Areas of Focus
Liability Coverages include not only general liability coverage but also the common liability coverages that are related to the premises or operations of a business.
Liability Coverage—COmmercial general liability-occurrence basis
This coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury, property damage or personal and advertising injury arising from the insured’s premises, operations, completed operations and products. The occurrence basis means that only occurrences that happen during the policy period are covered. There is no reference as to when the claim must be presented.
Most will use the occurrence basis. They should never go without this coverage since slips and falls can happen so quickly. The severity can be low, but it can also be high since we cannot control how a person falls, what is damaged or how they will react to treatment.
Liability coverage—Commercial general liability - claims-made basis
This coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury, property damage or personal and advertising injury arising from the insured’s premises, operations, completed operations and products. The claims-made basis means that only claims that are presented during the policy period are covered without consideration for when the occurrence happened (unless there is a retrospective date).
The claims -made form is used only if the coverage cannot be purchased on an occurrence basis.
liability coverage—Directors and officers liability
Insures corporate directors and officers against claims, usually by stockholders, alleging loss arising from mismanagement. Claims may also be made by other than stockholders against the corporation for mismanagement, which would also be covered. Outside Directorship Liability Policy Form is available, as supplementary protection, to assure sufficient limits for the exposure created when a company's director, officer or employee serves in an outside director position at its request. The coverage is not standard and may vary significantly between carriers, as well as by type of business, i.e., for-profit, not-for-profit, closely-held or publicly-traded. Any operation with outside directors will need this coverage or risk losing the outside directors.
liability coverage—employee benefits liability
Covers the cost to employees that results from incorrect information provided regarding their employee benefits. This DOES NOT INCLUDE fiduciary responsibilities or any discrimination or harassment situations. A simple example is not providing the employee with the appropriate COBRA information following termination that result in the ex-employee losing benefits. Coverage is provided by most carriers on their own filed forms. Coverage is provided either with a separate coverage part or as an endorsement to the CGL. ISO has developed a form but it is not yet in wide usage. Key comparisons are the types of benefits covered, claims-made vs. occurrence and the employer contribution.
Any automotive operation that provides employee benefits should purchase this coverage.
liability coverage—employment related practices
Covers lawsuits brought by employees (past, present or prospects), or governmental entities against the insured employer, alleging wrongful discharge, discrimination or certain types of harassment. ISO has developed an employment practices liability policy that can now be used as a standard of comparison. Companies have developed their own forms and they vary tremendously. Using the ISO standard should help agents advice insureds on the best direction to take.
Automotive operations have experienced many claims of harassment. It is often difficult to draw the line between innocent fun and malicious abuse. This coverage is important along with regular procedures and processes to help everyone understand what can and cannot be allowed.
liability coverage—owners and contractors protective liability (ocp)
This liability coverage is designed to protect either a property/business owner or a general contractor for the potential liability exposure that results from the negligent act of a subcontractor or an independent contractor hired to perform work on the insured’s behalf. The independent or subcontractor is the actual purchaser of the policy but the protection is for the insured who is either the property/business owner or a general contractor for whom the work is being done. Coverage is limited to a specific location and project. This coverage could be provided by attaching an additional insured endorsement to the contractor’s policy but not as completely. The separate policy allows the project owner/general contractor to better control the policy and make sure the limits are not diluted by other claims against the subcontractor.
Any automotive operation that is having extensive works done on their premises may want to consider requesting a contractor obtain an OCP policy in their name rather than just requiring a certificate of insurance. The cost may be slightly higher, but the added protection may prove invaluable.
liability coverage—railroad protective
This liability coverage is designed to protect a railroad, a general contractor or the project owner for the potential liability exposure that results from the negligent act of a subcontractor or an independent contractor hired to perform work on the insured’s behalf while working on or around railroads. The independent or subcontractor is the actual purchaser of the policy but the protection is for the insured who is either the railroad, property/business owner or a general contractor for whom the work is being done. Coverage is limited to a specific location and project. The Commercial General Liability Policy Form excludes construction or demolition projects that are at or near railroad properties including railroad tracks, beds, trestles, tunnels and the like. This is a limited coverage liability policy to buy back coverage.
