Webinar (2 hours)
““Miscellaneous Commercial
Coverages: Part 2”
Tom Ashley, AAI, AIAM, AIP
© Florida Association of Insurance Agents – 2010
11/09
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FLORIDA Agents -Important !!!
Per DFS requirements, you need to
sign an Acknowledgement Form in order
to receive CE credit.
1) Go to www.faia.com – Under “Education”, click
“Webinar Information”. Click “Webinar
Acknowledgement Form”
2) Complete all the required information and
transmit the form to FAIA.
3) You have three (3) business days to submit the
form.
Today’s Topics
1)
2)
3)
4)
Aviation Insurance
Electronic Data Liability Ins.
Ocean Marine
Key Person Life
Part I – separate class
1)
2)
3)
4)
Employee Theft
Directors and Officers Liability
Pollution Liability
Disability Income
Aviation Insurance
Aviation Insurance
--- Not standardized. Uses adaptations of other
forms, specifically fire and automobile.
--- Some insurers write aviation insurance on their
own contracts. Others participate in one of the
several aviation pools or underwriting groups
specializing in writing aircraft insurance.
Aviation Insurance
Hull Coverage
To protect against the risk of loss or damage to an
insured aircraft itself. Two options:
1) All-risk of PD on the aircraft not in flight,
and named peril coverage while in flight;
2) All-risk whether in flight or not.
Typically, insurers do not offer named peril option
in combination hull / liability policies.
Aviation Insurance
Hull Coverage
“In motion” – most common definition is “while the
aircraft is moving under its own power or
momentum generated therefrom.” Of course,
includes while the aircraft is in flight. In all
other situations, the aircraft is “not in motion.”
Deductibles are normally a percentage of the value,
2 ½%, 5%, 10% are most common.
Aviation Insurance
Hull Coverage
Most aircraft hull policies are “valued” policies,
but some policies are written on an actual cash
value or replacement cost basis.
Named perils include any or all of these: fire,
stationary land damage, windstorms, crash
insurance (comparable to automobile collision
coverage), and theft.
Aviation Insurance
Aircraft Liability
Covers public and passenger liability and property
damage liability. BI and PD under aircraft
liability is very similar to automobile liability,
with one exception: in aircraft liability, liability
to passengers is treated as a separate exposure.
Aviation Insurance
Aircraft Liability
A typical aircraft liability policy includes:
a) BI liability (excluding passenger liability)
b) Passenger liability
c) PD liability
Also available: Single limit BI and PD (excluding
passenger liability; and single limit BI and PD
(including passenger liability)
Aviation Insurance
Aircraft Liability
Essentially, the insuring agreement states that the
company will pay damages because of bodily
injury, sickness or disease, including death at
any time, or injury to or destruction of
property, arising out of ownership,
maintenance, or use of the aircraft.
Aviation Insurance
Aircraft Liability
Limits of liability are usually applied in the same
manner as in automobile liability policies. For
example: 100/300/50. Single limit, for example:
$300,000 BI and PD per occurrence.
Territorial limits include: U.S., Canada, and
Mexico. Often, coverage in Mexico is limited to
within 100 miles of the U.S. border. In Florida,
Bahamas is usually added by amendment.
Aviation Insurance
Aircraft Liability
Coverage is usually extended to temporary
substitute aircraft and, for private business and
pleasure craft operators, the use of any
nonowned aircraft by or for the named insured.
Aviation Insurance
Admitted Aircraft Liability
Typically written as an adjunct to Passenger
Liability, not applicable to passengers for hire.
It provides for principal sum payments for
death or dismemberment if, 1) the named
insured requests it and, 2) the company is
released from further liability. Interestingly, it’s
a means by which an insured by save a guest
from the necessity of bringing a legal action for
injuries.
Aviation Insurance
Medical Payments
Provides medical expenses for bodily injuries by
accident, without regard to legal liability.
Similar to automobile med pay in that it
provides for medical, surgical, ambulance,
hospital, etc., while in, entering into, or
alighting from the aircraft.
