insuring commercial casualty the national alliance for insurance education & research austin,...

Insuring Commercial Casualty

The National Alliance for Insurance Education & Research

Austin, Texas

Legal Liability

© 2009 The Society of CISR, Inc.

Learning Objectives

1. Identify and explain sources of liability

2. Explain the types of legal liability and how they can be created

3. Describe the types of damages that may be covered by a liability insurance policy


Liability Defined

• A responsibility or obligation to others, which courts recognize and enforce


Sources of Liability

• Premises

• Operations

• Products

• Completed Operations

• Ownership, Maintenance or Use of Autos


Sources of Liability

• Ownership, Maintenance or Use of Other Conveyances

• Employing Workers

• Liquor

• Environmental Impairment

• Professional Activities

• Bailee Liability


Liability Triggers

• Direct Liability: Your Conduct

• Vicarious Liability: Conduct of Others- Employer and Employee- Agency and Principal- Contractor and Subcontractor- Owner and Manager- Owner and Independent Contractor


Legal Liability

• Previously defined as a responsibility or obligation to others, which the courts recognize and enforce



Types of Legal Liability

Torts Statutes Contracts

Assumption of Liability

Breach of Contract

Modify Common Law

Intentional Torts

Negligence

Strict Liability

Absolute Liability

Torts

• Negligence


Person required to operate an automobile

safelyPerson runs a red light

Property damage to the other car and bodily injury

to the other driver

The breach of the duty caused the BI and PD


Intentional Torts• Intentional or voluntary act which results in

injury or loss to another– Libel– Slander– Wrongful entry or wrongful eviction– Assault and/or battery– Wrongful detention– False arrest– Copyright infringement, trademark

infringement, etc.


Strict Liability

• Concept applied in product liability cases

• Manufacturer, distributor, or seller is liable for any and all defective or hazardous products which unduly threaten a consumer’s health and safety

• Consumer only has to prove the defect and damages


Absolute Liability

• Liability without regard to fault or negligence

• Applies when known or unusual conditions are allowed to exist

• Applies regardless of the care exercised

• Includes dynamite, gasoline, chemicals, explosives, wild animals in captivity, domestic animals known to be abnormally dangerous, etc.


Statutory Liability

• Rule or law enacted by a legislative body providing direction or prohibition

• Statutes override common law

• Examples:– Workers Compensation– Dram Shop or Liquor Liability– EEOC & Employment Related– ADA


Contractual Liability

• Agreement between two or more parties

• Obligation to do or not to do a particular thing

• One party assumes the financial consequences or certain liabilities of another


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Contractual Liability

• Parties Commonly Involved– Lessor/Lessee

– Owner/Contractor

– Contractor/Subcontractor

– Manufacturer/Distributor


“Insured Contracts”

• Specific Types of Contracts that will be Defined in Liability Policies

• Not All Contracts are “Insured Contracts”

• Breach of Contract Not Typically Covered by Liability Insurance Policies


Damages

• Compensatory– Sums of money that will compensate for

the loss

– Includes Special Damages and General Damages

– Represents the combined total of monetary losses actually sustained by the plaintiff


Damages

• Special Damages– Specific dollar amounts that cover

medical bills, lost income, etc.

• General Damages– Subjective dollar amounts to cover

intangible losses such as pain & suffering, loss of consortium, etc.


Damages

• Punitive/Exemplary Damages– Imposed to punish the wrongdoer or

deter conduct in the future

– Statute may restrict the amount or prohibit insurability

– Policy language may exclude punitive damages


Summary of Learning Objectives

1. Identify and explain sources of liability

2. Explain the types of legal liability and how they can be created

3. Describe the types of damages that may be covered by a liability insurance policy


Commercial General Liability


Learning Objectives

1. Identify the exposure areas that may be covered by the Commercial General Liability Policy Coverage Form

2. Determine “Who is an Insured” in a Commercial General Liability Policy for specific situations

3. Identify the three major coverage sections of the Commercial General Liability Coverage Form and describe the general liability exposure areas included within each section


Learning Objectives

4. Identify the limits of insurance of the Commercial General Liability Coverage Form and apply the limits to specific loss situations

