1. Marco de Referencias
1.2. Marco Teórico Conceptual
1.2.1. Gestión Educativa
3. Coverage C—medical payments
4. Supplementary payments—Coverages A and B C. Section II—Who Is an Insured?
D. Section III—Limits of Insurance
E. Section IV—Commercial General Liability Conditions F. Section V—Definitions
III. Overview of CGL Claims-Made Policy
A. Meaning of “Claims Made”
B. Rationale for Claims-Made Policies (“long-tail” problem) C. Retroactive Date
D. Extended Reporting Periods
IV. Employment-Related Practices Liability Insurance
A. Insuring Agreement B. Co-Payment Provision C. Legal Defense
D. Exclusions
V. Workers Compensation and Employers Liability Insurance
A. Part One—Workers Compensation Insurance B. Part Two—Employers Liability Insurance C. Part Three—Other States Insurance D. Voluntary Compensation Coverage
VI. Commercial Auto Insurance
A. Business Auto Coverage Form
1. Liability insurance: various classifications of covered autos
2. Physical damage coverage: comprehensive coverage, specified causes-of-loss coverage, collision coverage, and towing and labor costs
B. Nonownership Liability Coverage
C. Garage Coverage Form—major coverages include liability coverage, garagekeepers coverage, and physical damage coverage
VII. Aircraft Insurance
A. Aviation Insurers (written by a relatively small number of aviation pools) B. Aviation Insurance for Private Business and Pleasure Aircraft
2. Medical expenses coverage
3. Physical damage coverage (can be written on an “all-risks” basis, or “all-risks” basis, not in flight, or “all-risks” basis, not in motion)
VIII. Commercial Umbrella Policy
A. Basic Features
1. Excess liability insurance 2. Required underlying coverages
3. Liability coverages: bodily injury and property damage liability; personal injury and advertising injury
4. Self-insured retention (SIR) for losses not covered by any underlying insurance but covered by the umbrella policy
B. Exclusions
IX. Liability Insurance—Businessowners Policy
A. Business Liability Coverage B. Medical Expenses Coverage C. Legal Defense Costs
D. Exclusions
X. Professional Liability Insurance
A. Physicians, Surgeons, and Dentists Professional Liability Insurance 1. There are two insuring agreements.
2. Liability is not restricted to accidental acts of the physician or surgeon.
3. There is a maximum limit per medical incident and an aggregate limit for each coverage. 4. Current forms permit the insurer to settle without the insured’s consent.
5. An extended reporting period can be added.
6. Professional liability insurance is not a substitute for general liability insurance. B. Errors and Omissions Insurance
XI. Directors and Officers Liability Insurance
A. Insuring Agreement B. Exclusions
Answers to Case Application
1. (a) The CGL policy would provide a legal defense and pay the legal costs of defending the Lastovica Corporation. The legal costs would be in addition to the amount of damages the insurer must pay because of the insured’s negligence.
(b) Smith Corporation could argue that Lastovica Construction is an independent contractor. As a general rule, business firms are not legally liable for work done by independent contractors (with some exceptions).
Chapter 26 Commercial Liability Insurance 183
(c) Yes. Under a workers compensation law, Lastovica Construction is responsible for the payment of Bill’s medical bills and part of his lost wages.
2. The loss is covered. The incident occurred during the policy period and was first reported within 60 days after the policy expired. Since the incident was first reported during the extended reporting period, coverage applies.
Answers to Review Questions
1. General liability refers to the legal liability of business firms arising out of business operations other than liability for automobile or aviation accidents or employee injuries. The most important general liability loss exposures are as follows:
(a) Premises and operations (b) Products liability (c) Completed operations (d) Contractual liability (e) Contingent liability
2. (a) Products liability refers to the legal liability of manufacturers, wholesalers, and retailers to persons who are injured or incur property damage from defective products.
(b) Completed operations refer to liability arising out of faulty work performed away from the premises after the work is completed.
(c) Contractual liability means that the individual or business firm agrees to assume the legal liability of another party by a written or oral contract.
(d) Contingent liability means that the firm can be held liable for work done by independent contractors. A firm can be held liable for work performed by independent contractors when (1) the activity is illegal; (2) it is a situation that does not permit delegation of authority; or (3) the work is inherently dangerous.