Aviation Insurance
Special Aviation Insurance Coverages
a) Hangarkeeper’s Liability Coverage
Protects the insured against legal obligations for
injury to or destruction of the aircraft or others
in the custody of the insured for storage, repair
of safekeeping. Covers all damage not excluded.
Aviation Insurance
Special Aviation Insurance Coverages
b) Airport and Air Meet Liability
Similar to premises and operations liability under a
CGL. Covers BI liability and PD liability.
c) Product Liability
Coverage for manufacturers and sales or repair
organizations against liability claims which are
attributable to defective products or work.
Aviation Insurance
Special Aviation Insurance Coverages
d) Cargo Liability
Protects against legal liability for loss or damage to
cargo or baggage.
Aviation Insurance
Exclusions
Each of these applies to all the coverages for both
hull and liability sections of the policy:
● There is no coverage for aircraft not registered
under a standard category airworthiness
certificate, in full force and effect, by the FAA.
Aviation Insurance
Exclusions
The policy will not cover while insured aircraft is:
1) Maintained for any purpose other than the use
classification permitted in the policy's Decs.
2) Operated while in flight by:
a) Other than the pilot named or described in
the declarations (or pilot endorsement); or
b) By a declared pilot operating outside the
limitations imposed in the declarations; or
Aviation Insurance
Exclusions
c) In flight under any conditions requiring
special permit or waiver from the FAA even if
such permit or waiver has been granted.
In addition to these general policy exclusions, the
following exclusions apply also to hull
insurance:
1) There is no coverage for loss caused by
conversion, embezzlement or secretion by …
Aviation Insurance
Exclusions
…any lessee or any other person in possession
of the aircraft under a bailment lease,
conditional sale, mortgage, or other
encumbrance.
2) All risks coverage exclusions common to other
physical damage insurance apply: wear and
tear, deterioration, freezing, mechanical or
electrical breakdown.
Aviation Insurance
Underwriting
Some considerations:
1) Pilots – qualifications and experience
2) Size – light or heavy aircraft
3) Type – land plane, seaplane or helicopter; and
4) Age and condition
Electronic Data
Liability Insurance
Electronic Data
Liability Insurance
In 2004, ISO developed CG 00 65, Electronic Data
Liability as a stand-alone coverage part – to
provide standardization. Remember, forms
offered by specialty or nonstandard insurers
may be quite different (broader or narrower)
than this ISO form.
Electronic Data
Liability Insurance
Four terms unique to this coverage:
1) Computer products or services -- manufacturing,
developing, designing, creating, selling,
handling, marketing, distributing, licensing or
disposing of computer or electronic goods
performed either by or on behalf of an insured
business. Goods include hardware, software,
components, peripherals, communications or
broadcasting equipment, industrial or robotic
equipment. Includes non-vehicular containers.
Electronic Data
Liability Insurance
Four terms unique to this coverage:
1) Computer products or services -- “products”
refers to manufacturing, developing, designing,
creating, selling, handling, marketing,
distributing, licensing or disposing of computer
or electronic goods performed either by or on
behalf of an insured business. Goods include
hardware, software, components, peripherals,
communications or broadcasting equipment,
industrial or robotic equipment.
Electronic Data
Liability Insurance
Four terms unique to this coverage:
1) Computer products or services -- “services”
addresses eligible activities that may create a
loss for a third party. Installation, testing,
service, maintenance, technical support, repair,
integration, networking, consulting or analysis
of or training for computer software or
computer programming, electronic or computer
equipment, components or peripherals,
communications or broadcasting equipment, …
Electronic Data
Liability Insurance
Four terms unique to this coverage:
1) Computer products or services -… or industrial or robotic equipment. Other
services include processing, storage,
transmission or other handling of electronic
data for others, providing broadcasting or
communication services for others, or
consulting, evaluating or advising on such
services using TV, cable satellite, radio, internet,
wireless or cellular transmissions.
Electronic Data
Liability Insurance
Four terms unique to this coverage:
2) Electronic data --- broadly defined to mean
information, facts or programs stored as or on,
created or used on, or transmitted to or from
computer software, hard or floppy disks, CDROMs, tapes, drives, cells, data processing
devices or any other media used with
electronically controlled equipment.
