General Insurance (Property & Casualty)

The following are notes from the course I am enrolled in to obtain a New York insurance license. I will update these notes as I take them.

The license confirms I have a minimum level of knowledge regarding the principles, practices, statutes, and regulations relating to the insurance profession and the services I will sell or represent to the public.

The license confirms I have a minimum level of knowledge about the insurance marketplace and related New York State laws and regulations.


Law of Contracts

Insurance Brokers

A person, association, firm, or corporation who acts or aids in soliciting, regulating, and procuring insurance on behalf of an insured (the broker represents the insured). However, when collecting the insurance premium, the broker is deemed to be the agent of the company.

A broker can write all forms of insurance except life insurance and annuities.

A broker must as a public duty give all necessary information to the companies with which he does business regarding the client even if such information is derogatory.

A broker license is necessary when an agent places an insurance policy with a company other than the one they are under contract.

Insurance Agent


An insurance agent acts on behalf of the insurance company with who he is engaged and represents the company.

There are two types of agents:


  1. An independent agent can represent more than one insurance company. 
  2. An exclusive or captive agent represents only one insurance company.
An agent has a contractual relationship with the companies who appoint the agent and is bound by the terms of the agreement (the certificate of appointment).

The agent may issue binders subject to the authority regarding the types of coverages and policy limits indicated in the contract.

The agent also owes duties to the insured especially regarding premiums and correctly representing policy coverage.

A position of trust is a Fiduciary position. When handling premiums, agents and brokers are acting in a fiduciary position.


An agent represents subsidiaries or affiliates of the company appointing him, if they write the same kind of insurance.



Valid contract - To form a valid contract, the law requires the following essential elements:


  • C - consideration
  • L - legal Purpose
  • O - offer and acceptance
  • C - compentent Parties
Rebate - is illegal and an unfair trade practice and against insurance law subject to exceptions. Any inducement given to a client or prospective client to buy insurance, such as shares of stock or tickets to  a sporting event. In addition to any other penalties, provided by law, illegal rebating is subject to a fine of $500 for each violation.

note: you can give a piece of merchandise up to $15.00 as long as it has your name (place of business) on it.


non-resident licensee: licensed agent or broker who lives in and is licensed in another state.



Types of Authority:




  1. Express or Expressed authority is specific authority by the insurer to the agent in oral or written agreement. It lists the agent's duties and responsibilities which include counter signing policies, issuing and delivering policies, etc.
  2. Implied Authority is given by the principal/insurer to the agent that is not formally expressed or communicated. This implied authority allows the agent to perform all of the usual and necessary tasks to sell and service insurance contracts and to fully exercise the agent's expressed authority, such as the agent collecting premiums.
  3. Apparent Authority is a doctrine that holds an agent may have whatever authority a reasonable person would assume he has. It is authority created when action by the insurer gives the impression the authority exists, such as the insurer supplying signs, business cards, stationary, etc.
In New York State, an insurance broker and agent must be 18 years old to be licensed.


Insurance Consultant (a separate license)


   Any person, firm, association, or corporation providing professional and skillful insurance advice without a broker or agent license. The consultant may not solicit, sell, or negotiate insurance policies. A licensed insurance consultant may not be an executive in or employee of or own shares given a substantial interest in any authorized insurer. He may not recommend or encourage the purchase of insurance, annuities, or securities from an authorized insurer in which any member of his immediate family holds an executive position or substantial interest.


Insurance contract/policy


   The premium agrees to indemnify the insured if he suffers loss or damage to his own property and/or protect against lawsuits.

Consideration on the part of the insured: payment of premium or promise to pay premium, to abide by the conditions of the contract.


Consideration on the part of the insurance company: is to pay covered losses.


Two parties to an insurance contract:



  1. insurance company
  2. insured
Two class of policy:
  1. indemnity: coverage for reimbursement for loss or damage actually sustained to one's own property (this is referred to as 1st party coverage). Example: auto collision, fire, theft
  2. liability: protection against lawsuits of others (referred to as 3rd party coverage). Example: auto liability, personal liability, professional (E&O) liability, etc.


Authorized/Admitted/Licensed company

   Is one authorized to do business in New York State. The license issued is called a "Certificate of Authority". These companies are covered by the New York State guarantee fund and protects the public in the event the company becomes insolvent.


Non-admitted/Unauthorized company


   Is not permitted to write insurance in New York State, subject to exceptions:


  • An independent agent/producer who represents one or more than one insurance company and also represents members of the buying public is classified as a wholesaler (general agent). 

Representations are statements made by the insured in the application for insurance which are considered true to the best of their knowledge - not absolute fact.


Insurable interest - must have a financial interest in the preservation of the property.


To collect under a policy of indemnity, an insured must have at the time of the loss or damage an insurable interest when he has a lawful substantial economic interest in the preservation of the property.

Classifications of insurable interest:

  • Ownership or part ownership as partners
  • Creditor and debtor relationship
  • Mortgagor and mortgagee
  • Possession
  • Life Tenant (additional insured) can live there for life
  • Tenant 
  • Value of the Lease. If there is a loss to property, they can be insured for the same value
  • Bailee is the custodian of the property. Ex: cleaners
  • Bailor: owner of the property.  Ex: customer

Binder: Contract for temporary insurance, either in writing or orally that immediate coverage is in effect pending insurance policy issuance.


Oral contract of insurance is valid and enforceable, but, if oral, it is good for not > 30 days and may be renewable once for 30 days.

Generally, insurance binders are issued:
  1. As proof of insurance when it is not possible to immediately issue a policy.
  2. To give insurance company an opportunity to inspect the property before issuing a policy.
  3. At no additional charge to insured, because the effective date is the same as the policy.
Application for Insurance. For the company to be able to determine whether they will issue coverage and what they should charge. The application contains the name of applicant, type of insurance, amount, description of property to be covered, plus other pertinent information.

Aleatory contract: Uneven exchange.
   You pay a premium, but might not get anything for it, except piece of mind.
   Insureds who suffer loss, may receive more from the insurer than they paid in premium.

Unilateral contract: One-sided.
   The insurance company is legally bound to perform its part of agreement to pay covered losses while the policy is in force. But, insureds are not legally bound to pay premiums if they no longer want coverage.

Contract of utmost good faith: Insurance company relies on the truthfulness and integrity of the applicant when issuing a policy. In return, insured relies on company's promise and ability to provide coverage and pay covered claims.

Duties and obligations of insurance broker to insured:
  1. Advise insurance coverage best suited to insured's needs. Whatever is not needed, get it in writing to show you offered it and they declined.
  2. Attempt to bind insurance immediately upon order receipt because you could be sued if insured thinks they have coverage.
  3. Check policy to see if it is written correctly.
  4. Explain coverage provided under the policy and what is not covered.
  5. Keep the policy in force because insured gets unearned premium and you don't get commission.
  6. Serve the insured in the event of a loss. (Assist in giving immediate notice to the company and provide insured with loss report forms).

Fair Credit Reporting Act

Included among the duties of a broker and agent is the duty to comply with this act which is Federal Law. Its purpose:
  1. To help assure confidential fair and accurate reporting of information about consumers obtained from outside agencies.
  2. Prohibits insurance companies from obtaining such reports unless applicants are advised reports may be obtained, in advance. Get permission in writing.
  3. Provides for signed disclosure statements to assure compliance with the act.
  4. Within guidelines, consumers may demand to know what the investigative agency has on file about them and to who reports are made. The insurance company need only advise the applicant from who the report was received. If the customer want the report, the have to go to the agency to get it.

Duties of the State Insurance Department (Dept. of Financial Services) and Superintendent / Commissioner

  1. Issues rules and regulations pertaining to insurance laws (does not pass or write insurance laws. This is done by legislature and the governor.
  2. License insurers, agents, brokers, consultants, adjusters, etc. (do not issue certificate of appointments to agent which is done by the insurance company)
  3. Suggests laws to the appropriate legislative committees and or governor who pass the insurance laws.
  4. Examine insurers financial operations (p&c carriers) are examined every three years.
  5. Approves policy forms and rates (ISO recommends).
  6. Oversees marketing practices.

Sources of insurability information. Insurance Services Office (ISO)

   Carries in depth information on the physical characteristics of buildings in many areas. The information deals with structural conditions, water supply, plumbing, heating, and sprinklers, and related matters. Depending on the insurance company and the varying capabilities of gathering this information in-house, they will utilize the ISO services to a greater or lesser degree. The use of the ISO is voluntary.


Re-insurance.


   The transfer of operations of risk by insurance companies to other insurance companies. Of the five forms or risk management, re-insurance is risk transfer.

The insurance company who requests the reinsurance is called the CEDING or primary insurer.
The insurance company that takes or shares the risk, is called the reinsurance company.
The consumer is serviced by the original or CEDING insurer. The CEDING insurer makes claim to the reinsurance company.

Two types of reinsurance:

  1. Treaty Reinsurance – agreement by the reinsurance company to reinsure all risks contained in the types of insurance, automatically.
  2. Facultative Reinsurance –negotiated separately for each insurance contract that is reinsured and might not take on all risks. 

Warranty – A statement of fact that a condition exists currently and will continue into the future.

Types of Insurance Companies

  1. Domestic – an insurance company organized in New York State.
  2. Foreign – organized in another state or jurisdiction within the U.S.
  3. Alien – organized outside of the U.S.
  4. Stock Insurance Company – owned by stockholders. Stockholders elect the board of directors who in turn elect the officers. Stockholders receive dividends which are a distribution of profits but are not guaranteed.
  5. Mutual insurance companies – owned by its policyholders. The policyholders elect the board of directors who elect the officers. Profits are issued as non taxable distributions, which is a return of unused premiums and are not guaranteed.
  6. Reciprocal insurers – A group-owned insurer which primarily deals with risk sharing of the owners in that they insure each other. Each member of the reciprocal is a subscriber. This type of insurer is managed by an attorney-in-fact (anyone authorized to act for them). http://en.wikipedia.org/wiki/Reciprocal_inter-insurance_exchange

    Examples of Unincorporated Reciprocal Interinsurance Exchanges

    1. Erie
    1. AAA
    1. Farmers
    1. USAA [United Services Automobile Association]
  7. Lloyds of London syndicates – members of the syndicate were liable and cannot discharge losses through bankruptcy; Groups of underwriters known as syndicates and each specializes in a specific type of insurance. Syndicate members transact the business of insurance and are individually liable for each risk written. This type of underwriter is sometimes referred to as an assemblage or assessable company (can be assessed).
  8. Fraternal benefits society – social organization involved in charitable activities. Members are usually members of a given faith, order, or society, and are usually non-profits. They usually provide Life and Health insurance for members.

Premium – money consideration which the insured pays to insurer for undertaking of the insurance company to provide insurance.

Gross premium – Total amount paid by insured shown on the DEC page.

Net premium – Gross premium minus producer’s commission.

Cancellation of Insurance Policies – Every policy can be cancelled by the insured at any time.
The company may also cancel the policy under certain circumstances.

Types of policy cancellation

  1. Pro-rata: a cancellation without a penalty and generally used when insurance company cancels the policy mid-term; charges an earned premium each day the policy is in force.
  2. Short-Rate: cancellation with a penalty; used when insured cancels the policy mid-term; calculate earned premium and add penalty.
  3. Flat-Rate: policy cancelled without charge by agreement (used when policy is not renewed)
Daily – copy of original policy provided by the insurance company when policy is issued which the broker and agent retains in their file as one of their records.
Negligence: the careless invasion by one party of the personal or property rights of another, such as one vehicle colliding with another vehicle.
Inferred negligence: vicarious responsibility. A person can be held guilty of negligence even though they had nothing to do with it such as the owner of an automobile who lends it to another who is involved in an accident – vicarious responsibilities / liability

Elements of negligence – the following must be present:

  1. Act of carelessness
  2. A comparison of the negligence, if any, of the parties (known as the doctrine of comparative negligence). When damages are reduced in proportion to the degree of negligence. It is a statutory defense wherein the parties involved, or a court, determine the degree of negligence of each party and the damages awarded are adjusted accordingly.
  3. Money damages (such as medical expenses or damages to property)
  4. Legal duty owed to act in a reasonable and prudent way
  5. Breach of legal duty
  6. Proximate cause (defined as that peril which can be traced in an unbroken chain of events as the cause of loss)
Note: intentional acts causing harm is not an element of negligence (criminal)
Subrogation – the substitution of the insurance company into the place of the insured concerning any rights or claims the insured may have against other persons, such as the insured collecting from their insurance company the damage caused by a third party.
Tort – A civil wrong that violates the rights of another and part of civil law rather than criminal law concerned with private relationships between people.
1st party – indemnity
3rd party – liability
Liability policies protect the insured from TORTS. Torts can be intentional or unintentional.
Respond eat Superior – Employers are responsible for the acts of their employees or agents who act within their real (express) or apparent authority.
Peril – Cause of loss
Note: A person is negligent if they fail to do what a reasonable and prudent person would do.
Note: In a pure contributory negligent state when a person is found to have contributed to her own loss in any way, another party may not be held liable.
Insurance contacts provide coverage for those perils considered insurable such as:
  1. Fire
  2. Burglary
  3. Windstorm
  4. Negligence, etc.
Hazard – A condition which can increase the frequency or severity of a loss or the chance that a loss will occur.

Four types of hazard

  1. Physical – A hazard that arises from the condition, occupancy, or use of the property itself, such as broken steps, a loose hand rail, defective equipment, or wet leaves on a highway.
  2. Morale – An individual through acts of indifference, laziness, carelessness, or by irresponsible actions can increase the possibility of a loss such as not wearing seat belts, or leaving unlocked doors, putting on makeup while driving.
  3. Moral – A person might create a loss situation on purpose to collect from an insurance company, such as an arsonist.
  4. Legal – Acts or requirements of the government such as change in building code requirements or use or restriction of use of property.
Risks – The chance that a peril will ripen into actuality causing a loss; uncertainty concerning loss.

Methods of Risk Management

  1. Sharing – A reciprocal insurer is an example of risk sharing in that all parties insure each other.
  2. Transfer – Consumers transfer risks from themselves to an insurer when buying a contract of insurance.
  3. Avoidance – Eliminates risks by avoiding an activity.
  4. ReductionMinimizing the chance of loss from occurring, such as installing a sprinkler system in a building or installing an alarm system.
  5. Retention – Not buying an insurance policy and being personally responsible for loss such as self-insurance, entirely or in part and use of deductibles.

Basic Categories of Risk

  1. Pure Risk – A situation where there is only the possibility of loss. Insurance policies are pure risk contracts. There is no chance of profit.
  2. Speculative Risks – A situation that gain or loss is possible such as betting on a horse race, investing in real estate, or buying stocks.
Waiver – The voluntary surrender of a known right such as not making a claim for a small loss even though it may exceed the deductible.
estoppel – A legal term referring to an equitable doctrine that precludes a person from denying or asserting anything to the contrary of that which has been established as the truth, by law. A person is barred from denying the truth of a fact that has already been settled.

Sections of an insurance policy

  • D – declarations – The section of the insurance contract that sets forth information that identifies the parties to the contract (insured and insurer), insured’s name and address, what is covered, where, when (policy period), and limits, rates, and premiums.
  • I – insuring / Insurance Agreement – A statement which in broad terms sets forth the perils insured against in the policy as well as the type of property or coverage covered by the contract. The insurance company promises to pay for damage or loss caused by a covered peril.
  • C – conditions – States the ground rules for the policy. Describe the responsibilities, duties and rights of both the insurance company and the insured. The insured has duty to notify the company of a loss on a timely basis or to protect property from further damage as well as the insurer’s duty to pay covered losses on a timely basis.
    • Note: Conditions have the purpose of controlling the company liability on covered losses by imposing obligations on themselves and the insured.
  • E – exclusions – Describe losses for which the insured is not covered. Some policies have a separate exclusions section, but, can often be found throughout the contract.
Note: Exclusions are a necessary part of an insurance contract for the following reasons:
  • A – To manage physical hazards
  • B – To manage moral hazards
  • C – Eliminate uninsurable perils, but, not to eliminate coverage in undesirable geographic areas which is known as REDLINING
Definitions – Terms used in the policy 
Primary Insurance – In cases where there are more than one policy providing coverage, this is the policy that pays first.
Excess Insurance – When the primary insurance policy limit is exhausted, this policy pays up to its limit.
Accident – Sudden unintended and unexpected event.
Concurrent Policies – Written portions of all policies covering the same property, read alike as to forms, interest, location, insuring agreement, and perils insured against in the policy. The policies may vary in amount, rates, premium, and inception date.
Non-concurrent policies – Do not have the same perils.
Compensatory Damages – Include the following types:
  1. General Damagesnot easily assigned a monetary value such as pain and suffering, emotional trauma, loss of consortium (companionship of another person – spouses)
  2. Special Damages – compensation for expenses incurred as a result of an accident, such as, medical bills and lost wages
  3. Punitive or Exemplary Damages – Damages intended to reform or deter people from engaging in conduct so egregious or insidious that society wants to make an example of the type of activity so it won’t be repeated.

New York State Law

Note: A person who makes derogatory and untrue statements about an insurer is guilty of defamation.
REDLINING – No insurer shall refuse to issue, renew, or shall cancel a policy of fire or auto insurance based only on the geographic location of the risk.
The insurer can refuse to write the policy if it would be against sound underwriting practices related to anticipated loss experience.
Complaints by individuals denied insurance shall be made directly to the SOI, who may require a physical inspection of the risk and hold a hearing.

F.A.I.R. Plan

(Fair Access to Insurance Requirements) aka New York Property Insurance Underwriting Association)
This is a residual market created by New York State to provide fire insurance when it is unavailable in the normal / private insurance marketplace. It is related to a joint underwriting association consisting of all insurers writing fire, homeowners, and commercial peril package policies.
Every such insurer is required to be a member of the association.
The object of the FAIR Plan is to provide economical fair and non discriminatory fire and extended coverage insurance to promote community development.
Provides for assessments to defray losses and expenses, commission arrangements, objective underwriting standards and overall dollar coverage, which shall not be  more than 1.5 million dollars on any one risk.
Any person having an insurable interest in a property located in NY State who has made an unsuccessful attempt to obtain coverage in the normal, private market, and who has no outstanding back premiums, is eligible to apply to the association for coverage.
The insurance should be for a term of one year and rates are governed by statute. The SOI has the power to examine the books and affairs of the association at any time.

