Liability insurance and Health Insurance Flashcards
Everyone has a duty of care to those who they come into contact with on a day-to-day basis:
Liability insurance
In the event of a breach of this, a party (whether an individual or a corporate body such as a firm) can be liable to pay damages (compensation) to another who suffers loss or damage arising from their negligence (lack of care).
True
Liability insurance
Even if found not liable, a party may have to pay the costs of taking legal action or advice. Covering such damages and costs is the purpose of::
Liability Insurance
The Employers’ Liability (Compulsory Insurance) Act 1969 states that almost every employer in the UK must be insured against its liability for the bodily injury or disease of its
employees that has happened in the course of their employment.
A certificate of insurance must be displayed at each place of business and this can be done electronically on condition that all employees have access to it.
The Employers’ Liability (Compulsory Insurance) Act 1969
The Employers’ Liability (Compulsory Insurance) Regulations 1998 increased the minimum limit for the sum insured to £5m.
True
The most important provisions of an employers’ liability policy are as follows.
Additional person(s) insured
Arising out of and in the course of employment
Claimant’s costs and expenses
Costs (USUALLY legal fees)
Damages
Definition of ‘employee’
Defence costs and expenses
Legal liability
Period of insurance
Territorial limits
Trade or business
Legal liability
(employers’ liability policy ) ?
Bodily injury as a result of the employer’s negligence or breach of statutory duty is covered
Damages
(employers’ liability policy ) ?
For loss of (and future loss of) earnings, and for pain and suffering and loss of
amenity
Costs (USUALLY legal fees)
(employers’ liability policy ) ?
Involved in the claimant substantiating their claim,
plus any award of cash and damages by the court.
Definition of ‘employee’
(employers’ liability policy ) ?
‘Any person who is under a contract of service or apprenticeship with the insured’.
*This is USUALLY extended to include, for example, self-employed persons, work experience students.
Arising out of and in the course of employment,
(employers’ liability policy ) ??
The time a person is considered to be at work is USUALLY counted from the moment they pass through the ‘boundary gates’.
Trade or business ,
(employers’ liability policy ) ??
USUALLY extended to cover the insured’s ancillary activities which directly form a part of the business.
Territorial limits,
(employers’ liability policy ) ??
USUALLY the UK, the Isle of Man, the Channel Islands or while temporarily outside these territories
Period of insurance ,
(employers’ liability policy ) ??
Provided the injury or the cause of the disease occurred during the period of insurance, insurers are liable even if the policy has expired
Defence costs and expenses,
(employers’ liability policy ) ??
The costs incurred by the insured when defending a claim
Additional person(s) insured, (employers’ liability policy ) ??
This refers to any director, partner or employee of the insured in their personal capacity, for actions brought against them for which the insured would be entitled to indemnity under the policy This cover may be offered as an optional extension under some policies
Cover may be limited by restricting the definition of ‘business’ and excluding certain kinds of work, machines and/or processes.
True
Employers’ liability policy
As this is a compulsory class of insurance, the insurer cannot refuse to deal with a claim on these grounds.
True
Employers’ liability policy
It merely obtains a right of recovery against its insured once it has made a payment.
True
Employers’ liability policy
What is public liability policy?
Covers all legal liability that is NOT specifically excluded.
What does public liability insurance provide for insured?
An indemnity to the insured for legal liability to third parties for damages (including claimants’ costs and expenses).
Examples?
Public Liability Policy
For bodily injury, death, disease or illness, and for any loss of, or damage to, third party property, which happens in connection with the business insured under the policy during the period of insurance.
Question 2.5
Can you think of three examples of where a claim could arise under a public liability insurance policy?
A sign hanging from an insured premises may fall and injure a passer by,
Customer slipping on wet floor, and hurting themselves,
Loose roof tile could blow from insured building, damaging vehicle parked outside.
The legal liability covers not just negligence, but ALSO nuisance, trespass and liability under statute.
True
Public Liability Policy
Accident the occurrence was not a deliberate act or omission of the insured
True
Public Liability Policy
Consequential loss e.g. when a vehicle has been damaged by a roof tile falling from the insured’s premises, the insured may be liable for the cost of a hire car for the third party whilst their vehicle is being repaired, and this would be covered.
True
Public Liability Policy
Injury to persons there must be some form of physical or medical impairment and/or
True
Public Liability Policy
Limit of indemnity USUALLY , a limit per occurrence and in the aggregate.
