Business Insurance – with appropriate insurance, a business’ profit and investment can be adequately protected in case an accident happens or a disaster strikes. Business insurance consists of different types of coverages to address different needs that a business may have: property, liability, commercial auto, worker’s compensation, professional liability, bond, etc…
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Property Insurance includes all types of insurance covering property loss exposures of both businesses and nonprofit organizations. The most common commercial property coverages are provided under standardized forms developed by Insurance Services Office (ISO) and the American Association of Insurance Services (AAIS).
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Causes of Loss – Basic Form covers fire and other specifically listed perils:
- Fire
- Lightning
- Explosion
- Windstorm or hail
- Aircraft or vehicles
- Riot or civil commotion
- Vandalism
- Sprinker leakage
- Sinkhole collapse
- Volcanic action
- Fungus (provided as an additional coverage)
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Causes of Loss – Broad Form covers basic form perils plus:
- Falling objects
- Weight of snow, ice, sleet
- Water damage
- Collapse (provided as an additional coverage)
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Causes of Loss – Special Form covers broad form perils, theft, and other perils that are not excluded.
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With replacement cost coverage, an insured recovers on the basis of replacement cost at the time and place of the loss. The insurer makes no deduction for loss of value because of physical depreciation.
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Actual Cash Value (ACV) equals replacement cost minus depreciation based on the property’s useful life.
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Builders Risk Insurance insures buildings under construction, including building materials and supplies intended to become a permanent part of the building, and temporary structures such as scaffolding and forms.
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Soft Costs Coverage can be added to a builders risk policy to cover various incidental expenses that might result from a physical loss to a building project, such as additional interest, advertising expenses, or real estate taxes.
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National Flood Insurance Program (NFIP) is a program through which the US government provides flood insurance to property owners in eligible communities.
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Flood Insurance Rate Map (FIRM) is a map showing exact boundaries for special flood hazard areas, the various flood zones, and base flood elevations.
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Business Income is the sum of (1) net profit or loss that would have been earned or incurred if operations had not been suspended plus (2) normal operating expenses, including payroll, that continue during the suspension.
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Extra Expenses are expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.
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Business Income (and Extra Expense) Coverage Form insures both business income and extra expense losses (even if the extra expense does not reduce the business income loss)
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Business Income (Without Extra Expense) Coverage Form insures business income but covers extra expense only to the extent that it reduces the business income loss.
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Marine Insurance – as understood internationally, insurance on vessels and their cargoes; in the US, includes both ocean marine insurance and inland marine insurance.
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Ocean Marine Insurance – term used in the US to differentiate traditional marine insurance from inland marine insurance.
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Inland Marine Insurance – insurance on a wide range of usually land-based risks that have some link to transportation or communication.
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Contractors Equipment Floater – a policy that covers mobile equipment or tools while located anywhere in the coverage territory.
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Bailees’ Customers Policy covers damage to customers’ goods while in the possession of the insured, regardless of whether the insured is legally liable for the damage.
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Equipment Breakdown Insurance covers loss resulting from the accidental breakdown of almost any type of equipment that operates under pressure or that controls, transmits, or uses mechanical or electrical power.
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Businessowners Policy (BOP) is a package policy that combines, in a simplified manner, most of the property and liability coverage needed by small and medium-sized businesses such as stores, offices, and apartment buildings.
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Surety Bond is a written contract in which one party guarantees another party’s performance for a third party. There are three parties to a surety bond:
Principal is the party who bears primary responsibility on a surety bond and who has the duty to perform for the obligee’s benefit.
Obligee is the party to whom a bond is given and who is protected against loss.
Surety is the party to a surety bond who answers to the obligee for the principal’s failure to perform as required by the underlying contract, permit, or law.
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Liability is a legal responsibility for the consequence of an act or omission
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A wrongful act or an omission, other than breach of contract, that invades a legally protected right and for which a remedy may be obtained.
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Negligence is the failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.
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Hazard is a condition that increases the frequency or severity of a loss.
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All damages (including special damages and general damages) that are intended to indemnify a person for injury or damage sustained.
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Special Damages are compensatory damages that have resulted or will result in measurable dollar amounts of actual loss to the person who has sustained injury or damage.
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General Damages are compensatory damages (such as damages for pain and suffering) that are presumed to follow from the type of wrong for which the injured person has made a claim.
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Loss of Consortium are the loss of the benefits that one spouse is entitled to receive from the other, including companionship, affection, and sexual relations.
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Punitive Damages are damages awarded in addition to compensatory damages, to punish the defendant, teach the defendant a lesson, or deter others from engaging in the same kind of conduct.