New York Insurance Law

Section 109 – Penalties and violation of insurance law 

Every violation of the insurance law (such as commingling premiums and personal funds) is a misdemeanor punishable by a fine of $500 or up to one year in jail or both, plus possible loss of license.
The max aggregate fine at any one hearing is $2500. Civil or criminal penalties may apply.

Section 2117 – It is unlawful to place business with an unauthorized or unlicensed insurer or to aid such company in any manner, when doing business in this state. 

Exceptions:
  1. A reinsurance contract
  2. Ocean/marine insurance (Fed controls this, not the state)
  3. Fidelity bonds for people working in NY State
  4. Licensed Excess Lines Brokers – may write all forms of insurance except WC and Accident & Health. May share commission with a regular broker who helps to write the insurance.
    1. Qualifications for license include:
      1. $200 annual license fee
      2. Surety Bond with a limit / penalty of $15,000
      3. No special exam

Section 2104(e) – The SOI may refuse to issue a license or a renewal if:

  1. Such applicant receives more than 5% of their total net annual commission from their own property or risks.
  2. Such applicant will receive more than 10% of their total net annual commission from the property or risks of their spouse or from the property or risks of a corporation in which the licensee or their spouse has controlling ownership or from a partnership and its members in which the licensee or their spouse is a member (a controlled business). 

Section 2104(h)

The term sub licensee refers to the officers of a corporation or members of a partnership, which is a licensed insurance broker authorized to solicit business and to act for on behalf of such licensed corporation or partnership. The sub licensee must be one who qualifies for and would be entitled to a brokers license in his name.

Note: If a sole sub licensee dies, a temporary license will be issued to another officer or partner for 90 days.

2110(A) - The superintendent may revoke or suspend any license if after a notice (10 days advanced written notice appearing to the licensee) and at the hearing he determines the broker or agent:

  1. Has violated any provision of law while acting as a licensee.
  2. Misappropriated any funds.
  3. Intentionally withheld material information in the licensee application.
  4. Attempt to obtain a license by fraud.
  5. Has demonstrated incompetency.

Section 2110(E)

   When a license is revoked, the superintendent may review the file only after one year has passed and then he need not change his decision.

2121

When an insurer delivers to a broker a policy issued at the request of the broker, the insurer thereby authorizes the broker to collect the premium or any installment premium on the insurer’s behalf.
This is provided the premium is collected within 90 days after the policy is issued, or after the statement date shown on the installment or any additional premium due.

2101(G)

One must be licensed as a public adjuster to adjust fire losses for compensation on behalf of the insured in NYS.
Public adjuster - adjust losses on behalf of the insured.
Independent adjuster - adjust losses on behalf of the insurer.

2120(A)

Every broker or agent acts as a fiduciary (position of trust) and must keep premium monies separate and apart from their own money unless they have special permission from the insurance company to commingle monies.
Note: Up to a $500 fine for each violation of commingling money. A licensee may deposit personal funds in their premium account to maintain an adequate balance. The licensee must keep a special account and proper books of account (cash receipts, cash disbursements, accounts receivable, accounts payable, and an expiration book). Only 3 types of checks can be written on this account:
  1. To the insurer for premiums earned.
  2. To the client for return premiums.
  3. To the licensee for commissions earned.

2134 Change of Address

The licensee shall inform the superintendent by a means acceptable to the superintendent of an address change (residential or business) within 30 days of the change.

2119

No broker has a right to charge an insured for their services in placing business, adjusting losses, or for giving advice unless they have a written agreement signed by the insured and stating the amount of compensation. A broker may not charge a greater amount than the premium fixed in the policy.

3106 Warranty

A provision in a policy which has the effect of requiring some condition to exist and to continue to exists before the insurer becomes liable, in case of a loss.

3105 Representation

A statement of past or present fact which is material in inducing the insurer to issue a policy and which statement of act if not true and if known to be untrue would have resulted in a refusal to issue the policy.
Note: Material misrepresentation in the application for an agent or broker license means the license may be revoked or suspended.

3407

Failure to file a proof of loss does not defeat the claim unless the insurer requests in writing that a proof of loss be filed and furnishes at least the blank form and then such proof is not filed by the insured within 60 days after receiving the notice.
The giving of such notice and the furnishing of such blank forms shall not be deemed an admission of liability or a waiver of any contract provision by the insurer.

2324 Anti-rebating and Exceptions

This section eliminates price discrimination.
No broker or agent shall pay or offer to allow a rebate to the insured or insured’s employee.
The following situations are permitted:
  1. Giving an article of merchandise costing no more than $15.00 with the licensee name printed on it.
Note: Giving stock or securities in return for buying a policy would be a rebate in violation of the law.
  1. The company may distribute dividends or make policy adjustments (mutual insurance companies)
  2. A licensed broker and agent may received commissions on their own property or risks which do not exceed the limits of 2104(E) 5%.
  3. A licensed broker may share commission with another licensed broker who aided in placing the risk.
Note: In addition, to any other penalties provided by a law, any person or corporation violating section 2324 may be required to pay a penalty of up to $500 for each violation.

Cease and Desist Order

If a person is found to have engaged in a defined violation by the superintendent, a Cease and Desist Order will be issued to stop engaging in such violation. Failure to do so may cause a penalty up to $5,000 per violation.
The amount of penalty will depend on whether the violation was willful.

License Display

In the main location or satellite office. The agent or broker that establishes it must prominently display the license or licenses of the supervising person(s) responsible for the place of business.

License Renewal

Unless suspended or revoked, an agent or broker license is valid for two years (Biennially) expiring on licensee birthday.
Applicants for each of the following licensees are exempt from the state exam requirements:
  • An applicant for a P&C license who has earned the CPCU Chartered Property & Casualty Underwriter designation (masters degree in insurance).
  • An applicant seeking to represent a fraternal benefits society as its agent.
  • An applicant for a license to sell baggage and accident insurance with ticket sales with a common carrier.

Twisting - Is a form of misrepresentation. The producer talks the client into canceling their insurance and buy another policy from the producer, to the detriment of the insured.

When all certificates of appointment for an agent have been terminated by the insurers, the agent’s license becomes inactive.
A licensee shall report to the superintendent any administrative actions taken against the licensee in another jurisdiction with 30 days.
A domestic insurance company files for review of their records once every three years.
Licenses subject to continuing education requirements must satisfy 15 credits for each biennial period.
If a nonresident licensee state is reciprocal with NY State, then NY State is reciprocal with that state for licensing.
Replacing a client’s all risk policy with a named perils policy is an example of an illegal marketing practice.

Excess Surplus Lines


Underwritten by insurance carriers that do not have a Certificate of Authority license and are not admitted or authorized to write insurance in NYS, except under certain conditions.
Surplus lines coverages are those risks that are generally not available form authorized carriers (such as aviation, ocean marine, railroads).
While surplus lines are generally an unregulated area of insurance, they are subject to the Surplus Lines Insurance Law of the state.
Affidavit or signed statement. Completed on each surplus lines placement summarizing efforts made to find coverage on the risk from admitted insurers.
Information about the transactions to be shown on the Affidavit include the names and addresses of the parties involved in the transaction:
  • Insured
  • Surplus Lines licensee
  • Retail agent/broker
  • Insurer
  • Statements indicating the extent of the diligent search used in the placement process.
  • Reasons for using a non-admitted insurer for the coverage.
  • Written notification to the policy holder about the lack of guarantee fund protection and other limitations of using a non-admitted carrier.
Total Cost Form. Provides the total cost of the excess line policy, including the premium, excess lines tax, stamping fee, and other authorized fees which the insured pays.
Export List
A group of coverages or risks that can be exported to non-admitted insurers without completing the due-diligence search requirements. This list is made up of coverages not usually available from Admitted carriers, simplifying the process when necessary.
The export list is periodically reviewed by state regulators and updated to reflect changes in market conditions.

Fire Insurance Basics


An arsonist is a moral hazard.
In New York, fire insurance policies are based on the original standard fire policy, aka, 165 line contract.
It is the oldest fire insurance form and while it is no longer used, its conditions are found in current fire policies.
Conditions, clauses, provisions mean the same thing.
Fire is either hostile or friendly.
Fire is a combustion sufficient to produce a spark, flame, or glow.

Under classifications of construction, material having a fire-resistance rating between on and two hours for walls, floors and roofs, is classified as modified fire-resistive.
A friendly fire burns with its intended place of confinement.
A hostile fire is one which burns outside of its intended place of confinement.
The following coverages are included in the peril (probable cause of loss) of fire:
  1. Water
  2. Chemical
  3. Other damage caused by the attempt to extinguish the fire
Note: Smoke damage is covered from hostile fires only.

Basic ways property is rated:

  1. Class Rates - Used when the insured property is one of a numerous normal hazardous class (one 4-family, brick or 1-4 frame private dwellings). No re-inspection is required for these risks.
  2. Specific or scheduled rates, used to rate property and liability risks using credits and charges to modify class rates, in line with the nature of the particular risks (mercantile manufacturing and apartment houses).
  3. Manual Rates - Rates published by the insurer on a rating organization in which the insurer is a member. (ISO)
  4. Judgement Rates - Determined in line with the underwriter experience such as ocean marine/wet marine.
  5. Retrospective Rating - (usually Workers Comp) - Premiums are adjusted at the end of the policy period to take into account losses occurring during the policy period. The original premium is adjusted in line with credits and debits.

Rate Approval Methods

  1. Prior approval - Rates are submitted to the insurance department and the insurers await their approval or disapproval or if not approved within a specific time limit, after filing without being disapproved.
  2. Mandatory Rates - Used for certain types of insurance where the state mandates the rates to be used such as in WC use of “authorized rates”.
  3. Open Competition - The State relies on the competition between insurance companies to promote fair and adequate rates.

Two types of losses

  1. Direct - Caused by a peril
  2. Indirect - Caused indirectly by a covered peril
Fire can cover both Direct and Indirect losses.
Direct loss is a loss to property sustained directly by a covered peril, such as a restaurant burning in a fire).
Indirect loss, aka, consequential loss, aka, time-element loss, is a loss resulting from a covered peril, such as loss of income by the restaurant while closed for repairs.

Types of Perils

Named Perils - Provide coverage for loss only from perils listed in the policy, such as fire, lightening, wind storm, etc.
Open or Special Perils - Provides coverage for losses from all perils, except exclusions. Also referred to as all-risk coverage, and risks of direct physical loss.

Examples of usually excluded perils:

  1. War
  2. Nuclear hazard
  3. Earthquake

Loss valuation methods / claim settlement options

Note: If the loss exceeds the policy limit, deduct the deductible from the total loss and the policy pays up to the limit of insurance.
  1. Actual Cash Value (ACV) - The cost of repairing or replacing damaged property with material of a like, kind, and quality at the time of the loss less an allowance for depreciation.
  2. Replacement Cost (RC) Endorsement - Waives depreciation, the insured is generally required to carry insurance equal to 80% of the full replacement cost. If the insured fails to maintain the proper amount, recovery will be on the ACV basis.
  3. Functional Replacement Cost - Allows Replacement with less costly property that functions similarly when identical property is not available due to technological or environmental change.
  4. Market Value - Change the valuation method from ACV or RC to a method that allows reimbursement based on the price a willing buyer would pay a willing seller, usually used for property where the value fluctuates based on market conditions, such as commodities (rice, wheat, corn, coffee).
  5. Stated Amount - Commonly used when insuring a valuable or unusual piece of property that establishes a maximum amount of insurance for loss purposes. The amount is established at the time of insuring the property, such as classic automobiles.

Policy Conditions

Rights, duties, obligations
  1. What voids a fire policy? Fraud, concealment, material misrepresentation.
  2. Cancellations for fire insurance - The insured may cancel at anytime generally on a short-rate basis after surrendering the original policy or by written request with an LPR form.
  3. The company may cancel under certain conditions on a pro-rata basis after giving the insured advance written notice. A mortgagee will receive written notice if one appears in the policy.
Mortgagee Interest in a Fire Policy
  1. Advanced written notice of cancellation.
  2. Pay any premium if insured fails to do so.
  3. File a Proof of Loss if insured fails to do so.
  4. Protected against acts of policy holder and therefore have coverage during periods of suspension.
Insured’s Requirements at Times of Loss
  1. Give immediate written notice to company
  2. Protect property from further damage
  3. Separate damaged from undamaged property
  4. Prepare an inventory of destroyed, damaged, and undamaged property, listing in detail quantities, costs, and the amount claimed.

Proof of Loss Form

Must be signed and notarized and must be submitted to the company within 60 days.
The time limit may be extended by the company in writing.
The following must be contained on the Proof of Loss Form:
  1. Interest of all parties in the property as to establish insurable interest.
  2. Time, date, and origin of loss.
  3. List all other insurance policies which could be called upon to contribute to the loss, whether collectible or not.
  4. The ACV of each item and the amount of loss on each:  RC - depreciation = ACV
  5. Any changes that have taken place at the location since the policy was issued.
Note: The insured may be required to submit to exam under oath to produce all records

First Party Insurance is indemnity insurance.
Concurrent policies have the same forms and perils.

Appraisal Provision

When the insured and company fail to agree on the ACV or amount of loss, either party may request in writing the use of this provision.
After the request has been made, each party has 20 days to select a competent and disinterested appraiser.
The appraisers in turn have 15 days to agree upon an umpire. If they fail to agree in 15 days on the umpire, a local court will appoint one.
Each party pays for their own appraiser and share the cost equally of the umpire and any court costs.

Abandonment

The insured cannot abandon property to the company in return for settlement. The insured has no options.

Suits against the company

The insured can sue the company provided the insured has complied with all conditions  in the policy. The suit must be brought within two years after date of loss.

Specific and Blanket Insurance

Specific is insurance written to cover one property on a policy for a specific amount of insurance. 
Blanket insurance is written to cover more than one property on a policy with a single amount of insurance applying to all covered properties under the policy.

Liberalization clause

States any broadening of coverage granted without an increase in premium will apply automatically to all outstanding policies with the same form and edition dates.

Inflation guard (endorsement)

Increases the amount of insurance to counteract the effect of inflation on building costs. To qualify for this endorsement, the insured must carry 100% of the full RC, and is usually optional for additional premium.

Other Insurance Clause, aka, pro-rata liability clause

More than one policy covers a loss. Each company establishes its liability for payment in proportion that its policy bears to the total insurance in force, whether collectible or not.

Pro-Rata Liability Formula

Used to determine the amount of coverage each insurer pays when more than one source of insurance is available to handle a given loss. Take the coverage written by Company A, divide that amount by the total coverage written by all sources and multiply the resulting percentage by the actual loss amount.
Example:
Company A Limit of insurance (50K) 
Company B Limit of insurance (100K)
Total Loss is (6K)
  1. 50K/150K * 6K= 2K
  2. 100K/150K * 6K = 4K
Total Settlement = 6K

Pro-Rata Distribution Clause

Used to distribute the total amount of insurance in force over each location covered in proportion that the value of each location bears to the total value of all locations.
The effect of this clause is to convert blanket insurance into specific insurance.

Coinsurance Clause

States the insured must carry insurance equal to a given percentage of the ACV or RC of the insured’s property at the time of the loss.
If the insured fails to carry the proper amount of insurance, they will become a co insurer to the percentage to their deficiency. The standard coinsurance percentage is 80%.
This clause applies to all losses, but in a total loss, the insured collects up to the policy limit.

Coinsurance Clause Formula

The purpose of the coinsurance clause is to encourage the insured to insure property to full value.
Insurance carried / Insurance required (ACV or RC * coinsurance value) * Loss = Settlement
Example:

Insurance carried is 80K
ACV is 200K
Coinsurance value is 80%
Loss is 10K
80K/(200K * 80%=160K) = 1/2
1/2 * 10K = 5K Settlement
If the insured agrees to amend the coinsurance clause, on the Declarations page, they will receive a 5% rate credit.
If the insured amends the coinsurance clause, from 80% to 100%, they will receive a 10% rate credit.
No benefit to bailee for a person or organization that is storing, moving, processing, etc, the insured’s property for a fee. The insurer will not grant any coverage or recognize any assignment of benefits.

Assignment Clause

The insured cannot transfer rights of ownership or interest in an insurance policy to another person without the insurer’s written consent.

Deductibles

Risk retention is this type of risk. It can help reduce small or frivolous claims submitted by an insured. It can also be a cost control factor.

Flat deductible

A specified dollar amount that is applied separately to each loss which the insured must bear.

Percentage

Usually a % of the building limit which the insured must bear (commonly used for the peril of wind).

Removal damage, aka, property removed, aka, preservation of property clause

Coverage is for any direct loss from any peril while being removed from a premises endangered by a covered peril (subject to exceptions, such as war).

Pair or Set Clause

A loss settlement condition in many property policies. In there is a partial loss to a pair or set, the company will pay the fair and reasonable portion of loss as the partial loss compares to the total value of the pair or set, giving the importance of the damaged or lost article to the set.

Example:
111111 (6 pens)

You lose one
Each pen is worth 1000K
Entire set is worth 12K
Settlement is 12K - ACV 5K = 7K settlement

The insurer is not obligated to pay for the entire set, if only a part is lost or damaged. However, they may have to pay more than the apparent proportion of the actual loss.

Dwelling Property Policies (DP)

The dwelling property program is designed to cover 1 to 4 family private dwellings with up to 5 roomers or boarders.
Permanently located mobile homes would be eligible, but only on the Basic Form.
Incidental businesses of the service type are permitted, but with no retail sales or manufacturing (eligible risks are beauty salons, or professional office).
Dwellings on a farm are not eligible and are insured under a farm coverage form.

Three policy forms:

  1. DP1 Basic Form
  2. DP2 Broad Form
  3. DP3 Special Form
DP Forms (You can pick the coverages wanted)

Cov A Dwelling

Insures the residential building and any structures attached, such as an attached garage, as well as materials and supplies on or next to the location which is used for construction, alterations, or repair of any structure at the location.
Building and outdoor equipment used for servicing the dwelling and located on the premises are considered dwelling, unless otherwise covered in the policy.
There is no coverage for land including the land on which the dwelling is built.

Cov B Other Structures

Coverage applies to other structures on the described premises not attached to the dwelling and are at least separated by a clear space. Coverage is in the amount of 10% of Coverage A.
There is no coverage for land, and is not permissible to use a structure for commercial or manufacturing.