5. Apply the various exclusions of the Commercial General Liability Coverage Form


Liability Exposures Covered by the CGL

• Premises– Owners, landlords, and tenants

– Ownership, maintenance or use

– Operations necessary for the premises



• Operations– Activities of the operation

– Includes service and repair away from the premises while in process



• Product Liability– Coverage begins when the product has

left the insured’s premises and is no longer in the insured’s possession



• Completed Operations– Coverage begins when the business

operation is completed



• Contractual Liability– Liability arising from an “insured

contract” or other contractual obligations covered by the policy



• Contingent Liability– Liability arising out of work performed for

the insured by someone else

– Protects an insured from the negligence of an “independent”



• Personal and Advertising Injury– Named perils as defined in the policy


Who is an Insured?


Individual OrganizationPartnership or Joint Venture

TrustLimited Liability

Company

Named Individual

Spouse

Named Partnership

Joint Venture

Partners

Members

Spouses

NamedEntity

Executive Officers

Directors

Stockholders

Named LLC

You

Members

Managers

NamedTrust

Trustees

PLUS OTHERS

Who is an Insured?

• Individual– Includes spouse with respect to the conduct

of the business

• Partnerships or Joint Ventures– Entity– Members, partners and their spouses

• Other Organizations– Entity– Executive officers, directors and

stockholders


Who is an Insured?

• Limited Liability Company (LLC)– Entity– Members and managers

• Trusts


Who is an Insured - Others


DeathVolunteer Workers

EmployeesReal Estate Managers

Legal Representative if

Insured Dies

Person or Organization

With Temporary Custody if

Named Insured Dies

NEWLY ACQUIRED ORGANIZATION

90 Days or End of Policy Period

DOES NOT INCLUDE:

PartnershipsJoint Ventures

Limited Liability Companies


• Employees within scope of employment

• Volunteer worker

• Real estate managers

• Person/Organization with temporary custody if named insured dies

• Legal representative if named insured dies



• Newly acquired or newly formed organizations– Earlier of 90 days or end of policy period

– No automatic coverage for partnerships, joint ventures or LLCs


Definitions

• Auto– Land vehicle– Includes attached machinery or equipment– Land vehicle subject to compulsory or financial

responsibility – Does not include mobile equipment

• Mobile Equipment– Defined as six types of land vehicles– Identifies several types of land vehicles that are

autos and not mobile equipment


Definitions

• Property Damage– Direct damage and loss of use

• Coverage Territory– United States– Territories and Possessions– Puerto Rico– Canada– And . . .


Definitions

• Coverage Territory– Limited Worldwide if:

• Products made or sold in the coverage territory OR• Arising out of activity of a person whose home is in

the territory but is away for a short time on insured’s business OR

• Personal and advertising injury take place through the Internet or similar communications means

AND• Liability is determined in a suit brought in the

coverage territory or in a settlement agreed to by the insurance company


Coverage Sections of the CGL Coverage Form

• Coverage A – Bodily Injury and Property Damage– Covered Unless Excluded

• Coverage B – Personal and Advertising Injury– Named Perils

• Coverage C – Medical Payments to Others– No Fault Coverage



• Coverage A – Bodily Injury and Property Damage– Caused by an occurrence

– Legal responsibility required

– Duty to defend

– No defense if the loss is not covered

– Exclusions apply



• Coverage B – Personal and Advertising Injury

– Caused by a committed offense

– Legal responsibility required

– Duty to defend

– No defense if the loss is not covered

– Named peril coverage© 2009 The Society of CISR, Inc.


• Coverage B – Personal and Advertising Injury– Injury arising out of one or more of the

following: • False arrest, detention or imprisonment• Malicious prosecution• Wrongful eviction from, wrongful entry into,

or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor



• Coverage B – Personal and Advertising Injury– Injury arising out of one or more of the

following: • Oral or written publication of material that

slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services

• The use of another’s advertising idea in insured’s advertisement

• Infringing upon another’s copyright, trade dress or slogan in insured’s advertisement



• Coverage B – Personal and Advertising Injury

– Exclusions designed to eliminate coverage for acts within insured’s control

– Internet exclusions apply



• Coverage C – Medical Payments to Others

– Caused by an accident

– Legal responsibility NOT required

– Purpose is goodwill and to reduce lawsuits



• Coverage C – Medical Payments to Others

– Bodily injury caused by an accident:

