Bảo hiểm - Chapter 26: Commercial liability insurance

Chapter 26Commercial Liability InsuranceAgendaGeneral Liability Loss ExposuresCommercial General Liability PolicyEmployment-related Practices Liability InsuranceWorkers compensation insuranceCommercial Auto InsuranceAircraft InsuranceCommercial Umbrella PolicyBusinessowners policyProfessional Liability InsuranceDirectors and Officers Liability InsuranceGeneral Liability Loss ExposuresGeneral liability refers to legal liability arising out of business operations other than auto or aviation accidents and employee injuriesSome important exposures include:Premises and operations liability, arising out of the ownership and maintenance of the premises where the firm does businessProducts liability, arising out of the manufacturing and sale of productsCompleted operations liability, arising out of faulty work performed away from the premises after the work or operation is completedContractual liability, arising out of the assumption of legal liability through a written or oral contractContingent liability, arising out of work done by independent contractorsCommercial General Liability PolicyThe commercial general liability policy (CGL) is widely used by firms to cover their general liability loss exposuresThe policy comes in two forms: an occurrence form and a claims-made formAn occurrence policy covers liability claims arising out of occurrences that take place during the policy period, regardless of when the claim is madeA claims-made policy covers only claims that are first reported during the policy period or extended reporting period, provided that the event occurred after the retroactive date, if any, stated in the policyThe CGL policy can be written alone or included in a commercial package policyCommercial General Liability PolicySection I of the CGL contains three major parts of coverage and supplementary paymentsCoverage A: Bodily Injury and Property Damage LiabilityThe insurer agrees to pay on behalf of the insured all sums up to the policy limits that the insured is legally obligated to pay because of bodily injury or property damageThe bodily injury or property damage must be caused by an occurrence, I.e., an accident, including continuous or repeated exposure to substantially the same general harmful conditionsCoverage does not apply when a loss is known or is apparent before the policy’s inception dateCoverage includes defense costs, and the insurer has the right to investigate a claim or suit and settle it at its discretionCommercial General Liability PolicyCoverage A contains a lengthy list of exclusions, including:Expected or intended injuries or damagesContractual liability, with some exceptionsLiquor liabilityWorkers compensation and employers liabilityPollution, with some exceptionsAircraft, auto, and watercraft, with some exceptionsMobile equipmentWarDamage to property owned, rented, or occupied by the insuredDamage to the insured’s product or workDamage to impaired propertyRecall of productsPersonal and advertising injuryElectronic dataDistribution of material in violation of statutesCommercial General Liability PolicyCoverage A includes legal liability coverageAlso known as fire legal liability coverageCovers liability for fire damage to premises rented to the named insured or temporarily occupied by the named insured with the permission of the ownerA separate limit of coverage appliesOther damage to property rented by the insured is NOT coveredCommercial General Liability PolicyCoverage B: Personal and Advertising LiabilityThe insurer agrees to pay those sums that the insured is legally liable to pay as damages because of personal and advertising injuryThe policy covers legal liability resulting from:false arrestmalicious prosecutionwrongful eviction or entryslanderviolation of privacycopyright infringementCommercial General Liability PolicyCoverage C: Medical PaymentsThe insurer will cover the medical expenses of persons who are injured in an accident on the premises or on ways next to the premises, or as a result of the insured’s operationsExpenses must be incurred within one year of the accidentPayments are made without regard to legal liabilitySupplementary Payments: Coverages A and BIn addition to the policy limits, coverage includes:All expenses incurred by the insurerUp to $250 for the cost of a bail bondUp to $250/day for actual loss of earnings by the insuredPrejudgment interestCommercial General Liability PolicySection II of the CGL indicates the individuals and organizations that are considered “insureds”If designated in the declarations, insureds include:Owner and spouse if a sole proprietorshipPartners, members, and their spouses if a partnership or joint ventureMembers and managers if a limited liability company (LLC)Officers, directors, and stockholders if a corporationA trust and trustees, but only with respect to their duties as trusteesInsureds also include persons not named in the policy:Volunteer workers acting for the organizationEmployees acting within the scope of employmentAny person or organization acting as a real estate managerA legal representative if the named insured should dieAny newly acquired or formed organization, other than a partnership, joint venture or LLCCommercial General Liability PolicySection III of the CGL contains the coverage limitsThe general aggregate limit is the maximum amount that the insurer will pay for the sum of the following: Damages under Coverage A (except for amounts paid for products-completed operations hazard), damages under Coverage B, and medical payments under Coverage CThe policy contains a separate products-completed operations hazard aggregate limitA personal and advertising injury limit is the maximum paid under