Electronic Data
Liability Insurance
Four terms unique to this coverage:
3) Electronic data incident --- refers to an accident,
or negligent act, error or omission, or a series of
casually related accidents, negligent acts, or
errors or omissions, which results in “loss of
electronic data.”
Electronic Data
Liability Insurance
Four terms unique to this coverage:
4) Loss of electronic data --- damage to, loss of, loss
of use of, corruption of, inability to access, or
inability to properly manipulate, “electronic
data”.
Electronic Data
Liability Insurance
Insuring Agreement
The ISO form makes the insurer responsible for
paying damages caused to third parties through
the loss of certain types of electronic data.
Coverage applies only if the data loss is caused by
an “electronic data incident”, takes place in the
coverage territory, and did not occur before the
Retroactive Date, if any, or after the end of the
policy period. If no Retroactive Date is shown,...
Electronic Data
Liability Insurance
Insuring Agreement
… the ISO form may provide coverage for claims
occurring before the policy inception date.
Policy is claims-made.
Territory is worldwide, but lawsuits must be
filed in the U.S., including territories and
possessions, Puerto Rico, or Canada.
Electronic Data
Liability Insurance
Exclusions
a) Expected or intended loss
b) Contractual liability
c) Computer Products or Services Exclusion –
“loss of electronic data” arising out of a
negligent act, error or omission, by or for you,
or anyone acting on your behalf in providing
“computer products or services.”
Electronic Data
Liability Insurance
Exclusions
d) Bodily injury, property damage, or personal and
advertising injury
e) Damage to your data
f) Performance of a contract (failed to or delayed)
g) Infringement of intellectual property rights
h) Unauthorized use of electronic data
i) Violation of an antitrust law
j) Criminal or fraudulent acts
Electronic Data
Liability Insurance
Deductible
The ISO form does not provide for a deductible.
Electronic Data
Liability Insurance
Conditions
Seven of the nine conditions found in the ISO form
are identical to those found in the CGL
coverage form (CG 00 01). Two have been
rewritten to address the unique EDL coverage.
They are:
Electronic Data
Liability Insurance
Conditions
1) Duties in the event of an electronic data incident
The insured is required to notify the insurer when
they know or suspect that a covered incident
has taken place which will result in a claim.
However, this notice does not qualify as notice
of a claim, which is required to be reported
immediately to the insurer.
Electronic Data
Liability Insurance
Conditions
2) Other insurance
Since this form is designed to prove only as excess
coverage if there is other insurance available,
the insurer has no duty to defend the insured
against any suit if the other insurer has the
obligation to do so. If the other insurer does not
defend the insured, the insurer carrying CG 00
65 will do so, but then will be entitled to the
insured’s rights against the other insurer.
Electronic Data
Liability Insurance
Extended Reporting Period (ERP)
The ISO form gives the insured the right to
purchase an Extended Reporting Period within
30 days after the end of the policy period. It’s
available if the coverage is cancelled or not
renewed by the insurer for any reason. It starts
at the end of the policy period.
The ERP lasts for three years. Use CG 31 73
Extended Reporting Period for EDL Coverage.
Electronic Data
Liability Insurance
Rating and Premium
Approaches to rating vary by carrier. ISO does not
provide rates or a rating methodology.
Typically, though, the insured’s receipts for
computer-related operations are used as the
rating exposure base.
Good luck !!!
Ocean Marine Insurance
Ocean Marine
--- aka “wet marine” to differentiate it from other
types of marine insurance
--- Ocean marine is the oldest form of insurance
known to exist
--- No standard forms – old terminology
Ocean Marine
--- The first ocean marine insurance policies
insured against the loss of a vessel or the cargo.
But shippers realized that cargo sitting on the
docks needed coverage as well, so ocean marine
insurance was extended to cargo on the docks.
--- When it was realized that cargo sitting in
warehouses awaiting shipment needed
coverage, then Inland Marine insurance was
developed – a separate coverage.
