WORKERS COMPENSATION AND EMPLOYERS LIABILITY COVERAGE
insures against claims for an employee’s work-related injuries or diseases, provided the claims are compensable by statute and/or imposed by law as damages. The policy incorporates other state’s insurance and is activated by the appropriate entry on the declarations. Employees exempt from the law can be covered by a voluntary workers compensation endorsement. Employers liability coverage provides protection when an employee sues their employer for damages outside of the state’s workers compensation statute.
LONGSHORE AND HARBOR WORKERS’ COMPENSATION ACT COVERAGE
protects workers who load or unload vessels, repair or build them, and do this work on or over navigable waters of the United States of America, the Longshore and Harbor Workers Compensation Act calls for. It does not cover seamen, sailors, masters, and crewmembers of any vessel, as well as clerical, office, automation support, and security personnel. Coverage is added to a workers compensation policy by endorsement.
MARITIME EMPLOYERS LIABILITY (JONES ACT)
What is the Jones Act?
The Jones Act requires that waterborne transportation of merchandise between two points in the United States must take place aboard a vessel that is U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-crewed. This is also known as “coastwise trade” and is governed by cabotage laws. The word “cabotage” is French and means “between the capes.”
Legal Background
The law generally referred to as the Jones Act is found in Section 27 of the Merchant Marine Act of 1920 (46 U.S.C. 55102) and is named after its author, Senator Wesley Jones (R-WA). U.S. cabotage laws actually pre-date the Jones Act to the founding of our nation and the First Congress of the United States. Transportation of merchandise is not the only activity governed by cabotage laws: They also pertain to passengers (46 U.S.C. 55103), salvage (46 U.S.C. 80104), towing (46 U.S.C. 55111), and dredging (46 U.S.C. 55109).
The Outer Continental Shelf Lands Act of 1953 (43 U.S.C. 1333) extends cabotage laws to the U.S. territorial sea and declares installations permanently or temporarily attached to the seabed to be points in the United States. This can apply to sites concerned with exploration, development, or production of natural resources. Merchandise transported to or from oil and gas facilities located on the U.S. Outer Continental Shelf is therefore required to be carried by Jones Act-qualified vessels.
EMPLOYMENT-RELATED PRACTICES COVERAGE
is available for the legal costs to defend claims against sexual harassment, wrongful termination and discrimination, and the actual legal liability for such acts. The coverage is known by various titles through a number of insurers. Employment-related practices liability (ERPL), employment practices liability insurance (EPLI), management risk protection, employers errors and omissions, and Americans with Disabilities Act (ADA) insurance all provide similar protections. Many policies cover employees as additional insureds or can be endorsed to do so if needed.
DIRECTORS AND OFFICERS LIABILITY COVERAGE
insures corporate directors and officers against claims that are usually brought by stockholders and that allege loss of value because of officer and director mismanagement. More individuals owning stock and more stringent standards imposed by the courts indicate a growing risk. An outside directorship liability endorsement 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 the company’s request.
FIDUCIARIES LIABILITY (PENSION, WELFARE AND EMPLOYEE BENEFIT FUNDS) COVERAGE
protects trustees and fiduciaries of pension, welfare and employee benefits plans from personal liability under the Employee Retirement Income Security Act of 1974 (ERISA). Certain provisions of the act establish the standards for prudent action by fiduciaries. The act permits the purchase of insurance out of the assets of the plan or trust to protect the plan and its fiduciaries, as long as the insurer permits recourse against the individual trustee.
WATERCRAFT COVERAGES
Hull and Machinery Coverage
Hull and machinery insurance, a subset of ocean marine insurance, protects insured vessels against physical damage caused by a peril of the sea or other covered perils while the vessel is in transit over water. Examples include tugboats, barges, floating machinery, etc.
Hull and machinery insurance policies can be cover a single vessel or the whole fleet of a ship owner, depending on how they are written. A very important provision of this insurance is “the collision liability” provision, which protects the owner of the craft against legal liability arising out of the owner’s vessel colliding with another ship, damaging property or cargo in the process. Collision coverage is also commonly addressed in a P&I policy form. The Collision liability clause does not apply to legal liability arising out of bodily injury or death, or property damage to fixed installations, such as piers. This kind of liability is more commonly addressed by a protection and indemnity (P&I) coverage.