Coverage BAn each-occurrence limit is the maximum amount the insurer will pay for the sum of damages under Coverage A and medical expenses under Coverage C arising out of any one occurrenceThe damage to rented premises limit is the maximum amount paid for damages under Coverage A due to a single fireThe medical expense limit is the maximum amount paid under Coverage C because of a bodily injury sustained by any one personExhibit 26.1 Illustration of the CGL Limits of InsuranceCommercial General Liability PolicySection IV of the CGL states the various conditions that apply to the coverage formFor example, this section contains provisions for dealing with bankruptcy, and the duties in the event of an occurrence Section V of the CGL contains the definitions of various terms used in the policySome terms defined in the policy include “advertisement”, “hostile fire”, and “volunteer worker”Commercial General Liability PolicyThe ISO claims-made policy is similar to the occurrence policy with the major exceptions of:Payment of claims is on a claims-made basisThe policy covers only those claims that are first reported during the policy periodThe event must occur after any stated retroactive dateThe policy contains an extended reporting period provisionThe purpose is to provide coverage under an expired claims-made policy for claims first reported after the policy expiresThe basic extended reporting period, with two separate reporting “tails” is automatically provided in certain circumstances (e.g., cancellation)The first tail is a five-year period after the policy expiresCovers events that occur during the policy period, and are reported to the insurer, but a claim may not yet be madeThe second tail is a 60-day period after the expiration dateCovers events that occur during the policy period that the insured may not be aware of Employment-related Practices Liability InsuranceUnder the ISO employment-related practices liability insurance coverage, the insurer agrees to pay damages resulting from a “wrongful act” arising out of:Demotion or failure to promoteWrongful terminationNegligent hiring or supervisionRetaliatory action against employeesCoercing an employee to commit an unlawful actWork related harassmentEmployment-related libelOther work-related verbal, physical, mental, or emotional abuse, such as gender discriminationEmployment-related Practices Liability InsuranceThe ISO form provides for a legal defenseIncluded as part of the policy limitA claim cannot be settled without the insured’s consentExclusions include:criminal actscontractual liabilityworkers compensationviolation of laws applicable to employers, such as the Age Discrimination in Employment ActInterest in this coverage is increasing due to an increase in suits against employers for sexual harassmentWorkers Compensation InsuranceWorkers compensation insurance provides medical care, cash benefits, survivor benefits, and rehabilitation services to workers who are injured or die from job-related accidents or diseaseBenefits are paid on the principle of liability without faultThe workers compensation and employment liability policy contains three parts:Part One: Workers compensation insurancePart Two: Employers liability insurancePart Three: Other-states insuranceWorkers Compensation InsuranceUnder Part One, the insurer agrees to pay all workers compensation benefits and other benefits that the employer must legally provide to covered employees who have a job-related injury or an occupational diseaseThere are no policy limits. The insurer pays all benefits required by state lawThe employer must reimburse the insurer for any payments that exceed regular benefits in certain cases, e.g., willful misconduct by the employerWorkers Compensation InsuranceUnder Part Two, the insurer agrees to pay those sums that the insured is legally liable to pay as damages for worker injuries that are not compensable under Part OneThis coverage is needed in some states where workers compensation is not required for smaller employers Employees who are injured must sue for damagesAlso, an employee may sue for injury caused by an accident at the job site, but the injury is not considered work relatedThe coverage contains many exclusions, including:Bodily injury to an employee employed in violation of the law with the knowledge of the insured Intentional bodily injury by the employerWorkers Compensation InsurancePart Three provides other-states insuranceThe employer is covered for workers compensation claims arising in states not listed on the information page (declarations page)Part One covers claims arising in any states listed on the information page Part Three coverage applies only if one or more states are listed on the information pageWorkers compensation insurance provides economic security to workers who are disabled by a job-related accident or diseaseWeekly cash benefits are paid during the period of disability; medical care is unlimited and rehabilitation and survivor services are availableCommercial Auto InsuranceThe ISO business auto coverage form is used to insure commercial auto exposuresThere are ten numerical classifications or “symbols” for covered autosCoverage of newly acquired autos depends on the symbols selectedThe form includes liability and physical damage coverageIt includes limited liability for pollution lossesOptions for physical damage coverage include comprehensive, specified cause-of-loss, and collisionCoverage for towing and labor costs can be addedCommercial Auto InsuranceThe garage coverage form is a specialized form for auto dealersThe insurer will pay all sums that an insured must legally pay as damages because of bodily injury or property damage caused by an accident in the course of