Ocean Marine
Ocean marine coverages are broadly classified as:
1)
2)
3)
4)
Hull
Cargo
Freight
Liability
Ocean Marine
1) Hull Coverage
Covers loss of or damage to the vessel for perils of
fire, lightning, earthquake, assailing thieves,
“perils of the sea,” jettisons, barratry of the
master or mariners and “all other like perils.”
--- “barratry of the master or mariners” – an illegal
act(s) by the captain or crew which puts the
ship in danger, to the detriment of the owner of
the ship.
Ocean Marine
1) Hull Coverage
--- Coverage is normally listed on a valued basis
--- Coverage usually limited to a specific
geographic area
--- If ship is layed up in port for an extended period
of time, the typical contract will provide for a
reduced premium
Ocean Marine
1) Hull Coverage
Deductibles:
a) “Average” – a stated flat amount
b) “Franchise” – No payment by the insurance
company until the loss reaches a certain limit.
If loss reaches that limit, then the loss is paid in
full. Franchise deductible may be either a
percentage of the insured value, or be expressed
in dollars.
Ocean Marine
2) Cargo Coverage
Covers loss or damage to goods shipped, may be
written on either of two forms:
a) Floating or open form – covers goods of a certain
class up to certain limits. No termination date,
but either party can cancel with 30 days notice.
Shipments are automatically covered, but
shipper reports to the insurer at regular
intervals as to value of cargo. Used for shippers
who ship throughout the year.
Ocean Marine
2) Cargo Coverage
Covers loss or damage to goods shipped, may be
written on either of two forms:
b) “Voyage policy” – used for a one-time shipment.
For shippers or importers who are not
regularly engaged in foreign trade.
Ocean Marine
3) Freight Coverage
Protection for the vessel owner in the event that
freight charges are not paid. The total loss of
the ship may involve the loss of the freight
which was to be earned on the cargo. Freight is
not earned until delivery of the cargo. This
coverage is often made a part of the Hull
coverage rather than being written as a
separate contract.
Ocean Marine
4) Liability Coverage -- two types
a) “Running down clause” -- covers collision & is
usually made a part of the Hull coverage.
Provides protection should the ship owner be
held liable for the negligent operation of the
vessel in damaging another ship. Should both
vessels be responsible, liability is fixed in
proportion to the degree each is at fault.
Ocean Marine
3) Liability Coverage -- two types
b) “Protection and Indemnity Insurance” -- covers
injuries to passengers, crew members or
persons on other ships, and for damage to
cargo, docks or other property.
Ocean Marine
Perils – frequently incl. in OM policies
● “Perils of the Sea” – wind, waves, collision,
stranding, sinking, and other types of incidents.
Perils such as fire are called “perils on the sea.”
● War – not included in OM policies. To add, use
endorsement known as “free of capture and
seizure clause” or a separate policy may be
issued.
Ocean Marine
Perils – frequently incl. in OM policies
● Fire – named as a separate peril. Both direct and
consequential losses as a result of fire are
insured. Includes damage by water and other
materials used to contain or extinguish fire.
● Enemies – includes all types of taking of the
insured property by force. Some policies
exclude pilferage since such losses are often the
result of the shipper’s negligence through
improper packaging.
Ocean Marine
Perils – frequently incl. in OM policies
● Jettison – the voluntary throwing overboard of
parts of the ship or its cargo in order to save
the vessel from sinking for from further
damage.
● Barratry – fraud by the master or crew with
intention of reaping gains at the expense of the
owner (ex., diverting the ship from course,
Ocean Marine
Other OM Clauses and Definitions
a) General Average Clause – in OM insurance,
“average” means loss or damage. This clause
refers to a loss which is a voluntary sacrifice of
a part of the ship or cargo, made by the master
of the ship to avert a common peril which
might well destroy the entire ship or cargo
unless this voluntary sacrifice is made. Such a
sacrifice must be borne by …
Ocean Marine
Other OM Clauses and Definitions
a) General Average Clause
… each interest involved in the proportion that the
value of its interest bears to the total value of all
interests engaged in the common venture.
