Lesson 8: Commercial Insurance Property Coverage and General Liability Flashcards
Commercial package policy
provides a broad package of property and liability coverages for commercial ventures other than those providing insurance through a business owner’s policy.
Inland marine
Inland marine is property insurance for property in transit over land, which addresses specific types of moveable property. Examples include instrumentalities of transportation (such as bridges, roads, and piers), communication (such as television and radio towers), commercial and personal floaters, transit and bailees.
Commercial package policies generally; coverage parts
package includes coverage for most commercial risks by combining property and general liability, building and personal property; boiler & equipment breakdown; commercial auto, inland marine, farm coverages, and crime. The following applies to a Commercial Package Policy, Commercial Property, Commercial Auto, Commercial General Liability, Commercial inland marine, equipment breakdown, Commercial Crime, and Farm Coverages (property & liability.
Commercial auto
Commercial auto insurance protects businesses when their vehicles are involved in a collision or are stolen, vandalized, or damaged. A business auto insurance policy provides coverage for bodily injury, and property damage.
Farm liability coverage
Under a single blanket limit, this policy form covers farm structures and buildings (excluding dwellings). There are two forms available under this coverage, Farm Property coverage form and a Farm Liability coverage form. This coverage can be written on a monoline or package policy providing the following:
–Farm (business) Personal Property
–Farm Structures and Buildings
All other items on the premises are covered. Items that are off-premises include:
–Farm equipment and machinery
–Livestock (with exceptions)
–Farm implements
Equipment breakdown
Explosion including the breakdown of equipment is the only peril covered by this contract. Notice that the definition of breakdown closely resembles our earlier definition of an accident. However, it does not include losses that happen over a period of time. Breakdown includes:
-Malfunction of pressure or vacuum equipment
-Mechanical malfunction including rupture or bursting
-Electrical malfunction, including arching
-Explosion, other than combustion explosions of steam boilers, engineering equipment or turbines
Crime insurance policies
Crime insurance policies cover specific types of property, money, and securities against loss by specific perils such as burglary, robbery, and theft.
Who typically uses commercial package policies?
business owners; nonprofits; churches; building owners; building tenants; contractors; manufacturers; grocery stores
Commercial Coverage Property
This package includes coverage for most commercial risks by combining property and general liability, building and personal property; boiler & equipment breakdown; commercial auto, inland marine, farm coverages, and crime.
Commercial Coverage A: Building
Coverage A: Building included are attached fixtures such as:
Floor coverings
Machinery & equipment servicing the building
Outdoor fixtures
Outdoor patio furniture
Commercial Coverage B - Business Personal Property
Covers Business & Personal Property contents of the insured where they occupy a commercial business. This coverage is for the business personal property located inside of the building or within 100 feet of the premises. Which includes:
Contents of Insured
Business Inventory
Leased equipment
Tenant’s Improvements
Commercial: Four Causes of Loss Forms
Basic covers few named perils.
Broad covers additional named perils.
Special covers all risk or open perils.
Earthquake covers damage from earth movement.
Coverage C: Personal Property of others
Coverage C covers the property of others which is in the insured’s care custody and control. This coverage is for the property located inside of the building or within 100 feet of the premises. For example, copier machines or computers which are rented.
Variations for Writing the Coverage
Specific Property- coverage for a particular location
Scheduled Coverage- provides different insurance types of insurance at various locations. They will have specific coverage amounts.
–For example, State Farm has three different buildings: Building A has 5MiL, contents in Building A has 15MIL. Building B has 2MIL and 5Mil for materials, and Building C has 17Mil and has 500K for contents.
Blanket coverage addresses have a single limit to one location or multiple locations.
–For example, 1MIL can be for my service equipment and will be covered regardless of where I move it as long as it is in a covered location.
The deductible is the amount applied by the insured towards the adjusted loss.
Consequential Losses
Forms that serve the purpose of covering losses which result from physical destruction.
Business Income forms:
1 Loss of business income
2 Extra expense
A civil authority clause is an insurance policy provision that outlines how the loss of business income coverage applies when a government entity denies access to the insured property. The insured experiences indirect loss.
A civil authority experiences indirect loss due to a gas leak downtown. Because the business had to close during the leak and repair, there was a loss of business income.
Builder’s risk
The limit for builders’ risk coverage is on a completed value basis, which is the estimated value of construction once construction is complete.
–Covers building materials under construction or renovation
–Construction contractors typically carry this coverage
–Start construction and values grow to completed value basis
Commercial Property Coverages
Buildings used for other than personal lines activities
The sections of the commercial property policy include:
- Commercial Property Declarations
- Commercial Property Conditions
- One or more cause of loss forms
- One or more coverage forms
- Endorsements
Commercial Coverage A
Bodily Injury and Property Damage
Commercial Liability Cov A - Coverage Parts/major sublines
Premises & Operations: Intended to cover bodily injury and property damage that occur to the public when they are at your place of business or the operations conducted by the business.
