IF3.6 Commercial Insurances / IF4.2 Flashcards
For a claim to be completed in commercial property insurance, perils must…
result in damage to the property
What does fire and special perils insurance do?
compensates the insured in the event of property damage caused by a fire of any of the ‘special perils’
What are the three parts of standard fire cover?
-fire (excluding explosion resulting from fire, earthquake or subterranean fire, and spontaneous fermenting or heating)
- lightning
- explosion (restricted to domestic purposes only)
What are the special perils in a fire and special perils policy?
Damage caused to the property by…
- Explosion (excluding boilers exploding due to steam)
- Aircraft (excl. sonic bangs)
- Riot and civil commotion (within 7 days)
- Malicious Damage e.g. vandalism
- earthquake
- Subterranean fire (underground fire)
- spontaneous fermentation or heating)
- Storm and Flood
- Escape of water (burst pipes)
- Impact (e.g. vehicles)
- Sprinkler leakage
- subsidence, ground heave or landslip.
Why do UK insurers accept earthquake as a special peril?
There is minimal earthquake activity in the UK
What are the special perils in a fire and special perils policy which are SOCIAL
- Riot and civil commotion (within 7 days)
- Malicious Damage e.g. vandalism
What are the special perils in a fire and special perils policy which are NATURE
- earthquake
- Subterranean fire (underground fire)
- Storm and Flood
- subsidence, ground heave or landslip.
What are the special perils in a fire and special perils policy which are CHEMICAL
- Explosion (excluding boilers exploding due to steam)
- spontaneous fermentation or heating
Riot Compensation Act 2016 / Riot Compensation Regulations 2017
- applies a £1 mil limit for any one claim
- will not apply to any consequential loss
- Claims against police have 42 days (a further 90 days to submit full claims details)
- provides limited cover for motor vehicles and trailers
- permits replacement goods and property on a new for old basis
Standard exclusions of Commercial property insurance
- war risks
- radioactive contamination
- terrorism
- Northern Island Excluded perils
- Pollution or contamination (unless caused by an insured peril)
- Marine policies
- ‘More specifically insured’ clauses
- ‘consequential loss’ e.g. loss of profits
- sonic bangs
- cyber risks
what does ‘All risks’ commercial insurance cover
Does not cover everything, just covers everything that is not specifically excluded.
Four groups of exclusions
- absolute exclusions
- gradually operating exclusions
- aspects of cover which can be written into the policy
- property risks more appropriate to another class of business
absolute exclusions
War, pollution, contamination, consequential loss
gradually operating exclusions examples
corrosion/rust, wind/rain damage
Aspects of cover which can be written into the policy examples
e.g. money, glass, subsidence
Property of risks more appropriate to another class of business examples
motor vehicles, aircraft
theft Insurance
Insurance to damage caused by theft and theft itself
Theft Act 1968
Someone is guilty of theft if they dishonestly appropriate property belonging to another with the intention of permanently depriving the other of it
Condition of commercial theft cover
must include force and violence either breaking in or out of the insured premises, removes cover for entry by a key, a trick or concealment on the premises while open and leaving without forcible exit.
common extensions to commercial theft insurance
- breakage of glass (unless specifically covered elsewhere)
- replacement of locks if keys are lost
- temporary removal
- index-linking
- extended or full theft
common exclusions of commercial theft insurance
- collusion
- fire and explosion
-cash, bank notes etc - livestock
Estimated maximum loss (EML)
the amount which is considered by the insurer to be an accurate reflection of the worst financial effect that the maximum foreseeable loss would have.
commercial glass insurance
destruction or damage to all fixed glass, including windows, doors, fanlights, showcases, mirrored glass and glazed partitions, and usually includes an extension to provide for the cost of boarding up damaged glass until replacement can be effected.
Usually excess of £250 to avoid small claims.