• On premises insured owns or rents

• On ways next to premises

• Because of insured’s operations

• Must take place in coverage territory

• Must be reported within one year of accident

• Exclusions apply

• Separate per person sub-limit of insurance



• Supplementary Payments– Expenses (Defense)

– Bail bonds $250

– Attachment bonds

– Reasonable expenses of insured

– Costs taxed

– Prejudgment and post judgment interest



• Damage to Premises Rented to You– Peril of fire

– Separate per premises sub-limit of insurance

– Perils other than fire


General Aggregate$1,000,000

ProductsCompleted Operations Aggregate$1,000,000

Each Occurrence

$500,000

BI & PDProducts & Completed Operations

Personal or Advertising Injury

LimitPer Person orOrganization

$500,000

BI & PD Premises

and Operations Medical

Payments Per Person

Limit$5,000

Damages to Premises

Rented To You

Per Premises Limit

$50,000

Limits of Insurance

• General Aggregate

• Products-Completed Operations Aggregate

• Importance of Aggregates!


Limits of Insurance

• Each Occurrence Limit

• Personal and Advertising Injury – Any one person/organization

• Medical Payment Limit – Any one person– Subject to Each Occurrence Limit

• Damage to Premises Rented to You– Per premises limit– Subject to Each Occurrence Limit


Exclusions

• Expected or Intended Injury– May use reasonable force

• Contractual– Still has coverage for damages the

insured would have had without the contract or agreement

– Still has coverage for an “insured contract”


WHAT IS AN INSURED CONTRACT?


Exclusions

• Liquor Liability– If insured is in the business

– Host Liquor is covered

• Workers Compensation

• Employer’s Liability


Exclusions

• Pollution– Still covers bodily injury caused by smoke, fumes,

vapor or soot from equipment used to heat the building

– Still covers bodily injury or property damage if you are a contractor and:

• The owner or lessee of the premises, site or location has been added to your policy as an additional insured with respect to that additional insured at that location; and

• Insured has never owned, occupied, rented or loaned the location to any insured other than that additional insured


Exclusions • Pollution

– Still covers bodily injury or property damage arising out of heat, smoke or fumes from a “hostile fire” – Premises

– Still covers bodily injury and property damage arising out of the escape of fuels, etc., needed for the operation of mobile equipment.

– Still covers bodily injury or property damage arising out of heat, smoke or fumes from a “hostile fire” – Operations

– Still covers bodily injury or property damage sustained within a building and caused by the release of gases, fumes, etc., from materials brought into that building in connection with operations being performed by insured or on insured’s behalf by a contractor or subcontractor


Exclusions

• Aircraft, Auto or Watercraft– Still covers watercraft ashore on

premise insured owns or rents.

– Still covers a non-owned watercraft that is less than 26 feet long and is not used to carry people or property for a charge


Exclusions

• Aircraft, Auto or Watercraft (continued)– Still provides liability arising out of parking an

auto on or on the ways next to insured’s premises

Important: The policy does

not provide property damage

coverage for the auto being

parked or property in the

care, custody or control of the

insured!


Exclusions

• Aircraft, Auto or Watercraft (continued)– Still covers liability assumed in an

“insured contract” for the ownership, maintenance or use of aircraft or watercraft

– Still covers bodily injury or property damage arising out of the use of “mobile equipment”


Exclusions

• Mobile Equipment

– Coverage applies for the “operation” of the mobile equipment

– Excludes transportation of mobile equipment by an auto owned or operated or rented or loaned to any insured

– Excludes mobile equipment practicing, preparing, etc., for a race, speed, demolition or stunting activity

• War


Exclusions • Damage to Property

– Excludes property the insured owns, rents or occupies

– Excludes premises the insured sells, gives away or abandons

– Property loaned to the insured

– Personal property in the care, custody or control of the insured

– Part of real property on which work being done or which requires repair, etc. because of the insured’s incorrectly performed work