Automotive operations close to a railroad track MAY be required by the railroads to purchase this coverage.
liability coverage—special events
Special events bring about many exposures not anticipated in a normal business. However, many businesses will participate in special events and may need special coverage during the event. In other cases, businesses may sponsor special events and therefore bring about unanticipated exposures that need to be addressed. Coverage for special events can be covered under a standard CGL policy. The insured may decide to purchase another policy to prevent dilution of their own limits in order to participate in the event. Coverage can be secured from the standard market or may need to be obtained from a specialty underwriter.
Automotive operations that sponsor special events should consider purchasing a special policy to protect the limits on their regular policy.
Property coverage provides first-party coverage on the insured’s tangible assets from a variety of causes of loss. There are many forms and approaches starting with the general and moving to the specific. The range of options allows an agent to work with a customer to develop the approach that is right for them.
property coverage—building and personal property coverage form
There are four types of property associated with every structure:
- The building or structure itself;
- The business personal property inside the building;
- The personal property of others in the building; and
- The improvements and betterments that have been made for the benefit of the current occupant.
All are covered under the Building and Personal Property Coverage Form. All can be provided with a specific limit or can be combined in various ways as blanket. A separate cause of loss form must be attached.
Automotive operations will normally use this form for most property coverage.
property coverage—building and business personal property coinsurance
Coinsurance is a technique to encourage proper insurance to value. The commercial fire rating section in the ISO manuals contemplate a minimum of 80 percent coinsurance. Any higher coinsurance receives a credit and lower receives a debit. The insured must choose a coinsurance percentage; it is then indicated on the declarations page. Failure to carry sufficient limits to satisfy the coinsurance requirement will cause a penalty at the loss settlement time.
Property coverage—building and business personal property alternatives to coinsurance
- Agreed value—suspends coinsurance but requires the insured submit annual signed statements of value indicating the 100 percent value of the property insured and then purchase either 90 percent or 100 percent of that value.
- Functional replacement cost—allows the insured to purchase the coverage necessary to rebuild or replace based on utilitarian needs. Examples include: replacing a three-story building that has two vacant stories with a one-story building or replacing wooden office furniture with cubicles.
- Peak season—allows the insured to increase business personal property values at peak times while keeping values lower at other times of the year. The insured picks the time period and the increased amount.
- Reporting forms—allows the insured to pay only for the business personal property needed while maintaining insurance to value. The insured schedules the maximum coverage needed for the year and pays a premium based on 75 percent of the value. He/She then reports the actual values periodically. At the end of the year the carrier calculates the premium difference. The insured will have the exact coverage needed for the time period.
Property Coverage—Condominium Coverage Form
Unit Owners Coverage
Business personal property owned by a unit owner, and personal property of others in the care, custody or control of the insured, may be covered under this form in the same manner and with the same general options as are associated with the Building And Personal Property Coverage Form except that there are considerations given to the uniqueness of condominium bylaws and coverage requirements. Coverage is provided by ISO but other carriers offer similar forms.
If an automotive operation is a part of a commercial condominium they will need this coverage. Their bylaws should be reviewed carefully to confirm that coverage is adequate.
Property Coverage—Commercial Output Policy
A commercial output policy is a property coverage part originally designed for the automobile manufacturer but now more appropriate for any large property exposure. The coverage is generally broader than the standard Property Coverage Form, with more flexibility. There are several built-in coverages but the deductibles tend to be higher. Most commercial output policies are unique to each company but the AAIS and the ISO both have developed forms to aid their members. A comparison of forms is necessary to determine the advantages and disadvantages. Particular attention must be paid to exclusions; property included and excluded, inland marine extensions, property at other locations, and any special limitations. The rating system is unique and a decision on whether the rate can be changed during the year is usually necessary.
This coverage could be beneficial to many owners of larger properties.
Property Coverage—Boiler and Machinery
This coverage has four separate parts:
- Damage from an accident to the items covered
- Damage to the insured’s other property caused by an accident to the items covered
- Loss of income due to damage to the item and/or damage to the other insured property
- Damage to property of others and bodily injury to others caused by an accident to the items covered.