True
Public Liability Policy
Loss of or damage to property damage to third party property, but may exclude intangibles (e.g. copyrights) or indirect economic loss.
True
Public Liability Policy
These should be considered by?
Public Liability Policy
Claims handlers
Exclusions ??
Public Liability Policy
- contractual liability where a liability would not exist if it were not for the existence of the contract;
- cost of rectifying defective work;
- deliberate acts, i.e. not ‘accidents’;
- injury or damage caused by the insured’s motor vehicles;
- injury or damage caused by the insured’s vessels and craft;
- injury to employees (this would be covered under an employers’ liability policy);
- lifts, elevators and boilers (covered under an engineering policy);
- professional negligence;
• property belonging to the insured (covered under a
property policy);
• product liability (as this is more specifically covered
under a product liability policy);
- radioactive contamination and
- war risks.
Question 2.6
Make sure you understand why each exclusion is inserted into the public liability insurance policy.
Many of these exclusions are inserted because there are more specific policies available to cover these risks.
What is standard product liability policy?
Covers legal liability for bodily injury or third party property damage which arises out of goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied or distributed by the insured.
How is cover available?
As a standalone product, but is more USUALLY packaged and combined with public liability cover.
Product Liability Policy covers?
- The basic cover is dependent on an element of accident.
- Cover is for consequential loss following actual injury or damage.
- Financial loss is NOT USUALLY covered as standard, unless accompanied by bodily injury or loss of or damage to property.
**However, a financial loss extension may be purchased by the insured to cover financial loss that does not accompany bodily injury or damage to third party property. This is called ‘pure financial loss’.
- The injury or damage should occur during the period of insurance, although some standalone product liability insurance may be written on a claims-made basis.
- A yearly aggregate limit of indemnity is USUALLY specified.
The injury or damage should occur during the period of insurance, although some standalone product liability insurance may be written on a claims-made basis…and
Where this is the case, the trigger for the claim attaching to the policy is :
when the claim was made, rather than when the loss occurred.
Product Liability Policy Exclusions :
- contractual liability;
- damage to the actual product(s) supplied; and
- faulty design or formula.
What is Professional indemnity insurance?
Covers the professional people’s liability for injury, damage or financial loss to their clients or the public that comes about as a result of a breach of professional duty, or from their negligent acts, errors or omissions in their professional capacity.
Question 2.7
Try to think of some examples of where a professional person may give advice which, when followed, leads to someone suffering loss or damage.
An architect designing house incorrectly or stockbroker recommending shares in disastrous company.
With professional negligence, the courts may award damages to the claimant for pure financial loss.
True
Professional indemnity insurance
It is USUAL for the policies of (Professional indemnity insurance) to offer cover on a claims-made basis. This means that ::
The policy applies to claims made against the insured during the period of insurance rather than claims occurring during the policy period.
Dishonesty of the insured will USUALLY be excluded.
True
Professional indemnity insurance
What is Health insurance?
Can be broken down into three types as follows.
Personal accident,
Sickness,
Medical expenses.
What is Personal accident in (Health Insurance)?
Provides payments in the event of accidental death or bodily injury.
What is Sickness in (Health Insurance)?
Provides payment for disablement due to sickness.
What is Medical expenses in (Health Insurance)?
Provides cover for individuals who seek medical treatment outside the NHS when they are ill.
A personal accident and sickness policy: is a benefit policy as opposed to a policy of indemnity.
True
Health Insurance= Personal Accident Policy
What is benefit policy?
it is a contract to pay a sum of money should a defined event occur, whether or not the insured sustains a direct financial loss.
Personal accident and sickness policies can be purchased as stand-alone policies, but are OFTEN ‘add-ons’ to ??
Household, Motor and Travel insurance.
Personal Accident can be purchased as much benefit cover as can afforded.
True
Personal Accident Policy
An accident that is covered under the terms of the policy, would receive benefits in accordance with the actual cover purchased.
True
Personal Accident Policy
Because they are benefit policies and not policies of indemnity, even if more than one policy, contribution will not be an issue.
True
Personal Accident Policy
However, insurers are eager to ensure that the benefit is no more than normal earnings as, if it were, this could provide an inducement to remain off work.
