Liability insurance and Health Insurance

Question 1

Everyone has a duty of care to those who they come into contact with on a day-to-day basis:

Answer 1

Liability insurance

Question 2

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).

Answer 2

True

Liability insurance

Question 3

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::

Answer 3

Liability Insurance

Question 4

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

Answer 4

employees that has happened in the course of their employment.

Question 5

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.

Answer 5

The Employers’ Liability (Compulsory Insurance) Act 1969

Question 6

The Employers’ Liability (Compulsory Insurance) Regulations 1998 increased the minimum limit for the sum insured to £5m.

Answer 6

True

Question 7

The most important provisions of an employers’ liability policy are as follows.

Answer 7

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

Question 8

Legal liability

(employers’ liability policy ) ?

Answer 8

Bodily injury as a result of the employer’s negligence or breach of statutory duty is covered

Question 9

Damages

(employers’ liability policy ) ?

Answer 9

For loss of (and future loss of) earnings, and for pain and suffering and loss of
amenity

Question 10

Costs (USUALLY legal fees)

(employers’ liability policy ) ?

Answer 10

Involved in the claimant substantiating their claim,

plus any award of cash and damages by the court.

Question 11

Definition of ‘employee’

(employers’ liability policy ) ?

Answer 11

‘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.

Question 12

Arising out of and in the course of employment,

(employers’ liability policy ) ??

Answer 12

The time a person is considered to be at work is USUALLY counted from the moment they pass through the ‘boundary gates’.

Question 13

Trade or business ,

(employers’ liability policy ) ??

Answer 13

USUALLY extended to cover the insured’s ancillary activities which directly form a part of the business.

Question 14

Territorial limits,

(employers’ liability policy ) ??

Answer 14

USUALLY the UK, the Isle of Man, the Channel Islands or while temporarily outside these territories

Question 15

Period of insurance ,

(employers’ liability policy ) ??

Answer 15

Provided the injury or the cause of the disease occurred during the period of insurance, insurers are liable even if the policy has expired

Question 16

Defence costs and expenses,

(employers’ liability policy ) ??

Answer 16

The costs incurred by the insured when defending a claim

Question 17

Additional person(s) insured,
(employers’ liability policy ) ??

Answer 17

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

Question 18

Cover may be limited by restricting the definition of ‘business’ and excluding certain kinds of work, machines and/or processes.

Answer 18

True

Employers’ liability policy

Question 19

As this is a compulsory class of insurance, the insurer cannot refuse to deal with a claim on these grounds.

Answer 19

True

Employers’ liability policy

Question 20

It merely obtains a right of recovery against its insured once it has made a payment.

Answer 20

True

Employers’ liability policy

Question 21

What is public liability policy?

Answer 21

Covers all legal liability that is NOT specifically excluded.

Question 22

What does public liability insurance provide for insured?

Answer 22

An indemnity to the insured for legal liability to third parties for damages (including claimants’ costs and expenses).

Question 23

Examples?

Public Liability Policy

Answer 23

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 24

Question 2.5

Can you think of three examples of where a claim could arise under a public liability insurance policy?

Answer 24

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.

Question 25

The legal liability covers not just negligence, but ALSO nuisance, trespass and liability under statute.

Answer 25

True

Public Liability Policy

Question 26

Accident the occurrence was not a deliberate act or omission of the insured

Answer 26

True

Public Liability Policy

Question 27

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.

Answer 27

True

Public Liability Policy

Question 28

Injury to persons there must be some form of physical or medical impairment and/or

Answer 28

True

Public Liability Policy

Question 29

Limit of indemnity USUALLY , a limit per occurrence and in the aggregate.

Answer 29

True

Public Liability Policy

Question 30

Loss of or damage to property damage to third party property, but may exclude intangibles (e.g. copyrights) or indirect economic loss.

Answer 30

True

Public Liability Policy

Question 31

These should be considered by?

Public Liability Policy

Answer 31

Claims handlers

Question 32

Exclusions ??

Public Liability Policy

Answer 32

• 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 33

Question 2.6

Make sure you understand why each exclusion is inserted into the public liability insurance policy.

Answer 33

Many of these exclusions are inserted because there are more specific policies available to cover these risks.

Question 34

What is standard product liability policy?

Answer 34

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.

Question 35

How is cover available?

Answer 35

As a standalone product, but is more USUALLY packaged and combined with public liability cover.

Question 36

Product Liability Policy covers?

Answer 36

• 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.

Question 37

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

Answer 37

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.

Question 38

Product Liability Policy Exclusions :

Answer 38

• contractual liability;
• damage to the actual product(s) supplied; and
• faulty design or formula.

Question 39

What is Professional indemnity insurance?

Answer 39

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 40

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.

Answer 40

An architect designing house incorrectly or stockbroker recommending shares in disastrous company.