Products & Completed Operations: Protection against defective products or completed services liability claims. For example, defective products that cause injury to someone or property damage away from the premises
Commercial Coverage A - BI & PD Exclusions
- Intended Bodily Injury or expected Property Damage
- Liquor liability
- Workplace accidents to employees
- Pollution Liability
- Acts of War
- Ownership & Operation of aircraft, watercraft, vehicles
- Mobile Equipment in transit
- Damage to property owned by insured, rented to insured, occupied by insured or in the care, custody or control
- Cost of product recall
Coverage B: Personal Injury & Advertising Liability
Advertising Liability
1. Copyright Infringement
2. Use of an individual’s likeness without permission
Personal Injury
1. Wrongful Accusation
2. Invasion of Privacy
Examples include: Personal Injury- economic loss due to slander or defamation of character. Wrongful detention or false arrest due to a shoplifting accusation. Humiliation associated w/ wrongful accusation.
Coverage C: medical payments
covers necessary medical expenses incurred within one year of the accident regardless of fault
Fire, Legal and Liability Coverage
Property that is leased or rented to the insured that is in the care, or custody of the insured damaged by fire, smoke, explosion
The Occurrence trigger
The policy in place when the injury or damage first occurs is the policy that pays, regardless of when the claim is first reported.
Claims Made Trigger
The policy in place when the claim is first reported is the policy that pays; provided that the injury occurred on or after the policy’s retroactive date.
—-Mini-tail- reported losses up to 60 days past expiration that were incurred during the policy term.
—-Midi-tail- a loss has been reported during the 60-day window of reporting and pays for losses up to five years past expiration.
—-Full-tail or supplemental extended reporting period (SERP). Any losses that have not been reported during the policy period or the 60 days past expiration can be reported indefinitely.
————-Premium is a one-time payment up to 200% of the annual policy premium for that coverage part.
————-Aggregate limits are restored annually.
Retroactive Date Rule:
The earliest date of coverage and defines when coverage begins. This date can only be advanced with the written consent of the first-named insured.
Claims Made
With a “Claims Made” policy, the insurer will only cover claims made during the policy period, rather than cover occurrences and allow claims to be submitted after the policy period. A Claims Made Policy is designed to prevent a phenomenon called “stacking of liability claims.” Suppose an occurrence happened repeatedly over a 2 to 3 year period. Under an “occurrence basis” policy, the insured could “stack” claims to gain maximum liability limits for each year.
Extended Reporting Periods (ERP)
Extended Reporting Periods can fill in the gap during the transitional period when a “Claims Made” policy is replaced by an “Occurrence” form. In other words, ERPs provide an extension of coverage for claims made after the policy’s expiration date. The policy provides an Extended Reporting Period if:
The” claims made” form is canceled or not renewed.
The insurer renews or replaces the form shown in the Declarations of the current form.
The insurer renews or replaces the form with an occurrence form.
Once an Extended Reporting Period is in effect, it cannot be canceled. There are two kinds of ERPs - the Basic and the Supplemental.
Basic Extended Reporting Period
The Basic Extended Reporting Period of either 60 days or five years is available automatically and free of charge. It provides automatic coverage for any valid claim made during the 60 days after the policy expires, as long as the incident occurred between the expiring policy’s retroactive date and its expiration date.
—If an event took place before the “Claims Made” policy expired, but it appears that the claims may not be made until after the 60 day basic extended reporting period, the insured has up to 60 days after the policy expiration to report the occurrence or offense to the insurer. In this case, the five year basic extended reporting period automatically applies, and
—Claims for damages arising from the reported occurrence can be brought any time during the five year period.
Supplemental Extended Reporting Period
The Supplemental Extended Reporting Period endorsement provides an unlimited extension of the reporting period.
—The extended reporting period takes effect at the end of either the 60 day or five year ERP, whichever applies.
—The insured must request this endorsement and pay an additional premium.
Retroactive Date
The Retroactive Date is the date when a “Claims Made” policy may not pay. However, the retroactive date can provide some measure of protection against previous losses that may have occurred before the claims made form was written.
–The retroactive date is listed in the CGL Declarations. The insured has three options for the retroactive date: o Use the same date as the policy effective date.
——-Use an earlier date than the policy effective date.
——-Use no retroactive date.
–When selling a new CGL policy, agents should take care to not create a gap when the insured has no coverage.
Aircraft Liability Insurance
It extends coverage to passengers and other third parties.
Aviation Insurance
Aviation insurance protects an individual or entity involved in the manufacture, use or operation of an aircraft. Aviation insurance includes all facets of general aviation - flight instructors, aircraft manufacturers, pilots, airlines or airports.
Like auto or homeowners insurance, aviation insurance provides coverage for property damage and/or medical payments (when combined with passenger liability coverage), property loss, and bodily injury.
Coverage is written as “all-risk” “or all-risk while not in flight.”
All-risk coverage protects against all risks while the aircraft is in the air or on the ground, though there are usually exceptions and limitations.
All-risk while not in flight offers coverage to the aircraft only when it is on the ground.
Aircraft Hull Coverage
It covers losses or damage to the hull of the aircraft. The hull includes all major structural components of an aircraft, including wings, instrument panel, fuselage, tail, rudder, and other structural components.
Commercial Umbrella
Commercial Umbrella policy is designed to supplement existing insurance policies. This means Commercial Umbrella Insurance kicks in when the cost of damage exceeds the limits of certain liability insurance policies you already have.
What line of ins cannot be included in the commercial package policy?
Professional liability
A business income loss resulting from an order by a civil authority closing nearby roads after a major fire will be covered for a maximum period of:
3 weeks