Protection and Indemnity
This insurance, usually referred to as “P&I,” provides cover for ship owners, operators, and charterers for third-party liabilities encountered in the commercial operation of entered vessels. The main risks usually covered under P&I are liabilities, expenses, and costs for:
Loss of life, injury and illness of crew, passengers and other persons
Cargo loss, shortage or damage
Collision
Damage to docks, buoys and other fixed and floating objects
Wreck removal
Pollution
Fines and penalties
Mutiny and misconduct by crew
Crew repatriation and substitution
Damage to property on board the insured vessel
Quarantine
Vessel Diversion Expenses
Unrecoverable General Average contributions
Vessel’s proportion of General Average
Loss of life, injury and illness of crew, passengers and other persons
Cargo loss, shortage or damage
Collision
Damage to docks, buoys and other fixed and floating objects
Wreck removal
Pollution
Fines and penalties
Mutiny and misconduct by crew
Crew repatriation and substitution
Damage to property on board the insured vessel
Quarantine
Vessel Diversion Expenses
Unrecoverable General Average contributions
Vessel’s proportion of General Average
Vessel Pollution Liability
Our Oil Pollution Cleanup Coverage is designed for the Brownwater Industry and is primarily intended to cover vessel owner responsibilities under OPA 90 and CERCLA for discharge or potential oil discharge from bunkering spills and grounding or sinking.
Coverages can include:
Oil Pollution Act (OPA90)
Non-OPA
Fines and Penalties
State Fines and Penalties
Alaska COFR
CERCLA
Non-CERCLA
Criminal Defense
California COFR
COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE
is designed to cover bodily injury and property damage liability exposures related to operating a commercial venture. Instead of having to select and group the specific hazards to be insured, which may result in potential insurance program gaps, this coverage involves a comprehensive approach. The basic areas covered by the CGL include: the insured’s ownership or use of the premises, the insured’s ongoing operations on and off the premises, products manufactured, sold or distributed by the insured, completed operations of the insured, personal and advertising injury liability of the insured, and medical payments coverage.
CGL coverage also covers liability assumed by the insured under a defined contract. All coverages are subject to policy definitions, exclusions and limitations.
The basic CGL coverage form can be customized and tailored with a multitude of optional forms and endorsements that broaden, delete or restrict the contract’s core coverages. This will help form a contract specifically designed for the individual insured.
Two CGL policy programs are available. The first is the “occurrence-based” coverage that provides protection for covered losses when the injury occurs during the covered policy period, regardless of when notification of the loss or claim takes place. Under this policy, the key to coverage is the date on which the covered loss or injury actually occurs.
The second is the “claims-made” coverage form. In these forms, coverage is triggered by the actual filing date or receipt of the claim, in addition to the date or time period in which the loss or injury occurred. Any covered loss or claim filed within the policy period is handled by that policy, regardless of when the actual loss or injury occurred, subject to the retroactive date. The retroactive date is shown on the declarations. It can be the policy inception date or any date prior to it. However, for complete protection, it should be the date on which claims-made coverage first began. This is because prior to that date, loss or injury was covered by an occurrence policy. The carrier of a claims-made policy will only consider losses or injuries that occur after the retroactive date.
OWNERS AND CONTRACTORS PROTECTIVE (OCP) LIABILITY COVERAGE
is designed to protect either a property/business owner or a general contractor. This policy type concerns the potential liability exposure resulting from the negligent act of a subcontractor or an independent contractor hired to perform work on the insured’s behalf. While the independent or subcontractor is the actual purchaser of the policy, the protection is for the insured property/business owner or the general contractor for whom the work is being done. Coverage is limited to a specific location and project. Using this form of insurance, the general contractor or owner doesn’t have to be added as an additional insured to the subcontractor’s policy. OCP Liability Coverage also provides limits of insurance dedicated to the project.
EMPLOYEE BENEFITS LIABILITY COVERAGE
addresses the requirements of employers to provide their employees with benefits information. This provides coverage for damages that result when an employer does not fulfill its notification requirements and the employee is denied access to benefits he or she could have received otherwise.
ENVIRONMENTAL LIABILITY
ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE
insures the pollution exposure associated with the insured’s property and operations, including costs of cleanup and remedial or corrective action due to a third-party demand or a government order. The pollution exclusion in general liability insurance effectively eliminates coverage for damages for the bodily injury, property damage, and cleanup costs associated with most types of pollution events. Because of this, customized protection for the pollution exposure of numerous insureds in this category is essential.
UNDERGROUND STORAGE TANK (UST) LIABILITY COVERAGE
The United States Environmental Protection Agency (EPA) requires most property owners or business operators with an underground storage tank containing a petroleum product to show proof of financial responsibility. This is in case the contents of that underground storage tank cause any bodily injury or property damage, including corrective action costs, to a third party. This includes underground storage tanks designed to hold heating fuels as well as those for fueling vehicles.
INTERNATIONAL INSURANCE COVERAGE
Property and casualty insurance for buildings, equipment and operations in the United States does not usually extend to distribution centers, plants and operations in foreign countries, so separate international insurance coverage is needed. In addition, automobile, general liability and workers compensation exposures must be covered for operations or employees of the insured away from the United States.