Exclusions

• Damage to Your Product– Resultant property damage, caused by

the insured’s product, is covered

• Damage to Your Work– Resultant damage is covered– Covers property damage to insured’s

work if done on insured’s behalf by a subcontractor


Exclusions

• Damage to Impaired Property

• Recall of Products, Work or Impaired Property

• Personal and Advertising Injury

• Electronic Data

• Distribution of Material in Violation of Statutes

• Exclusion Notes



1. Identify the exposure areas that may be covered by the Commercial General Liability Policy Coverage Form

2. Determine “Who is an Insured” in a Commercial General Liability Policy for specific situations

3. Identify the three major coverage sections of the Commercial General Liability Coverage Form and describe the general liability exposure areas included within each section



4. Identify the limits of insurance of the Commercial General Liability Coverage Form and apply the limits to specific loss situations

5. Apply the various exclusions of the Commercial General Liability Coverage Form


Business Auto Coverage


Learning Objectives

1. Identify the exposures covered by the Business Auto Policy

2. Determine who is and who is not an insured in the Business Auto Policy for specific situations

3. Explain specific definitions and policy conditions

4. Identify a covered auto when presented the appropriate symbol information

5. Determine whether a newly acquired auto is covered


Learning Objectives

6. Identify what types of vehicles are granted coverage through the Liability Extension

7. Apply the liability exclusions found in the Business Auto Policy

8. Apply the physical damage exclusions found in the Business Auto Policy


Exposures Covered by the Business Auto Coverage Form

• Liability for Ownership, Maintenance or Use– Owned– Non-Owned– Hired

• Physical Damage– Owned– Hired or Borrowed


Business Auto Policy Structure


Business Auto Coverages

• Policy Coverages– Liability– Physical Damage

• Endorsement Coverages– Medical Payments– Personal Injury– Uninsured/Underinsured Motorists

• Additional Forms


Who is an Insured?

• Named Insured any Covered Auto

• Others Using Covered Auto With Permission EXCEPT:– Owner of hired or borrowed auto– Employee using own vehicle– Anyone in the auto business– Loading & unloading with exceptions– Partner/member using own vehicle

• Vicarious Liability


Definitions

• Accident

• Auto– Travel on public road– Attached machinery or equipment– Land vehicle subject to compulsory or financial

responsibility– Does not include mobile equipment – Same definition as the CGL

• Bodily Injury

• Property Damage


Definitions

• Insured Contract– LEASE + Rental Agreement but not for physical damage

• Loss

• Mobile Equipment– Same definition as the CGL

• Pollution– Will discuss in Exclusions

• Trailer


General Conditions

• Other Insurance

TYPE PRIMARY EXCESS

Covered Auto – Owned X

Trailer if Covered Auto & Connected to an Owned Covered Auto

X

Covered Auto - Not Owned X

Trailer if Covered Auto & Connected to any Motor Vehicle Not Owned

X

Liability Assumed Under Contract X


General Conditions

• Policy Period and Coverage Territory – Policy period shown on declarations

• Territory– United States of America– Territories & possessions– Puerto Rico – Canada – And . . . –


General Conditions

• Worldwide if:– Covered auto

– Private passenger type

– Leased, hired, rented or borrowed without a driver for 30 days or less; And

– Insured’s liability is determined in a suit in the policy territory or accepted by the insurance company


Covered Autos• Symbols Designate Coverage


Coverages Covered Autos

Limit Premium

Liability $500,000 $

Personal Injury Protection (Or Equivalent No-Fault Coverage)

Separately Stated In Each Personal Injury Protection Endorsement Minus $ Ded.

$

Added Personal Injury Protection (Or Equivalent Added No-Fault Coverage)

Separately Stated In Each Added Personal Injury Protection Endorsement Minus $ Ded.

$

Auto Medical Payments $ $

Uninsured Motorists $

Underinsured Motorists (When Not Included in Uninsured Motorists Coverage)

$

Physical Damage Comprehensive Coverage

Actual Cash Value Or Cost Of Repair, Whichever Is Less, Minus $250 Deductible For Each Covered Auto, But No Deductible Applies To Loss Caused By Fire Or Lightning. See Item Four For Hired Or Borrowed “Autos”.

$

Physical Damage Specified Causes of Loss Coverage

Actual Cash Value Or Cost Of Repair, Whichever Is Less, Minus $25 Deductible For Each Covered Auto For Loss Caused By Mischief OR Vandalism. See Item Four For Hired Or Borrowed “Autos”.