A usual exclusion in commercial glass insurance
- scratching or chipping
- damage by fire, lightening and explosion
commercial money insurance
Protects against the loss of money & damage to safes and strong rooms in attempted theft.
negotiable items
readily convertible into their cash value e.g. cash (low limits £1000)
non-negotiable items
difficult to convert into a cash value e.g. cross cheques (high limits £250k)
limits of negotiable items
- while in the premises, when open for business and while in transit (standard limit e.g. £1000)
- Money in a safe (higher up to 10k)
- premises out of working hours (lower £250)
- private residence of a employee (low e.g. up to £250)
standard extensions for commercial Money insurance
- personal accident/assault
- credit cards
specific exclusions for commercial Money insurance
- errors in book keeping
- dishonesty of an employee (not discovered in 7 days)
- damage arising outside the UK
- a safe/strong room being opened by a key left on the premises (while closed for business)
escort warranty
depending on the amount of money being carried a specific number of people may need to be present
Index-linking
adjusts the declared value at renewal to make sure that inflation is taken into account so that the sum insured will be sufficient.
what is theft cover usually priced on?
Estimated maximum loss (EML)
Target goods
high value items which may be targeted by thieves e.g. computer equipment, wines & jewellery
HIGH VALUE LOW QUANTITY ITEMS
Pecuniary Insurance
Loss involves a direct financial loss
Business Interruption Insurance
Covers loss of earnings and expenses incurred while a business is unable to operate at full capacity due to fire or other insured incident.
Examples of pecuniary insurance
Business Interruption & Legal
Why is business interruption neccessary?
- earning may reduce or cease following property damage
- certain overheads still need to be paid
- increases in costs incurred in order to keep the business operating
What is the sum insured of business interruption based on?
gross profit (turnover)
How is gross profit calculated?
turnover - uninsured working expenses
Material Damage Proviso
Can’t make a claim from a business interruption policy until you have a property policy covering the physical damage for the incident and have made a claim.
Maximum indemnity period for business insurance
chosen by the insured as the amount of time that business interruption policy will support a business. (12 to 36 months)
What are the two things covered on a Business insurance policy?
- actual or potential earnings (loss of earnings)
- overhead fees or increased costs to working (e.g. laptops)
Uninsured working expenses
costs which vary in direct proportion to the level of turnover e.g. electricity, raw materials
Optional Extensions of business interruption
- specified suppliers
- unspecified suppliers
- specified customers
- transit
- prevention of access
- public utilities
- notifiable disease/murder/suicide
- contract site (cover is provided for all sites not just the main one)
Specified/Unspecified Suppliers for business interruption policies
if the supplier suffers a serious loss and cannot supply the insured goods then it will be covered. Unspecified is the same but they provide less than 10% of the materials and the limit of indemnity is lower.
Specified customers for business interruption policies
If the retailer you sell most of your products too is damaged and stops buying will provide cover.
Public Utilities for business interruption policies
failure of gas, water & electricity that effect production.
Notifiable disease, murder & suicide for business interruption policies
if the insured is prevented from conducting their business activities on their premises business may be lost and is hence covered.
Difference between and Increased cost of working policy (ICOW) and an increased cost of working clause in an business interruption policy
Stand alone policies cover uneconomic loss
Legal Expenses Insurance
Costs arising out of the need to take action in the courts or to defend an action bought against the insured.
Standard legal expenses insurance covers
- employment disputes
- criminal prosecution defence cover
- property disputes cover
- motor cover
- patents, registered designs, copyright and trademarks cover (defending claims against alleged breach of copyright)
- taxation proceedings
Employment and property disputes legal cover
covers the cost of defending disputes e.g. with neighbours over planning applications or over unfair dismissal
Criminal Prosecution Defence Cover
covers the cost of defending an action against the insured, usually under health and safety legislation (fines are excluded, this is against public interest)
What does Motor legal cover protect agaisnt
uninsured loss recovery, defending motor prosecution
Negligence
Doing something which the reasonable or prudent person would not do, or omitting to do something which a reasonable person guided by those considerations which ordinarily regulate the conduct of human affairs, would do.
Employers Liability Insurance
Injuries arising from employers negligence will be covered & costs and expenses of the claimant when the event occurs within the boundary gates of workplace or in the course of employment
Employers liability (Compulsory Insurance) Act 1969
every employer in great Britain must be insured against liability for bodily injury or disease sustained by their employees arising out of and in the course of their employment
minimum limit of indemnity for employers liability insurance
£5m (although most insurers provide £10m)
How long must you keep your employers liability insurance certificate?
40 years
in employers liability insurance, pure accidents which are not the result of negligence are…
not covered.