Question 41

With professional negligence, the courts may award damages to the claimant for pure financial loss.

Answer 41

True

Professional indemnity insurance

Question 42

It is USUAL for the policies of (Professional indemnity insurance) to offer cover on a claims-made basis. This means that ::

Answer 42

The policy applies to claims made against the insured during the period of insurance rather than claims occurring during the policy period.

Question 43

Dishonesty of the insured will USUALLY be excluded.

Answer 43

True

Professional indemnity insurance

Question 44

What is Health insurance?

Answer 44

Can be broken down into three types as follows.

Personal accident,

Sickness,

Medical expenses.

Question 45

What is Personal accident in (Health Insurance)?

Answer 45

Provides payments in the event of accidental death or bodily injury.

Question 46

What is Sickness in (Health Insurance)?

Answer 46

Provides payment for disablement due to sickness.

Question 47

What is Medical expenses in (Health Insurance)?

Answer 47

Provides cover for individuals who seek medical treatment outside the NHS when they are ill.

Question 48

A personal accident and sickness policy: is a benefit policy as opposed to a policy of indemnity.

Answer 48

True

Health Insurance= Personal Accident Policy

Question 49

What is benefit policy?

Answer 49

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.

Question 50

Personal accident and sickness policies can be purchased as stand-alone policies, but are OFTEN ‘add-ons’ to ??

Answer 50

Household, Motor and Travel insurance.

Question 51

Personal Accident can be purchased as much benefit cover as can afforded.

Answer 51

True

Personal Accident Policy

Question 52

An accident that is covered under the terms of the policy, would receive benefits in accordance with the actual cover purchased.

Answer 52

True

Personal Accident Policy

Question 53

Because they are benefit policies and not policies of indemnity, even if more than one policy, contribution will not be an issue.

Answer 53

True

Personal Accident Policy

Question 54

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.

Answer 54

True

Personal Accident Policy

Question 55

Consequently, insurers will specifically ask about the existence of other policies on the:

Answer 55

Proposal form.

Question 56

Insurers will specifically ask about the existence of other policies on the Proposal form. , why??

Answer 56

In this way, they (insurers) can check that the overall benefits provided by all the policies are set at realistic levels.

Question 57

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.

Answer 57

A and B

Question 58

What is Personal accident insurance?

Answer 58

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.

Question 59

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.

Answer 59

True

Personal Accident Policy

Question 60

What is Sickness insurance?

Answer 60

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.

Question 61

(Sickness Insurance)

Cover USUALLY excludes any:

Answer 61

Sickness contracted within the first 21 days of the start of the policy period and is subject to a franchise.

Question 62

What is franchise?

Answer 62

Refers to a period of time or an amount of money under which a policy would not come into force.

Question 63

No benefit or indemnity would be paid for periods or amounts falling below this threshold.

Answer 63

True

Franchise policy

Question 64

However, unlike an excess, once this period or amount is exceeded then the whole period or amount is covered.

Answer 64

True

Franchise policy

Question 65

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.

Answer 65

True

Franchise policy

Question 66

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.

Answer 66

Eva receives benefits from her policy for 14 days of sickness.

Question 67

The policy benefits provided under personal accident and sickness policies USUALLY include payments on the event of any of the following.

Answer 67

Death

Medical expenses

Permanent total disablement

Permanent partial disablement

Temporary total disablement

Temporary partial disablement

Total loss of sight in one or both eyes

Question 68

Death?

Answer 68

USUALLY within twelve months of the event giving rise to the claim

Question 69

Permanent total disablement? (PTD)

Answer 69

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.

Question 70

Permanent partial disablement? (PPD)

Answer 70

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%.

Question 71

Temporary total disablement? (TTD)

Answer 71

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.

Question 72

Temporary partial disablement? (TPD)

Answer 72

This ONLY applies following an accident

(i.e. not for sickness) * and reduces the sum payment of 30%.

Question 73

Medical expenses?

Answer 73

Incurred for treatment or appliances given or prescribed, up to a fairly low limit

Question 74

Exclusions for (Health insurance policy benefits) ??

Answer 74

• 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.

Question 75

What is Medical expenses insurance?

Answer 75

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.

Question 76

How are policies sold?

Answer 76

As group schemes to businesses as an employment benefit for staff and their families.

Question 77

Some policies allow for a cash benefit to be paid if the insured person prefers to accept NHS in-patient treatment.

Answer 77

True

Medical expenses insurance

Question 78

There is a wide range of products available on the market.

Answer 78

True

Medical expenses insurance

Question 79

Basic cover is likely to have many exclusions (for example, the treatment of pre-existing conditions) and lower ‘per treatment’ limits. but,

Answer 79

More expensive cover and group cover will be wider, have considerably fewer exclusions and significantly higher ‘per treatment’ limits.