Commercial Insurance Test 3
Terms in this set (81)
Uninsured and Underinsured motorist coverage
allows a business to cover it's employees and its vehicles against injury or damage caused by the negligence of an "uninsured" or "underinsured" motorist
Why does Bailey not like recommending underinsured and uninsured motorist coverage?
because if a worker gets hurt, it is covered under workers compensation , If a vehicle gets hit, the cars are covered with collision and comprehensive physical damage
Personal Injury Protection (PIP)
Pays for the medical bills of occupants of a vehicle involved in an accident regardless of fault
Why does Bailey not like PIP?
Should be covered under workers compensation
What is a Garage Coverage Form?
A unique policy designed for businesses in the automotive industry (car dealerships, body shops, etc) combines a General Liability with Auto Liability
What are the 3 main coverages under a Garage Coverage Form?
1. garage liability
2. garage keepers
3. physical damage coverage
What is covered under "garage liability"?
provide coverage for bodily injury or property damage arising from "garage operations"
What is covered under "garage keepers"?
covers the insured's liability for damage to vehicles left in their care, custody, or control
Is "physical damage coverage" popular in Texas?
no because of hail storms, no insurance company wants to offer it
What are the 3 methods of garage keepers coverage?
1.Legal liability Only ($5,000)
2. Direct Excess Option ($6,000)
3. Direct Primary Option ($8,000) (Bailey's choice)
What are a few limitations of physical liability coverage on a garage coverage form?
1.Sometimes have a $2,500 deductible per car
2. Sometimes have $50,000 occurrence limit
3. Restrictions apply because it is very hard to insure
What are the note able exclusions from a garage coverage form?
1. False pretense
2. Drive away collision
What is false pretense?
any kind of scheme or trickery
What are the conditions of Drive Away Collision?
we don't coverage damage to a vehicle delivered over 50 miles
What is a Business Owner's Policy (BOP)?
package policy designed for small businesses that combines property insurance with General Liability
What are the 6 advantages of a BOP?
1. Discounted premium
2. Automatic inclusion of business interruption (12 months)
3. No coinsurance
4. Replacement coverage is standard
5. Automatic seasonal increase- up to 25%
6. Many other whistles and bells
What are the 2 basic exposures of worker's compensation and employer's liability?
1. The legal responsibility to pay benefits to injured workers as required by state statute
2. Potential legal liability of the employer arising from an employee injury
What is contributory negligence?
employee contributed to their own injury
Define "assumption of risk"
you have to assume there is risk in what you do
What does "fellow servant" mean
another employee hurts you
Before worker's compensation and employer's liability statue
Employee had the right to sue the employer, Employee had to prove negligence, Employer could be held liable for all common law elements of damage, Not a healthy environment
After worker's compensation and employer's liability statue
Employee does not have to prove negligence, Employee gets some benefits, Employer no longer as vulnerable- legal liability greatly reduced, Employer gets to pay a big WC premium
What are the 4 "causes of employment" that a workers comp injury can arise from?
1. Medical benefits
2. Disability benefits
4. Death benefit
ALL employees are covered under workers comp EXCEPT
1. Domestic workers
2. Farm workers (under a certain payroll)
Who/what is an employee?
A person hired to perform services for another and is under the direct supervision and control of the employer
What is an independent contractor?
as one who contracts to do a piece of work according to his/her own methods and is subject to someone else's control only as it pertains to the end result
What are the 4 methods of meeting the workers comp obligation?
1. Buying insurance from an insurance company
2. Competitive State Fund
3. Monopolistic State Fund
4. Self Insurance
What are the different plans to choose from when buying insurance from an insurance company?
1. Guaranteed cost
2. Retrospective Ratings Plan (loss sensitive)
3. Deductible Plan (loss sensitive)
4. Dividend Plan (loss sensitive)
What are the 4 parts of a Worker's Compensation Policy?
1. WC Benefits
2. Employer's Liability Insurance
3. Other States Insurance
What are the 4 workers comp endorsements?
1. Voluntary Compensation Endorsement
2. U.S. Longshore and Harbor Workers Worker's Compensation Act Endorsement
3. Executive Officers and Partners
4. Waiver of Subrogation Endorsement
What is the Voluntary Compensation Endorsement?
obligates the insurance company to pay an amount equal to workers compensation benefits that would otherwise be payable to such employees (domestic and farm) if they were subject to the act
What are a few examples of how an employer can be sued (thus the reason to have employers liability insurance)?
1. "action over" claims (aka third party claims)
2. "Dual Capacity" claim
3. Spouse or Family member lawsuits from wrongful death
What is the purpose of Other States Insurance?
List states in 3C of the information page (all other states not listed in 3A except monopolistic)
What is a stop gap endorsement?
provides employees liability in monopolistic states
Who does part 1 (wc benefits) apply to?
For all states listed under item 3A of the information page
What is an Excess and Umbrella Insurance Policy?
designed to provide additional liability coverage above and beyond the limits provided by the underlying policies (BAP, CGL, EL)
What are the limits of other policies that you can stack a Excess and Umbrella policy on top of?
CGL 1 million occurrence limit (2 million aggregate)
EL 1 million occurrence limit
Auto 1 million occurrence limit
Umbrella goes on top of these limits to extend them
What are the purposes of having an excess and umbrella policy?
1. Protect the insured's assets
2. Difficulty in estimating the maximum probable loss for liability lawsuits
3. Effect of aggregate limits on underlying CGL
What does an excess policy do?
just provides excess liability (as the name implies)
What does an umbrella policy do?
provides excess liability and coverages a very few gaps not protected by underlying policies
arise from "professional" services rendered
What are the differences between a professional liability policy and a CGL
1. Claims-mad policies (vs. Occurrence based policies)
2. The insured (doctor) must consent to any settlement (some policies have a Hammer Clause)
3. Right to select defense council
4. Always a deductible
What is the purpose of a Directors and Officers Liability policy?