Enterprise and Regulatory Reform Act 2013
negligence must be proven when a claimant brings forwards an employers liability claim
Define Employee
Any person who is under a contract of service or apprenticeship with the insured
losses occuring
if disease was caused by work and has arisen since the policy expired then the policy is still liable.
optional extensions of employers liability insurance
- defence costs and expenses
- additional persons insured (e.g. other partners, directors etc.)
- compensation for court attendance
- unsatisfied court judgements
Public Liability Insurance
legal liability for third parties for damages in respect of bodily injury, death, disease or illness, and for any loss of or damage to property which happens in connection with the business insured under the policy and occurring during the period of insurance.
HAS TO BE NEGLIGENCE.
Limit per occurence
When there is a limit of indemnity for an event that occurs (even if there are multiple claims resulting from the event).
What does loss or damage to property exclude
intangibles e.g. copyrights and also direct economic loss
Common exclusions of public liability insurance
- those covered by other policies (e.g. injury to employees, property belonging to the insured, product liability, professional negligence, motor vehicles)
- Contractual Liability
- Cost of rectifying defective work
- Deliberate acts
- Vessels and craft
- war risks
-radioactive contamination
Product Liability Insurance
legal liability for bodily injury or property damage which arises out of goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied or distributed by the insured.
sold in conjunction with public liability.
cover is for the consequential loss following an injury, not covering financial loss the loss must occur during the period of insurance. Must be an ACCIDENT.
Yearly aggregate limit of indemnity
all total claims should not exceed a given limit
Common exclusions for product liability insurance
- contractual liability
- damage to actual goods supplied
- faulty design or formula
Pollution Liability insurance
indemnity provided in respect of pollution or contamination caused by a sudden identifiable, unintended and unexpected incident which takes place at a specific moment and place.
Professional Indemnity Insurance
liability for injury, damage or financial loss to clients or the public as a result of a breach of professional duty or negligent acts, errors or ommisions in their professional capacity.
Claims made basis
The policy that is in force at the time of a claim is the one to pay out (not the one in place when the loss occured)
Which policies are issued on a claims made basis?
professional indemnity
Which policies are issued on a losses occuring basis?
product liability, public liability, employers liability
Retroactive dates
when buying professional indemnity insurance a retrospective date should be provided which is the date where insurers will pick up claims from.
Directors and officers (D&O) insurance
protects directors against personal liability for financial loss suffered by a third party.
Companies Act 2006 on Directors
If a director breaches a responsibility they can be held personally liable.
Errors and Omissions (E&O) Insurance
Intermediaries are required to hold E&O insurance to cover when a broker has made a mistake that their client to suffer a loss.
Medical Malpractice Insurance
protection against damages and defence cots for any claims for bodily/personal injury or damage.
Cyber Insurance
covers the losses relating to damage to, or loss of information from IT systems and networks.
Relates to both physical property, the pecuniary loss following interruption, and liability to third parties in respect of loss of or damage to third party property or loss of third party data.
Specific points of cover of cyber insurance
- loss of data
- theft of money through electronic systems
- loss of business following interruption to electronic systems
- reputational risk following loss of data
- cost of paying damages to third parties
- legal defence cost
first party cyber threats
those which directly effect the insured
third party cyber threats
those which effect the third parties who the data related to
Principle consideration when underwriting employers liability insurance?
the trade of the company
Lapse Flow Analysis relates to
business which has been lost
difference between consumer theft insurance and commercial
commercial always requires forcible or violent entry
Is there cover for entry by a key, a trick concealment on the premises while open in commercial theft insurance?
No
Additional Cost of Working (ACOW) in business interruption
business interruption will cover any increased costs of working after an event (a limit applies)
With all risks cover, all loss or destruction of or damage to the property insured is recoverable as long as:
- it has occurred accidentally in respect of the insured
- the cause is no specifically excluded
Standard legal expenses policy limit
25k-100k
What 3 items are looked at under a Business Interruption policy?
- gross profit
- wages
- accountants fees
Main type of insurance policies partnered with Business Interruption policies
- fire and special perils
- all risks
- engineering
Creditor Insurance
Covers an insureds inability to continue credit instalments in the event of redundancy or unemployment.
Time limited.
Territorial limits of employers liability insurance
The UK, Isle of Man, Channel islands or while temporarily outside of these territories.
Max time benefit payments for personal accident will be paid
104
Franchise
period of time/ amount of money which must be exceeded before policy comes into force.
Usual franchise time period for sickness policies
7 days
