commercial 104

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Commercial 104

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TWFG Commercial Business SchoolCommercial 104

Commercial 101 – 104Commercial 101

OverviewCommercial Insurance Basic TermsCommercial Insurance Polices: OverviewImportant Auxiliary CoveragesACORD Forms OverviewCommercial Lines Workflow ProcessSubmission ChecklistPost-Binding Checklist

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How Does the Underwriting Process Operate?Commercial Insurance Policy Coverages: First Level DetailSilverplume Overview (Live Demo)

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Commercial Lines Basics Property: COPECommercial Lines Basics Property: BuildingCommercial Lines Basics Property: Business Personal Property (BPP)Module 3 Case Study

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Commercial AutoMulti-Line Policy TypesWorkers Compensation OverviewEndorsements Common to Most Policies

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Learning Objectives

Understand what exposures are covered under the Commercial Auto Policy

Understand the difference between a Business Owners Policy (BOP) and a Commercial Lines Package Policy and when using each is the best choice

To gain a basic understanding of what coverages are provided the basics of rate classification under the Workers Compensation Policy

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Commercial AutoMost businesses use some type of auto in their operations.

For some the use is incidental, such as a contractor driving to and from a job site.

For others, the use is essential, such as furniture delivery.

Obviously, the more an auto is on the road, the greater the exposure, or chance of loss, and therefore the greater the premium

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Commercial AutoThis class is designed to help you become more familiar with auto coverages, how commercial autos are rated, and the exposures that an underwriter evaluates

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Commercial AutoCommercial Auto Definition:

A land motor vehicle or trailer designed for use on public roads

Any other land vehicle subject to a compulsory insurance law

For a vehicle to be properly insured on a Commercial Auto Policy, it must be registered in the company’s name (or individual for a sole proprietor)

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Commercial AutoCommercial Auto Definition:Mobile equipment is NOT a commercial auto: Farm equipment, forklifts, bobcats, bulldozers and other vehicles not designed for use over public roads.

Also included are mobile chassis with permanently attached pieces of heavy equipment designed specifically for movement of that equipment.

Exempted are vehicles with snow plows attached and street cleaning vehicles. These are considered “autos”

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Commercial AutoDefinition of Insured:

You, meaning the corporation, partnership or sole proprietor listed as the name insured

Anyone else using a covered auto with your permission. There are some exceptions for family members and employees if they own the vehicle in question. These situations can be addressed by specific

endorsements

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Commercial AutoCommercial Auto Coverages:UM/UIM:Uninsured and underinsured motorist coverage is similar to the same coverages found in the Personal Auto Policy, as are PIP, Med Pay and Towing. UM/UIM is mandatory in most states. In others, it may be rejected, but must be done so by signing a specific form, and the form normally must be signed with each renewal. (Key Concept) This is an area where enormous E&O exposures exist. It is vital that each agent maintain an auto “checklist” both for new business and renewals, which includes verification of the acceptance/rejection and collection of the signed rejection form

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Commercial AutoCommercial Auto Coverages:BI/PD:The definitions for bodily injury, property damage and accident match those of the CGL

The bodily injury or property damage must result from the ownership, maintenance or use of a covered auto

We will discuss what a covered auto is in a later section

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Commercial AutoPhysical Damage Coverages:

Comprehensive, Collision, and Specified Causes of Loss apply similarly as they do with Personal Auto Policies

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TWFG Commercial Business School

Commercial 104

Commercial AutoCommercial Auto Rating & Classification:

Several factors used to determine classification and rating

Understanding needed to be able to apply these factors to properly write commercial auto

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Weight and Vehicle Type:Private passenger Form of commercial truck including vansWeights – classified as, and based on

GVW:LightMediumHeavyExtra Heavy

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TWFG Commercial Business School

Commercial 104

Commercial AutoCommercial Auto Rating & Classification:Private Passenger: Sedan/SUV/Coupe/Non-Commercial VanLight Trucks: Pick-up Trucks/Commercial Vans up to 10,000lbs Medium Trucks: Box Trucks/Commercial Vans up to 20,000lbsHeavy Trucks: Large box and Non-Semi up to 45,000lbsExtra Heavy Trucks: Large box and Non-Semi over 45,000lbsService or Utility Trailers: Load capacity up to 2000lbsTrailers: Load capacity over 2000lbsSemi-Trailers

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Commercial AutoCommercial Auto Rating & Classification:Use of Vehicle: Classifications based on the degree of “Over-The- Road” exposure according to how the vehicle is normally used