Note: It is permissible to rent a private garage for use as a garage.
Note: Under coverages A & B, there is no coverage for radio and tv antennas and ariels, including their mast, towers, or lead-in wiring from wind, hail, ice, snow, or sleet.

Cov C Personal property/contents

Covers personal property owned or used by the insured and resident family members when the property is located on the premises.
Coverage C can also cover property of a servant or guest, if requested by the insured and on the premises. (by endorsement)

Note: Coverage C is an on-premises limit but does provide for a world wide limit of 10%, except for row boats and canoes.There is no coverage for personal property of a tenant or boarder. In addition, there is 30 days coverage or the end of the policy period - whichever occurs first, when the insured is moving to a new principal residence in the same state.

Cov D (Fair) Rental Value

Pays the insured the fair rental value of that portion of the premises rented to others, or held for rental at the time of loss, if there is a covered direct peril loss to property covered under coverages A, B, or C.

Cov E Additional Living Expense

Only available on the DP2 and DP3
Provides compensation to the insured for the increased living expenses when they are forced to live elsewhere after a covered direct peril loss.
Coverages A, B, C are Direct Coverages
Coverages D, E are Indirect Coverages
Under Coverage D & E, civil authority loss is limited to two weeks in coverage

DP1 Basic Form

Insures the dwelling and other structures for perils of fire, lightening, and internal explosion.
For additional premium and by endorsement, the insured may add the extended coverage perils (E.C. Perils)
If the EC Perils are added to the DP1, vandalism and malicious mischief (VMM) can be added for additional premium. 
However, glass breakage is excluded.
Coverage for Additional Living Expenses is available by endorsement.

DP2 Broad Form

Insures the dwelling and other structures as the DP1, but automatically includes the EC Perils as well as the VMM.
No coverage if the dwelling has been vacant for > 60 consecutive days, prior to a loss.
The broad form perils are automatically included.
Note: Smoke damage is a covered peril of the Dwelling Broad Form; however, the description of the peril specifically excludes smoke from agricultural smudging or industrial operations.

DP3 Special Form

Insures the dwelling and other structures on an all risk (open perils) basis or risk of direct physical loss on a replacement cost basis
If personal property(contents) is present, coverage is on a Broad Form Actual Cash Value basis.
Insurance agreement has the named perils.

Note: The DP3 is the only form that covers theft of building property when the dwelling is unoccupied such as copper plumbing from a basement heating system and built-in appliances as long as the dwelling or other structures are not under construction or have not been vacant for > 30 days immediately before a loss.

EC Perils

W - windstorm
C - ivil commotion (large # of people)
S - moke
H - ail
A - ircraft
V - ehicle
V -olcanic eruption
E - xplosion
R - iot

Broad Form Perils

B - burglar(y) Damage
I  - ce, snow, or sleet (weight of)
G - lass
A - ccidental Discharge (Plumbing, heating)
F - alling objects
F - reezing of pipes
E - lectrical Damage
C - ollapse (any named peril that is covered and causes collapse, including hidden vermin damage)
T - earing assunder (apart) like a hot water system

Other Coverages

Other Structures

The insured may use up to 10% of the COV A limit of insurance if a covered peril loss damages another structure described in COV B.
Under DP1, this limit is included in the COV A limit.
Under DP2 and DP3, it is an additional insurance.

Debris Removal

States the company will pay the reasonable expense of removing debris of covered property after a covered peril loss, subject to the policy limit.
These expenses are included within the limit of coverage.
Expense of removing ash, dust, or particles from a volcanic eruption which caused damage to a building or property, contained in the building will be paid.

Improvement, Alterations, and Additions

The insured may use up to 10% of the Cov C limit, if, as a tenant, they suffer a covered peril loss to improvements made or acquired at their own expense to part of the described location used only by the insured.
This coverage is additional insurance.

Worldwide Coverage

The insured can use up to 10% of the Cov C limit of liability for loss by a covered peril, to covered property under Cov C, except row boats and canoes (anywhere in the world).
Cov C limit of liability is reduced by the use of this other coverage, for the same loss.

Rental Value and Additional Living Expense

Additional living expense is not available under the DP1.
The insured may use up to 20% of the limit for both fair rental value and additional living expenses. This coverage is additional insurance under the DP2 and DP3.
However, under the DP1, use of the rental value limit will reduce the Cov A limit for the same loss.

Reasonable Repairs

Covers the reasonable expense to protect covered property from further damage after covered property is damaged by a peril insured against in the policy.
This coverage does not increase the limit of insurance for the covered person. It is built into the limit of insurance.

Preservation of Property, aka, Property Removed, aka, Removal Damage

Under a DP1 and Standard Fire Policy, this coverage is for 5 days after removal.
Under a DP2 and DP3, this coverage is for 30 days after removal.

Trees, Plants, Shrubs, Lawns

DP1 - no coverage
DP2 and DP3 - Coverage is provided on a named perils basis, including:
  • Fire
  • Lightening
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles not owned or operated by the insured or a resident of described location
  • Vandalism and malicious mischief, VMM
  • Damage during a burglary or attempted burglary, but not theft of property
Coverage is 5% of Cov A limit, but not > $500 per item.
This is additional insurance.

Fire Department - Service Charge

Under all dwelling forms, if the insured is liable under a written contract or agreement for fire department service when called to save or protect covered property from an insured peril, the insurer will pay up to $500.
The policy deductible does not apply, and this is additional insurance.

Collapse

Collapse and glass in DP2 and DP3 is Other Coverage.
DP1 does not include the Broad Form coverages.
Collapse covers direct physical loss to covered property involving collapse of a structure or any part of a structure caused by one or more of the following perils:
  • A peril insured against in the policy
  • Hidden decay and dry rot
  • Hidden insect or vermin damage
  • Weight of people, animals, contents, or equipment
  • Weight of rain collecting on the roof
  • Use of defective materials or methods in construction, remodeling, or renovation, if the collapse occurs during the construction, remodeling, or renovation.
Not covered under collapse is settling, shrinking, bulging, cracking, or expansion.
This coverage does not increase the limit of insurance relative to the damaged covered property.

Glass or Safety Glazing Material

Covered under DP2 and DP3 Forms
Note: DP1 cannot have Broad Form Perils.
Covers breakage of glass or safety glazing material, part of a covered structure, like a storm door or storm window.
Also covered, damage to covered property by glass or safety glazing material which is part of a covered structure, storm door, or storm window is covered.
There is no coverage if the dwelling is vacant (empty) for > 30 consecutive days, immediately prior, to the loss.
This coverage does not increase the limit of insurance applying to damaged property.

Ordinance or Law (Legal Hazard)

Under DP2 and DP3 only
Covers increased cost of construction, repair, or demolition, regulated by an ordinance or law.
An additional 10% of insurance amount is available for these expenses.
The insurance agreement shows perils insured against and promise to pay for covered losses, as well as a description of the property.
DP2 - Bldgs and Other Structures (Named Perils)
DP3 - Bldgs (Open Perils)
Note: There is no additional premium charge for Other Coverages. They are included automatically.

Loss Settlement under DP Forms

DP1 - ACV basis only
DP2 and DP3 - Buildings under Cov A and CovB are RC (have to meet coinsurance requirement at 80%, without deducting for depreciation, provided the insured is carrying sufficient insurance for coinsurance purposes)
Personal Property under Cov C, is covered at ACV.

Claim Settlement Example:

Insured has a DP2 Broad Form covering rental property for Cov A at 300K.
Loss by fire, building destroyed.
Detached garage has a 35K loss.
Firemen and fire trucks also damaged sod lawn.
Ignoring deductible in policy, the policy will pay what?
The structure pays 10% of limit, so 30K for the detached garage.
The building is a total loss, so 300K is covered.
The lawn is covered up to 5% of the total limit, so 15K is covered for lawn.
Answer: 300K + 30K + 15K = 345K Settlement

General Exclusions for DP1, 2, and 3 (entire contract)

Earth Movement, aka, earthquake

Unless a fire, explosion, or breakage of glass, or safety glazing material ensues from earth movement, then the policy would pay for the ensuing damage.

Water Damage

Flood and Backup of sewers and drains or water under the ground surface which seeps through the basement walls.
If fire or explosion results from the water damage, coverage applies to ensuing damage.

Neglect

Neglect is excluded if insured did not use all reasonable means to protect property after a loss.

War

Nuclear Hazard

Intentional Loss

Power Failure

No coverage for power failure off the premises or other utility service. However, if a peril insured against ensues, like a fire, the company will pay for ensuing damage.

Ordinance or Law

Deductible Clause

DP1, 2, 3
The standard deductible is $250
Note: Deductible is an example of risk retention

Endorsements

Personal Liability Endorsement
This mono-line policy can be added to the DP form as an endorsement for additional premium.
Personal Liability Coverage L and Medical Payments to Others Coverage M - provide coverage on and away from the residence premises relative to personal activities worldwide.
It covers bodily injury or property damage for 3rd parties, as a result of the insured’s negligence.
In addition, the endorsement provides supplementary payments for claim expenses, first aid, and physical damage to property of others.

Broad Form Theft Coverage - Coverage for theft of personal property and can be added to the DP form for additional premium. It covers personal property and contents of an owner occupied dwelling, condo, or co-op, as well as apartment renters.

Perils insured against are theft, and attempted theft both on and off premises. 
Certain types of property are excluded and or subject to limitation.
Note: While the dwelling policy includes a number of standard provisions, such as liberalization clause, non-renewal provision, and deductible clause, the inflation guard clause is not a standard provision.
Personal residence on a farm is not eligible for a DP form.

Homeowner’s Program

A homeowner’s policy is a package policy, consisting of two sections which are:

  1. Property (indemnity)
  2. Liability

And, includes various perils, such as:

  • fire
  • lightening
  • theft
  • liability, etc.

The following HO forms are available:

  1. HO2 - Broad Form
  2. HO3 - Special Form
  3. HO4 - Contents Broad Form
  4. HO5 - Comprehensive Form
  5. HO6 - Unit-Owners Form
  6. HO8 - Modified Coverage Form
Homeowners policies are package policies. They contain more than one type of insurance and offer advantages like premium savings, broader coverage, and fewer policies are needed.

Eligibility Requirements for a HO Policy:

  1. The owner occupant of a 1-4 family private dwelling.
  2. A tenant in a private dwelling or apartment house (5 or more family units)
  3. The owner of a condo or co-op.
Note: A farm is not eligible for a HO policy.

Homeowners Policies

HO2 Broad Form

Dwelling and other structures are insured on a Broad Form / Named perils basis and losses are paid on a replacement cost basis.
Note: Until the damages have been repaired or replaced, the insurer will pay losses on an ACV basis, unless the cost to repair or replace is < $2500 and 5% of the limit of insurance.

However, the insured will have 180 (6 months) days from date of loss to complete the repairs or replacement of the damages, to file additional claim for the difference between ACV and replacement cost.

The Contents / Personal Property are insured on a Broad Form / Named peril basis.
Losses are paid at ACV.

There is no coverage for fences, driveway, or sidewalks damaged by a vehicle owned or operated by the insured.

Note: Under collapse, settling is not covered.


HO3 Special Form


The Dwelling and Other Structures are covered on an All Risks, aka, Open Perils, aka, risk of direct physical loss and losses are paid on a RC cost basis.

Content / Personal Property is covered on a Broad Form / Named Perils basis with losses paid at ACV.
Note: This form would cover a loss caused by rainwater entering an open window, causing damage to the building, such as walls and floors.


HO4 - Contents Broad Form (Named Perils)

Lightening
Fire
VMM ( you can add VMM )
Extended Perils

Designed for tenants or renters.

The policy insures Contents / Personal Property on a Broad Form perils basis, and losses are paid at ACV.

The policy provides 10% of COV C limit for improvements and betterment as additional insurance.


HO5 - Comprehensive Form (Provides the broadest coverage)

This policy provides Open Perils Coverage on the buildings and personal property.

Note - This policy would cover damage caused by a deer jumping through a window of the insured dwelling, damaging walls, floors, and personal property.
Losses to the buildings are covered at RC cost, but personal property at ACV.


HO6 - Unit Owner’s Form

For owner occupants of condos and cooperative units, this policy covers personal property on a Broad Form perils basis and provides a minimum $1,000 limit for additions, alterations, fixtures, and appliances.


HO8 - Modified Coverage Form


Replacement of the BASIC FORM HO1
For older, historical houses

Used to insure older homes (such as early 1900s) and replaces the HO1 Basic Form

This form is used when there is a significant difference between Replacement Cost and Market Value.

The dwelling is insured for Market Value and losses to building and personal property are settled on a Actual Cash Value basis.

The policy covers buildings and personal property on a named perils basis including:
fire
lightening
EC Perils
VMM
theft - max limit $1,000
glass

Note: No coverage for accidental discharge, such as a result of a washing machine hose wearing out.

Note: Flood peril is excluded from all HO policy forms.

Note: Standard HO deductible is $250.00 for each loss.

Note: Definition of dwelling, other structures, personal property and loss of use (includes additional living expense and fair rental value) are same as DP forms.

Section I (Coverage for insured's property)

Cov A - Dwelling
Cov B - Other Structures (additional insurance)
Cov C - Personal Property (additional insurance)
Cov D - Loss of Use (rental value and add. living expenses) - (additional insurance)

Section II
Cov E - Personal Liability
Cov F - Medical Payments to Others

Section I of HO2, HO3, HO5, HO8

Cov A - Dwelling

Primary limit chosen by insured

The policy does not cover:
  • Land on which the dwelling is located,
  • Theft in, to, or from a dwelling under construction, including materials used in the construction.
  • VMM including ensuing loss, if the dwelling was vacant for more than 60 consecutive days immediately before the loss. 

Cov B - Other Structures

10% of COV A limit (such as unattached garage)

No coverage for 4 types of property:
  • Land, including land on which the other structures are located.
  •  Other structures rented or held for rental to anyone who isn't a tenant of the dwelling, unless the other structure is used solely as a private garage.
  • Other structures from which any "business" is conducted.
  • Other structures used to store business property that is owned by someone other than  an insured or a tenant of the dwelling. 
Note:  HO2, HO3, HO5 buildings under COV A and COV B are insured on an RC basis provided they are carried at 80% coinsurance at the time of loss
Example: 
You have a dwelling with Cov A limit 300K; RC of dwelling is 600K;  Loss is 560K
What is the settlement?
Answer - 600K(RC) x 80% coinsurance =480K; 300K (COV limit) / 480K = .625 x 560K(loss) = 350K settlement; COVA limit is 300K, therefore 300K is the answer.

COV C - Personal Property / Contents

Coverage is for personal property owned or used by the insured anywhere in the world. 

Covered at the named insured's request: property owned by others while it is on the residence premises occupied by the insured or properly owned by a guest or residence employee while located in any residence occupied by an insured. 

Coverage for property at other residence is limited. 

note: Property of roomers, boarders, and other tenants (except relatives of the insured) is excluded. 

For a 1 and 2 family dwelling, the limit is 50% of COVA limit.
For a 3 family dwelling, the limit is 30% of COV A limit.
For a 4 family dwelling, the limit is 25% of COV A limit.
Example: For a 1 - 2 family dwelling, COV A limit is 360K, therefore, Personal Property is 180K, automatically

COV D - Loss of Use

30% of COV A limit
Example: COV A limit is 360K, therefore, COV D limit is 108K
Includes:

  1.  Additional living expenses
  2.  Fair rental value
  3.  Civil authority prohibits use which is limited to 2 weeks coverage.

Section I of HO4

Usually purchased by tenant or renter.
COV C - Personal Property
Primary limit chosen by insured
COV D - Loss of Use
30% of COV C limit

Section I of HO6

COV A - Additions, alterations, fixtures and appliances
$1,000 minimum limit
COV C - Personal Property
Primary limit chosen by insured
COV D - Loss of Use
50% of COV C limit
Note: COV B, C, D in all policies, is additional insurance.

COV C - Personal Property

Covers personal property owned or used by insured, worldwide for full amount.

The only exception to worldwide limit is property kept in a secondary residence premises of the insured where coverage is limited to 10% or $1,000, whichever is greater.

No coverage for antique autos in insured’s garage.
No coverage for animals, birds, fish.

Limitations on certain classes of personal property:

  1. $200 - money, bank notes, bullion, coins, etc.
  2. $1,500 - trailers not used with water craft (camper trailer)
  3. $1,500 - loss by theft of jewelry, furs, watches, etc.(any other covered peril under the policy is covered up to the limit)
  4. $5,000 - grave markers
  5. $2,500 - property on residence premises used for business purposes and $500 for same property off premises.
  6. $2,500 - loss by theft of silverware, gold ware, etc.
Note: animals, birds, fish are excluded.

Recovered Property

The insured has the option to retain covered property, or relinquish to the insurer.
Should the insured choose to retain the recovered property, they need only to return the amount received in settlement.

Additional Coverages (DP FORMS is called Other Structures)

Included in HO policies at no extra premium cost.
Includes debris removal (same as DP except if amount of direct physical lost and debris removal expenses is > limit liability, an additional 5% is available for those expenses).
Example:
300K is total loss of dwelling
Debris removal expense is $15K
In a HO policy, the total settlement would be 315K - 5% of 300K is 15K
In DP form, debris removal is included, so settlement is 300K
Trees, shrubs, plants, lawns (5% of COVA, but $500 max for each tree, plant, shrub).
Under HO4 and HO6, the aggregate limit is 10% of COV C limit.

Fire Department Charge ( same $500 limit as DP Forms)

Collapse (same as DP Forms)
Property Removal / Removal Damage is covered for 30 days. 
Credit card, electronic fund transfer, forgery, counterfeit money - while the policy shows $500 as the coverage limit, the limit in New York is $1,000 pursuant to NY Special Provisions Form HO0131 which is additional insurance and covers the following: (no deductible)
  1. The insured’s legal obligation to pay because of theft or unauthorized use of credit cards.
  2. Theft or unauthorized use of the insured’s fund transfer card.
  3. Forgery or alteration of the insured’s check or negotiable instrument.
  4. Lost to insured as the result good faith acceptance of counterfeit US or Canadian currency.

Loss Assessment (ex: gated community)

The limit is $1,000 for assessment by a corporation or association of property owners when the insured is an owner or tenant of the residence premises and there is a direct loss to property caused by a peril insured against in the policy owned by all members collectively.
This coverage is additional insurance.
Exclusions - same as DP Forms including:
Flood (referred to water damage in the General Exclusions section of the policy) - FED (FEMA) max limit on residence is 250K, Personal Property $100K
Intentional Loss
Nuclear Hazard
War, etc.

