Business Liability Issues in Insurance

1. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • What is it? • Business liability is the risk exposure that any business entity assumes in its dealing with the public • Examples • Premises and operations liability • Products and completed operations liability

2. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Advantages • Transfer the payment for liability of the risk • Premiums are tax deductible • Insurance company will handle most, if not all, of the legal and paper work • Insured need not spend time and resources to handle the problem • Insurance company can assist in loss control (before a loss occurs)

3. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Disadvantages • Loss of use of dollars spent on premiums • Bad publicity for the insured business resulting from a difficult insurer • Example – not willing to settle the claim quickly • Insured gives up control over the management and settlement of the claim

4. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Disadvantages (cont’d) • If insurer becomes insolvent • Management and settlement of claims fallback on business • Financial protection for the insured is limited by the Commercial General Liability Form (CGL) exclusions and set policy limits • Not all liabilities will be covered

5. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Business liability insurance • CG 00 01 and CG 00 02 • Forms that provide insurance for most business liability exposures • CG 00 01 – Occurrence form • For coverage to apply, the injury or damage must occur during the policy period • Claims can be made anytime during or after the policy period • CG 00 02 – Claims made form • For coverage to apply, the injury or damage must occur during the policy period • Claims must be made during the policy period as well

6. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Business liability insurance (cont’d) • Policy Structure for the CGL Forms • Insuring agreement • Contractual connection between the insured and the insurance company • Exclusions • Supplemental payments • amounts insurance company agrees to pay (in addition to the stated limits of insurance) for certain expenses incurred in handling and settling a claim or lawsuit against the insured • Who-is-an-insured clauses

7. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Business liability insurance (cont’d) • Policy Structure for the CGL Forms (cont’d) • Limits of insurance section • Describes the amounts the insurer will pay • Stated on the declarations page • Conditions • Guidelines that the insurer and insured must follow as part of the contract • Definitions • Defining the terms in the contract

8. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Limitations and exclusions • Bodily injury (BI), Property damage (PD) or personal and advertising injury • These are defined terms in the policy • If the injury or damage alleged does not match these definitions, then coverage will not apply for the claim • Injury and damage must take place in the coverage territory and during the policy period • How much the insurer will pay • Insured chooses the limits of coverage they will buy

9. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Limitations and exclusions (cont’d) • Exclusions are standardized • Coverage A (BI and PD) has an exclusion for BI and PD expected or intended from the standpoint of the insured • Coverage A is based on occurrence – an accident – not intentional actions • Coverage B (personal and advertising injury) • Does apply to intended acts of the insured • Coverage is not without limitations • Criminal acts • Publishing information you know to be false • Exclusion via endorsements • To exclude certain exposures that may be better served via other insurance forms

10. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Other types of insurance for business liability risks • For businesses with special exposures or exposures the insurance company does not wish to insure • Examples • Pollution liability • Injuries bases on discrimination, sexual harassment • Certain risks that should have a different liability form so that unique exposures are properly handled

11. Business Liability Issues in Insurance Chapter 13 Risk Management For Financial Planners • Other types of insurance for business liability risks (cont’d) • Monitoring results • Have liability policies been applicable to losses and claims • Are the limits of protection adequate • Is the amount paid in premium cost effective • Are there new liabilities or liabilities no longer in existence since the policy was written • Have any claims and lawsuits been properly and satisfactorily handled by the insurer