3. A general liability policy provides coverage for both products liability and completed operations. Both products liability and completed operations loss exposures are included in a definition called “products-completed operations hazard.” This term refers to bodily injury and property damage liability losses that occur away from the premises and arise out of the insured’s product or work after the insured has relinquished possession of the product, or the work has been completed. For example, assume that a gas water heater is improperly installed and explodes one month later. The loss is covered under the products-completed operations hazard.
4. (a) The insurer agrees to pay on behalf of the insured all sums the insured is legally obligated to pay up to the policy limits because of bodily injury or property damage to which the insurance applies. The bodily injury or property damage must be caused by an occurrence. An occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful condition.
(b) Under this coverage, the insurer agrees to pay those sums that the insured is legally obligated to pay as damages because of personal and advertising injury. This term is defined in the policy and includes false arrest, detention, or imprisonment; malicious prosecution; wrongful eviction or entry; oral or written publication that slanders or libels; oral or written publication that violates a person’s right to privacy; using another’s advertising idea in your ad; and infringing upon another’s copyright or slogan or image.
(c) Medical payments 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 operations. The medical expenses must be incurred within one year of the accident and are paid without regard to legal liability.
5. An occurrence policy is one that covers claims arising out of occurrences that take place during the policy period, regardless of when the claim is made. In contrast, the claims-made policy only covers claims that are first reported during the policy period, provided the event occurred after the
retroactive date (if any) stated in the policy.
6. (a) Under Part One, the insurer agrees to pay all workers compensation benefits that the employer must legally provide to covered employees who are occupationally disabled.
(b) Part Two is the employers liability section of the policy. Under this section, employers are covered against lawsuits by employees who are injured in the course of employment, and the injury is not compensable under the state’s workers compensation law.
Part Two is needed for several reasons. A few states do not require workers compensation coverage unless the employer has a certain number of employees, such as three or more. Part two protects the employer if an injured employee sues for damages. Also, an injury that occurs on the job may not be considered work-related, and therefore it is not covered under the state's workers compensation law. In addition, the occupation may not be covered under the state’s workers compensation law. Part Two protects the employer if an occupationally injured employee sues for damages.
(c) Employers may have employees who might be covered under a workers compensation law of another state. Other states’ insurance covers such employees if the states are shown on the declaration page of the policy. In such cases, if the employer begins work in any of the states listed and is not insured for such work, the policy applies as if that state were listed in the policy for workers compensation purposes. Thus, the employer has coverage for any workers
compensation benefits that it may have to make under that state’s workers compensation law. 7. (a) The business auto coverage form can be used by business firms to insure liability loss exposures
from automobiles. The employer can select those automobiles to be covered under the policy. In addition, the firm has a choice of physical damage coverages that can be used to insure covered autos against damage or loss. Nonownership liability exposures can also be covered under the policy, which covers the firm if employees should injure someone while driving their cars on company business.
(b) The garage coverage form includes liability insurance, garagekeepers insurance, and physical damage insurance. Garagekeepers insurance covers the garage owner’s liability for damage to customers’ automobiles while they are in the garage owner’s care for service or repairs. 8. (a) Physical damage insurance provides coverage for direct physical damage to the aircraft. The
insured has a choice of physical damage coverages:
• “All-risks” basis. All physical damage losses to the aircraft are covered except those losses specifically excluded.
• “All-risks” basis, not in flight. The aircraft is covered on an “all-risks” basis only when it is on the ground and not in flight.
• “All-risks” basis, not in motion. The aircraft is covered on an “all-risks” basis only when it is standing still.
Chapter 26 Commercial Liability Insurance 185
(b) Liability coverage pays for bodily injury or property damage arising out of the insured’s ownership, maintenance, or use of the insured aircraft. Coverage also applies to bodily injury arising out of the premises where the aircraft is stored.
9. (a) The coverages provided are Coverage A—Bodily Injury and Property Damage Liability, and Coverage B—Personal and Advertising Injury Liability. The insurance is excess insurance that applies after the minimum underlying limits are exhausted.