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Statue of Limitations terminates a claimant’s right to enforce a claim after a specific time period.
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Libel is defamatory statement expressed in writing.
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Slander is a defamatory statement expressed in speech.
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Nuisance is anything interfering with another person’s use or enjoyment of property.
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Strict Liability is liability that is not based on negligence or intent to cause harm.
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Vicarious Liability is a legal responsibility that occurs when one party is held liable for the actions of a subordinate or an associate because of the relationship between them.
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Contractual Liability is liability assumed under any contract or agreement.
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Statutory Liability is liability imposed by a specific statute or law.
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Hold-Harmless Agreement is a contract provision in which one party agrees to indemnify another.
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Premises and Operations Liability is the legal responsibility of an organization for bodily injury or property damage caused by either of the following:
- An accident occurring on premises (land, buildings, or other structures) owned, leased, or rented by the organization
- An accident occurring away from such premises, but only if it arises out of the organization’s ongoing (as opposed to completed) operations
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Products Liability is the legal responsibility of the manufacturer, distributor, or retailer to the user or consumer of a product. The liability arises out of the manufacture, distribution, or sale of an unsafe, dangerous, or defective product and the failure of the manufacturer, distributor, or retailer to meet the legal duties imposed with respect to the particular product.
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Completed Operations Liability is the legal responsibility of a contractor, repairer, or other entity for bodily injury or property damage arising out of the entity’s completed work, including defective parts, or materials furnished with the work.
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Personal and Advertising Injury is injury that results from numerous offenses such as false detention, malicious prosecution, wrongful eviction, slander, libel, use of another’s advertising idea, and copyright infringement.
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Fire Legal Liability Coverage is coverage that insures liability for fire damage to premises while rented to the named insured or temporarily occupied by the named insured with the owner’s permission.
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Medical Payments Coverage is coverage that pays medical expenses of injured persons regardless of whether the insured is legally liable.
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Commercial General Liability (CGL) Coverage Form is a coverage form used for insuring an organization’s premises and operations liability loss exposures and products and completed operations liability loss exposures.
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Host Liquor Liability Coverage is coverage for a person or an organization that serves alcoholic beverages to others but is not in the alcoholic beverage business; it covers the insured host against liability for accidents caused by persons who become intoxicated as a result of the insured’s serving of alcoholic beverages.
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Occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
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Bodily Injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
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Property Damage is physical injury to tangible property, including resulting loss of use of that property, and loss of use of tangible property that is not physically injured.
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Occurrence Coverage Trigger is the event that triggers coverage under an occurrence-based coverage form: the occurrence of bodily injury or property damage during the policy period.
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Claims-Made Coverage Trigger is the event that triggers coverage under a claims-made coverage form: the first making of a claim against any insured during either the policy period or an extended reporting period.
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Retroactive Date is the date on or after which injury, damage, or another insured event must occur in order to be covered under a claims-made policy.
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Extended Reporting Period is an additional period (also called a “tail”) following the expiration of a claims-made policy, during which the expired policy will cover claims first made for injury or damage that occurred on or after the policy’s retroactive date (if any) and before policy expiration.
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Employee Benefits Liability Coverage Endorsement is the endorsement that modifies the CGL coverage form to cover damages because of negligent acts, errors, or omissions in administering the named insured’s employee benefits program.
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Certificate of Insurance is a brief description of insurance coverage prepared by an insurer or its agent, commonly used by policyholders to provide evidence of insurance.
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Liquor Liability Insurance covers liability arising out of the serving or selling of alcoholic beverages to others.
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Business Auto Coverage Form covers liability arising out of the ownership, maintenance, or use of autos and physical damage to autos owned, leased, or hired by the named insured. “Auto” means a land motor vehicle, trailer or semitrailer designed for travel on public roads. However, “auto” does not include “mobile equipment”
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Covered Auto Designation Symbols are as follows:
- Symbol 1: any "Auto"
- Symbol 2: owned "Autos" only
- Symbol 3: owned private passenger "Autos" only
- Symbol 4: owned "Autos" other than private passenger "Autos" only
- Symbol 5: owned "Autos" subject to no-fault
- Symbol 6: owned "Autos" subject to a compulsory uninsured motorists law
- Symbol 7: specifically described "Autos"
- Symbol 8: hired "Autos" only
- Symbol 9: non-owned "Autos" only
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Collision Coverage provides coverage for physical loss to a covered auto or its equipment caused by collision of a covered auto with another object or by overturn of the covered auto.