Designed to cover the directors and officers of a business for their legal liability arising from their "wrongful acts" on the board
Define "wrongful act"
any breach of duty, neglect, error, misstatement, omission or other act done in the capacity of a D or O
What is covered under a D&O policy
1. Covers the D&Os for their personal liability when they are not indemnified by the organization
2. Covers the amounts that the organization pays to the D & Os because of indemnification
3. Entity coverage
What are the 6 common exclusions of a D&O policy?
1. Libel or slander
2. Gaining any personal profit to which they are not legally entitled ("monkey business")
3. Failure to maintain adequate insurance for the organization
4. Violations of the Securities Exchange Act
5. Acts of deliberant dishonesty
6. Liability under ERISA
Employment Practices Liability insurance is bought in case of allegations of what?
Sexual harassment , Wrongful termination, Discrimination
What does Employee Benefit Liability cover?
covers an employer against lawsuits alleging improper advice or errors made with regard to employee benefits
What does Fiduciary Liability Insurance cover?
covers the fiduciaries for lawsuits alleging breach of their fiduciary duty
What are the 4 reasons why companies need Foreign Liability Insurance?
1. To cover all lawsuits filed outside the USA (key note reason)
2. To even cover some lawsuits filled in USA if the injury is caused by someone outside the USA
3. The use of automobiles in a foreign country
4. WC issues- repatriation (getting a dead body back to the USA), endemic disease (diseases that are specific to parts of the world like malaria or yellow fever)
What are the 5 primary coverage elements of Cyber Insurance?
1. Electronic data protection (aka Data restoration Costs)
2. Business Interruption
3. Network Security Liability
4. Cyber Extortion (ransomware attack)
5. cyber crime
What is electronic data protection?
providing coverage for the cost of recovering or restoring electronic data that has been deleted or damaged
What does business interruption coverage do?
loss of income die to suspension of an insured's computer system due to a cyber attack
What does network security liability coverage do?
coverage for the insured's liability arising from a security breach
What does cyber extortion coverage do?
provides coverage for expenses related to computer network kidnap or ransom
What is a surety bond?
an agreement by one party (ie the surety) to answer for the failure of another party (I.e. the principal) to perform an obligation as promised
What is the short definition of a surety bond (acceptable on test)?
a surety bond guarantees an obligation
What are the 3 parties involved in a surety bond?
1. Surety- guarantees the obligation
2. Obligee- the party that receives the surety's guarantee
3. Principal- the party whose obligation is being guaranteed
What are the 3 C's of qualifications of a surety bond?
What indemnifies the bond company if there is a claim?
The principle, his individual, and spouse are obligated to indemnify the bond company if there's a claim
What is one type of surety bond?
What are the two sections of a Business Auto Policy (BAP)?
Section 1- Covered Autos
Section 2- Liability Coverage
Is the BAP flexible when determining covered autos?
The BAP allows great flexibility in determining which specific vehicles will be covered by the various coverage sections
What is symbol 1 under section 1 of a BAP?
What does section 2 (liability coverage) of a BAP do?
Pays all sums an insured may be legally obligated to pay because of bodily injury or property damage caused by an accident by a "covered auto"
Who is an insured?/ Who is covered by this policy? under a BAP
1. The named insured
2. Anyone else using a covered auto with the permission of the insured
EXCEPT: an employee if the auto is owned by that employee
What is the one exception to who is covered under a BAP?
an employee if the auto is owned by that employee
What are the exclusions to a BAP?
1. Expected or intended
2. Contractual liability exclusion
3. Workers Compensation Exclusion
4. Employees Liability Exclusion
5. Fellow Employee Exclusion
6. Care, Custody, or Control Exclusion
7. Handling or Property (pertains to the loading and unloading exposure)
8. Movement of Property by a mechanical device
10. Completed Operations
11. Pollution exclusion
What is an example of a contractual liability exclusion?
General Contractor runs over someone and company gets sued, GC assumes liability
What is the purpose of the workers compensation exclusion?
to eliminate coverage for injury to any employee
What is an example of the workers compensation exclusion?
Car rental example, employee gets in accident, employee cant sue the business so they sue the car rental place, car rental place say come indemnify us to business, business covers it because of contract
Give an example under the fellow employee exclusion
Eating lunch on the dock and employee backs company truck into them, dock employee cant sue permissible driver, injury covered under workers compensation
Explain an example under the handling and property exclusion
Once the box is unloaded and they drive off, they aren't liable if the box falls down the stairs and hurts the kid
Give an example under the operations exclusion
Bucket truck is covered while moving, not covered when parked and bucket being used because then it is considered equipment
Give an example under the completed operations exclusion
Fleet of street sweepers, clean mall parking lot, bicycler falls and hurts head, not covered, this is a CGL claims
What is explained in the completed operations exclusion
This exclusion makes it clear that the BAP does not provide coverage for lawsuits arising from the complete operations performed with autos/trucks
What is explained in the pollution exclusion
No coverage for injury or damage caused by the discharge of a pollutant being transported by the insured
What is an example under the pollution exclusion
gas tanker truck
What is covered considering the pollution exclusion
The escape of fuels needed for the vehicle function
If our insured collides with a tanker truck
What are the types of coverage under Physical Damage Coverage in a BAP
1. Collision (other cars, bridges, overturns, etc)
2. Comprehensive (loss by almost any peril except collision)
3. Specified Loss
If there is physical damage how much does the insurance company pay?
1. The cost to repair or
2. The actual cash value of the vehicle (whichever is less)
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