Endorsements

Earthquake - Under COV A, B, C

Covers loss caused by earthquake and land shock waves or tremors before, during, and after volcanic eruption. (A single earthquake includes shocks occurring within a 72 hour period).
No coverage for any flood damage to exterior masonry veneer for the cost of filling land.
Minimum deductible - $250 but may be a % of COV A Dwelling and COV C Personal Property.

Scheduled Personal Property Endorsement (HO 61 10)

This endorsement is an outgrowth of the personal articles floater which is a mono line policy and still available. Both the policy and endorsement are similar, subject to exception.
Covers named insured and all family members resident int he same household. Perils insured against on an all risk of loss or damage basis with a worldwide coverage territory.
Losses are usually settled on an ACV basis.
Property covered on a scheduled / itemized basis, subject to exceptions.
Note: NAIC (National Association of Insurance Commissioners) describes the types of risks classified as Marine Insurance.
Generally, they are instruments of communication and transportation (bridges, tunnels, radio and tv antennas)
Imports and exports, domestic shipments, and personal and commercial floaters, as defined by the nationwide marine definition.
Note: Inland Marine Policies, aka, dry marine policies, are commonly referred to as floaters because the property covered moves from location to location.

General Exclusions apply to entire contract:

W AR
I nsects and vermin (DP covers it under ‘hidden vermin’)
N uclear 
W ear and Tear
I nherent Vice (internal to property that happens with external cause - like metal rusting, ability to self-destruct)
G radual Deterioration

Pair or Set Clause (scheduled personal property endorsement)

Other than Fine Arts

The insurance company is liable for a fair and reasonable portion of loss that the lost or damaged property bears to the total value of the pair or set.

The insurance company agrees, in a loss, to allow the insured to surrender the remaining property and collect the fully insured amount.

Example:

10K pair of earrings
1 earring is lost
The other is valued at 4K -----The insured would receive 6K
Property Appraisal clause - When the insured and insurance company cannot agree on the value, they can get their own appraiser.

CLASS I - Jewelry

Insured on a Scheduled basis with evidence of value (written appraisal) is usually required
Each item must be described in detail with a limit of insurance applicable to each item.
For additional premium, the insured may purchase a Valued Form.
Note: Engagement rings should be insured under separate policies in the names of both parties who are not yet family members and may not be in the same household. (avoids questions as to insurable interest)

CLASS II - Furs

Insured under the same conditions as Jewelry

CLASS III - Cameras

Insures photographic equipment on a Scheduled Basis.
Note: Insured may purchase a blanket amount for small items such as a tripod, lens covers, and light meters for up to 10% of Scheduled Limit of cameras.
Note: Different rates apply for amateurs and professionals.

CLASS IV - Musical Instruments

Insures musical instruments and sheet music on a Scheduled basis.
Note: Insured may purchase a blanket amount for small items such as a tripod, lens covers, and light meters for up to 10% of Scheduled Limit of cameras.
Note: Different rates apply for amateurs and professionals.

CLASS V - Silverware

Insures silverware on a Scheduled or blanket basis, but, excludes coverage for pens and pencils, smoking instruments, flasks, and jewelry.

CLASS VI - Golfer’s Equipment

Covers golf clubs, equipment, and clothing. Insures street clothing while in the clubhouse locker. Golf balls are covered for fire and burglary.
Note: Since coverage is provided worldwide coverage, coverage would apply if golfer’s equipment was stolen from a trunk of insured’s car to the extent of ACV.

CLASS VII - Fine Arts

Covers items such as paintings, statuary, rare books, antique furniture, oriental carpets, etc.
Items of fine arts are insured on a Scheduled Basis with evidence of value usually required.
Fine Arts are automatically insured on a valued basis, instead of ACV.
Note: The insured must agree that insured property will be packed and unpacked by competent packers.
When they agree competent packers will be used, that is called a Warranty.

Additional Exclusions:

  1. Damage while being worked on
  2. Breakage of fragile articles, like ceramics, unless caused by fire, lightening, windstorm, aircraft, VMM, theft, explosion, earthquake, flood and collision, derailment of overturn of transporting conveyance. This exclusion can be eliminated for additional premium.
  3. No coverage while on Exhibition (if coverage is desired, a commercial exhibition floater is required)

VIII and IV - Coins and Stamps (Collections)

Insures stamps, coins, and paper money of collectors, on a Scheduled Basis.

Additional Exclusions on collections:

  1. Fading, thinning, denting, scratching
  2. Transfer of colors
  3. Theft from unattended auto
  4. No coverage for antique autos

Newly Acquired Property Clause 

As to jewelry, furs, cameras, musical instruments, the insured is granted automatic coverage on newly acquired property, but only of the kind presently insured.
The limit is up to 25% of the scheduled amount, for that class of property, or 10K, whichever is less. This coverage is for 30 days after acquisition.
Similar provisions apply to fine arts, but coverage is 25% of the scheduled amount, but no maximum dollar amount and the coverage is for 90 days, after acquisition.
During the period, losses are paid on an ACV basis.

Personal Property Replacement Costs (for HO)

Coverage is provided under COV C without consideration for depreciation.
Property such as antiques, memorabilia, etc, whose ages and histories contribute to their value as well as outdated, obsolescence, unused, or not maintained in good working order, etc., are excluded.

Section II of HO Insurance

Note: All HO Policy Forms have identical Section II coverages.

COV E - Personal Liability

Pays for damage related to bodily injury (BI) or property damage (PD) or personal activities up to the limit of liability.
Note: Personal Injury Liability (libel, slander, etc) is not covered in unendorsed HO policies.

Additional Coverages (Supplementary payments)

In addition, to the limits of liability, the policy covers the following at the insurer’s expense:
  1. Claim Expenses - legal fees to defend the insured
  2. First Aid Expenses
  3. Damage to property of others up to $1,000 limit per occurrence (such as damage to a borrowed lawn mower by an insured)
  4. Loss Assessment - Pays up to $1,000 for an insured’s share of a loss assessment, charged by a property owner’s association.
Note: Excluded under COV E and COV F is payment for BI or Property Damage arising from ownership, maintenance or use of:
  1. Inboard motor boats except while in storage
  2. Inboard motor boats with > 50 horsepower
  3. Outboard motor boats > 25 horsepower
  4. Sailing vessels 26 feet or more in length

COV F - Medical Payments to Others

Pays necessary medical expenses incurred or medically determined within three years from the date of the accident causing BI, regardless of fault. (referred to as the good neighbor coverage)
Pays reasonable charges for medical, surgical, Xray, dental, hospital, professional nursing, and funeral services, etc.
Note: Medical payments coverage does not apply to named insured, a covered spouse, or regular residents of insured’s household (except resident’s employees). It does apply to a person’s guests who is on insured location with the permission of the insured, 3rd party coverage.

A per occurrence limit applies to losses covered under Coverage E - Personal Liability.
A per person limit apples to losses covered under Coverage F - Medical Payments to Others.

Bankruptcy or insolvency of an insured does not relieve the insurer of its obligations under the policy.

Reminders:

  • HO-2 Broad Form insures the dwelling for the 16 named perils and losses and valuation is on a RC cost basis.
  • HO-2, 3, 4, 6 forms insure personal property for the 16 named perils and losses are valued on an ACV cost basis. 
  • HO-3 Special Form insures the dwelling and other structures on an open perils basis and losses are valued on an RC cost basis. 
  • HO-5 Comprehensive Form insures the dwelling, other structures, and personal property on an open perils basis and losses for the dwelling and other structures an on an RC cost basis while personal property is an an ACV cost basis. 
  • Full-time students living away at college are considered insured if they are under age 24 as well as full-time students under age 21 and in the care of the named insured.
  • Coverage B - Other Structures does not provide insurance for other structures rented or held for rental to anyone who is not a tenant of the dwelling, from which business is conducted, or where business personal property is stored. 
  • If personal property is usually located at a residence other than the residence premises, coverage is limited to 10% of Coverage C or $1,000, whichever is greater.
  • Loss Assessment coverage provides up to $1,000 for loss assessment charged by an association or corporation or property owners against the insured for direct damage to property collectively owned by all members.
  • Landlord's furnishings provides up to $2,000 of coverage on a named perils basis.

Automobile Insurance (Personal)

Three types of auto coverages:

  1. Personal Auto Policies (PAP) 
  2. Commercial Auto Policies
  3. Policies used by auto businesses including:
    1. Garage liability
    2. Garage Keeper’s Legal Liability

1. Personal Auto Policy (PAP)

This personal lines policy is sold primarily to cover individually owned private passenger autos (non-business), and can be for a term of one year or less. Primary use is personal, although incidental business use is allowed - e.g., making sales calls.
The PAP has six parts:

Part A - Mandatory - BI and PD Liability Coverage

25/50/10 - split or dual limits
25 is BI per person
50 is BI per accident
10 is PD property damage

Part B - Optional - Medical Payments

Part C - SUM (Supplementary Uninsured Motorists)

  1. Mandatory - Uninsured Motorists 25/50 BI
  2. Optional - Under insured Motorists

Part D - Optional - Damage to your auto (Collision) and Comprehensive (Other Than Collision)

Part E - Duties After an Accident or Loss

Part F - General Provisions

Plus - Selected Endorsements


Personal Injury Protection (PIP/No-fault)

  1. Basic PIP - Mandatory
  2. Optional Basic Economic Loss (OBEL) - Optional
  3. Additional PIP - Optional

Towing and Labor - Optional

Extended or Optional Transportation Expense

Definitions

You and Your, aka, Named Insured: The person named in item #1 of the Policy Declarations, including a spouse if a resident of the same household.
We, Us, Our: The insurance company providing coverage
Your Covered Auto 
  1. Any vehicle shown in the Declarations
  2. Any newly acquired auto
  3. Any non-owned auto or trailer while used as a temporary substitute or any other vehicle described in this definition which is out of normal use because of it’s breakdown, repair, servicing, loss, or destruction.

Newly Acquired Auto

Means any of the following types of vehicles you become the owner of during the policy period:
  1. Private passenger auto up to 10K lbs.
  2. Pick up truck or van predominantly used for non business purposes.

Replacement Vehicle

If a newly acquired auto replaces an auto shown in the DEC, coverage is provided without you having to ask the insurance company to insure it. (Premium only changes in the Part D - Collision)

Additional Acquired Vehicle

If a newly acquired auto is in addition, to any shown in the DEC, it will have the broadest coverage not provided for any vehicle shown in the DEC. 
The insured must ask the insurance company to insure an additional acquired auto within 14 days after becoming the owner.
If insured asks the company to insure a newly acquired auto after 14 days, coverage will begin on the date of request.

Coverage for Damage to your Auto

For a newly acquired auto, coverage begins on the date you become the owner, if:
  1. The new auto replaces one shown in the DEC
  2. The company provided the coverage on the vehicle you replaced for at least 12 months, prior, to the date of replacement. You must ask the insurance company to insure it within 3 days after becoming the owner.

For each of the following, which falls within a 3 day period, we will extend the period by one day:
  1. Saturday
  2. Sunday
  3. Legal Holiday

Family Member

Any person related to the named insured by blood, marriage, or adoption, including a ward and foster child who is a resident for the same household.

Occupying

Means in or getting in or getting out, on, getting on, getting off
Note: Standing by the car exchanging insurance information is not considered occupying an automobile.

Use

Use of a vehicle includes it’s loading and unloading

Trailer

A vehicle designed to be pulled by a private passenger type auto, pickup, or van. Also, a farm wagon or farm implement, while towed by a private passenger auto, pickup, or van.

Covered Persons

  1. Named insured or any family member (including unlicensed child) for the ownership, maintenance, or use of any auto or trailer.
  2. Any person using the insured’s covered auto with permission
  3. For the covered auto, any person or organization, with legal responsibly for acts or omissions of a person for who coverage is afforded (respond eat superior). Ex: if a secretary uses her car to run an errand for her boss.
Note: Covered person does not include a resident of the named insured’s household who is not a family member or does not have permission, such as a roomer or boarder.

Part A - Liability Coverage - BI, PD Liability

Insuring Agreement


  1. The company will pay:
    • Damages for BI or PD (for injuries to a pedestrian and or PD - such as a street light) which any insured becomes legally responsible because of an auto accident.
    • Damages include any prejudgement interests awarded against the insured.
  2. The company will settle or defend as they consider appropriate, any claim or suit asking for these damages.
  3. In addition, to their limit of liability, the company will pay all defense and court costs they incur. However, their duty to settle or defend ends when the limit of liability has been exhausted.

Supplementary Payments

In addition to their limit of liability, the company will pay for an insured:
  1. All defense and court costs they incur.
  2. Up to $250 for premium costs of bail bonds required because of an accident.
  3. Premiums on appeal bonds and bonds to release attachments in any suit the company defends.
  4. Interest accruing after a judgement, in any suit the insurer defends.
  5. Up to $200 per day, for loss of earnings, but not other income (such as investment income) due to attendance at hearings or trials that the insurer’s request.
Note - The insurance company does not obtain the court bonds noted in #2 and #3 (above). They reimburse the premium costs up to the limits.

Note - Medical payments Part B is not part of supplementary payments Part A. It is a separate optional coverage.

Example of Part A Supplementary Payments:

Insured has a PAP with a CSL of 60K.

The following judgements are entered against the insured:
  1. 27K BI to Mrs. P.
  2. 20K BI to Mrs. O.
  3.   8K BI to Mrs. H.
  4.   5K Damage to other auto involved in the accident.
In addition, insured suffered loss of earnings of $1,500 attending a 5 day trial at the insurer’s request. 
The insured incurred $200 for premium cost of an appeal bond.
The insured incurred $100 for release of attachment bond.
The insured incurred $350 premium cost of a bail bond.

What is the insurance company’s total liability?

27K + 20K + 8K + 5K = 60K
$200 a day for 5 days = $1,000 loss of earnings
$200 (appeal bond) + $100 (attachment bond) + $250 (bail bond) = $550

The insurance company’s total liability is $61,550

Part A Exclusions

The company does not provide liability coverage for any insured:
  1. Who intentionally causes or directs another person to cause BI or PD.
  2. Bodily injury to an employee, while employed (Workers Compensation covers this).
  3. Any vehicle used to carry persons or property for a fee (commercial auto covers this) - Does not apply to a Share the Expense car pool.
  4. While the insured is engaged in the business of selling, repairing, servicing, storing, or parking autos (Garage Liability insurance covers this). note: A car rental agency is not eligible for Garage Liability as this form is primarily for businesses that sell, service, or store automobiles.
  5. Any vehicle < 4 wheels, such as a motorcycle.
  6. Any person using a vehicle without a reasonable belief that they are entitled to do so.

Part A Limits of Liability

Minimum Split / Dual Limits of Liability in NY

  1. $25K BI per person
  2. $50K BI total per accident
  3. $10K PD per accident
The minimum combined / single limit / single limit 60K for all BI and PD in any one accident.

New York Statutory Death Benefit

Minimum limits of liability - 25 / 50 / 10

NY amendment 

If the limit shown in the policy is < 100 BI each person and 200 BI each accident, either on a dual or single limit basis, and the accident results in death, the company will pay up to 50K for death of any one person and up to 100K for death of 2 or more persons in any one accident, but still not more than 50K for any one person.

Out of State Coverage

25 / 50 / 10 minimum liability New York
If an auto accident occurs to a covered auto in another state or province, other than the one in which the insured auto is principally garaged, the policy for the purposes of that accident will provide the higher specified limits.

Other Insurance Clause (Pro Rata Liability Clause)

If there is other liability insurance, the company will pay only their proportion of loss their limit of liability bears to total of all applicable limits.
However, insurance provided for non-owned autos is excess over other valid collectible insurance.
Example of Other Insurance Clause:
Insured has Part A limits of 50 / 100 / 25
Neighbor has Part A limits of 100 / 300 / 50
Insured borrows neighbor’s auto with permission and is involved in an at fault accident in which a 3rd party obtains 125K BI judgement against the insured.
How is the judgment settled? The neighbor’s policy pays 100K and the insured’s policy pays 25K.

Part B Medical Payments

Note: Family members are covered as pedestrians.

Part C Uninsured Motorists

The company will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of BI, only in NY State. There is no coverage for PD. It provides no protection for the owner or operator of the uninsured auto.

Uninsured Motor Vehicle means a land motor vehicle or trailer of any type:
  1. To which no BI liability bond or policy applies at time of the accident.
  2. To which a BI liability bond or policy applies at time of accident, but the limit of BI is less than the minimum limit for BI liability specified by the Financial Responsibility law in state in which your covered auto is principally garaged.
  3. Which is a hit and run vehicle that cannot be identified and hits you or any family member or a vehicle you or a family member are occupying.
  4. To which a BI liability bond or policy apples at the time of an accident, but the bonding or insuring company denies coverage or becomes insolvent.
Note - An insured injured by an auto carrying Part A limits of 25 /50 /10 is not an uninsured motorist. They are an under insured motorist.

Supplemental / Uninsured under insured motorist coverage

SUM and UIM
This is available up to a limit of 250K / 500K BI
But, no higher than Part A policy limits. If you have 250 /500 UM or UIM, Part A has to be at least that much.
UIM is not mandatory.
This endorsement extends the limits to accidents that occur outside of NY State, but within the policy territory.

Part D - Damage to your auto

Other Than Collision - Comp and Collision

Collision 

Upset (such as flipping over on an icy road) or the striking with another vehicle or object (such as a bridge support or telephone pole) of the covered auto or non-owned auto.

Other Than Collision

The following types of losses are considered to be Other Than Collision:
  1. missiles or falling objects
  2. fire
  3. theft or larceny (done in dark or mysterious)
  4. explosion or earthquake
  5. windstorm
  6. hail, water, flood
  7. VMM
  8. riot and civil commotion
  9. contact with a bird or animal
  10. breakage of glass - if caused by a collision

Transportation Expenses


  1. The company will pay $20 per day, subject to a max of $600 for transportation expenses incurred by the insured if a loss to your covered auto or non-owned auto.
  2. If the loss is caused by a total theft of the auto, coverage begins 48 hours after the theft,  and ends when the auto is returned to service or company has paid for it’s loss.
  3. The company will pay only expenses beginning when the auto is withdrawn from use for > 24 hours, for any other covered loss.
Note: The insurance carrier does not furnish a rental vehicle. It reimburses the cost incurred.
Example:
Vehicle stolen on May 1
Vehicle recovered and put back into use May 12.
The company will pay $200 ($20 for 10 days) after a 48 hour wait.