The items covered are boilers and other heating devices. In addition most machinery and equipment including electronic devices can be included. ISO has a Standard Boiler and Machinery Policy Form. The major writers of this coverage use their own forms but the structure is similar to the ISO version.
Both building owners and tenants, if heating with boilers, will want to consider this coverage in order to prevent coverage gaps.
Property Coverage—Legal Liability
This form provides property coverage for direct physical loss or damage, including loss of use, to property of others in the insured's care, custody and control, for which the insured is legally liable. Coverage is not for the benefit of the insured but is for the benefit of the property owner. That owner must be the one who files a claim for damages. The coverage is provided with a standard ISO coverage form. The insured chooses basic, broad or special cause of loss. The determination of the cause of loss is made based on the wording of the agreement between the property owner and the insured. Since this is legal liability only, the only cause of loss that will actually be covered is that which is required by the contract, so purchasing a broader cause of loss than the contract states is a waste of money.
Property Coverage—Additional Debris Removal
Whenever there is a building or business personal property loss, debris is created. The debris must be removed in order for the reconstruction to begin. Payment for debris removal in the Building and Personal Property Coverage Form is limited to 25 percent of the loss. An additional $10,000 is provided as an enhancement to the basic form. This may not be sufficient for some insureds, so the option is available to buy additional limits. Limits are purchased on a per- location basis instead of the standard per- building basis. This allows insureds to consider their entire location and determine potential debris removal considerations.
Unusual construction or difficult-to-access places can contribute to an increase of debris removal expense.
Automotive operations often have hazardous waste and special debris concerns that could add significantly to the debris removal cost so this coverage should be considered.
Property Coverage—Ordinance or Law Coverage
The standard ISO Building and Personal Property Coverage Form excludes coverage for any costs that are associated with building law changes. There are three specific types:
- The first deals with laws that require a building to be torn down if more than a certain percentage is destroyed and it does not meet current codes. There is no coverage for the destruction of the undamaged portion of the building. Coverage A would pay for this.
- Second, there is no coverage for the demolition of the undamaged portion. Coverage B would pay for this.
- Third, there is no coverage to bring a building up to code in order to gain permits to build. Coverage C would pay for this.
Coverage may be purchased under an ISO form using CP 04 05. Some carriers offer this coverage in a slightly different manner.
Automotive operations may be subject to ordinances about particular businesses in certain areas of town that could result in their having to move following a sizable loss. A partial loss could quickly turn into a total loss with only the partial loss covered. In addition, since the public regularly enters the building there could be American with Disabilities Act considerations that could involve increased cost of construction should ANY loss occur.
Property Coverage—Outdoor Trees, Shrubs and Plants Enhancement
The standard ISO Building and Personal Property Coverage Form considers outdoor trees, shrubs and plants as not covered property. This endorsement changes them to covered property but with a specific limit and some added exclusions. There is an option to include or exclude vehicle damage. The standard ISO Building and Personal Property Coverage Form does provide a limited amount of coverage for trees, shrubs and plants. If this is not sufficient to satisfy a property loss, endorsement CP 14 30 should be considered.
Property Coverage—Replacement Cost
The standard valuation on an insurance policy is actual cash value. The actual cash value is replacement cost today less depreciation. This valuation basis indemnifies the insured and puts him/her in the same condition after the loss as before. However, since it is difficult to rebuild old for old, the alternative valuation of replacement cost is encouraged. Replacement cost coverage is available in most property forms, inland marine forms and some auto forms. It is an important tool but if the insured wants to have replacement cost valuation, he/she must also insure to replacement cost which can be a large increase of limits and premium.
Property Coverage—Utility Services - Direct Damage
The standard ISO cause of loss forms exclude loss due to utility service disruption of communication, power or water. This ISO endorsement returns the cause of loss to the policy. The disruption may be due to damage to off-site facilities or power lines as selected by the insured. This does not cover consequential loss due to spoilage.
Automotive operations cannot function without the utility services operating. If there are items that would be damaged by a sudden loss of water, power or communication, serious thought should be given to purchasing this coverage.