$

Physical Damage Collision Coverage

Actual Cash Value Or Cost of Repair, Whichever Is Less, Minus $500 Deductible.

$

Physical Damages Towing and Labor

$ For Each Disablement Of A Private Passenger “Auto” $

PREMIUM FOR ENDORSEMENTS $

*ESTIMATED TOTAL PREMIUM $

*THIS POLICY MAY BE SUBJECT TO FINAL AUDIT

Covered Autos• Symbols May Differ From Coverage to Coverage


Coverages Covered Autos

Limit Premium

Liability 2, 8, 9 $500,000 $ 1,459.00

Personal Injury Protection (Or Equivalent No-Fault Coverage)

Separately Stated In Each Personal Injury Protection Endorsement Minus $ Ded.

Added Personal Injury Protection (Or Equivalent Added No-Fault Coverage)

Separately Stated In Each Added Personal Injury Protection Endorsement Minus $ Ded.

Auto Medical Payments 2 $ 5,000 $ 125.00

Uninsured Motorists

Underinsured Motorists (When Not Included in Uninsured Motorists Coverage)

Physical Damage Comprehensive Coverage

7 Actual Cash Value Or Cost Of Repair, Whichever Is Less, Minus $250 Deductible For Each Covered Auto, But No Deductible Applies To Loss Caused By Fire Or Lightning. See Item Four For Hired Or Borrowed “Autos”.

$ 320.00

Physical Damage Specified Causes of Loss Coverage

Actual Cash Value Or Cost Of Repair, Whichever Is Less, Minus $25 Deductible For Each Covered Auto For Loss Caused By Mischief OR Vandalism. See Item Four For Hired Or Borrowed “Autos”.

Physical Damage Collision Coverage

7 Actual Cash Value Or Cost of Repair, Whichever Is Less, Minus $500 Deductible.

$ 598.00

Physical Damages Towing and Labor

$ For Each Disablement Of A Private Passenger “Auto”

PREMIUM FOR ENDORSEMENTS

*ESTIMATED TOTAL PREMIUM

*THIS POLICY MAY BE SUBJECT TO FINAL AUDIT

Symbol 1

• Can be used for liability only

• Triggers liability coverage for any auto

• Provides the broadest coverage available


Symbols 2, 3, and 4

• Used for owned autos

– Symbol 2 Owned Autos

– Symbol 3 Owned Private Passenger Autos Only

– Symbol 4 Owned Other than Private Passenger Autos

• Autos owned at inception and newly acquired

• Can be used for all coverages (Towing for private passenger autos only)


Symbol 5

• Owned autos required to have no-fault benefits

• Covers autos owned at inception and newly acquired if required to have no-fault


Symbol 6

• Owned autos required to have uninsured motorists coverage and not able to reject coverage

• Covers autos owned at inception and newly acquired if required to have uninsured motorists coverage


Symbol 7

• Specifically described autos only

• Can be used for all coverages

• Includes liability for non-owned trailer attached to a scheduled auto

• Potential problem with newly acquired!


Symbol 8

• Hired autos

• Can be used for liability and physical damage

• Does not include auto leased, hired, rented or borrowed from employees, partners or members, or members of their households


Symbol 9

• Non-owned autos

• Liability only

• Autos the named insured does not own, lease, hire, rent or borrow & used in connection with your business.

• Includes autos owned by named insured’s employees, partners, members or any members of their households.


Symbol 19

• Mobile equipment subject to compulsory or financial responsibility laws


Covered Auto Designation Symbol CA 99 54

• Use to customized coverage

• Examples of use– Mopeds, Motorcycles, or Motor Homes

– Isolate a Specific Type of Vehicle for Coverage: “All Owned Vehicles With a Model Year of 2005 or Newer”


Newly Acquired

• Symbol 1, 2, 3, 4, 5, 6, or 19

• Newly acquired autos of the same described type automatically have that coverage for the remainder of the policy period


Newly Acquired

• Symbol 7

• Coverage for Newly Acquired Only If:– The company insures all owned autos for

that specific coverage; Or

– It is a replacement unit and the auto it replaced had that coverage

– And it is reported to the insurance company within 30 days


Certain Trailers, Mobile Equipment, and Temporary Substitute Autos

• Liability for Trailers:– Load capacity under 2000 lbs.