Part D Exclusions

  1. Loss while being used to carry persons / property for a fee (commercial).
  2. Damage due and confined to wear and tear, freezing, mechanical or electrical breakdown or failure or road damage to tires unless damage is result of the total theft of the auto.
  3. Loss to custom furnishings or equipment in or upon any pickup truck or van.
  4. Loss to equipment designed for the reproduction of sound unless equipment is permanently installed in the auto. No coverage for loss to tapes, records or other devices intended for use with such sound equipment.
  5. Loss of CB Radios, two-way mobile radio, telephone or scanning monitor receiver, or their accessories, unless permanently installed in the opening of dashboard or console as designed by manufacturer.

Part D Limit of Liability

The company’s limit of liability for loss will be the lessor of:
  1. The ACV of the stolen or damaged property or
  2. The amount necessary to repair or replace the property with other property of like/kind/quality (indemnity).
However, the most the company will pay for loss to:
  1. Any non-owned auto which is a trailer is $500.
  2. Equipment designed solely for reproduction of sound, including any accessories intended for use with such sound equipment, which is installed in locations not used by auto manufacturer for installation of such equipment is $1,000.

Deductible

Deductibles apply separately to each loss, to both collision and other than collision, and is a flat deductible.

Personal Injury Protection aka PIP aka No Fault aka Comprehensive MV Insurance Reparations Act
BASIC PIP - This is package of 1st party benefits with a limit of 50K which is  per person aggregate, for the following expenses:

  1. Medical expenses including all reasonable and necessary needed expenses.
  2. Loss of wages limited to 80% of average weekly wage to a maximum of $2,000 per month, for a maximum of three years.
  3. Substitute Services - Up to $25 per day for up to one year for services such as cleaning, cooking, gardening, etc.
Note: In addition, to the above benefits, there is a 2K death benefit.

Optional Coverages:

  1. Optional Basic Economic Loss (OBEL) - for additional premium provides additional 25K of 1st party benefits, but unlike basic PIP and additional PIP, this benefit can be self directed by the insured where the insured will have a choice of:
    1. A continuation of the Basic Economic Loss including medical, loss wages, and substitute services.
    2. Loss of wages, only
    3. Psychiatric, physical, or occupational therapy and rehabilitation
    4. Combination of options #2 and #3
    5. Additional PIP - For additional premium, the insured can buy up to an additional 100K of PIP coverage in increments of 50K
New York Auto Inspection Law aka Regulation 70
Personal Automobile Policy - Parts E and F
General provisions and duties after an accident or loss.
Note: Under the PAP, the insurance company may cancel by mailing to the named insured shown in the DEC at the address shown, at least 15 days notice, if cancellation is for non payment of premium. The insured can avoid cancellation by paying the premium within 15 days of receiving the notice.

An insured may cancel his Personal Auto Policy by giving the insurer written notice at least 20 days in advance of the effective date of cancellation or by returning the policy to the insurer.

If an insurance company does not renew a Personal Auto Policy, the notice of non-renewal sent to
the insured must include the reason for non-renewal.

Only vehicles shown in the declarations are considered a "covered auto" in the Personal Auto 
Policy.

The right of an insurer to inspect any vehicle covered for physical damage does not apply to
replacement vehicles if the insurer provided coverage on the vehicle that was replaced.

In NY State, when a Personal Auto Policy is issued with a combined singled limit, that limit applies 
to Bodily Injury only.

NY Safe Driver Insurance Plan

Depending upon the driving record of covered persons, the insured may be entitled to as much as a discount of 10% of the premium.

However, in the voluntary / private market, poor driving records may be surcharged by as much as 150% of the premium.

In the NY Auto Insurance Plan (NYAIP) aka Assigned Risk, poor driving records may be surcharged as much as 200%.

Named Non-Owned Auto Liability Coverage
This is purchased by an individual who does not own or lease an auto, but desires or needs insurance. It is excess insurance coverage. For example, the person may want an umbrella policy, but has no auto insurance.
Joint Ownership Coverage Endorsement
Amends the definition of You and Your to refer to two or more individuals, other than husband and wife, residing in the same household or to non-resident relatives who jointly own the insured vehicle.
Miscellaneous Type Vehicle Endorsement
Amends the definition of covered auto to include motorcycles, motor homes, golf carts, all terrain vehicles, and dune buggies, but not snow mobiles.
New York State requirements - Basic PIP, Uninsured Motorist, Part A
NY Auto Ins. Plan (NYAIP) - is gov’t residual market set up to make auto insurance available to applicants who have tried unsuccessfully to obtain auto insurance in the standard voluntary market and are entitled to automobile insurance.

All authorized insurers eligible to write auto insurance in NY State are require to participate in the plan, on an apportioned basis.
The Assigned Risk is a conduit between applicant and the insurance company that is assigned to write an auto policy.
The assigned insurance company will write the auto insurance policy for a term of 3 years (of which there are 2 renewals) or the insured is able to obtain coverage in the standard / voluntary / private market.
An applicant for auto insurance in the assigned risk plan, must certify they attempted to obtain coverage with at least three insurance companies in 60 days prior, to the application to the plan, and was declined at rates not exceeding those available under the plan.
Agents and brokers licensed to write auto insurance in NYS and subject to all requirements set forth by the superintendent and plan certification and rules may bind coverage upon submission of required application and premium deposit.
Supplemental Spousal Liability Endorsment
This optional coverage protects against liability of an insured because of death or injury to his / her spouse, up to the policy limits.
While the injured spouse may be entitled to recovered damages, they must prove legal liability of the insured spouse.

Notice of the availability of the coverage is required to be given by an insurer upon issuing a MV policy to meet the NY vehicle and traffic laws. The notice which is required to be on the front of a premium notice shall:
  1. State such coverage is available
  2. Explain the coverage
  3. State the premium
Note: This notice must be provided by the insurer at least annually.

Personal Umbrella / Catastrophe Liability Policy

When insureds require higher limits of liability than can be provided by personal lines policies, the personal umbrella policy can meet the higher limits need.

A personal umbrella policy has two important purposes:
  1. Provide additional excess liability insurance above basic coverage of underlying liability insurance
  2. Covers some losses not covered by underlying liability insurance.

Coverage for Excluded Losses

A personal umbrella policy may cover losses not covered by the underlying primary policy. The umbrella would begin to provide coverage after a retention limit aka self-retention limit, which works like a deductible because it represents the amount of loss the insured must cover out of pocket.
Self-retention limits vary from $500 - 10K. They do not apply to losses that are covered by the underlying liability coverage.

National Flood Program (NFIP) Federal Program


Flood - a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is yours) from:
  1. Overflow of inland or tidal waters
  2. Unusual and rapid accumulation or run-off of surface water from any source
  3. Mud Flow - A river of liquid and flowing mud on surface of dry land areas as when earth is carried by a current of water.
Note - Sewer backup is not covered.

The NFIP enables property owners to buy flood insurance and was created by Congress in 1968, managed by the Federal Insurance Administration (FIA). It is a branch of the Federal Emergency Management Agency (FEMA) which is under the Homeland Security Agency banner.

There are three policy forms:
  1. Dwelling Form covers 1-4 family dwellings
  2. Residential Condo Bldg. Association Form is used for residential condos.
  3. General Form is used for commercial bldgs.
Eligibility - Generally communities voluntarily apply for coverage through NFIP.

Note - If a community does not apply for membership in the NFIP, properties within that community are not eligible for coverage.
If the government determines a community is flood prone, it may require compliance with the Federal flood program standards. Almost any building walled and roofed principally above ground and is fixed to a permanent site, is eligible for a flood policy. A policy can cover a building, contents, or bot.

Coverage

Two types of flood insurance are available:
  1. Emergency
  2. Regular program
Emergency. When a community applies to the NFIP, the Emergency program applies, and will remain in the program until the government finalizes the flood insurance rates for the community. Under the Emergency program, insureds can purchase limited amounts of coverage, 35K for a single family dwelling and 10K for contents. For other residential and nonresidential structures, the limit is 100K for the building and 100K for contents.
Regular. After the Regular program goes into effect, the limit for a single family dwelling and other residential structures is 250K and 100K for contents. For nonresidential structures and contents, the limit is 500K for both.
Deductible - A deductible applies to both building and contents.
Under the Emergency program, the standard deductible is $1,000.
Under the Regular program, the standard deductible is $500.
The deductible apples separately to each building and contents loss on a per occurrence basis.
Higher deductible is available.
Application Procedure
To apply for flood insurance with the NFIP, it is necessary to submit a fully completed application accompanied by a check for the full gross premium. Partial premium deposits are not permitted.
Coverage does not take effect until after a waiting period of 30 days, following date of application subject to these exceptions:
  1. Initial purchase of flood insurance, with a loan (original and re-finance)
  2. Policies take effect at 12:01 am on the day after the application and premium are mailed when a community first enters the Emergency or Regular program (during the first 30 days).
  3. When an existing flood policy is assigned to a property purchaser, prior to transfer of title, coverage takes effect on the date of title transfer.
  4. After a policy is in effect, changes in coverage take effect, at 12:01 am on the 5th day after the request date and premium payment are mailed.
Auto Insurance Question
Insured has a PAP with a CSL (combined single limits) of 300K, at fault accident with the following judgments:
Mrs. A 125K BI
Mrs. C 100K BI
Mrs. K    80K BI
5K PD to other auto
25K Legal Fees
Lost income is $1500 for 5 days attendance by insured at trial
$200 appeal bond premium
$100 release of attachment bond
$350 premium bail bond
What is the insurance company’s total liability?
125K + 100K + 80K + 5K + 25K = 335K
Lost Income is $200 per day for 5 days = $1000
$200 + $100 + $250 (bail bond) = $550
335K + 1K + $550 = $36,550 is the insurance company’s total liability

Commercial Package Property
4 types:
  1. Property
  2. Liability
  3. Crime
  4. Boiler/Machinery

Section 1 - Property
Building and Personal Property Coverage Form

Cov A

Building - Insures the building or structure described in the Declarations, including completed additions, fixtures, outdoor fixtures, permanently installed machinery and equipment, personal property owned by the insured used to maintain or repair the premises. It also covers materials, equipment, and supplies located at, on, next to, or within 100 feet of the described location, which is used for construction, alteration, or repair of any structure at the location.

Note: 5 families and above is considered Commercial
Note: Insuring Agreement describes the coverage

Cov B

Your Business Personal Property aka Contents - Covers business personal property located at, on, next to, or within 100 feet of the described location. It includes furniture and fixtures, machinery and equipment, stock or inventory, leased equipment, and tenants improvements and betterments.

Cov C

Personal Property of Others
This covers the personal property of others in the insured’s care, custody, and control, located at, on, next to, or within, 100 feet of the described location.

Property not covered under the Building and Personal Property Coverage Form
  1. Accounts, bills, evidences of debt, money and securities
  2. Animals unless boarded by the insured, or if owned by the insured, as stock or inventory (ex: pet store, vet)
  3. Bulk heads, piers, pilings, wharves, and docks
  4. Growing crops and lawns
  5. Automobiles
  6. Contraband

Additional Coverages in the Building and Personal Property Coverage Form

  1. Debris Removal - Limited to 25% of the damage to the property insured. These expenses are included within the limit of coverage. However, if the amount of direct physical loss and debris removal expense is more than the limit, an additional $10,000 is available for those expenses.
  2. Preservation of Property - Limited to 30 days after removal.
  3. Fire Department Service Charge - Limited to $1,000
  4. Pollutant Cleanup and Removal - Pays up to $10,000 for the cleanup and removal of pollutants, resulting from a covered cause of loss.
  5. Increased Cost of Construction - Pays up to $10,000 for the increased cost of construction, to comply with any ordinance or law.
  6. Electronic Data - Pays up to $2,500 in any one year for the cost to replace or restore electronic data damaged by covered cause of loss.

Coverage Extensions
  1. Newly acquired or constructed property 
    1. Newly acquired or constructed buildings under Cov A are covered automatically for up to $250,000.
    2. Contents - Business personal property at newly acquired locations is covered automatically for up to $100,000.

Note: Newly acquired buildings and/or contents are covered for 30 days or the end of the policy period, whichever is first.

  1. Personal effects of the insured or employees - Limited to $2,500.
  2. Valuable Papers and Records - Pays up to $2,500 to repair or replace valuable papers or records damaged by a covered cause of loss. Such firms as Abstract Companies, Architects and Engineers need to cover plans and drawings, and others who use valuable papers purchase this form to cover valuable documents.
  3. Business Personal Property off premises - Limited to $10,000.
  4. Outdoor Property - Applies to outdoor fences, detached signs, antennas, trees, shrubs, plants, and lawns, for the following perils, only: fire, lightening, explosion, riot, and civil commotion, and aircraft. This coverage is limited to $1,000, but not more than $250 per tree, plant, or shrub.
  5. Non-owned detached trailers - Pays up to $5,000 for trailers not owned by the insured, in their care, custody, and control, at the described premises.

Deductible Clause
The standard deductible is $500.00.

Cause of Loss Forms
There are 3 Forms to choose from:

1. Basic Cause of Loss Form - The following perils are included:
  • Fire
  • Lightening
  • EC Perils 
W - indstorm
C - ivil commotion (large # of people)
S - moke
H - ail
A - ircraft
V - vehicle
V - olcanic eruption
E - xplosion
R - iot
  • Note: for volcano coverage, the time is increased to 168 hours to make one occurrence.
  • VMM (Vandalism and Malicious Mischief)
  • Sprinkler leakage
  • Sink hole collapse
2. Broad Cause of Loss Form - Insures the same perils as the Basic Cause of Loss Form and insures 5 additional coverages:
  • Falling objects
  • Weight of ice, sleet, and snow
  • Water Damage. The commercial version of accidental discharge.
  • Collapse
  • Glass Breakage. If the breakage is caused by VMM, or other than a peril in the policy, then coverage is limited to $500 in one loss, but not > $100 per pane.
3. Special Cause of Loss Form - Provides coverage on an all risk basis.

Note: The Special Cause of Loss Form typically includes theft, but not theft committed by the insured or employees.
Note: Limitations under the Special Cause of Loss Form:
  • Theft of jewelry is limited to $2,500
  • Theft of furs is limited to $2,500

Vacancy Provision
A building is considered vacant, unless, at least 31% of the total square footage is in use.
If the building is vacant more than 60 consecutive days, the following losses will not be paid:
  • VMM
  • Sprinkler leakage
  • Glass Breakage
  • Water Damage
  • Theft
For covered causes of loss, other than those listed above, the company will reduce payment by 15%.

Builders Risk Insurance

Designed to cover buildings, during construction, against insured peril damage.

When the building is finished, the policy is cancelled on a pro-rata basis, and is rewritten subject to the appropriate rules.

Two Forms in General Use
  1. Completed Value Form - The policy is written in an amount equaling the completed value of the structure, but at greatly reduced rates. This is the safest Form, as it eliminates under-insurance at the time of loss.
  2. Monthly Reporting Form - This permits the insured to make monthly reports of values going into the building. There is automatic coverage between reports, provided the previous report was correct.

Note: Coinsurance applies to business income. It is referred to as the Need for Adequate Insurance Provision. The required percentage is 100%.
Example: 

(Insurance Carried / Required Insurance) * Loss = Amount Settled

You have an 800K Building, but only covered 500K

(500 / 800) X 720K loss = 450K Settled

Time Element Coverages
These are designed to cover the loss of use of the insured property due to insured peril damage. Recovery is measured by the Basis of Time. These include:

  • Business Income Coverage
  • Extended Business Income Coverage
  • Business Income from Dependent Properties
  • Extra Expense Insurance

Business Income Coverage aka Business Interruption Insurance
This does for the insured what the business would have done had no loss occurred.

The coverage starts on the date of loss and continues until the premises are ready to resume operations or the policy limit is exhausted.

If the loss of use is caused by the actions of a civil authority, then coverage begins 72 hours after the loss and is limited to 3 weeks in time.

Coinsurance applies to business income. The insured may elect to cover 50, 60, 70, 80 as much as 110% of their annual gross earnings, including payroll.

Business Income Formula

Gross Sales - Cost of Merchandise = Gross Earnings

Gross Earnings X Co-ins % = Amount of Insurance

Example:

500K Gross Sales - 200K Cost = 300K Gross Earnings

300K Gross Earnings X 80% = 240K Amount of Insurance

Methods of Avoiding the Coinsurance Penalty under Business Income

For additional premium, the insured may add either of the following:
  1. Maximum period of restoration - Limits the amount of time benefits will be received.
Example: 120 days
  1. Maximum monthly indemnity - A factor shown as a fraction is listed in the policy which limits the amount of insurance available for any one month. 
Examples: 1/3, 1/4, 1/6, 1/12

Extended Business Income Coverage
Extends coverage after a property has been restored for up to a maximum of 30 days.

Business Income from Dependent Properties aka Contingent Business Interruption Insurance
Provides coverage to the insured for the suspension of their business when losses occur to other premises such as a supplier or customer.

Extra Expense Insurance
Designed for businesses which must continue to operate at the time of loss regardless of the expenses incurred.



Commercial Inland Marine

Nationwide marine definition - Agreement between the insurance companies and the state insurance departments, concerning the insuring powers of inland marine companies, by outlining which coverage may or may not be written.

Inland Marine Forms
  • Personal Floaters
  • Commercial Floaters
  • Bailee Forms
  • Import/Export Floaters

Also includes instruments of transportation and communication, such as, bridges, tunnels, radio and television towers, and pipelines.


JEWELERS BLOCK COVERAGE FORMS. Insures retail, wholesale, and manufacturing of jewelry. Covers the insureds stock in trade consisting of jewelry, precious and semiprecious stones, precious metals and all other articles incidental to the business. 

