
Bind Order
Bind coverage request Must include: Signed ACORD 125 signed ACORD 126 signed ACORD 829 Signed supplemental applications Copy of the deposit check Subjectivities
Voluntary Audit
The carrier sends a ‘Voluntary Audit Form’ to the insured within 30 days of the policy expiration date. The insured must complete the form and return it to the insurance carrier quickly. The main focus of the audit is to determine the insured’s actual exposure figures during the policy year.
Physical Audit
THis type of audit is far more extensive and is conducted within 60 days after the policy expiration. An auditor visits the business and completes an audit within 30 days.
Documents needed for Audits
The insured is required to provide source documents and one or more certification documents to the auditing company.
Gross Sales Based GL Policy Source Documents: Sales journals General ledger Income statements- Profit & Loss Statement
Verification Documents:
Fed tax returns
State sales tax returns
Income statements-profit & loss
Payroll-Based GL Policy
Source:
payroll vendors payroll info reports
Internal reporting applications payroll information reports
Accountants or bookkeeping services payroll information
If the insured paid for contracted labor: a report with names, description of work performed, date work started/ended, total amount paid and cost of materials supplied
Verification DOcs: Fed form 941 Fed form w2 Fed form w3 State unemployment wage reports If sole proprietor: fed form 1040 If partnership: fed 1065 If corporation: form 1120 If insured paid for contracted labor: COI and dates worked
If INsured Disagrees with Audit Outcome
Insured needs to submit a written a don signed letter of dispute including their info (business, policy, phone # email, and description of what’s being disputed)
THe insured still needs to pay the undisputed portion of the final audit pending resolution.
If insured does not comply with Final Audit
This is unfortunate and beyond the CSR’s ability to provide assistance. The insured current policy may be canceled. The insured’s final audit premium could be increased.
Common Final Audit Mistakes
1: accidentally including the following in the gross sales:
Sales or excise taxes
Credits for repossessed merchandise and products returned
Finance charges for items sold on installments
Freight charges on sales if freight is charged as a sep item on invoice
Royalty income from patent rights or copyrights
Intra-company sales
Failing to collect COI from contractors
CGL automatically covers the insured for suits due to an independent’s contractors operations. The base rate applied for this coverage can be decreased if the insured obtains and keeps certificates of insurances for their inde contractors on file. Additionally, the COIs can preserve the liability limits of the insured and keep claims out of their loss experience.
Coverage A
Coverage for an occurrence which results in a third-party’s bodily injury and/or property damage.
Coverage A is triggered if:
- bodily injury or property damage occurs during the policy period
- bodily injury or property damage is caused by an occurrence
- occurrence takes place in the coverage territory
- insured is legally liable for the loss
- insured was not aware of the bodily injury or property damage, in whole or in part, prior to the policy period
Medical Expense Limit
Most that an insurance carrier will pay for medical expenses under Coverage C for third-party bodily injuries. Coverage for an Occurance which results in a third-party becoming injured due to the insured’s business activities.
Primary and Non Contributory Endorsement
Specifies that a specific party will e first to respond on a covered claim in which two or more parties share responsibility
Supplementary Payments
Provides the insured with coverage for costs incurred to investiggage claims, defend against any lawsuits insured under Coverage A or Coverage B and a few other expenses the insured may incur.
Coverage B
Personal and Advertising Injury: libel, slander, false arrest, infringing on another’s copyright, malicious prosecution, use of another’s advertising idea, wrongful eviction
Triggered if:
- event occurs within the policy period.
- occurrence takes place in the coverage territory
- insured is legally liable
Designated COstruction Project(s) General Aggregate Limit Endorsement
Changes the aggregate limits on a policy to be applied on a ‘per project’ basis.
Supplemental Application
Sent to the insured to collect additional information regarding business operations as it relates to the industry
Coverage C
Coverage for an occurrence which results in a third-party becoming injured due to the insured’s business activities. will pay for the injured third-party’s medical expenses in hopes that the third-party will not file a lawsuit against the insured. Coverage C is considered a “no-fault coverage” which differs from Coverage A and B since the insured is not required to be legally liable.
Triggered if:
- event occurs within the policy period
- occurrence takes place in the coverage territory