Workers Compensation coverages are standard because of state mandates but variances occur because each state establishes its own workers’ compensation statute. In addition, there are federal laws that must be taken into consideration whenever a non-federal employer works in an area that is under the control of the federal authorities. The coverage is definitely not one-size-fits-all.
Workers’ Compensation Coverage—Workers Compensation and Employers Liability
Part A covers all injuries and diseases that must be covered according to the individual state workers compensation statutes. All benefits are paid in accordance with the schedule provided by the states. Part B covers the liability that may be imposed beyond the state statutes subject to the exclusions and conditions of the policy. The National Council of Compensation Insurers provides a standard form that is a model for all member companies to use. Certain states have alternatives but all are fairly similar. Part A is mandatory and dictated by the states; however, Part B is more insurer-defined and should be compared by carrier, particularly the exclusions.
Automotive operations should always carry this coverage if they have any employees.
Workers’ Compensation Coverage—Federal Employers’ Liability Act (FELA)
Covers not only those employees who actually work for the U.S. federal government, but also those who work for or on railroads that cross interstate lines and may not normally be subject to state workers compensation coverages. Coverage is provided by an endorsement to the workers compensation policy.
Automotive operations with contracts to operate on or near the railroads or who work on or near federal bases may need to consider this coverage.
Workers’ Compensation Coverage—Longshore And Harbor Workers Coverage
Covers workers or maritime employees in positions such as longshoremen, harbor workers, shipbuilders, ship-breakers, ship repairers or other employees engaged in loading, unloading, repairing or building vessels. It also covers employees who work on navigable waters, adjoining piers, wharves, dry docks, terminals, building ways and marine railways. It does not cover masters, captains, or crews of vessels unless further endorsed to voluntarily cover those positions. Coverage is provided by an endorsement to the workers compensation policy. Automotive Operations that operate on the water, especially on navigable waters, such as rivers and oceans, may be required to purchase this coverage.
Workers’ Compensation Coverage—Stop Gap Or Employers Liability Coverage
There are gaps between the workers compensation policy and the CGL which can leave an insured uncovered. In most states the carriers attempt to correct these by use of the employers liability coverage. However, in monopolistic states, the workers compensation carrier is the state so the CGL carrier is the one who attempts to fill the gap. Coverage may be offered as a stand- alone policy or as an endorsement to the CGL policy. There is no standard policy so comparisons should be made based on the limits offered, exclusions and limitations.
If the automotive operation is located in any of the monopolistic states they should purchase stop- gap liability. All other workers compensation policies should include the employers liability as Part B of the policy.
Workers’ Compensation Coverage—Voluntary Compensation
Each state has a definition as to who must be covered and who is exempt under workers compensation. The employer then has the opportunity to include the exempt employees using the voluntary compensation endorsement.
Automotive operations should consider including all exempt employees by using this form in order to eliminate coverage gaps.
Provides all of the coverages that the insured should need if he/she owns, leases or hires vehicles. It also covers the insured for the non-owned usage of a vehicle when an employee or volunteer uses their vehicle on company business. The schedule allows the insured to sculpture the coverage as needed by the use of symbols. The policy can cover all owned, leased, hired and non-owned autos or can be more selective.
Commercial Auto Coverage—Liability
Provides coverage for bodily injury and property damage to others who are damaged by an insured vehicle.
Commercial Auto Coverage—Physical Damage
Collision - provides coverage for covered vehicles that are damaged by an impact with another vehicle, object or animal.
Other than collision - provides coverage for damage to covered vehicles by any cause of loss other than collision and other items specifically excluded.
Commercial Auto Coverage—Uninsured Motorist
Provides coverage to the insured for bodily injury that they have suffered caused by an uninsured motorist. It does not respond if the motorist is underinsured. The limit should be equal to the limit of the bodily injury carried on the policy.
Commercial Auto Coverage—Underinsured Motorist
Provides excess coverage to the insured for bodily injury they have suffered caused by an underinsured motorist. It does not respond if the motorist is uninsured. The limit should be equal to the limit of the bodily injury carried on the policy.