RAILROAD PROTECTIVE LIABILITY COVERAGE
provides protective liability coverage for railroad owners from the vicarious acts of contractors or subcontractors that work either for them or on their behalf while under contract. It covers claims for bodily injury or property damage and for physical damage to certain railroad-related property that arise out of operations the designated contractor performs. The contractor or subcontractor that does the work purchases this coverage in the name of the railroad and for its benefit.
While the railroad is the named insured, it is not the party that purchases the coverage: the designated contractor purchases it. The provided coverage applies only to the specific job location.
CYBERLIABILITY COVERAGE
This coverage continues to evolve. Many insurance companies are developing products to provide errors and omissions and liability coverage for companies operating in cyberspace. Some examples of new forms include coverage for allegations of patent infringement, virus introduction and violation of confidentiality. There is no standard form, name or consistency in coverage grants. In spite of this, if an insured has an active online presence, the exposure is real and is growing so fast that this coverage should be considered.
EXCESS LIABILITY COVERAGE
provides insurance limits in excess of underlying general liability, automobile liability, employers liability, and/or other scheduled liability policies. This policy has no unique forms and is strictly a following form policy. The coverage available in the underlying policies is also available in the excess policy, and exclusions in the underlying policies are also exclusions in the excess policy.
UMBRELLA COVERAGE
is a stand-alone liability policy purchased as a supplement to an insured’s general liability, automobile liability, and employers liability policies. It provides excess limits over the underlying coverage. Because it has its own exclusions and amendments, umbrella coverage policies also provide broader coverage than underlying coverage versions. Losses covered under that broader coverage are subject to a self-insured retention (SIR) that is commonly either $10,000 or $25,000.The umbrella policy is triggered when the limits of the underlying insurance are exhausted or when a claim not covered by an underlying policy occurs.
PROPERTY COVERAGES
BUILDING
refers to the building or structure. It also includes inside and outside fixtures, permanently installed machinery and equipment, and equipment used to service the building. Some examples of building service equipment are refrigeration, cleaning and cooking equipment, though many other types of equipment are covered as well.
BUSINESS PERSONAL PROPERTY
is the furniture, fixtures, machinery, equipment, stock and other personal property owned by the insured that is used for their business. Labor, materials or services that are furnished or arranged by the insured on personal property of others, use interest of the insured as a tenant in improvements and betterments made to the premises, and leased personal property for which the insured is contractually responsible to provide coverage are also considered business personal property.
PERSONAL PROPERTY OF OTHERS
applies to personal property that is considered to be in the care, custody or control of the insured while it is situated on their premises.
FLOOD
applies to direct loss or damage by flood to buildings and their contents on either a replacement cost or an actual cash value basis. Coverage for flood damage is available in four different ways. The flood cause of loss may be included by using a flood cause of loss form. A difference in conditions (DIC) policy may be purchased with flood as a covered cause of loss. Alternately, insureds can purchase a separate flood policy from a nonstandard insurance company. In areas declared eligible by the Federal Insurance Administrator, agents and brokers may arrange for insurance directly with the National Flood Insurance Program (NFIP) or with participating insurance companies. When properties are located in NFIP-eligible flood zone areas, most carriers will require that a NFIP policy be purchased for its maximum limit before they provide excess flood coverage.
CONTRACTORS’ EQUIPMENT COVERAGE
provides physical damage insurance on mobile or contractor equipment located at the insured’s premises, jobsites or in transit. The property covered ranges from employees’ tools to scaffolding to cranes and everything in between. If an item of property is used to do a job and not licensed for road use, it probably qualifies as contractors’ equipment and should be covered. This is a flexible policy that can be tailored to respond to specific situations. Coverage can be on an all risk or named cause of loss basis.
SURETY BONDS
CONTRACT–BID BONDS
guarantee that the contractor bidding for a contract will fulfill the terms of the bid for the contract owner, assuming the bid is accepted, or else forfeit the bond penalty.
CONTRACT–PERFORMANCE BONDS
guarantee that a contractor will perform its contractual obligations for the benefit of the owner. The bond obligations are those outlined in the contract and the attached plans and specifications. These obligations are owed to the owner in return for a sum of money the owner agrees to pay to the contractor. This bond is issued after bid bonds have been posted and the lowest responsible bidder has been awarded the contract.
CONTRACT–COMPLETION BONDS
are given by a project owner to a lender or mortgagee. It guarantees a construction project will be successfully financed to completion, free of liens. This should not be confused with a performance bond given by the contractor to the owner guaranteeing faithful performance of the building or construction contract.
LICENSE AND PERMIT BONDS
are as numerous as the regulations affecting commercial activities. When a governmental entity requires an individual or business to obtain a permit or a license to perform an action or service, a bond is normally required to guarantee that the licensee or permit holder will perform as promised.
CONTRACT–LABOR AND MATERIAL PAYMENT BONDS
guarantee that a contractor will pay all legitimate bills for labor and material in connection with a construction contract. The bond may be written as a separate bond or as an integral part of a performance bond.
