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34 Cards in this Set
- Front
- Back
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3 categories of liability insurance |
General liability Specialized liability Workers compensation |
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Exposures |
-may result from action we choose to take or actions we choose not to take. -intentional acts such as speeding or selling potentially dangerous products can make us liable to others. -when we fail to exercise proper care that is considered prudent, we can also be held liable. Ex: child care center hiring worker w/ record of abuse but failed to run background check when hiring can be held liable. |
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Categories of general business liability exposures |
Direct Liability Vicarious Liability Contractual Liability |
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Direct Liability |
Arises from firm's own actions. Most of exposures (except by automobiles) fall into the following categories: -premises &operations-biz bldg &grounds -work liability-service firms i.e. plumbers, exterminators. Sued for work done or improperly done causing injury. -product liability-firm's product caused injuries to users. |
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Vicarious Liability |
-also called indirect liability, mostly arises when firm hires independent subcontractors. -if sub injures a third party, firm may be named in lawsuit along w/ independent contractor. Claim would be made that firm was negligent in hiring, informing, and supervising the sub. |
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Contractual Liability |
-a firm accepts by contract a liability that it otherwise would not have. Ex: Acme allow YY Rail to build tracks onto its property for ease of transport. YY wants to be relieved of all liability and Acme accepted. YY train runs into a truck injuring driver and damaging truck. Driver can file a lawsuit against both Acme and YY but Acme's insurer will satisfy the legal judgement. |
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Businesses may buy insurance for the following liabilities |
Vicarious Liability Losses Contractual Liability Losses Direct Liability Losses |
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Business Insurance Package |
-general biz liability to cover commercial liability -personal property ins to cover physical assets ie office contents or inventory that are leased or owned. -policy package may also cover lost income &extra expenses resulting from an insured peril -insures lost or damaged property at replacement value w/o deducting for depreciation -covers other people's property to the extent that biz owner is legally liable for damage. -provides coverage for slander, libel& false advertising even if lawsuit lacks merit |
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Comprehensive Policy |
comprehensive general liability CGL 1940-combines different types of coverage into a single contract. Includes coverage for bodily injury and property damage liability ins for operations at described premises. New operations or properties acquired were automatically added. Some insurer still use this form but was replaced in 1989 as commercial general liability, same abbreviation. |
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Commercial General Liability CGL 1989 |
New ISO CGL follows 2 formats: -Occurrence based liability-requires the insurer to honor claim for injury even if claim is made 25 years after policy expired. -Claims made form-obligates insurer to pay only for claims first made by insured during policy period and from incidents after the retroactive date listed on the policy |
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Long Tail Claims |
Insurers call claims made many years after alleged injury, long tail claims. Ex: Mfr makes product in 1940 that injures a person in 2006, premiums paid in 1940 will not cover damages to be paid in 2006. -2 examples of long tail liabilities: product liability and medical malpractice. |
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Tail Coverage |
-after contractor completes work, an extended policy is purchased to cover any liability -tail period referred by insurers as extended reporting period, extends time during claim can be filed for a loss. -also called supplemental tail coverage can be purchased for add'l premium to provide for a few years after policy year expires. |
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Business Umbrella Policy |
-risk mgr contemplate worse case scenarios, must consider if plaintiff sues successfully for amt above CGL. Commercial umbrella policy can be purchased to provide the following coverage: -Excess coverage over underlying liability coverage is available when policy limits are not enough to pay for judgments against insured. -More comprehensive coverage is available for losses &exposures left uncovered by underlying policies. -Drop-down coverage is available meaning umbrella becomes the underlying coverage after underlying liability policies have been exhausted, if the insured absorbs the first dollars of the loss. |
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Business Umbrella Policy Cont'd |
-includes coverage for bodily injury, mental injury &anguish, sickness, disease, disability, &also libel, slander &defamation of character -common exclusions for liabilities arising from workers compensation, unemployment compensation, disability benefits law and others. |
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Excess Liability Insurance |
-umbrella policy is called the excess policy because it covers losses in excess of the underlying limits. -typically, insured's retention must be min $10K and often larger if umbrella policy is providing the initial coverage. Umbrella policy usually requires insured to maintain mim amt of underlying liability coverage. Ex of required coverage: $250K/$500K for bodily, $100K for property, $100K for auto liability coverage, $100K-500K for employer liability |