– Designed for travel on public roads

– No automatic physical damage



• Liability for Mobile Equipment:– Carried or towed by covered auto

– Not covered if moving under its own power (covered under CGL)



• Liability for Temporary Substitute Autos

– Any non-owned auto used with permission of owner

– As a temporary substitute of a covered auto you own

– Because your covered auto is out of commission due to: breakdown, repair, service, loss or destruction


Liability Coverages

• Insuring Agreement– Legal obligations

– Bodily injury and property damage

– Including covered pollution expenses

– Company’s choice to defend or settle

– No duty to defend if there is no coverage


Liability Coverages• Supplementary Payments

– Defense costs

– $2,000 bail bonds required as result of an accident

– Attachment bonds

– Reasonable expenses incurred at request of carrier ($250 day)

– Tax costs from defended suit

– Post judgment interest (not pre judgment)


Liability Coverages

• Out-of-State Coverage

– If covered auto is driven in a state that requires higher liability limits or additional benefits, the policy will automatically provide these coverages

–


Liability Exclusions

• Expected or Intended Injury

• Contractual other than an Insured Contract

• Workers Compensation, Disability Benefits, Unemployment Compensation Law or Similar Law

• Employee Indemnification or Employer’s Liability



• Care, Custody or Control

– Property damage to property owned by the insured

– Property damage to property transported by the insured

– Property damage to property in the care, custody or control of the insured



• Handling of Property

– Before it is being loaded onto a covered auto

– After it has been finally delivered

– There IS coverage in between



• Movement of Property by Mechanical Device– Unless the mechanical device is a hand

truck; or

– The mechanical device is attached to the covered auto



• Operations of Mobile Equipment– Does cover, however, the movement

over the road or the locomotion.

• Completed Operations– Covered CGL



• Pollution

– Will Cover

• Pollution that comes from the part of the auto part designed to hold it and it is necessary for the operation of the vehicle;

OR

• The pollutant is not cargo AND it is released from an accident from a covered auto AND it occurs away from a premise owned or rented to an insured.



• War– Exclusion only applies to liability assumed in a

contract or agreement

• Racing


Physical Damage

• Coverage is granted (or not granted) by the Symbol indicated on the declarations

• Pays for loss to covered auto

• Caused by:– Comprehensive– Specified Perils– Collision


Physical Damage

• Comprehensive

– Any cause except collision with another object or upset

– Includes glass breakage

– Includes loss by hitting animal or bird

– Includes loss by falling object or missile


Physical Damage• Specified Perils

– Fire, lightning or explosion

– Theft

– Windstorm, hail or earthquake

– Flood

– Mischief or vandalism

– Sinking, burning, collision or derailment of any conveyance transporting the covered auto


Physical Damage

• Collision – With another object

– Overturn of covered auto

• Towing – Only for private passenger type auto


Physical Damage

• Coverage Extensions– Transportation Expense

• Private passenger auto type• Resulting from total theft• 48-hour waiting period• $20 per day/$600 maximum


Physical Damage

• Coverage Extensions– Loss of Use Hired/Rented

• Insured legally responsible• Written agreement• No driver furnished• Covered physical damage loss• $20 day/$600 maximum


Physical Damage Exclusions

• Nuclear hazard, war, insurrection, rebellion, revolution, etc.

• Racing– Organized– Practicing or racing or while auto being

prepared

• Wear and tear, freezing, mechanical breakdown, road damage to tires, unless caused by another covered loss.– For example, theft