CONTRACT–PERFORMANCE OF SERVICE OR SUPPLY BONDS
are the most commonly requested contract bonds. They guarantee that a contract to furnish specified supplies or materials is completed according to its stated terms. These bonds are used mainly for public contracts but can be used for private ones too.
TERRORISM INSURANCE COVERAGE
is not specifically excluded in most standard insurance coverage forms, but many companies exclude both domestic and foreign terrorism by endorsement. Under The Terrorism Risk Insurance Act (TRIA), coverage must be offered but the client can accept it, refuse part of it, or refuse all coverage as they see fit. Whatever decision is made, an endorsement explaining the coverage and how the backstop provisions of the act will respond must be issued. At the time of this writing, the terrorism backstop is based on the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) that extends federal backup coverage until 2014.
COMMERCIAL AUTO COVERAGES
BUSINESS AUTO COVERAGE
provides selected liability and physical damage coverages without the need for numerous additional forms and endorsements. Liability coverage can be provided for all autos, limited to selected groupings of autos or only applied to specifically scheduled autos. Coverage can also be provided for when non-owned autos are used by employees or when autos are hired.
Collision and overturn is one optional physical damage coverage. Comprehensive coverage, which is loss from causes other than collision or overturn, is often purchased. Another less expensive option, specified causes of loss coverage, is similar to the comprehensive option but pays only from loss caused by named perils. The physical damage coverages are often provided on a scheduled vehicle-only basis, but can be provided for all autos or selected groupings only, just as with the liability coverages.
AUTO MEDICAL PAYMENTS
reimburse passengers and operators of vehicles for medical and funeral expenses arising from accidents which occurred while traveling in, entering or exiting an insured vehicle. The named insured and his or her family members are also covered when traveling in any auto, and even when struck by any auto while walking.
COLLISION COVERAGE
protects the owner against loss from collision or upset of motor vehicles. When a motor vehicle is sold under a finance contract or agreement, the loss payee (lender) usually requires that the purchaser provide a policy with collision and comprehensive coverage.
COMPREHENSIVE COVERAGE
protects the insured’s business autos and other motor vehicles against most causes of loss such as fire, theft or other physical damage hazards, such as glass breakage. It does not cover loss due to collision and overturn and certain road hazard maintenance perils.
HIRED CARS
rented or hired by a business for the operator can be insured to cover the liability exposure. A hired physical damage option is also available.
NONOWNERSHIP AUTOMOBILE COVERAGE
protects the insured to the extent of liability imposed by law and within policy limits against claims for accidents due to employees, partners or other agents operating their own automobiles in the course of the insured’s business.
UNINSURED/UNDERINSURED MOTORISTS COVERAGE
provides coverage that pays the insured, within coverage limits, for damages caused by drivers of uninsured or underinsured automobiles when such drivers are legally liable for the injury to the insured. Each state establishes the minimum limits of liability for this coverage and also whether the coverage is for bodily injury only or extends to cover property damage. Many states require that limits equal to the bodily injury and property damage limits be offered to the insured.
PROFESSIONAL LIABILITY COVERAGES
ARCHITECTS OR ENGINEERS PROFESSIONAL LIABILITY COVERAGE
insures economic loss to an architectural or engineering firm or an individual arising from claims for alleged negligent acts, errors or omissions in the course of professional duties. Coverage can be modified to fit the needs of soil engineers involved with building projects.
ERRORS AND OMISSIONS INSURANCE–MISCELLANEOUS COVERAGE
is tailored for various firms and individuals who provide advice and guidance for clients whose operations depend on such counsel. An example is a management consultant.
SAFETY AND ENVIRONMENTAL CONSULTANTS ERRORS AND OMISSIONS COVERAGE
insures professional liability, errors and omissions arising from engineering and technical services. Examples of services are those associated with asbestos and other pollution problems. A principal risk involved is when an option is provided that a given area or operation meets Environmental Protection Agency (EPA) standards when EPA later rules that the area or operation, in fact, does not.
DIRECTORS AND OFFICERS (D&O) LIABILITY
A type of liability insurance covering directors and officers for claims made against them while serving on a board of directors and/or as an officer. D&O liability insurance can be written to cover the directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences.
FIDUCIARY LIABILITY
The responsibility on trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to errors and omissions (E&O) in the administration of employee benefit programs as imposed by the Employee Retirement Income Security Act (ERISA).
EMPLOYMENT PRACTICES LIABILITY
The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds.
COMMERCIAL CRIME COVERAGE
Typically provides different types of crime coverage, such as: employee dishonesty coverage; forgery or alteration coverage; computer fraud coverage; funds transfer fraud coverage; money and securities coverage; and money orders and counterfeit money coverage.