Note: ALSO COVERS SIMILAR PROPERTY OF OTHERS IN THE INSURED’S CARE, CUSTODY, AND CONTROL 
A completed and signed proposal, which is the application which forms a part of the policy .This is an annual policy and requires a new proposal be submitted each year. 
Coverage is on an ALL RISK BASIS and the coverage territory is the U.S., CANADA, AND PUERTO RICO. 
EXCLUSIONS UNDER JEWELERS BLOCK (wigwin)

1
W
War
2
I
Insect Venom
3
G
Gradual Deterioration
4
W
Wear & Tear
5
I
Inherent Vice
6
N
Nuclear

7. DAMAGE WHILE BEING WORKED ON 
8. INFIDELITY (If the insured’s employee)
9. UNEXPLAINED LOSS OR MYSTERIOUS DISAPPEARANCE OR INTENTIONAL SHORTAGE. 
10. THEFT FROM AN UNATTENDED AUTOMOBILE
11. FLOOD & EARTHQUAKE (FOR ADDITIONAL PREMIUM, THIS MAYBE INCLUDED)
12. SEIZURE OF PROPERTY BY ORDER OF CIVIL AUTHORITY 

PROPERTY NOT COVERED
1. PROPERTY SOLD UNDER DEFERRED PAYMENT SALES AGREEMENT 
2. PROPERTY WHILE ON EXHIBIT (EXHIBIT FLOATER) 
3. PROPERTY WHILE IN THE MAIL UNLESS SENT BY REGISTERED MAIL. 
4.CONTRABAN 

SIMILAR DEALER FORMS
1. CAMARA & MUSIC INSTRUMENT DEALERS
2. STAMP & COIN DEALERS
3. EQUIPMENT DEALERS, SUCH AS FARMER’S TRACTORS, CONTRACT EQUIPMENT 
4. FUR DEALERS. COVERS THEIR OWN PROPERTY ONLY 
Note: THE LONG TERM NATURE OF FUR STORAGE IS BEST COVERED BY FURRIER'S CUSTOMER POLICY 

FURRIER'S CUSTOMER POLICY:
A BAILEE FORM 
COVERS STORAGE COMPANIES, DEPARTMENT STORES, DRY CLEANERS AND FURRIERS. IF COVERAGE IS FOR THE FURS BELONGING TO CUSTOMERS FOR WHICH THE FURRIER HAS ISSUED STORAGE RECEIPTS, THE INSURANCE COMPANY IS NOT RESPONSIBLE FOR MORE THAN THE AMOUNT ON THE RECEIPT. 

EXCESS LEGAL LIABILITY ENDORSEMENT. FOR ADDITIONAL PREMIUM, THE INSURANCE COMPANY WILL PAY ALL AMOUNTS WHICH THE FURRIERS MAY BE  LEGALLY OBLIGATED TO PAY BECAUSE OF THEIR NEGLIGENCE IN EXCESS OF THE AMOUNT INDICATED ON THE RECEIPT. 
A COMPLETED SIGNED PROPOSAL IS REQUIRED, AND IS THE APPLICATION WHICH FORMS THE POLICY, A CONTINUOUS POLICY WITH NO FORMAL EXPIRATION, AND PREMIUMS ARE CHARGED ON A MONTHLY REPORTING BASIS. 
THE COVERAGE IS PROVIDED ON “ALL RISK BASIS” AND THE COVERED TERRITORY IS THE U.S., CANADA, AND PUERTO RICO. 
TRANSPORTATION INSURANCE
THE FOLLOWING THREE POLICIES SERVE DIFFERENT PURPOSES, BUT, ARE USUALLY SIMILAR AS TO THE PERILS INSURED AGAINST AS WELL AS THESE EXCLUSIONS:
THE USUAL NAMED PERILS ARE: 
  • FIRE
  • LIGHTNING 
  • BRIDGE COLLAPSE
  • FLOOD
  • EARTHQUAKE
  • WINDSTORM
  • THEFT 
  • COLLISION OR OVERTURN 
THE USUAL EXCLUSIONS ARE: 
  • WAR 
  • NUCLEAR
  • INHERENT VICE
  • DELAY OR LOSS OF MARKER
  • STRIKES
  • INFIDELITY OF THE INSURED OR EMPLOYEES 
  • MONEY, SECURITIES, AND JEWELRY 

1. MOTOR TRUCK CARGO POLICY (CARRIES LEGAL LIABILITY FORM) 
A BAILEE FORM, THIS INSURES THE TRUCKING COMMON CARRIER FOR LEGAL LIABILITY ARISING OUT OF LOSS OR DAMAGE TO THE SHIPPERS GOODS CASED BY THE ABOVE PERILS.
THE CARRIER IS RESPONSIBLE FOR MOST LOSSES EXCEPT FOR LOSSES SUCH AS WAR OR NEGLIGENCE OF THE SHIPPER. 
THEREFORE, THE CARRIER MUST WIND UP SELF INSURING THE LOSSES NOT COVERED.
INTERSTATE COMMERCE COMMISSION ENDORSEMENT OR ICC ENDORSEMENT 
TO COMPLY WITH FEDERAL REGULATIONS  THE ENDORSEMENT CONVERTS THE  POLICY TO “ALL RISK”  FOR THE BENEFIT OF THE SHIPPER.
Note: IF THE INSURANCE COMPANY HAS TO PAY AND THE PERIL IS NOT INSURED, THE INSURANCE COMPANY GETS REIMBURSED BY THE COMMON CARRIER.  
Note: CANCELLATION OF THIS POLICY FOR ANY REASON REQUIRES A 30 DAY ADVANCED NOTICE BE GIVEN TO THE ICC.

2. TRANSPORTATION POLICY
OFFERED IN TWO VERSIONS:
  • TRIP TRANSIT. Covers a one time shipment.
  • OPEN POLICY. Covers continuous, ongoing shipments. 

MONTHLY REPORTING
THE FORMS INSURE THE SHIPPER FOR LOSS OR DAMAGE WHILE THEIR GOODS ARE IN THE HANDS OF A COMMON CARRIER.
ADVANTAGES OF HAVING A TRANSPORTATION POLICY:
1. PROMPT PAYMENT IF CLAIMS AGAINST THE SHIPPER
2. HIGHER LIMITS OF COVERAGE THAN PROVIDED FOR UNDER THE BILL OF LADING

3. MOTOR TRUCK CARGO POLICY (OWNERS FORM). INSURES THE  OWNER’S GOODS OR TRUCKS, OWNED OR LEASED TO THE INSURED, WHEN NO COMMON CARRIER IS INVOLVED. 

MISCELLANEOUS FLOATERS

1. ACCOUNTS RECEIVABLE COVERAGE FORM. “ALL RISK” form covering records of accounts receivable.  Pays the cost to reconstruct the records, and pays noncollectable sums, due to the insured, caused by destruction or damage to records. 
2. VALUABLE PAPERS & RECORDS COVERAGE FORM.  “ALL RISK” form covering documents and records.
  1. BAILEE'S CUSTOMER POLICY“ALL RISK” form covering property of customers left with the insured for cleaning or processing, covered regardless of negligence.
  2. AGRICULTURAL MACHINERY & LIVESTOCK FLOATERS. Covers machinery on an “ALL RISK” basis, insured’s live stock for loss by death or destruction because of fire, lightening, windstorm, collision, or overturn of transporting conveyance. 
  3. CONTRACTORS EQUIPMENT FLOATER. “ALL RISK” form covering tools and equipment of any sized contractor. 
  4. INSTALLATION FLOATER“ALL RISK” form covering property of contractors during transit to the job while installing, until paid.
  5. INSTALLMENT SALES POLICY AKA DIFFERED PAYMENT MERCHANDISE FORM. “ALL RISK” form, covering property sold under a “conditional bill of sale” for single interest to cover the store only, or dual interest covering the store and the customer.
  6. SIGN FLOATER. “ALL RISK” form covering signs.

COMMERCIAL GENERAL LIABILITY "CGL"

COVERS OCCURRENCES ARISING OUT OF THE PREMISES FOR OPERATIONS OF COMMERCIAL BUILDINGS INCLUDING ELEVATORS. SOME COMMON LIABILITY EXPOSURES ARE:

  1.  PREMISES
  2.  OPERATIONS
  3.  COMPLETED OPERATIONS
  4.  PRODUCTS
  5.  CONTRACTUAL LIABILITY
  6.  CONTINGENT LIABILITY
  7.  PERSONAL INJURY
  8.  ADVERTISING INJURY

CGL POLICY IS OFFERED IN TWO VERSIONS 


  • OCCURRENCE FORM. Coverage is triggered based on the effective dates of the policy and the date of the event giving rise to the claim. It does not matter when the loss is reported.
  • CLAIMS MADE FORM. Coverage is triggered by the date the insured first became aware of the possibility of a claim and notified the insurer. The policy period for the claim will extend backward to a "retroactive" date possibly years before the effective date of the policy. The claim has to be made during the policy period or the "extended reporting period (ERP)". Claims-made forms are more commonly used with Professional Liability Insurance.
BOTH FORMS ARE IDENTICAL, EXCEPT EACH ONE HAS DIFFERENT COVERAGE TRIGGERS, RELATING TO COVERAGE A & B. 

CGL POLICY IS BROKEN DOWN INTO THE FOLLOWING SECTIONS:


Section I. COVERAGES

  • Coverage A. BI & PD
  • Coverage B. PERSONAL AND ADVERTISING INJURY
  • Coverage C. MEDICAL PAYMENTS

Section II. WHO IS INSURED 

Section III. THE LIMITS OF LIABILITY 

Section IV. CONDITIONS

Section V. DEFINITIONS. 


SECTION I 


Coverages A, B, & C


Cov A - BI & PD 

 1. PREMISES. COVERS PEOPLE INJURED OR PROPERTY DAMAGED WHILE ON THE PREMISES, INCLUDES BUILDINGS, SIDEWALKS, PARKING LOTS AND VACANT LAND. 
2. OPERATIONS. COVERS OPERATIONS FOR ACTIVITIES OF THE EMPLOYEES AND OR PRODUCTS UNDER THEIR CONTROL, AWAY FROM THE PREMISES
3. PRODUCTS. COVERS INJURY ARISING OUT OF THE USE OR CONSUMPTION OF MERCHANDISE AWAY FROM THE PREMISES OF THE MANUFACTURER OR VENDOR. THE KEY IS 
"OFF PREMISES, NON POSSESSION " 
4. COMPLETED OPERATIONS. SIMILAR TO THE  PRODUCT EXPOSURE. REFERS TO CONSTRUCTION TYPE RISKS COMPLETED AND PUT TO THEIR INTENDED USE. 
5. CONTRACTS OR CONTRACTUAL LIABILITY. COVERS THE ASSUMPTION OF LIABILITY AS DEFINED BY THE INSUREDS CONTRACT DEFINITION IN THE POLICY. COVERS THE ACT OF HOLDING HARMLESS ANOTHER PARTY. CONTRACTORS WHICH ARE DEEMED TO BE NECESSARY AND BASIC TO CONDUCT BUSINESS ARE AUTOMATICALLY COVERED UNDER THE PREMISES OPERATION LIABILITY EXPOSURE, REFERRED TO AS INCIDENTAL CONTRACTS AND INCLUDE THE FOLLOWING (L.E.A.S.E.):
  • LEASE OF PREMISES AGREEMENT. A BASIC REQUIREMENT OF TENANTS. THE LANDLORD IS HELD HARMLESS FROM THE POSSIBLE LIABILITY FROM THE TENANT’S ACTIVITIES. 
  • EASEMENT AGREEMENT. THE OWNER OF LAND ALLOWS ANOTHER PARTY THE LIMITED USE OF LAND. THE OWNER IS HELD HARMLESS FROM POSSIBLE LIABILITY.
  • AGREEMENT TO INDEMNIFY MUNICIPALITIES. VILLAGE AND GOVERNMENTS OFTEN REQUIRE LOCAL BUSINESSES TO HOLD THEM HARMLESS FROM POSSIBLE LIABILITY. 
  • SIDETRACK AGREEMENT. BUSINESS LOCATED NEAR RAILROAD TRACKS MIGHT WANT A "SIDETRACK " OR "SPUR" LEADING FROM THE MAIN LINE TO THEIR PLACE OF BUSINESS. BEFORE THE RAILROAD AGREES, THE BUSINESS WILL AGREE TO HOLD THEM HARMLESS FROM POSSIBLE LIABILITY DUE TO THE IMPROPER  USE OF THE SIDETRACK.  
  • ELEVATOR MAINTENANCE AGREEMENT. CONTRACT BETWEEN THE OWNER OF THE ELEVATOR AND COMPANY THAT SERVICES THE ELEVATOR. THE SERVICE COMPANY WILL WANT TO BE HELD HARMLESS FROM POSSIBLE LIABILITY DUE TO THE IMPROPER USE OF THE ELEVATOR. 
6. CONTINGENT LIABILITY. REFERS TO THE LIABILITY THAT ARISES OUT OF WORK DONE BY AN INDEPENDENT CONTRACTOR. TYPICALLY INDIVIDUAL BUSINESSES CANNOT BE HELD RESPONSIBLE FOR THE NEGLIGENCE OF AN INDEPENDENT CONTRACTOR, BUT, THERE ARE SOME EXCEPTIONS: 
  • ACTIVITY IS ILLEGAL 
  • WORK IS INHERENTLY DANGEROUS
  • SITUATION INVOLVED DOES NOT PERMIT THE DELEGATION OF AUTHORITY 
7. FIRE DEPARTMENT LEGAL LIABILITY. PROVIDES COVERAGE FOR PROPERTY DAMAGE TO PREMISES RENTED OR LEASED IN THE NAMED INSURED, IF CAUSED BY FIRE, AND SUBJECT TO ITS OWN SEPARATE LIMITS IN THE POLICY. COVERAGE IS PROVIDED ON A PER FIRE BASIS, NOT PER OCCURRENCE. 

EXCLUSIONS UNDER COV A 

  • INTENTIONAL ACTS ON PART OF THE INSURED
  • WORK RELATED ACTIVITIES (WORKERS COMP)
  • AUTOMOBILE, AIRCRAFT, WATER CRAFT ACCIDENT
Note: EXCLUSION DOES NOT APPLY TO THE INCIDENTAL PARKING OF CUSTOMERS CARS ON PREMISES 
  • DRAM SHOP LIABILITY AKA LIQUOR LIABILITY 
  • EXCLUSION DOES NOT APPLY TO HOST LIQUOR LIABILITY 
  • PERSONAL PROPERTY OF OTHERS IN THE INSURED’S CUSTODY, CARE, AND CONTROL
  • DISCHARGE OF POLLUTANTS 
  • WAR & NUCLEAR

Cov B - PERSONAL & ADVERTISING INJURY 

PERSONAL INJURY. INJURY OTHER THAN BI ARISING OUT OF ONE OR MORE OF THE FOLLOWING OFFENSES: 
  1. FALSE ARREST 
  2. SLANDER & LIBEL 
  3. INVASION OF PRIVACY 

ADVERTISING INJURY. COVERED IF CAUSED BY AN OFFENSE, COMMITTED BY THE INSURED, IN ADVERTISING THEIR GOODS, PRODUCTS, OR SERVICES. INJURY MUST ARISE OUT OF ONE OR MORE OF THE FOLLOWING OFFENSES:
  1. ORAL OR WRITTEN PUBLICATION OF MATERIAL THAT SLANDERS OR LIBELS A PERSON OR ORGANIZATION OR VIOLATES THEIR PERSON’S RIGHT TO PRIVACY 
  2. MISAPPROPRIATION OF ADVERTISING IDEAS OR STYLES
  3. INFRINGEMENT OF COPYRIGHT, TITLE, OR SLOGAN 

EXCLUSIONS FOR COVERAGE B 

  1. THE INSURED KNOWS THE ORAL OR WRITTEN PUBLICATION IS FALSE
  2. A BREACH OF CONTRACT
  3. THE FAILURE OF GOODS TO CONFORM TO ADVERTISING QUALITY 
  4. WRONG DESCRIPTION FOR PRICE OF GOODS, PRODUCTS OR SERVICES STATED IN YOUR ADVERTISEMENT
  5. AN OFFENSE COMMITTED BY AN INSURED WHOSE BUSINESS IS ADVERTISING, BROADCASTING, PUBLISHING, AND TELECASTING. 

SUPPLEMENTARY PAYMENTS UNDER COV A & B (Does not apply to COV C)

IN ADDITION, TO THE LIMITS OF LIABILITY, THE COMPANY AGREES TO PAY: 
1.  ALL DEFENSE & COURT COSTS INCURRED
2. THE COST OF BAIL-BOND FOR MAXIMUM OF $250 
3. THE COST OF APPEAL-BONDS & BONDS TO RELEASE ATTACHMENT
4. ANY OTHER REASONABLE EXPENSES INCURRED BY THE INSURED AT THE COMPANY’S REQUEST, INCLUDING LOSS OF EARNINGS, BECAUSE OF ATTENDANCE FOR A HEARING OR TRIAL, FOR UP TO $250 PER DAY 

COVERAGE C MEDICAL PAYMENTS. THE COMPANY AGREES TO PAY NECESSARY MEDICAL AND FUNERAL SERVICES INCURRED WITHIN ONE YEAR OF AN ACCIDENT, CAUSING BI UNDER THE PREMISES, OPERATIONS LIABILITY EXPOSURE. 