Service Use: Vehicles used to transport workers/supplies to and from job sites. Parked most of the time. Ex.: Electrical Contractor’s truckRetail Use: Vehicles used for deliveries to residences, such flower/furniture delivery. Frequently changing routesCommercial Use: All other vehicles, such delivery trucks (to businesses)

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Radius of Operation: Distance normally traveled from the place of business

Local: 50 – 100 milesIntermediate: 51 – 200 milesLong Distance: Over 200 miles

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Special Industry Classifications: The last classification and rating factor applies to special classes, such as dump trucks and trailers, concrete trucks, and food delivery

Garaging Address: Determines the rating territory for each unit. For large fleet schedules, units may be garaged at multiple addresses

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Commercial AutoSymbol Values:For each coverage selected the insured will select a Symbol, which determines which vehicles are included for that coverage.

Symbo1 1 Any Auto: Any owned, non-owned, or hired auto.Typically only allowed for liability coveragesSymbol 2 Owned auto only: Used for liability, UM/UIM and other coverages.

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Commercial AutoSymbol Values:

Symbol 3 Owned Private Passenger Autos: Used by entities which strictly use private passenger autos, such mobile computer repair service. Need to include

symbols 8 and 9Symbol 4 Owned Autos other than

Private Passenger: Could be used by commercial trucking outfit. Need to

include symbols 8 and 9Symbols 5/6 Apply to UM/UIM, PIP, and Med

Pay

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Symbol 7 Specifically Described Autos: Typically used for Physical Damage coverage when some units will not have the coverage, such as older units

Symbol 8 Hired Autos: Extends selected coverages to autos the insured leases, hires, rents, or borrows but NOT those belonging to employees for partners

Symbols 9 Non-Owned Autos: Extends coverage to autos which ARE owned by employees or partners. Typically only liability coverage is extended to Hired

and Non-Owned autos

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Other Items:Need to supply complete list of drivers

with DL number

Driving records and experience will be evaluated by UW

You must determine if insured has a formal “Fleet Safety Program”

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Commercial AutoWho is an Insured?The named insured for a covered autoA permissive user of a covered auto (employees)

Who is not an Insured?The owner of a Hired AutoAn employee in their own autoA partner/member in an auto they own

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Commercial AutoImportant Endorsements:

CA 99 17 Individual Named InsuredDesigned for sole proprietors, partners

and LLC members when the car they drive (covered auto under the BAP) is their personal car

CA 99 10 Drive Other Car CoverageDesigned for officers, partners, or

employees who are furnished a company car and it’s the only vehicle available

to that individual (does not own a personal auto)

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Commercial AutoImportant Endorsements:CA 99 16 Hired Auto Specified as Covered Auto You OwnThis extends liability and/or physical damage to autos owned by owners or employees and used in the business. Specific autos are scheduled. CA 99 33 should also be used

CA 99 33 Employees as InsuredsExtends liability coverage to all employees whose autos are listed on the CA 99 16

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Commercial AutoImportant Endorsements:CA 20 01 Lessor-Additional Insured and Loss PayeeEffectively turns a leased auto into a covered auto rather than a hired auto. This makes the insured’s auto coverage primary

CA 99 47 Employee as LessorAdds the scheduled auto (which is owned by an employee and leased to the business) as a covered auto and the employee who leases it as an insured

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Underwriting Auto ExposuresUse of Vehicles

How vehicles are used is a major component in underwriting

Service vehicles presents the lowest exposures

Retail vehicles presents the highest exposures

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Underwriting Auto ExposuresAge and Condition of Vehicles

While older, well maintained vehicles are acceptable, newer units are preferred

Older units have more maintenance issues

Newer units indicates financial success, and a planned budgetary commitment to vehicle safety and quality

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Underwriting Auto ExposuresFormal Safety Program

For fleets of 5 or more units a formal safety program is preferred and should include:

Designated Safety OfficerDaily Vehicle InspectionsRegular Safety MeetingsAccident Investigation ProcessDriver Safety Training Classes

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Underwriting Auto ExposuresDriver Selection Program

Does the insured have procedures for selecting drivers? Components would include:

Minimum number of years driving experience

Driver training program where appropriate

Acceptable driving recordRegular check of MVRs

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Underwriting Auto ExposuresVehicle Maintenance Program

Regular scheduled vehicle maintenance documented

Regular oil changesPerform manufacturer’s recommended

maintenanceReplacement of tires, etc. all done on a

regular basis

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Underwriting Auto ExposuresOvernight Garaging/Protection

Are vehicles taken home at night?Parked on the street, access by other family members?Proper endorsements in place?Parked inside a secured area?Left at job sites overnight (larger units)- properly secured/use of anti-theft devises?