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Comprehensive Coverage provides coverage, subject to certain exclusions, for physical loss to a covered auto or its equipment resulting from any cause except collision or overturn.
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Specified Causes of Loss Coverage provides coverage for physical loss to a covered auto or its equipment caused by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, or vandalism; or resulting from the sinking, burning, collision, or derailment of any conveyance transporting the covered auto. Specified causes of loss coverage, although not as broad as comprehensive coverage, covers several important auto physical damage perils for a lower premium than that for comprehensive coverage.
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Towing and Labor Coverage provides coverage for towing and labor costs incurred when a covered auto of the private passenger type is disabled.
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Transportation Expenses Extension is the extension in the Business Auto Coverage Form that covers expenses incurred for substitute transportation when a covered auto of the private passenger type is stolen.
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Rental Reimbursement Coverage Endorsement is the endorsement that extends the Business Auto Coverage Form to cover the cost to rent a temporary substitute auto when a covered auto has been damaged by any covered cause of loss.
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Individual Named Insured Endorsement is the endorsement that supplements the Business Auto Coverage Form to provide coverages that an individual named insured and his or her family members would have if they were covered under the Personal Auto Policy.
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Drive Other Car – Broadened Coverage for Named Individuals is the endorsement that can be used to extend the coverages of the Business Auto Coverage Form to the individuals named in the endorsement (and their spouses) while using autos they do not own and that do not qualify as covered autos under the policy.
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Uninsured Motorists Coverage provides a source of recovery for occupants of a covered auto or for qualifying pedestrians who are injured in an accident caused by an at-fault motorist who does not have bodily injury liability insurance or has insurance but not enough to pay all of the insured’s damages, by a hit-and-run driver, or by a driver whose insurer is insolvent. Bodily injury UM/UIM pays without deductible. Property damage UM/UIM pays with an automatic deductible of $250, and it also pays for rental car.
In Texas, rejection of this coverage must be in writing.
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Personal Injury Protection pays benefits, regardless of who is at fault, for medical expenses, loss of income, loss of services, and funeral expenses resulting from bodily injury to occupants of a covered auto because of an auto accident. In Texas, rejection of this coverage must be in writing.
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Auto Medical Payments Coverage Endorsement is the endorsement to the Business Auto Coverage Form that covers medical expenses of the named insured (if an individual) and other persons injured in auto accidents, regardless of legal liability.
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Individual Named Insured Endorsement supplements the Business Auto Coverage Form to provide coverages that an individual named insured an his or her family members would have if they were covered under the Personal Auto Policy.
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Drive Other Car – Broadened Coverage for Named Individuals Endorsement can be used to extend the coverages of the Business Auto Coverage Form to the individuals named in the endorsement (and their spouses) while using autos they do not own and that do not qualify as covered autos under the policy.
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Garage Coverage Form is designed to cover the commercial auto and general liability exposures of auto and trailer dealers.
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Motor Carrier Coverage Form is designed to cover the commercial auto exposures of a person or organization providing transportation by auto in the furtherance of a commercial enterprise.
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Garagekeepers Coverage, included in the Garage Coverage Form, provides for damage to customers’ autos in the named insured’s care, which can be provided on a legal liability basis or, for an additional premium, on a direct primary or direct excess basis.
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Trailer Interchange Coverage, included in the Motor Carrier Coverage Form, protects a motor carrier against liability for damage to trailers in its possession under written trailer interchange agreements.
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Worker’s Compensation Insurance covers an employer’s obligation to pay all compensation and other benefits required of the employer by a workers’ compensation law.
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Employers’ Liability Insurance covers an employer against its common-law liability for occupational injury to employees.
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Directors and Officers (D&O) Liability Insurance covers a corporation’s directors and officers against liability for their wrongful acts that would not be covered under a CGL or an auto policy; also covers the sums that the insured corporation is required or permitted by law to pay to the directors and officers as indemnification.
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Employment Practices Liability (EPL) Insurance covers an organization, its directors and officers, and its employees against claims alleging damages because of wrongful employment practices such as sexual harassment, wrongful termination, and unlawful discrimination.
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Fiduciary Liability Insurance covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duties or other wrongful acts.
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Professional Liability Insurance covers liability of individuals or organizations that render services requiring specialized education, knowledge, judgment, or skill and that are predominantly mental or intellectual, as opposed to physical or manual.
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Note: Information provided at this Learning Center is extracted from various text books written by the American Institute for Chartered Property Casualty Underwriters (AICPCU) and from the Texas Department of Insurance (TDI).