True
Personal Accident Policy
Consequently, insurers will specifically ask about the existence of other policies on the:
Proposal form.
Insurers will specifically ask about the existence of other policies on the Proposal form. , why??
In this way, they (insurers) can check that the overall benefits provided by all the policies are set at realistic levels.
Question 2.8
Which two, out of the three following statements about benefit polices are correct?
a. A benefit policy will pay a set amount for a loss, agreed at the commencement of the policy.
b. Medical expenses is an example of a benefits policy.
c. Sickness insurance will pay out for an unlimited period, should you be unable to work through illness.
A and B
What is Personal accident insurance?
Accident cover pays lump sums in the event of death or specified injuries. Accident cover pays lump sums in the event of death or specified injuries.
It pays weekly benefits for up to 104 weeks if temporarily totally disabled due to an accident
(and reduced benefits if temporarily partially disabled).
An annuity would be paid in the event of permanent total disablement.
There is ALSO a personal accident cover which provides a stipulated amount to be paid as a lump sum in the event of death or injury, e.g. £10,000 for total or partial loss of sight.
True
Personal Accident Policy
What is Sickness insurance?
Sickness cover provides a weekly benefit for up to 104 weeks if the insured is disabled from following their usual occupation due to sickness or disease.
(Sickness Insurance)
Cover USUALLY excludes any:
Sickness contracted within the first 21 days of the start of the policy period and is subject to a franchise.
What is franchise?
Refers to a period of time or an amount of money under which a policy would not come into force.
No benefit or indemnity would be paid for periods or amounts falling below this threshold.
True
Franchise policy
However, unlike an excess, once this period or amount is exceeded then the whole period or amount is covered.
True
Franchise policy
For a sickness policy the franchise is USUALLY seven days.
An insured who is sick for less than seven days receives no benefit, but an insured who is sick for more than seven days receives benefit for their entire period of sickness.
True
Franchise policy
Example 2.2
Bob Jones takes out a sickness policy with a seven-day franchise. Three months later he falls ill and is laid low for six days after which he returns to work. No benefit is paid to him by his policy.
Eva Wilkes takes out a similar policy. Three months later she too falls ill. She is quite poorly for two weeks (i.e. 14 days) after which she returns to work.
Eva receives benefits from her policy for 14 days of sickness.
The policy benefits provided under personal accident and sickness policies USUALLY include payments on the event of any of the following.
Death
Medical expenses
Permanent total disablement
Permanent partial disablement
Temporary total disablement
Temporary partial disablement
Total loss of sight in one or both eyes
Death?
USUALLY within twelve months of the event giving rise to the claim
Permanent total disablement? (PTD)
USUALLY a capital sum or an annuity is paid,
but OFTEN not until 12 or 24 months after the accident as it may take this long to decide whether the disability is permanent and total.
Permanent partial disablement? (PPD)
A permanent disablement that stops the person getting on with a substantial part of their normal business, *Insurers calculate a continental scale benefit, of 20%.
Temporary total disablement? (TTD)
USUALLY a weekly benefit is paid for a maximum of 104 weeks, subject to franchise 7,14,21 days.
Unlikely to be Permanent Total Disablement.
Temporary partial disablement? (TPD)
This ONLY applies following an accident
(i.e. not for sickness) * and reduces the sum payment of 30%.
Medical expenses?
Incurred for treatment or appliances given or prescribed, up to a fairly low limit
Exclusions for (Health insurance policy benefits) ??
- childbirth, pregnancy, venereal disease and/or AIDS.
- the consequences of a pre-existing infirmity or disease;
- the insured being under the influence of, or being affected by, alcohol or non-prescription drugs;
- self-inflicted injury or disease including suicide.
What is Medical expenses insurance?
Covers members of the public, either individually or in group schemes, against most of the expenses of undergoing in-patient or out-patient treatment in private hospitals.
How are policies sold?
As group schemes to businesses as an employment benefit for staff and their families.
Some policies allow for a cash benefit to be paid if the insured person prefers to accept NHS in-patient treatment.
True
Medical expenses insurance
There is a wide range of products available on the market.
True
Medical expenses insurance
Basic cover is likely to have many exclusions (for example, the treatment of pre-existing conditions) and lower ‘per treatment’ limits. but,
More expensive cover and group cover will be wider, have considerably fewer exclusions and significantly higher ‘per treatment’ limits.