Cov C EXCLUSIONS

1. ANY INSURED OR PERSONS HIRED TO WORK FOR THE INSURED 
2, TENANTS OF THE INSURED 
3. PERSONS INVOLVED IN AN ATHLETIC CONTEST 
4. PERSONS INJURED RESULTING FROM THE PRODUCTS COMPLETED OPERATIONS LIABILITY EXPOSURE

SECTION II.  WHO IS AN INSURED 

INDIVIDUALS, CONCERNING THE CONDUCT OF BUSINESS, SUCH AS PARTNERS, SPOUSES, OFFICERS, DIRECTORS, AND EMPLOYEES, PROVIDED THEY WERE ACTING WITHIN THE SCOPE OF THEIR EMPLOYMENT 
OTHER INSUREDS 
  1. ANY PERSON OR ORGANIZATION WHILE ACTING AS A “REAL ESTATE MANAGER” 
 2. ANYONE HAVING PROPER, TEMPORARY, CUSTODY OF THE INSURED’S PROPERTY, SHOULD THE INSURED DIE
 3. ANY NEWLY ACQUIRED OR FORMED ORGANIZATION, FOR WHICH THE INSURED HAS A MAJORITY INTEREST, IS COVERED AUTOMATICALLY, FOR 90 DAYS OR THE END OF THE POLICY PERIOD, WHICHEVER IS EARLIER 
 4. ANYONE DRIVING MOBILE EQUIPMENT WITH PERMISSION IS COVERED FOR LIABILITY, BUT, NOT FOR INJURY TO THE DRIVER OR COMPANY EMPLOYEES
Note: MOBILE EQUIPMENT IS COVERED FOR BI OR PD, IF A VEHICLE AND INCLUDES ANY ATTACHED EQUIPMENT PROVIDED 
 1. IT IS DESIGNED FOR USE PRIMARILY OFF PUBLIC ROADS 
 2. MAINTAINED FOR USE SOLELY ON OR NEXT TO THE PREMISES 
 3. VEHICLES THAT TRAVEL ON CRAWLER TREADS (BULLDOZERS) 
 4. CONTRACTORS & SIMILAR TYPE EQUIPMENT, EXCAVATORS, CRANES, & PAY LOADERS 
 5. ANY OTHER VEHICLES NOT USED ABOVE, PROVIDED THEY DO NOT TRANSPORT PERSONS OR PROPERTY FOR A FEE AND ARE NOT CONSIDERED AUTOS, SUCH AS SNOW REMOVAL VEHICLES, STREET SWEEPERS AND CHERRY PICKERS 

SECTION III. LIMITS 

A GCL POLICY HAS TWO SEPARATE SUB-LIMITS OF COVERAGE 
1. GENERAL AGGREGATE LIMIT WHICH INCLUDE THE PREMISES OPERATION LIABILITY EXPOSURES 
2. PRODUCTS COMPLETED OPERATIONS 
AGGREGATE ONE POLICY OCCURRENCE. LIMIT APPLIES TO BOTH. HOWEVER, THERE ARE TWO SEPARATE AGGREGATE LIMITS WHICH ARE REDUCED BY THE PAYMENTS OF EACH LOSS.
THE AGGREGATE LIMITS ARE ALWAYS TWO TIMES PER OCCURRENCE AMOUNT.
SECTION IV - CONDITIONS 
SECTION V - DEFINITIONS - EXPLAINS THE TERMS USED IN THE POLICY 
SECTION V - IN CLAIMS MADE - POLICY IS FOR EXTENDED REPORTING PERIODS 
SECTION VI - IS FOR DEFINITION 

HOW IS A CGL POLICY RATED


THE TYPES OF RISKS ARE BROKEN DOWN INTO FOUR MAJOR BUSINESS GROUPS AND ARE WRITTEN AS FOLLOWS: 
1. MERCANTILE. CLASSIFIED BY TYPES OF GOODS SOLD AND ARE CHARGED A RATE PER $1000 OF GROSS SALES 
2. MANUFACTURING. CLASSIFIED BY THE FINISHED PRODUCTS AND ARE CHARGED RATE PER $1000 OF GROSS SALES 
3. CONTRACTING & SERVICES. THE COMPANY CHARGES RATES OF $1000 OF PAYROLL FOR EACH CLASSIFICATION OF THE INSUREDS OPERATIONS 
4. BUILDING & PREMISES
   A. BUILDINGS & APARTMENTS ARE RATED PER UNIT 
   B. HOTELS RATED PER $1000 PER GROSS SALES
   C. OFFICE SPACE RATED PER $1000 PER SQUARE FLOOR AREA 

Commercial Auto Coverage

Can be written as a mono line policy, or as part of a Commercial Package Policy. 

More than one coverage form when issued as part of a CPP:
  1. One or more Commercial Auto Declaration Forms.
  2. One or more Commercial Auto Coverage Forms:
  • Business Auto Coverage Form
  • Garage Coverage Form
  • Truckers Coverage Form
  • Motor Carrier Coverage Form
  • Business Auto  Physical Damage Coverage Form
      3. Endorsements

Business Auto Coverage Form

Covers owned, leased, hired, rented, or borrowed private passenger autos, trucks, trailers, and semitrailers owned or used by the insured. It does not cover an employee.

Provides liability coverage for trailers towed by a covered vehicle.

Covers non-owned vehicles, including employee's autos used in the business.

Covers mobile equipment required to be registered to drive on public roads.

Note: Vehicles sold, stored, or repaired for others may not be insured (insured on the garage coverage form).

Medical Payments Coverage is available by endorsement to the Business Coverage Form. The coverage is not automatically included in the commercial auto forms.

Section I - Covered Autos

Symbols under Section I - Covered Autos: Symbol 1-9 and 19

What is not a Symbol under Section I - Covered Autos"? Dealers auto liability coverage.

Section II - Liability Coverage

Fellow employees are not an "insured" under the Business Auto Coverage form.

Section III - Physical Damage Coverage

What is the max the insurer will pay for a covered transportation expense claim? $600

Uninsured Motorist is a separate coverage added by endorsement and is not included in the physical damage coverage under a Business Auto Form.

Section IV - Business Auto Conditions

Section V - Definitions

Garage Coverage Form

Provides auto liability and physical damage coverage, as well as general liability insurance for businesses engaged in the sale, service, parking, or storage or autos. Ex: vehicle dealerships, sales agencies, repair shops, service stations, storage garages, and public parking places.

It eliminates coverage gaps by writing the following coverages on the same form:
  • Premises liability
  • Products liability
  • Auto liability
  • Auto physical damage coverage
  • Garagekeepers coverage

Section I - Covered Autos

Symbol 30 - Autos left for service, repair, storage, or safekeeping
Symbol 31 - Dealers autos physical damage coverage

Section II - Liability Coverage

  • Garage Operations - Other than Autos, similar to commercial general liability insurance
  • Garage Operations - Covered Autos, similar to business auto insurance
Note: Completed Operations after the car leaves the shop has a mandatory $100 deductible.

The Garage Coverage Form  Section II does include completed operations.

Section III - Garagekeepers Coverage

  • Comprehensive Coverage
  • Specified Causes of Loss
  • Collision
Garagekeepers coverage pays for loss or damage to a customer's vehicle and equipment while in the insured's care for servicing, repair, parking or storing.

Section IV - Physical Damage Coverage - Same as the Business Auto Coverage Form

Comprehensive coverage is part of the Physical Damage coverage.

Business Auto Physical Damage Coverage Form

The five symbol designations are:
  1. Owned autos only
  2. Owned private passenger autos only
  3. Owned autos other than private passenger autos only
  4. Specifically described autos
  5. Hired autos only
Autos left for service is not one of the five symbol designations.

The auto physical damage coverage that pays for damage to an insured vehicle from almost any cause except collision is called Specified Peril Coverage. Specified Peril Coverage  provides coverage only for certain named perils such as fire.

An individual who uses a truck type vehicle to carry his own cargo would receive auto coverage under Business Auto Coverage Form. This would be a private carrier and the Business Auto Coverage Form would apply.

When a sole proprietor has his personal auto insured under the Business Auto Coverage Form and wants to rent an auto under his own name, Drive Other Car Coverage naming the owner must be attached to the Business Auto Coverage Form. Drive Other Car Coverage extends Business Auto Coverage Form to cover borrowed or rented vehicles.

Mobile equipment is only covered for liability when being carrier or towed.

Truckers and Motor Carrier Coverage Forms

Truckers Coverage Form. Covers business exposures of motor carriers for his who transport the goods of others.

Motor Carrier Coverage Form. Provides coverage for business exposures due to the transportation of goods owned by others for hire and transporting their own property.

A business individual that carries people and property for a fee from one place to another is called a Common Carrier (part of the general public).

Crime also called Fidelity Insurance


Provides coverage for the perils of burglary, robbery, and theft. Crime insurance protects businesses from employee and other types of dishonesty such as embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting, and other criminal acts pertaining to loss of money, securities, or personal property. Crime insurance may be written on its own policy or added to a commercial package policy.

Burglary. The taking of property from the inside of the premises by a person unlawfully or leaving the premises as evidenced by marks of forcible entry or exit.

Robbery. The taking of property from the care and custody of a person by one who has caused or threatened to cause that person bodily harm or committed an obvious unlawful act witnessed by the victim.

Safe Burglary
  1. The taking of property from within a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by marks of forcible entry upon it’s exterior.
  2. The taking of the safe or vault from inside the premises.

Theft. Any act of stealing. Therefore, it includes burglary, robbery, and safe burglary.

Premises. The interior of the portion of any building occupied by the insured in conducting the insured’s business. Premises can be amended by endorsement to include the portion of the grounds entirely enclosed by a fence or wall. 

Watch Person. Any person the insured retains to have care and custody of the property inside the premises and who has no other duties.

Custodian. The insured, any partner or employee, having care and custody of the property inside the premises, excluding any person while acting as a watch person or janitor.

Messenger. The insured, any partner or employee, having care and custody of the property outside the premises.

There are four parts to the Commercial Crime coverage: 
  1. The Crime Declarations form. Includes name and address, policy period, coverages, limits of insurance, deductibles, premiums, endorsements, and notice of cancellation or prior insurance.
  2. The Common Policy Conditions form. (see handout IL 00 17 11 98)
  3. Crime General Provisions Form. 

Section A. General Exclusions. 
        1. Loss committed by the insured or any partner. 
        2. Loss resulting from the seizure or destruction or property by order of civil authorities. 
        3. Indirect loss such as unrealized income.
        4. Expenses related to any legal action or civil authority.
        5. War
        6. Nukes

Section B. General Conditions.
1.  Discovery Period. The loss must be discovered not later than one year from the end of the policy period. 
  1. When a loss occurs, the insured must notify the company, quickly.
3.  The insured must keep records of all covered property so the company can verify the amount of any loss.
4.  The insured must file a proof of loss within 120 days. 
5.  Any additional premises acquired by the insured are covered automatically for 30 days. This provision applies only if such additional premises are acquired by consolidation, merger, or the purchase of assets of some other entity.
6.  Salvage distribution. Any recoveries less the cost of obtaining them will be distributed as follows: 
    1. To the insured until reimbursed for the part of the loss that exceeds the limit of insurance and the deductible. 
    2. Then, to the insurance company until reimbursed for settlement made. 
    3. Then, to the insured towards the reimbursement of their deductible.

  1. Coverage Forms. 
  • Form A. Employee Dishonesty
  • Form B. Forgery and Alteration
  • Form C. Theft, Disappearance, and Destruction

Section 1. Covers loss of money and securities, resulting directly from loss, by theft, disappearance and destruction, inside the premises or a banking premises. Form C also covers loss or damage to a locked safe, vault, cash register, cash box or cash drawer, located inside the premises for actual or attempted theft or unlawful entry into these containers.

Section 2. Covers money or securities, outside the premises, in the care and custody of a messenger for loss caused by theft, disappearance, and destruction. Section II also covers loss to covered property outside the premises for loss by theft, disappearance, and destruction while in the care of an armored motor vehicle company, but only for the amount that the insured cannot recover under the contract with that carrier.

Additional Exclusions. 
1. Employee Dishonesty
2. Accounting or Math Errors or Omissions
3. Loss resulting from the giving or surrendering or property in any exchange or purchase.
4. Loss or damage to the premises by fire, however caused.
5. Loss of property contained in any money operated device unless the amount of money deposited in the device is recorded by continuous recording instrument in the device.
6. Computer fraud and extortion
7. Damage from VMM to the premises
8. Voluntary parting of Title to or possession of property.
Banking premises. Interior of premises of the building occupied by a banking institution or similar safe depository.

  • Form D. Robbery and Safe Burglary

Section 1.A. Covered property is property other than money and securities, inside the premises, in the care and custody of a custodian. The covered cause of loss is actual or attempted robbery.
Section 1.B. Covered property is property other than money and securities, inside the premises, in a safe or vault. The covered cause of loss is actual or attempted safe burglary.

Section 2. Covered property is property other than money and securities, outside the premises, in the care and custody of a messenger. The covered cause of loss is actual or attempted robbery. Section II also covers loss to covered property, outside the premises, in the care and custody of an armored motored vehicle company, but, only for the amount the insured cannot recover under the contract with the carrier.

Limitations. Same as 1 and 2 under Form E.

Additional Exclusions.
        1. Employee Dishonesty
        2. Loss by fire, however caused, except for damage to a safe or vault.
        3. Damage from VMM
        4. Loss or damage to property after it has been transferred or surrendered to a person or place, outside the premises, because of computer fraud or as a result of a threat to do bodily harm to any person or damage to any property (extortion).


Form E. Premises Burglary

Covered Property.  Property other than money and securities inside the premises. The covered causes of loss are actual or attempted robbery of a watch person and actual or attempted burglary.

Premises Damage Clause. Covers damage to the premises and it’s exterior provided the insured is the owner or is liable for damage to it. If a loss occurs, coverage is suspended until the premises are restored to the same condition of security that existed, before the loss. This provision does not apply if the insured maintains a watch person while the premises are closed for business. 

Limitations under Form E. 
1. Coverage is limited to $1,000 per occurrence for loss of or damage to:
2. Precious metals and semiprecious stones, pearls, furs, or articles containing such material when such material constitutes the principal value of the article. 
3. Manuscripts, drawings, or records of any kind, or the cost of reconstructing them, or reproducing any information contained in them. 

Additional Exclusions under Coverage Form E
  • Employee Dishonesty
  • Loss occurring while there is any change in the condition of the risk within the insured’s control that increases the possibility of loss.
  • Loss by fire, however caused, except for damage to a safe or vault.
  • Loss occurring during a fire.
  • Damage from VMM, but, for additional premium, this coverage may be included.

Property Not Covered. Motor vehicles, trailers, semitrailers, or any of their equipment.

Form F. Computer Fraud (see Coverage Form F)

Form G. Extortion (see Coverage Form F)

Form H. Premises theft, and robbery outside the premises (see Coverage Form H)
Note: Form H is an alternate to Forms D and E (Either you buy Form H or Form D and E)
Note: Section 2 of Form H is a duplicate of Section II of Coverage Form D - Robbery and Safe Burglary.

Business Owners Policy (BOP) 


A BOP is a prepackaged commercial form designed for small businesses covering buildings and/or business personal property. The BOP also provides liability coverage on an occurrence form basis. (like a homeowners for business with small risks)

Cov A - Building
Insures the building or structure described in the declarations, including completed additions, fixtures, outdoor fixtures, permanently installed machinery and equipment, personal property owned by the insured used to maintain or repair the premises, materials, equipment, and supplies located at, on, next to, or within 100 feet of the described location used for construction, alteration, or repair or any structure at the location. It also covers your business personal property in apartments, rooms, or common areas, furnished by the insured as landlord.

Cov B - Your Business Personal Property (Contents, Commercial Cov C is built into here)
Covers your business personal property located at, on, next to, or within 100 feet of the described location. However, property within transit is covered. 

Your business personal property includes furniture, fixtures, machinery, equipment, stock or inventory, tenant’s improvements and betterments, leased equipment. It also covers personal property of others in the insured’s care, custody, and control.

Note: Loss by theft of jewelry is limited to $2,500.
Note: Loss by theft of furs is limited to $2,500.

The BOP is offered in a special form, meaning coverage is on an all-risk basis. However, at the insured’s option, they may add a named perils endorsement. This endorsement takes away the all-risk coverage and provides coverage for the following perils only:
  • Fire
  • Lightening
  • EC Perils
  • VMM
  • Sprinkler leakage
  • Sink hole collapse
  • Accident to a transporting conveyance

Additional Coverages
  1. Debris Removal. Limited to 25% of the damage to the property insured. The coverage is included within the limits of liability for that loss. However, if the amount of direct physical loss and debris removal expense is more than the limit, an additional $10,000 is available for those expenses. 
  2. Preservation of Property. Coverage is for 30 days after removal.
  3. Business Income Coverage
  4. Extended Business Income Coverage
  5. Business Income from Dependent Property
  6. Extra Expense Coverage
  7. Fire Department Service Charge. Coverage limited to $1,000
  8. Forgery and Alteration. Coverage limited to $2,500
  9. Exterior Glass
  10. Fire Extinguisher Systems Recharge Expense. Coverage limited to $5,000
  11. Outdoor signs attached to the building. Covered up to $1,000
  12. Pollution Cleanup. Coverage limited to $10,000
  13. Counterfeit Money Coverage. Coverage limited to $1,000
  14. Increased Cost of Construction. Coverage limited to $10,000

Coverage Extensions
  1. Newly acquired or constructed buildings under Cov A are covered automatically for a maximum of $250,000.
  2. Business personal property under Cov B at newly acquired premises are covered automatically for a maximum of $100,000.

Note: Newly acquired building and/or contents are covered for 30 days or the end of policy period, whichever is first. 

  1. Personal effects of the insured and employees are covered up to $2,500.
  2. Valuable papers and records. Coverage is limited to $10,000 on premises and $5,000 off premises
  3. Accounts Receivable. Coverage limited to $10,000 on premises and $5,000 off premises. 
  4. Business Personal Property off premises. Coverage limited to $10,000.
  5. Outdoor Property. The insured may extend coverage to outdoor fences, radio and tv antennas, signs other than signs attached to the building, trees, shrubs, plants, and lawns, for up to $2,500 for the following perils only:
  • Fire
  • Lightening
  • Explosion
  • Riot or civil commotion
  • Aircraft

Optional Coverages
For additional premium, the following may be included:
  1. Outdoor signs other than as provided for in policy
  2. Employee Dishonesty
  3. Money and Securities
  4. Burglary and Robbery for the named perils form only
  5. Boiler and Machinery 

Property Not Covered
  1. Aircraft
  2. Motor Vehicles
  3. Watercraft
  4. Growing Crops and Lawns
  5. Contraband
After a claim has been paid under the Businessowners Liability Coverage, he recovery rights belong to the insurer.

Workers Compensation and Employer's Liability

Covers a residence employee who works in regular employment of < 40 hours per week, or engaged in casual employment.

Coverage does not apply to an employee not required to be covered, under the NY Workers Compensation Law. Coverage pays all benefits required of an insured by the NY Workers Compensation Law, when due.

Elective States. In these states, workers comp benefits are provided at the option of the employer.

Compulsory States. In these states, workers comp benefits must be provided by the employer with some exceptions. New York is a compulsory state.

Monopolistic States. In these states, workers comp benefits may only be provided through a state insurance fund. 

Dual States. In these states, workers comp benefits may be provided by either a state insurance fund or by insurance companies. New York is a Dual State.

Part 1. This is the agreement, by the insurance company, to perform, on behalf of the insured, the obligations of the workers comp law in those states listed in the declarations.  

Part 2. Employer’s Liability Section. Obligates the insurance company to defend any legal action instituted by an employee.


Endorsements


New York State Amendatory Endorsement, aka, The New York Limit of Liability Endorsement. This must be attached to every workers comp policy issued in this state. It removes any limit of liability for Part 2 for employees subject to the workers comp law. 

