Unit 18-Miscellaneous Commercial Insurance Flashcards
PROFESSIONAL LIABILITY INSURANCE
Professional liability-liability arising out of rendering or failing to render services of a professional nature–is excluded under GL policies. Special professional liability policies have been developed for many professionals, including physicians, surgeons, dentists, lawyers, insurance agents, architects, accountants, and directors and officers of corporations. Each policy is tailored to fit a specific occupational need. Most policies are written on a claims-made basis.
What is medical malpractice?
Medical malpractice is the term commonly applied to medical professional liability policies written for medical professionals or institutions, including physicians, nurses, dentists, surgeons, opticians, optometrists, chiropractors, and veterinarians.
What is Errors and Omissions (E&O)?
Errors and omissions (E&0) is a broad term that refers to professional liability policies written for other professionals, such as insurance agents, accountants, architects, stockbrokers, engineers, consultants, and attorneys.
Explain fiduciary liability and directors and officers liability.
Another type of professional liability policy, the fiduciary liability policy, protects those who manage private pension and employee benefit plans against liability for violation of the Employee Retirement Income Security Act of 1974 (ERISA), which governs employer-sponsored retirement plans.
An insurance agent has liability exposure and needs to be properly insured under an E&O policy. E&O insurance is also appropriate for directors and officers of corporations who may be sued as individuals by stockholders. Directors and officers have no coverage under a GL for personal liability, and they also have no coverage under the homeowners contract for liability arising out of business pursuits. This exposure is properly insured under a type of E&O insurance called directors and officers liability.
Explain Consent to Settle
Some professionals believe that settling claims out of court is an admission of an error that may harm their professional reputations. In the past, professional liability policies contained a provision that the insurer could not settle a claim without the insured’s consent. Currently, most policies do not require
the insureds consent to settle a loss.
Professional Liability covers …
• Medical malpractice
errors ancommissions
• Directors and ofticers
•Fiduciary liability
•Consent to settle clause
LIOUOR LIABILITY INSURANCE
The CGL coverage form does not cover businesses that sell or serve alcohol bars, restaurants, liquor stores, etc.) for liability arising from this exposure. Therefore, there is a need for a separate form to cover this liability risk.
This form provides coverage for bodily injury and property damage for which the insured may become liable as a result of contributing to a persons intoxication. The laws governing this risk exposure vary
from state to state
This form may also be called dram shop coverage. A dram shop literally refers to a bar, tavern, or place where alcoholic beverages are served.
Liquor Liability
• Not covered by the CGL
• Businesses that sell or serve
• Bodily injury or property damage
as result of contributing to a person’s intoxication
• Also called dram shop (A dram is a unit of measurement equal to one-eighth of an ounce.)
EMPLOYMENT PRACTICES LIABILITY INSURANCE
The GL excludes losses arising out of wrongful termination, discrimination, sexual harassment, and other employment-related practices. This coverage is provided by employment practices liability (EPL)
EPL covers a company and its directors, others, and current and former emplovees against claims or lawsuits regarding inappropriate workplace behavior. The policy covers legal costs, whether the company wins or loses the suit. Here are some examples of actions that are covered by an EPL policy:
• Discrimination
• Harassment
• Failure to promote
• Retaliation
• Wrongful termination
Employment Practices Liability
• Not covered by CGL
• Only policy that covers
diSCrimInatIOn
AVIATION LIABILITY
The most significant differences between aircraft and automobile insurance are the higher dollar exposure to loss and the high degree of care required by the operator of the aircraft. As in automobile policies, the two basic aviation coverages are physical damage and liability.
Aviation Liability insurance for owners of aircraft includes coverage for:
• Legal liability to third parties (other than passengers)
• Bodily injury to passengers
• Property damage
• Medical payments
Aviation Liability
•Persons other than passengers
•passengers
•Property Damage
•Medical (no fault)
What is Physical Damage Coverage
Aviation physical damage coverage, called aircraft hull insurance, is much like the comprehensive and collision coverages provided by auto insurance. It covers the complete aircraft, including its airframe, engines, controls, and electronic navigation and communications equipment. It does not cover personal effects. Either a fixed dollar or a percentage of the loss deductible usually applies. Coverage can be provided while the aircraft is:
• in the air or on the ground;
• on the ground only; or
not in motion under its own power.
The declarations indicate what coverage applies and any special restrictions or deductibles.
Aviation Physical Damage Coverage summary
Aviation Physical Damage Coverage
• Similar to auto collision and
comprenensive
• Also called hull coverage
• May be covered:
• in the air or on the ground;
• on the ground only; or
• not in motion under its own power
COMMERCIAL UMBRELLA LIABILITY INSURANCE
Just as personal umbrella policies are available to cover the catastrophic liability exposures of personal risks, high-limit commercial umbrella policies are designed to provide catastrophic liability coverage for business risks.
Because the umbrella policy is not designed to handle usual or everyday exposures, the insured must have underlying liability coverage, such as commercial auto liability or commercial general liability coverage, before an umbrella policy will be issued.
A commercial umbrella policy provides coverage in three situations.
• The policy limits applying to a loss under an underlying policy have been exhausted.
• A loss is excluded under an underiving contract but not excluded under the umbrella. (Ihe insured must first meet the retention–deductible limit.)
Previous losses reimbursed under an underlying policy have reduced its aggregate limit so that a subsequent loss is not fully covered.
DIFFERENCE IN CONDITIONS INSURANCE (DIC )
Difference in Conditions (DIC) Insurance is property insurance that covers high severity, low frequency perils–the exact opposite of what is normally accepted by insurance companies. Catastrophic coverage for risks like floods and earthquakes is usually excluded from policies, but if the insured has an exposure, a DIC policy can be written to provide coverage. Other ways DIC insurance can be used is to provide additional limits of coverage for certain perils that standard markets are unable or unwilling to provide
The most common form of DIC policies are considered “all risk;” however, the perils that would normally be covered on a standard policy are excluded and the customary exclusions are covered.
Difference in Conditions
• Unique property coverage written for catastrophic exposures
• High deductibles
• No coinsurance requirements
The Unauthorized Market and Surplus Lines
An authorized or admitted insurance company (insurer) has a current certificate of authority issued
by an insurance department specincally authorizing the insurer to transact particular lines or business
in that state. The law prohibits anyone from acting as an agent for an unauthorized company and an
insurer from transacting any line of business for which it is not authorized.
in almost every state, exceptions are made for certain transactions that allow unauthorized or nonadmitted insurers to legally conduct business without a certincate of authority. Lines of business that fall under that category may include transportation and ocean marine risks, reinsurance, and surplus lines coverages
Surplus lines insurance is provided by carriers that do not need to be filed with a state insurance department in order to otter coverage. An agent or broker that works with surplus or excess lines carriers is required to have a surplus lines license. Each state has specific regulations regarding business that is procured by way of excess or surplus lines insurers.
Conditions for Obtaining Coverage
Three conditions must be met before surplus lines insurance may be obtained from an unauthorized insurer.
•The business must be obtained through a licensed surplus lines producer, agent, or broker.
• It is determined after a diligent search that the full amount of insurance cannot be obtained from
authorizecinsurers who marker the insurance in the state.
• Coverage may not be obtained as a surplus lines coverage solely for the purpose of obtaining a
better contract or a lower premium than an authorized insurer can provide.
Examples of surplus lines coverage include amusement parks, music or rock concerts, movie filming,
and auto or boat racing