Physical Damage Exclusions

• Equipment excluded

– Tapes, records, CDs, visual or data devices

– Speed measuring or jamming equipment

– Electronic equipment unless designed for the reproduction of sound

– Accessories used with electronic equipment

– Exceptions to exclusions

• Diminution in value


Physical Damage Loss Settlement

• Smallest of:– ACV– Cost to repair/replace with like kind & quality

• Depreciation will be applied

• Excludes betterment

• Deductible



1. Identify the exposures covered by the Business Auto Policy

2. Determine who is and who is not an insured in the Business Auto Policy for specific situations

3. Explain specific definitions and policy conditions

4. Identify a covered auto when presented the appropriate symbol information

5. Determine whether a newly acquired auto is covered



6. Identify what types of vehicles are granted coverage through the Liability Extension

7. Apply the liability exclusions found in the Business Auto Policy

8. Apply the physical damage exclusions found in the Business Auto Policy


Workers Compensation


Learning Objectives

1. Describe the legal concepts of the Workers Compensation system

2. Explain the use of the Information Page to activate coverage related to Items 3.A., 3.B., and 3.C.

3. Name and describe four different benefits paid by Workers Compensation

4. Describe the four most common types of Employers Liability claims

5. Describe the uses of Major Workers Compensation and Employer Liability Endorsements


Concepts of Statutes

• Elimination of negligence theory in favor of no-fault method of recovery

• Subject to statutory benefits• Benefits are partial and final• Employers assume the cost of

occupational injuries an diseases arising out of and in the course of employment

• Exclusive or sole remedy


Statutory Considerations

• All states have compulsory Workers Compensation requirements except New Jersey and Texas

• Funding sources– Insurance companies– Competitive state funds– Monopolistic state funds

• ND, OH, WA, WY [NOWW]

– Self insurance


Workers Compensation and Employers Liability Policy

• Information Page

– Item 1. Named insured– Item 2. Policy period– Item 3. Coverage triggers

• 3.A. Workers Compensation• 3.B. Employers Liability• 3.C. Other States Insurance


Workers Compensation and Employers Liability Policy

• Item 3.A. Workers Compensation– Include ALL states where the insured

has KNOWN operations or EXPECTS to have operations

– Activates Workers Compensation laws for those states listed

– Cannot list monopolistic states


Workers Compensation Benefits

• Medical: Usually unlimited

• Disability: Lost wages, waiting period and compensation for scheduled injuries

• Rehabilitation: Physical & vocational training

• Death Benefit: Payable to dependent


Employers Liability

• Item 3.B. Employers Liability– Applies to all states listed on Information Page

in 3.A.

– Limits can be increased from minimum limits• Bodily Injury by Accident $100,000 Each Accident• Bodily Injury by Disease $500,000 Each Limit• Bodily Injury by Disease $100,000 Each

Employee


• Types of Claims – Third Party Claim (Action Over)

– Care and Loss of Services

– Consequential Bodily Injury

– Dual Capacity Claims

Employers Liability


• Twelve Exclusions

• Defense Costs in Addition to Limits of Liability

• No Coverage, No Defense

Employers Liability


• Suggested Wording

Item 3.C. Other States Insurance

All states, U.S. Territories, and Possessions except North Dakota, Ohio, Washington and

Wyoming, Puerto Rico, the U.S. Virgin Islands, and states designated in Item 3.A. of this

Information Page.


• Applies Only to States Listed

• Must Begin Work AFTER Effective Date

• “At Once” Notification

• 30 Days to Notify After Renewal

Item 3.C. Other States Insurance


• Longshore and Harbor Workers Act– Maritime employments in and around

navigable waters of the United States

– Land-based jobs such as longshore, harbor workers, shipbuilders, ship repairers, etc.

Federal Endorsements


• Maritime Coverage Endorsement– Masters or crews of vessels

– American crewmembers on American ships

– Based on negligence



• Outer Continental Shelf Land Act Coverage Endorsement– Extends Longshore and Harbor Workers

Coverage to oil & gas rigs on outer continental shelf

– Limit is 10 miles for Texas; 3 miles for all other states



• Foreign Coverage Endorsement– Employees hired in U.S.

– Traveling or temporarily outside U.S. (90 days)

– Includes endemic disease

– Includes excess repatriation

Other Endorsements


• Employers Liability Coverage Endorsement– Provides Employers Liability in

Monopolistic States

– Coverage can also be added to the CGL with a Stop Gap Endorsement

Other Endorsements


• Sole Proprietors, Partners, Officers and Others Coverage Endorsement– When allowed by statute

Other Endorsements



1. Describe the legal concepts of the Workers Compensation system

2. Explain the use of the Information Page to activate coverage related to Items 3.A., 3.B., and 3.C.

3. Name and describe four different benefits paid by Workers Compensation

4. Describe the four most common types of Employers Liability claims

5. Describe the uses of Major Workers Compensation and Employer Liability Endorsements


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