Commercial Auto Coverage—Personal Injury Protection
Provides coverage necessary to meet the requirements of state -mandated "no-fault" coverages.
Commercial Auto Coverage—Hired Car
Provides coverage for the insured on any vehicle that is hired by the insured. Physical damage coverage may also be purchased. A car must be hired for less than six months in order to be considered hired and not leased. This coverage may be purchased with owned auto coverage or as a standalone.
Commercial Auto Coverage—Non-Ownership Automobile Liability
Provides coverage for the employer when an employee or a volunteer uses their vehicle on the employer’s business and causes damages. Coverage may be extended to the employee, but only through a special endorsement.
Commercial Auto Coverage—Garage Policy
The garage policy was developed to provide comprehensive liability coverage to protect both the general liability and automobile liability exposure using only one coverage form in order to prevent gaps and overlaps. The garage coverage form contains premises liability, products liability, and automobile liability coverage. It also includes physical damage protection to vehicles (owned either by the insured or his garage customers).
Commercial Auto Coverage—Garagekeepers
Garagekeepers coverage provides coverage for loss or damage to customers’ cars. The coverage may be provided on a legal liability basis or without regard to legal liability. It may be offered as direct coverage that is excess over insurance carried by customers or as direct coverage on a primary basis.
All automotive operations that work on customers’ vehicles should carry this coverage.
Excess liability provides coverage that supplements the limits of an insured's General Liability, Automobile Liability, and Employers Liability policies. An Excess policy's coverage is triggered when the limits of the underlying insurance have been exhausted, or when a claim develops that is not covered by an underlying policy and exceeds the self- insured retention.
Excess Liability Coverage—Excess Liability Policy
Covers only excess liability over scheduled policies. This policy is very similar to an umbrella but all terms and conditions are defined in the underlying coverages. This policy merely extends the limits. Coverage is provided by many carriers using their own forms. Key areas of comparisons are exclusions and following form terms.
Automotive operations should carry either an umbrella or an excess policy. If unusual terms have been negotiated in the underlying policy, the excess liability could provide the most complete coverage; but if the underlying is standard, the umbrella may provide some gap coverage not available in the excess.
Excess Liability Coverage—Umbrella Policy
An umbrella serves two purposes. First, it provides excess liability limit over the scheduled underlying policies. Second, it fills some gaps in the underlying coverage. There is no standard umbrella policy. Therefore, coverage comparison is a must. Key areas of comparison are exclusions, deductible, whether a follow-form is offered over unusual underlying exposures, limits, and defense cost (in or out of the limits).
Automotive operations should carry either an umbrella or an excess liability policy because of the potential for catastrophic loss due to the number of persons in the establishments who could be damaged.
Surety / Bonds
There are many types of bonds offered by the surety market. They are separated into two primary categories—Contract and Non-contract. The Contract bonds (including bid, contract and payment bonds) are used when a contractual obligation is made regarding specific contracts. The non-contract bonds (including license, permit, and judicial bonds) relate to obligations and performances that must be met but are not due to a contract.
The bid process can be a long one. When it is complete the customer expects the contractor or supplier to deliver as promised. Many times a bid bond is required that obligates the surety to honor the bid bond by either issuing a contract bond if the contractor or supplier receives the contract or pay a penalty that will offset the cost of reopening the bid process.
Automotive operations may enter into contracts with governments for services and supplies when a bond is required.
Contracts are a way of doing business. One way to guarantee that a contract is performed is to require that a bond be posted for its successful performance. The bond provides a level of security beyond the signature on the contract. The purchaser of the services is assured that either the contract will be carried out or a Surety will compensate him.
Automotive operations may enter into contracts with governments for services and supplies when a bond is required.
Most municipalities and states require license bonds of many types of business in order to obtain permits or licenses. This coverage is available using Surety Association forms.
Aviation coverages are provided by specialty markets. These coverages are needed for any operation that utilizes aircraft in their business. The applications are extensive and coverage is unique and more closely associated to Ocean Marine than other types of coverage.