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Underwriting Auto ExposuresLoss History

For fleets of 5 or more units a formal safety program is preferred and should include:

Severity vs. FrequencyFrequency indicates an ineffective loss

control program.Severity may be a one-off issue, but

where there preventable factors

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Multi-Policy TypesBusiness Owner’s Policy (BOP)Designed for small and medium sized businesses Combines basic property and general liability coverages into one packaged policyLess expensive than purchasing separatelyMost carriers include enhancement endorsements for a nominal feeCan be endorsed to include coverages such as EPL and Cyber Liability, and an Umbrella

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Multi-Policy TypesCommercial Package Policy (CPP)

Designed for more complicated medium sized accounts and most all large accounts

Combines property and general liability but has more flexibility in the extend of coverage options available

Allows more in-depth analysis of exposures and a more tailored approach to coverages

These are risks where “knowing the business” is essential for the agency and where credibility is a must both win and retain the account

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Workers Compensation Coverage OverviewBackground

Began in 1911 due to burden on society from injured employees without health insurance

Employer to bear the cost of work-related injuries and illness without regard to negligence

Workers covered regardless of fault, and employers could not be sued by employees

Workers Compensation became the sole remedy for occupational injuries

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Workers Compensation Coverage OverviewCoverages Provided

Workers Compensation policies provide two different coverages

Workers CompensationEmployers Liability

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Workers Compensation Coverage OverviewWorkers Compensation

Provides no-fault coverage to employees for work related injuries and illness

When purchased, WC is the sole remedy for injured workers

Payments are partial and periodic, with emphasis on returning employee to work

No limit on reasonable and necessary medical coverage

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Workers Compensation Coverage OverviewEmployers Liability

Provides coverage to employer for injury-related claims made by employees for things not covered by WC statutes

Legal Liability to Employees Not Covered by WC:

Gross NegligenceIntentional InjuryDual Capacity Claims

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Workers Compensation Coverage OverviewEmployers Liability

Legal Liability to Others:Loss of Services by Family MembersThird-Party (action-over) ClaimsConsequential Bodily Injury Claims

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Workers Compensation Coverage OverviewCoverage by State

WC is mandatory in all states except Texas and New Jersey, where it is elective

A sole proprietor with no employees in not eligible for WC

4 states have Monopolistic State Funds- no private insurers: ND, OH, WA and WY

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Workers Compensation Coverage OverviewPremium Basis

Payroll is the basis for WC premium. If payroll reaches min premium threshold the

risk qualifies for experience ratingExperience rating worksheet calculates the

Experience Mod which applies a debit or credit the rating process

Carries have option to apply a Schedule Rating based on peculiarities of a specific risk

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Workers Compensation Coverage OverviewStop Gap Coverage

A form of “stand alone” Employers Liability coverage used in Monopolistic Fund states which do not combine EL with WC. Usually added to the CGL

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Workers Compensation Coverage OverviewUnderwriting Workers CompensationManagement Attitude Toward WCIs the employer involved in minimizing hazards/reducing costs?Are safety programs mandatory and enforced?Are accidents investigated and results incorporated in an ongoing program of loss improvement?Does employer provide back-to-work programs?Are employees involved in safety process?Evidence of good housekeeping/maintenance of building, machinery, and processes

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Workers Compensation Coverage OverviewUnderwriting Workers CompensationIndependent Contractors:Contracting risks are impacted by how an Independent Contractor is definedIf sub-contractor does not meet the definition of an independent contractor, then the subs payroll must be included in the hiring contractors WC exposuresMost definitions include reference regarding who controls the work, and the relationship between the contractor and the sub

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Workers Compensation Coverage OverviewUnderwriting Workers Compensation

Descriptions of Coverages: Items 3A, 3B, and 3C

The information page (Dec Page) for the typical WC and EL policy has three important fields listed as 3A, 3B, and 3C

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Item 3A: States with Active OperationsList all states where insured has known

operationsActivates WC laws for those statesCannot list Monopolistic States. Must

separately purchase the Monopolistic Fund policies in those states (add Stop Gap Coverage)