garage operationsGarage operations includes garage business locations, autos covered under the form, and all operations necessary or incidental to a garage businessDamage to property of others in the insured’s care, custody, or control are excludedAdding garagekeepers legal liability coverage can eliminate this exclusionThere is no coverage for property damage to any of the insured’s products if the product is defective at the time it is soldPhysical damage insurance on covered autos can be includedAircraft InsuranceMost states apply the common-law rules of negligence to aviation accidentsSome states have absolute or strict liability laws that hold the owners or operators of aircraft absolutely liable for aviation accidentsAbsolute liability is imposed on commercial airlines for aviation accidents that occur during international flightsAviation insurance is highly specialized coverage and is underwritten by a small number of insurer organizationsMajor airlines generally buy a minimum of $1.5 billion of liability coverage on their jetsAircraft Insurance for Private Business and Pleasure AircraftGlobal Aerospace provides coverage for private business and pleasure aircraftThe policy provides coverage for property damage and bodily injury arising out of the ownership or use of the insured aircraft, medical expense coverage, and physical damage coverage for damage to the aircraftSeveral liability coverages are available:Bodily injury liability excluding passengersPassenger bodily injury liabilityProperty damage liabilitySome exclusions to liability coverage include:Property damage or bodily injury arising out of liability assumed in a contractWar, hi-jackingAircraft Insurance for Private Business and Pleasure AircraftThe medical expense coverage pays reasonable medical expenses for passenger injuriesCrew members are generally excludedPhysical damage insurance provides coverage for direct damage to the aircraft. Three forms are available:“All-risks” basis“All-risks” basis, not in flight“All-risks” basis, not in motionCommercial Umbrella PolicyA commercial umbrella policy can protect a business against catastrophic liability judgmentsThe ISO commercial umbrella policy pays the ultimate net loss in excess of the retained limit for bodily injury, property damage, and personal and advertising injury to which the insurance appliesThe ultimate net loss is the total sum the insured is legally obligated to pay as damagesThe retained limit refers to (1) the available limits of underlying insurance listed in the declarations, or (2) the self-insurance retention, whichever appliesIf a loss is covered by an underlying insurance contract, the umbrella policy pays only after the underlying limits are exhaustedIf the loss is not covered by any underlying coverage, the insured must satisfy a self-insured retention (SIR)Commercial Umbrella PolicyInsureds are required to carry certain minimum amounts of liability coverage before the umbrella insurer will pay any claimsThe form contains a lengthy list of exclusions for bodily injury and property damage liability, including:Expected or intentional injuryLiquor liabilityPollutionLiability arising out of professional servicesThe form also contains a list of exclusions for personal injury and advertising liability, including:Criminal actsFailure of the product to perform as advertisedEmployment-related practices, such as harassmentBusinessowners PolicyThe ISO businessowners policy (BOP) includes liability coverage that is similar to the CGL formThe coverage includes:Business liabilityMedical expensesLegal defenseAlthough the BOP excludes professional liability, some professional liability endorsements are available for:retail drugstoresbarbers and beauticiansfuneral directorsoptical and hearing aid establishmentsprintersveterinariansProfessional Liability InsuranceProfessional liability insurance is available for certain business professionals to provide protection against a lawsuit involving a substantial error or omissionThe physicians, surgeons, and dentists liability coverage form covers these professionals for acts of malpractice or omission resulting in harm or injury to patientsLiability is not restricted to accidental acts of the physician or surgeon. The policy also covers the physician for liability arising out of negligent acts of an employeeCurrent forms permit the insurer to settle a claim without the physician’s or surgeon’s consentAn extended reporting period endorsement can be added to cover future claims arising out of incidents that occurred during the policy periodProfessional Liability InsuranceErrors and omissions insurance provides protection against loss incurred by a client because of negligent acts, errors, or omissions by the insuredThis coverage is purchased by professionals who provide advice to clients, such as:insurance agents and brokerstravel agentsreal estate agentsstockbrokersattorneysconsultantsengineers, and architectsThe policies are generally issued on a claims-made basis, covering only claims made in the current policy periodClaims that result from dishonest, fraudulent, criminal or malicious acts by the insured are specifically excludedDirectors and Officers InsuranceA directors and officers (D&O) liability policy provides financial protection for the directors and officers and the corporation if the directors and officers are sued for mismanagement of the company’s affairsTypically, the policy agrees to pay damages on behalf of directors, officers, and employees because of a wrongful actD&O policies are written on a claims-made basisCommon exclusions include bodily injury and property damage, libel and slander, personal profit, deliberate dishonesty by the insured, and illegal discrimination