(b) Insureds are required to carry certain minimum amounts of liability insurance before the umbrella insurer will pay any claims. The following minimum limits are typically required: • Commercial General Liability Insurance
—$1 million (each occurrence) —$2 million (general aggregate limit)
—$2 million (products and completed-operations aggregate)
• Business auto liability insurance—$1 million (combined single limit) • Employers liability insurance
—$500,000 (bodily injury per accident)
—$500,000 (bodily injury by disease per employee) —$500,000 (disease aggregate)
(c) If the loss is not covered by any underlying insurance but is covered by the umbrella policy, the insured must satisfy a self-insured retention (SIR), which is similar to a deductible. The SIR can range from $500 for small firms to $1 million or more for large corporations.
10. The major features of a physicians, surgeons, and dentists professional liability insurance policy, are as follows:
(a) There are two insuring agreements.
(b) Liability is not restricted only to accidental acts of the physician or surgeon.
(c) There is a maximum limit per medical incident and an aggregate limit for each coverage. (d) Current forms permit the insurer to settle without the insured’s consent.
(e) An extended reporting period can be added.
(f) Professional liability insurance is not a substitute for general liability insurance.
11. The first insuring agreement covers the personal liability of directors and officers. The policy agrees to pay damages because of a wrongful act. Insured persons include directors, officers, and employees. The second insuring agreement pays on behalf of the corporation. The coverage reimburses the
corporation for loss resulting from the company’s obligation to reimburse directors and officers to the extent required or permitted by law for suits alleging wrongful acts by such directors and officers. Some policies also provide entity coverage, which covers the corporation if it is named a defendant in
a covered suit alleging wrongful acts by directors and officers.
Answers to Application Questions
1. (a) The false detention of the customer is covered under personal and advertising injury liability. Although the claim was reported after the policy expired, the incident occurred during the policy period and is covered under an occurrence policy.
(b) The property damage is covered under property damage liability. (c) The loss is covered under personal and advertising injury liability.
(d) The loss is covered. The commercial general liability policy covers liability arising out of completed operations. Completed operations refers to liability arising out of faulty work performed away from the premises after the work or operations are completed.
(e) The medical expenses are covered under medical payments coverage. If Ben were sued for the injury caused by the employee, he would be covered under bodily injury liability.
2. (a) If Jill is legally liable for the explosion, the medical expenses of the customers would be covered in full under bodily injury liability. If she is not legally liable for the loss, the policy would pay a maximum of $5000 to each injured customer under medical payments coverage.
(b) The loss is covered as a fire legal liability loss.
(c) The loss is covered. If Jill is negligent, the amount paid is $200,000.
3. (a) Both Allison and the employee are covered for the bodily injury to the customer. Under the Businessowners Policy, the definition of the insured also includes employees while acting within the scope of their duties.
(b) Covered. The medical expenses are covered under Medical Payments (Coverage C) up to the policy limits. If a lawsuit results from the injury, the company is covered for the bodily injury to the customer under Bodily Injury and Property Damage Liability (Coverage A).
(c) Covered. Personal injury is covered under the Businessowners Policy, which includes defamation of character and false arrest.
(d) Not covered. Although the policy provides products liability coverage, damage or loss to the product itself is not covered.
4. (a) The physician is covered for the negligent act of the nurse. Unless the nurse is named as an insured under the physician’s policy, the nurse has no coverage under the physician’s policy. (b) The surgeon is covered for a lawsuit or claim arising out of the setting of a broken arm. This is a
professional act that is covered under the policy.
(c) The loss is not covered under the physician’s professional liability policy because it does not involve a professional act. A general liability policy is needed to cover this type of loss exposure. 5. The business auto policy pays the policy limit of $1 million. The umbrella policy pays the remaining
$4 million of the judgment.
6. This is a completed operations loss exposure. Completed operations is a term that refers to liability rising out of faulty work performed away from the premises after the work or operation is completed. Contractors, plumbers, electricians, and similar firms can be held liable for bodily injuries and property damage to others after their work is completed. When the work is in progress, it is part of the operations exposure. However, after the work is completed, it is a completed operations exposure. For example, an electrical contractor can be held liable for faulty wiring at a customer’s home that later results in a fire.
7. The business auto coverage form would cover this loss exposure. The appropriate symbol must be selected to designate the classification of autos to be covered. If an employee injures another motorist while delivering pizzas, Fast Pizza would be covered for any suit.