Note that there are no occurrence or aggregate limits for WC

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Item 3B: Employers Liability LimitsThis is the EL limits, which apply to all

states listed under 3AConsider limits carefully, especially if an

Umbrella is purchased. $1M/$1M/$1M is recommended

There is no policy aggregate for BI by accident, only per accident limit

BI by disease has a per employee and policy limit

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Item 3C: Other States CoverageActivates WC laws for listed states in

which work begins in those states after the effective date

Insured must notify the company when work begins in any state listed in 3C. Activated states must be moved to 3A at renewal

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What determines which States WC laws apply? (Any may apply)

State in which the employee was hiredState of the employee’s residencyState where the Primary Employer is

locatedState in which the employee is paidState where the injury occurred

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Endorsements Common to Most PoliciesThere are three classes of endorsements that are common to most Commercial Lines policies

Additional InsuredsLoss PayeeWaiver of Subrogation

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Endorsements Common to Most PoliciesAdditional Insured

Usually requested when a business operates on property owned by others, or is doing work at another’s property

Purpose of endorsement is to protect the property owner

Numerous types of Additional Insured endorsements

Included automatically on Commercial Auto.Not used on property or WC

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Endorsements Common to Most PoliciesLoss Payee

Can be either lenders of lessorsHave a financial interest in specifically

described propertyProtects interest by requiring that the Loss

Payee be named on any loss checkUsually combined with an Additional Insured

endorsementCan be used on any policy that insures property

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Endorsements Common to Most PoliciesWaiver of Subrogation

Commonly requested in conjunction with the Additional Insured endorsement

Transfers all responsibility to the insured for losses, even if the Additional Insured contributed to loss

Waives insured’s right to subrogate (go after portion of the loss that was Additional Insured’s fault)

Common on Auto, GL, and WC

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QUIZ

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You are presented the opportunity to write auto coverage for an industrial electrical contractor. They have a fleet of 15 pick-ups driven by their employees to job sites. They also have 7 heavy trucks used to carry supplies and 6 utility trailers pulled by the pick-ups.

9 of the pick-ups are over 7 years old, and the insured does not want to carry comp and collision on these units. The same applies to 5 of the 7 heavy trucks.

The pick-up trucks are used for local jobs, but 5 of the heavy trucks are used for jobs within 200 miles of the insured’s shop. The insured wants PIP and UM/UIM

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What symbols would you use for the following Coverages?

Liability PIP UM UIM

Comp Coll Trailers

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What symbols would you use for the following Coverages?

Liability (1) PIP (2) UM (2)UIM (2)

Comp (7) Coll (7,8) Trailers (none needed)

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What radius of operations apply to:

The Pick-ups The Heavy Trucks

The Trailers

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What radius of operations apply to:

The Pick-ups (local) The Heavy Trucks (intermediate)

The Trailers (local)

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What use and weight classifications are applied to:

The Pick-ups The Heavy Trucks

The Trailers

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What use and weight classifications are applied to:

The Pick-ups (service, light) The Heavy Trucks (service, heavy)

The Trailers (service, utility)

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What are two main types of combination policies issued to businesses?

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What are two main types of combination policies issued to businesses?

BOP and Commercial Package Policies

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What are two coverages provided in a Workers Compensation Policy?

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What are two coverages provided in a Workers Compensation Policy?

Workers Compensation and Employer’s Liability

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If an employee sustains a routine injury on the job, can he/she sue the employer?Why or why not?

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If an employee sustains a routine injury on the job, can he/she sue the employer?Why or why not?

1. No2. WC is the sole remedy unless gross negligence is present

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If an employee sustains an injury on the job and believes the employer’s gross negligence caused the injury, can the employee sue the employer?If so, would the employer’s WC policy respond?If so, in what manner?

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If an employee sustains an injury on the job and believes the employer’s gross negligence caused the injury, can the employee sue the employer?If so, would the employer’s WC policy respond?If so, in what manner?

1. Yes2. Yes3. The EL coverage would respond

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Is Workers Compensation mandatory in Texas?

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Is Workers Compensation mandatory in Texas?

No

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What two types of rating plans can be applied to a large workers compensation risk?

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What two types of rating plans can be applied to a large workers compensation risk?

Experience rating and Schedule rating

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Future Classes

February 28th Commercial 101March 6th Commercial 102March 13th Commercial 103March 20th Commercial 104

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Industry Segment Classes (Beginning in March)

Retail & Service Farm/RanchArtisan Contractor Excess & SurplusCommercial Auto Professional LiabilityWorkers Compensation UmbrellaCommercial Real Estate BondsRestaurant Financial InstitutionsManufacturing Hotels/MotelsAgriculture Medical Technology

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Questions???

commercial 104

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