For employees not subject to the law, the standard limit is $100,000 BI each accident, $100,000 by disease each employee, and $500,000 by disease policy limit.

Maritime. The constitution of the United States gives the Federal government jurisdiction over maritime matters. State laws do not apply to injuries or death to maritime workers employed on navigable waters of the US or high seas. The employees are governed by the following:

  1. General Maritime Law
  2. The Jones Act
  3. Death on High Seas Act
  4. US Longshoreman's and Harbor Workers Compensation Act

Premiums. The company charges an authorized rate to an estimated payroll per $100 for each classification of the insured’s operation. Payroll is referred to as remuneration.

Deposit premium aka Initial or Advanced Premium. Premium the insured pays at the inception of the policy. The insurance company will audit each policy at expiration or cancellation to verify any earned premiums. 
Note: There is an expense constant of $200. (automatically charged, in addition, to the premium)


Class
Est./Payroll
Rate/$100
Avg. Premium
Excavators
100,000
$7.00
$7,000
Concrete
200,000
$6.00
$12,000
Masons
300,000
$2.00
$6,000
Executive Officers
400,000
0.50
$2,000
Miscellaneous Payrolls
50,000
$2.00
$1,000
Total


$28,200

Misc. Payrolls. Payrolls with no rates in the manual. They are assigned to the governing class. The governing class is the classification of the insured’s operation other than standard exceptions which carries the highest payroll on audit.

Standard Exceptions. Low rated categories such as clerical, drivers and helpers, outside sales person, messengers and collectors, executive officers, and draftsmen.

Cancellations on a Workers Comp Policy

If cancellation is by the company, it is Pro-Rata.
If cancellation is by the insured, it is Short-Rate, unless the insured is retiring, or has completed the job for which the policy was issued. Then, the cancellation is on a Pro-Rata basis.
Mid-term cancellation by the company requires 10 days notice, plus mailing, is given to the Workers Comp Board and the insured. 
Non-renewal cancellation requires 30 days notice, plus mailing.

The New York State Insurance Fund may only cancel for non payment of premium.

Workers Comp Benefits 

An injured employee is entitled to receive free medical, hospital, nursing, surgical, rehabilitation, and transportation fares with no limit in time or amount. 

Wage Benefits. 
Waiting period is 7 days unless the disability last more than 14 days. Then, benefits are payable from the first day of disability. This is referred to as a retroactive provision.

The employee receives 2/3 of their average weekly wage, up to a maximum of $600 a week. 

Types of Disabilities under Workers Comp

Temporary total. Not able to work, but expected to recover.
Permanent total. Not able to work for the rest of your life.
Temporary partial. Partially disabled, but can do some work.
Permanent partial. Loss of or loss of use of an organ or body member. 

Scheduled Awards
For certain injuries, there are scheduled and lump sum awards, where wage loss is presumed due to the nature of the injury.

Death cases 
Funeral expenses will be paid to a maximum of $5,000 upstate and $6,000 downstate.

Dependents of the employee will receive an award using the same formula as the employee receives. Children can collect up to age 18 or 23, if a full time student. A spouse receives the benefit for life or until remarriage and will receive a lump sum amount equally 24 months of benefits.

If an employee is killed and has no dependents, the carrier is required to make a contribution of $50,000 to the estate of the employee and required to make a contribution of $5,000 into the Workers Comp Program. Of this amount, $3,000 goes to a reopened case fund. $2,000 goes to a vocational rehabilitation fund.

Obligations of the employee, employer, and doctor
The employee must give notice to the employer of any injury within 30 days, or for an occupational disease, 90 days, from when the symptoms first manifest themselves.

The employer must notify the Workers Comp Board within 10 days.

The doctor must file a preliminary report with 48 hours of first treatment. A complete detailed report must be made with 15 days of first treatment, and progress reports, as requested.

The employment of a minor, in violation of the law, entitles the minor to double compensation. The punitive portion is paid for by the employer.

Rules regarding subcontractors.
A contractor who subcontracts any part of a job is legally obligated to see that the subcontractor carries Workers Comp coverage for the subcontractor’s employees. Otherwise, the contractor is considered the employer of the subcontractor and is charged the premiums and losses. To protect themselves, the contractor requests a Certificate of Insurance from the subcontractor’s carrier that certifies Workers Comp coverage is in effect covering the subcontractor. If the subcontractor’s policy is cancelled for any reason, the contractor will be notified.

Exceptions for Workers Comp
Executive Officers are included in the policy and their payrolls are computed on a maximum of $1,825 a week or a minimum of $600 a week. If there are not more than two officers or shareholders, they may elect to be covered or not.

Sole owners and partners may elect to be covered and their payrolls are computed the same as the executive officers.

Premium Discount Rule
A credit shown as a percentage is applied to the workers comp premium. The percentage increases as the size of the premium increases. It is applied to all policies, greater than $5,000 in premium. It is given in recognition that the expense of writing and servicing large premium risks is proportionately less than smaller premium policies. 

Experience Rating
A system used to modify the manual premium. To qualify, a risk must have developed a premium of at least $10,000 for each of the last 2 years in the plan, or at least $5,000, in each of the past 3 years in the plan.

Under this plan, the frequency of losses is penalized more than the severity.

Employee suits against third parties
When injury or death is caused by negligence of a party, not in the same employ, the employee may except workers comp benefits, or sue the third party, or both.

If recovery is made by the employee, the Workers Comp carrier has a lien on the proceeds to the extent of payments made. Should the employee take no action, the Workers Comp carrier does, but only to the extent of payments made.

New York States Disability Benefits Law (DBL)
This law is administered by the Workers Comp Board as it complements the Workers Comp law, by providing for the payment of cash benefits to employees who become disabled by reason of injury or illness with no connection with their employment.

Bonds aka Suretyship

There are two basic types of bonds:

1. Fidelity Bonds. Employee Dishonesty

Aspects common to all Fidelity Bonds

1. Three party contract - Principal, Obligee, Surety

2. These bonds contain conditions and limitations for which the surety is liable.

3. Coverage is automatically void when the employer has knowledge of a previous dishonest act of an employee and fails to disclose it and it is also void as to future acts of an employee immediately upon discovery of a loss covered by the bond. 

4. Contains a discovery period, allowed to the insured, after the coverage ceases to exist within which to discover loss that occurred while coverage was in effect. The typical discovery period is one year. 

  1. Super-ceded suretyship clause. The company agrees to indemnify the insured against loss under a prior bond. This is for losses that would have been covered under the earlier bond, except that discovery period had passed. 

  1. The term of a Fidelity Bond is continuous and remains in effect until formally cancelled by the obligee or surety. 

  1. Fidelity bonds do anticipate a loss and are priced to reflect a loss payment.

Three general classes of Fidelity Bonds:
  1. Individual. Covers one person.
  2. Schedule Bond. Offered in two versions.
    1. Name Schedule. List the employee names to be bonded. 
    2. Position Schedule. Lists the positions to be bonded. Example: cashier
3. Blanket Bond. Covers all employees without exception and as a result, if a loss occurs, there is no need to identify the dishonest employee.They need only prove the loss occurred. Blanket bonds are offered in two versions: 
  • Commercial Blanket Bond. The penalty or limit is the maximum amount applied to any single loss regardless of the number of employees involved. 
  • Blanket position bond. Limit applies to each employee involved. Therefore, it better covers collusion losses. 

2. Surety Bonds. The guarantee of an obligation

The bonds are 3 party contracts. The principal, the obligee, and the surety.

Principal. Party who wants to fulfill certain obligations on a contact.

Examples:
  1. A contractor who wishes to build a building for the city.
  2. The mayor of a city who promises to discharge their duties faithfully.
  3. The guardian of a minor who certifies in court that they will oversee their client’s financial matters properly.

Obligee. Party who expects the Principal to perform on the contract or agreement in question. If the Principal fails to perform, the obligee will be reimbursed for damages according to the terms of the bond.

Examples:
  1. The city that requests bids from contractors on a building project. 
  2. The city that expects the mayor to discharge their duties faithfully.
  3. The minor who has a guardian handling their financial matters.

Surety. Party who guarantees the performance of the obligation of the Principal to the Obligee. The Surety is usually an insurance company or a bonding organization.

The difference between insurance and Suretyship:
1. Insurance is a two party contract. Suretyship is a three party contract. 
Insurance is designed to pay covered losses and is priced to reflect a loss payment.
Suretyship is not designed to pay covered losses. In theory, no losses are expected. It is just one party lending its good name and credit to another party.
In insurance, when losses are paid, generally the insurer cannot recover the loss amount from the insured. The Surety has the right by contract to recover any loss payments from the defaulting Principal.
In insurance, covered losses are beyond the insured’s control, but the subject of a particular bond is within the Principal’s control.

Underwriting of Surety Bonds

First C - Character The integrity of the principal before the bond can be written.

Second C - Capacity The principal’s ability to perform the operation.

Third C - Capital - Important in situations that require the principal, to spend their own funds.

Precautions and guarantees available to the surety:
  1. Indemnity.  Assets of an outside party are made available to the principal to complete the obligation.
  2. Collateral. Assets are deposited with the surety to meet the obligation if and when called upon.
  3. Joint Control. The surety must approve the spending of money or property covered by its bonds.(Joint Control not normally used today).

Classes of Surety Bonds

I. Contract Bonds. Guarantee the performance detailed in a wide variety contracts. Used for contracts involving construction, repair, maintenance, and material supply.

Examples:
Bid Bond. A preliminary bond filed with the bidding. It is a guarantee that if the bidder is awarded the contract, they will sign the contract, provide a performance bond, and undertake the work awarded to them. A bid bond is usually a small percentage of the estimated contract price, for example, 5 or 10 percent.

Performance Bond. A guarantee the contractor will complete the work awarded to them, and is made a part of the bond.

Payment Bond. Also known as a labor and materials bond, usually issued with a performance bond. Guarantees payment of labor and materials by the contractor.

Supply Bond. Guarantees delivery of material according to specifications, price, date, and delivery.

Methods of Settling Contract Claims

The bonding company may finance the contractor to enable them to complete the obligation.

The bonding company may authorize the obligee to re-award the contract and agree to pay any difference in cost.

The bonding company may complete the obligation with their own organization. 

II. Court Bond aka Judicial Bonds. Required in court proceedings and fall into two categories:
  1. Fiduciary Bond. A fiduciary is someone in a position of trust. Fiduciary bonds are required of persons entrusted with property by the court. 
  2. Litigant Bond. May be required of a plaintive or defendant in a court case. To guarantee the payment of damages that might be awarded to the other party. (see handout)

  1. License and Permit Bond. Required by local or state agencies of individuals before they can engage in certain business or professional activites. Guarantee compliance with the rules governing the license or permit. Examples: Liquor bonds, plumbers, electricians, Excess Lines Brokers. 
  2. Public Official Bonds. Designed to guarantee the performance of public officials for the protection of the public. 
V. Federal Bonds. Guarantee compliance with Federal laws and regulations. Required of liquor manufacturers, tobacco companies, firearm manufacturers, any other industry under Federal regulation.

ERISA BONDS
Employee Retirement Income Security Act of 1974

This requires a Fidelity Pension Bond be maintained for all individuals handling funds and/or property belonging to an employee pension or welfare fund. 

Small Business Administration Surety Bond Guarantee Program
This provides guarantees on surety bonds for all businesses unable to obtain the bonds in the voluntary market on contracts of $1,000,000 or less

Ocean Marine

Ocean Marine is the oldest form of insurance. There are no government regulations, no rate book, no set policy forms, and everything is negotiable. 

Basic Perils
Fire losses are covered except when involving the spontaneous combustion (inherent vice) of certain cargos. 

Perils of the sea. Includes sinking, stranding, and damage by sea water. 

Assailing thieves. Requires theft through the threat of violence, not petty theft by the crew. 

Jettison. The act of throwing cargo overboard to protect the ship and crew from harm. 

Barratry. Willful misconduct of the captain and/or crew. It is a violation of the trust shown by a shipowner in the captain of the ship. 

Explosion. Explosions while at sea or in port are covered. Excludes steam boiler explosions.

INCHMAREE CLAUSE. Named for a court case involving a vessel of the same name. Covers bursting boilers, breakage of shafts, defects in machinery, and crew negligence. 

Basic Exclusions of Ocean Marine

  1. Damage due to dampness. 
  2. Delay or loss of market. 
  3. Acts of war which is catastrophic, including confiscation, detainment, seizure, or revolution. Note: Terrorism is not considered war because it is not catastrophic.
  4. Strikes, riots, and civil commotion.

Four separate areas of Ocean Marine
  1. Hull. Taken out by the ship owner. Covers the ship itself, not the cargo or crew. Five separate contracts within the hull policy, and as a result, the policy could pay up to five times its face amount.
Physical loss or damage. Covers loss or damage to the vessel, itself.
General Average. Unique to marine insurance is general averaging. This is the voluntary sacrifice of cargo or ship for the general well being of the voyage from a peril of the sea. In such situations, all owners of shipped goods and the ship owner generally share in the loss. No one specific owner suffers the entire loss.

Requirements for a general average loss:

1. Must be an impending peril
2. Must be a sacrifice
3. Sacrifice must be successful
4. The ship owner is not lacking in due diligence, i.e., the ship was seaworthy

      Sue and Labor. The company will pay the reasonable expenses incurred by the insured to minimize the loss.
      Collision Liability. Covers the other vessels damaged and the cargo on board that vessel. 
      Defense Costs. Covers legal fees.
  1. Cargo. Two types of cargo policies:
    1. Stray or special risks. Covers the one-time shipment.
    2. Open Cargo Policy. Covers continuous ongoing shipments.
Coverages for cargo policies: 
FPA. Free of Particular Average aka Free of all partial losses. This is the cheapest. It only pays for total losses. 
W.A. aka With Average. Pays for partial and total losses on a named peril basis.
A.R. aka All Risks. Pays for partial and total losses on an all risks basis.
Endorsements under Cargo Insurance:
Air Transit.
Inland Transit.
Warehouse Coverage.
Clauses under Cargo Insurance:
Warehouse to warehouse clause. States the cargo must reach final destination within a specified period after the ship arrives in port. Example: 60 days.
Marine extension clause. Eliminates the timely delivery requirement, if the cause for delay is beyond the insured’s control. Example: a strike
  1. Protection and Indemnity Insurance aka PNI. Liability insurance taken out by the ship owner. Covers third party BI, PD, and Personal Injury. Crew members are considered to be wards of the court and are always correct no matter the cause of their injury or death. 
  2. Freight insurance. Covers the loss of use of the insured vessel. Example: Business Income

Warranties under Ocean Marine

Legality of Purpose. Any ocean marine voyage must be legal in its purpose.

Prompt attachment of risks. If a voyage is delayed, the underwriter must be notified, immediately. 

Sea Worthiness. A term that includes aspects of a commercial sailing venture that are taken for granted, such as a sound vessel and a competent captain and crew.

No deviation. Refers to the need to adhere to a planned course and schedule, unless some emergency rules otherwise. 

Accident and Health Insurance
The purpose of health insurance is to protect the insured from economic losses sustained as a result of an accident or sickness.

Five basic areas of health insurance:
  1. Hospital Expense Insurance. Pays for medical expenses incurred while in a hospital. A typical hospital policy provides two basic benefits:
Daily hospital benefit. Pays for room and board charges. Three different methods of payment of this benefits:
  • Indemnity approach. The plan pays the actual cost of the daily service up to some maximum.
  • Valued approach. The plan pays the actual cost based on a fixed amount for each day of hospitalization.
  • Service approach. Service benefits rather than cash benefits are paid. Example: Company pays the highest semi-private room and board rate.
Miscellaneous Expense Benefit. A hospital policy also provides a lump sum benefits for miscellaneous expenses, such as lab tests, xrays, medications, and operating room use. Three different methods for this payment: 
Choice for a maximum dollar amount. At time for the application of insurance, the insured selects the amount of benefit.
Multiple of the daily room benefit. A factor is listed in the policy that is applied to the daily room benefit which determines the amount of the benefit. Example: 30 times the daily room benefit, aka, DRP.
Percentage participation clause aka coinsurance. Insured and the company share covered expenses based on a given ratio up to some maximum. Example: 80%/20% of $5,000
Note: Maternity in NY is treated as an illness.
  1. Surgical Expense Insurance. Can be added to a hospital expense policy. Provides payment of surgeons fees for surgical operations in a hospital or elsewhere. Benefits are typically paid on a surgical schedule listing various procedures with maximum amount paid for each.
  2. Major Medical Insurance. Designed to pay a large portion of the covered expenses of a catastrophic illness or injury. Major Medical Insurance provides very broad coverage, such as hospital room and board, miscellaneous expenses, surgical expense, regular doctor fees, prescriptions, private duty nursing, wheelchairs, iron lungs, artificial limbs and eyes, and mechanical equipment used for treatment. Major Medical has very few exclusions. Common exclusions are war or military conflict, elective cosmetic surgery, dental care except as a result of an accident, eye and hearing exams, eye glasses and hearing aids.
Lifetime maximums. Major Med policies are written with high maximum lifetime limits. Examples: 1M, 2M, 5M, and unlimited. 
Deductibles. Major Med policies contain deductibles that must be satisfied before benefits are paid. The deductibles are typically written on a calendar year basis. Deductibles may be Individual or Family.
Percentage Participation Clause aka Coinsurance. The insured and the company share covered expenses based on a given ratio up to some maximum. The maximum is referred to as a Stop Limit after which the company will pay 100% of the covered expenses. Example: 80%/20% of $5,000
Corridor Deductible. Some Major Med plans have a corridor deductible. Applies after the percentage participation clause. Its purpose is to separate the Major Med portion from the basic healthcare. It is typically $1,000.
Family Coverage. Available under any of the medical plans. The insured may elect to cover a spouse and/or dependent children up to age 19.
Coverage for an unmarried dependent child may be continued beyond age 19, but not beyond age 25, if they are a full time student.
Handicapped and retarded children. Coverage for an unmarried dependent child who is incapable of self-sustaining employment by reason of mental illness, developmental disability, mental retardation, or other physical handicap, cannot be terminated, while the policy is in force, as long as the individual in question became so incapacitated prior to age 19 or 25 as a full time student. 

  1. Disability Income Insurance.
  2. Group Health Insurance. Two or more



                          
        






























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