Ocean Marine
Other OM Clauses and Definitions
b) Free of Particular Average Clause – losses which
are accidental and do not require a
contribution from other parties, the loss falling
only on the particular parties with interests in
the damaged property. Provides that no
particular average loss will be paid unless the
loss is caused by certain perils such as
stranding, burning, sinking, or collision.
Ocean Marine
Other OM Clauses and Definitions
c) Sue and Labor Clause – requires insured to take
all steps necessary to save and preserve the
goods from loss, or to minimize a loss which has
occurred. If insured fails to do this, it’s
considered a violation of a policy condition and
the insured loses the rights of recovery. Insured
must incur reasonable expenses such as salvage
fees, storage, etc. which will be ….
Ocean Marine
Other OM Clauses and Definitions
c) Sue and Labor Clause
… reimbursed by the insurer, even if the expenses
sustained fail to recover the goods.
Ocean Marine
Other OM Clauses and Definitions
d) Total Losses – Actual and Constructive
1) Actual – the property no longer exists or it is
beyond salvage.
2) Constructive – the cost to salvage plus the cost
to recondition exceeds the value. A constructive
loss is compensated by the insurer in the same
way as an actual loss.
Key Person Insurance
Key Person Insurance
--- Very simple. It’s life insurance on a key
employee or key executive to protect a business
against interruptions caused by the loss of the
key person – to offset the economic loss.
Key Person Insurance
A key person is any person in an organization
whose contribution to the operation and success
of the business is essential.
Key Person Insurance
The business:
a) is the owner of the policy, and
b) pays the premiums, and
c) names itself as the beneficiary of the death
benefit
The business can use the death benefit (or cash
value, if still living) for a variety of purposes.
(more)
Key Person Insurance
Purposes
a) Business indemnification – compensates a
business for any financial loss caused by the
death of a valuable key person. Death of a key
person could result in 1) less liberal credit
terms from suppliers, 2) banks may be less
willing to lend money, 3) loss of valuable
accounts, etc.
Key Person Insurance
Purposes
b) Reserve fund – cash values increase steadily (as
long as key person is still living) to provide a
cash reserve fund for the business, which
appears each year as an asset on the company’s
balance sheet.
Key Person Insurance
Purposes
c) Business credit – Death of a key person can
seriously affect a business’s credit. Key person
insurance can impact in two ways:
1) can be shown as tangible evidence of
business character, and
2) can be used as a guarantee of loan
repayment upon death of the key person.
Key Person Insurance
Purposes
d) Favorable tax treatment – the death benefit is not
taxable to the business. (But, the premiums are
not tax deductible – have to pay taxes on the
premiums.)
Representing
Unauthorized
Entities
Florida Statement
The state of Florida has taken a very strong
position on the issue of unauthorized
entities. An unauthorized entity is an
insurance company that is not licensed
by the Florida department of financial
services. Agents and brokers have
responsibility for conducting reasonable
research to ensure that they are not
writing policies or placing business with
unauthorized entities. Lack of careful
screening can result in significant
financial loss to Florida residents due to
unpaid claims and/or theft of premiums.
Agents may be held liable when
representing these unauthorized
entities. It is the agents and brokers
responsibility to give fair and accurate
information regarding the companies
they represent. Any question about the
authorized status of a company can be
checked by calling the Florida
department of financial services at
877-693-5236 or for out of state agents,
800-413-3089 .We urge all agents and
brokers to adhere to this admonition.
For more information on unauthorized
entities go to FAIA’s website at
www.faia.com and under the Education
section you will find a handout that you
can download.
FLORIDA Agents -Important !!!
Per DFS requirements, you need to
sign an Acknowledgement Form in order
to receive CE credit.
1) Go to www.faia.com – Under “Education”, click
“Webinar Information”. Click “Webinar
Acknowledgement Form”
2) Complete all the required information and
transmit the form to FAIA.
3) You have three (3) business days to submit the
form.
Webinar (2 hours)
““Miscellaneous Commercial
Coverages: Part 2”
Tom Ashley, AAI, AIAM, AIP
© Florida Association of Insurance Agents – 2010
11/09