Aviation Coverage—Aircraft Policy
Aircraft policies are business auto policies for vehicles that fly. There are four coverages available:
- Liability for bodily injury or property damage to those hurt by the plane
- Passenger liability for bodily injury or property damage to those in the plane
- Medical Expense coverage for passengers and crew
- Hull coverage or physical damage coverage for the plane itself.
Aircraft coverage is very specialized with a limited marketplace and few standardized forms. Automotive operations with multiple locations over a wide geographic area may find that a small airplane is more convenient than commercial airline flight.
Aviation Coverage—Passenger Liability
Covers the bodily injury to passengers on an airplane. This is separate coverage from bodily injury to others and is written on a per seat/aggregate basis. All airplane coverage is written by nonadmitted carriers on forms developed by those carriers. Key comparisons are on the limits by coverage type and exclusions.
When an aircraft is owned, this coverage should be purchased to protect any passengers that may be on the plane.
Employers and employees both know the critical role that the workplace plays in offering a better quality of life through a robust benefits package.
What employees may not know, however, is how to capitalize on benefit offerings, or how to select the right benefit options for themselves or their families. And employers may not know how to properly analyze claims made on benefit plans, how to interpret data to adjust their benefits offerings to deliver more of what employees want, or when to develop wellness programs to prevent excessive medical expenses for conditions caused in part by unhealthy lifestyles.
To help workers better grasp and employ benefits knowledge beyond orientation and yearly renewal periods, employers need an online collection of benefits and wellness materials that serves as a real-time solution generator for employee benefits questions.
Data collected and housed in a central online program will allow employers to refine popular offerings, pinpoint underutilized benefits and analyze employee insurance claims—all of which adds value your benefit package.
Besides data storage and sorting functions, employers need a central hub for educational materials that explain the complex world of health insurance to their employees, alleviating the burden of providing in-depth personal instruction.
Employers need a central hub for educational materials that explain the complex world of health insurance to their employees.
Providing a benefits suite can be a dynamic asset for your company that bolsters your bottom line in two critical ways: by acting as a magnet for attracting and retaining top talent, and by keeping your employees and their dependents healthy and free from expensive claims.
Sophisticated benefits analysis tools give workers a chance to research various benefits options and discuss their elections for the coming year with their families.
To recoup the costs of offering benefits and to achieve gains in productivity, morale, and talent acquisition and retention, it is critical to highlight the value of your company’s benefit package. Having a proper platform in place to disseminate information is crucial. An ideal platform should include support in the form of:
- Notifications that send out alerts prior to important benefits deadlines
- Multiple education resources that explain differences between health plan options, medical savings accounts and retirement information, customized to the needs and ages of a diverse workforce
- A plan selector tool that uses personalized lifestyle data to help employees decide what benefit options are best
- A tracking calendar that enables users to stay informed about important deadlines pertaining to medical savings accounts
- Comprehensive plan information for health insurance companies or network providers
- A direct line of communication with the HR department
The cost of health care is rising at an unsustainable rate, placing a significant burden on employers. With new health care reform rules, some employers may be tempted to drop coverage and accept a penalty instead, but should also consider the employee satisfaction implications.
Instead of potentially overreacting by dropping benefits altogether, employers can choose to manage costs through claims analysis. While health claims data analysis has long been an option, getting good data can often be challenging. To get full value out of claims analysis as quickly as possible, employers need a tool that is extensive and illuminating, and includes certain features, such as:
- Outlining rules and calculating model or projected budgets for various types of health and retirement plans and medical savings accounts
- Using health and prescription claims data to uncover high-cost problem areas
- Benchmarking costs and claims against national data
- Illuminating cost drivers for targeted wellness initiatives
- Showing the impact of plan design changes
- Surveying your employee population to determine their priorities
- Gauging what employees value from underused offerings
Discover these features and more with PlanAdvisor® and Decision Master® Warehouse, industry-leading client portals complete with customizable, comprehensive benefits solutions. For more information, contact SOLV Risk Solutions today.
To recoup the costs of offering benefits and to achieve gains in productivity, morale, and talent acquisition and retention, it is critical to highlight the value of your company’s benefit package.