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Environmental impairment liability (EIL) |
describes a class of legal claims against individuals and organizations whose actions damage the environment. |
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Pollution |
-destruction of the environment but heat, noise, or toxic substances. |
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Superfund |
Risk managers must be familiar with these requirements for 2 reasons: -Many corporations accept responsibility of good corporate citizenship, ie responsibility of protecting environment. -Many of these laws provide for significant fines and penalties. |
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Some laws that promote cleaner environment |
-Clean Air Act -Clean Water Act -Toxic Substances Control Act -Comprehensive Environmental Response and Compensation Liability Act (CERCLA) and its amendments, incl SARA of 1986. |
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Product Liability Insurance |
-liability arises when manufactured item injures a consumer -traditionally provided to manufacturer under comprehensive general liability policy. However, this policy doesn't make clear who is liable for loss. -not only can manufacturer be named in lawsuit, dealers carrying product can be named as well. -key question in product liability cases is whether plaintiff has burden of establishing defendants negligence or whether defendant has burden of proving a lack of negligence on its part Ex: asbestosis, injured exposed 20 years ago 1970-1975, first symptoms may not appear until 2005, dies in 2010. Employer may have had many policies between now and then. Injured may have also smoked 2 packs a day. |
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Triple Trigger Theory |
If several insurance policies were in force at time of injury, all insurers would be responsible for providing a coverage. The 3 triggers: Exposure Manifestation Exposure-in-residence period |
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Exposure Theory |
Insurer whose policy was in force when the first exposure to hazardous waste occurred |
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Manifestation Theory |
insurer whose policy was in force when the disease was first recognized |
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Exposure-in-residence Period |
insurer whose policy was in force when the disease developed |
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Professional Liability |
-error cause by professionals. Also known as malpractice liability, errors and omissions (EO) coverage. -insurer are liable to pay for all sums up to policy limit. Insured becomes legally obligated to pay damage as a result from providing services or failure to provide service. -generally do not give insurers right to settle without insured's consent. To protect insured's professional reputation. |
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2 clauses of Professional Liability Ins. |
Coverage Clause: language of the coverage clause of professional liability for lawyers makes insurer's intention clear Claim Settlement: legal obligation to pay damages implies litigation establishing professional negligence. |
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Professional |
-a person w/ special skills, education, or knowledge compensated to provide a service to the public. -licensed by the states. -originally was restricted to ppl employed in areas of theology, law, and medicine. -today, term applied more widely. -professional liability ins is a necessary purchase for accountants, actuaries, architects, directors of corporations, pharmacists, hair stylists, insurance agents and brokers, and other professions requiring special education or a license. |
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Types of Liability Coverage |
-Doctors -Druggist -Hospital -Directors and Officers -Errors and Omissions -Completed Operations -Medical Liability |
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Doctors Liability Policy |
-for physicians, surgeons, and dentists -$1M per incident, $3M per policy period -policy cost depends on city and state -surgeons and obstetricians have highest premium -rates not a function of doctors' history -poor claim history can lead to non-renewal or denial of coverage |
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Director and Officers liability insurance (D&O) |
-covers directors of corporations and other org -value in attracting ppl to serve on board of directors -w/o coverage, personal assets may be subject to liability claims or have to finance their own legal defense funds due to their alleged malfeasance. |
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Errors and Omissions Insurance |
-covers real estate agents, insurance agents, accountants and architects -covers contract performance disputes -this coverage is not provided by general liability ins. |
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Completed operations insurance |
policies cover claims from injuries arising after a service is rendered and the propertys control is returned to the owner. This coverage would help a plumber whose negligence caused a water heater to explode. |
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Medical Liability Categories |
-medical liability ins-commercial ins premium, self-ins contributions & uninsured losses -defensive medical costs-diagnostic test & treatment cost that wouldn't have been incurred if there was no threat of lawsuit -liability-related administrative costs-incurred to min liability exposure incl extra record keeping and time spent in litigation -medical device &pharmaceutical liability-self-ins cost of drug firms &med equipment mfr. |
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Employment Practices Liability |
arises from hiring, terminating, and supervising personnel. The following are some of the reasons employers have been sued: negligent hiring, invasion of privacy, negligent supervision, negligent discharge, wrongful discipline and negligent evaluation. |
