Introduction to Liability Insurance 1 Workshop Programme Introduction

Introduction to Liability Insurance 1

Workshop Programme Introduction Legal background Principles governing the award of damages General principles Employers’ liability insurance Public (general) and product liability insurance Professional liabilities Liability claims Slide 2

Session 1 Introductions -Of me - To each other - To liability insurance

Property policies +$ Insurer Insured Suffers Loss If policy liable/covers loss Slide 4 u slide

Liability policies +$ Insured Insurer If insured legally liable and policy liable/covers loss Slide 5 -$ If legally liable Another party suffers loss u slide

Liability policies pay… If policy liable Indemnifies Insurer Insured’s Defence Costs Insured Damages payable to Claimant If insured legally liable and Claimant’s Legal Costs policy liable Slide 6 u slide

Liability payments Insured’s Defence Lawyers ? ? Reinsurer Insured Claimant’s Lawyers Slide 7 u slide

Liability policies • Employers Liability/Workers Compensation • Public/General Liability • Products Liability • Professional Indemnity • Directors & Officers Liability • Employment Practices Liability • Motor Third Party/Auto Liability • Cyber Liability Slide 8 • Environmental Impairment Liability • Marine Liabilities – Energy – Cargo – P&I – Charterers – Freight Forwarders – Carriers • Aviation Liabilities – Airline – Airport – Aviation Products • Prospectus Liability

Liabilitylatency Liability – the tail An occurrence Claimant Injury or aware of Damage injury results or damage Incurred But Not Reported Slide 9 Claimant Insured makes notifies claim insurer Claim Settled How Long?

Liability programme structure USD 50 M USD 25 M Excess USD 25 M USD 20 M Excess USD 5 M Primary USD 5 M Slide 10

Session 2 Legal background Slide 11

Session 2 - Legal background Slide 12 • • • What is legal liability What are the consequences What consequences are insurable Tort v contract Sources of liability in tort • • – Negligence – Nuisance – Defamation – Intellectual property. – Statute – Strict liability Defences Contract

What is legal liability? • A responsibility in law for the consequences of your actions • Criminal Law deals with an act which is punishable by the State - usually results from a deliberate act e. g. Burglary • Regulatory Law deals with acts which contravene statutory or other regulations • Civil Law deals with any deliberate act or any accidental error or omission adversely affects other people or their property, or affects them financially but no criminal offence has occurred. Slide 13

Consequences of legal liability Slide 14 Type Of Law Consequences Insurance cover Criminal defence costs, Some policies e. g. D&O fines, disqualification, may cover criminal prison defence costs Regulatory Legal representation costs, disqualification, fines Some policies e. g. D&O may cover criminal defence costs Civil Compensation/Compen satory Damages, defence costs, claimants’ costs, punitive/exemplary/mult iple damages Policies will cover all aspects other than punitive damages which may be covered or may be excluded

Contract v Negligence Breach Of Contract Or Negligence Customer Defendant Third Party Negligence Slide 15

Civil Liability • Tort (“a civil wrong”) - Case Law Or Statute – Fault – Strict Liability • Contract – Can be same duty as tort – Can be slightly different duty – Can be in addition to tortious duty – Can modify tortious duty • Enlarge • Reduce Slide 16

Liabilities in tort • • • Slide 17 Negligence Nuisance Trespass Defamation - Libel and slander Breach of Intellectual Property e. g. copyright, patent Strict Liability Breach Of Statutory Duty Breach of Confidence Breach Of Privacy Breach of Fiduciary Duty/Trust

Negligence “The omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate human affairs would do or doing something that a prudent man would not do” Blyth v Birmingham Waterworks Company (1856) Slide 18

Negligence – 4 steps Negligence Duty of care owed Breach of duty caused damage Plaintiff Must Prove All Four Slide 19 Forseeable that breach would cause damage

Negligence – 4 steps Negligence – Duty Of Care The Neighbour Test Must Prove All Four Donoghue. Plaintiff v Stevenson (1932) Slide 20

Negligence – Duty Of Care • Professionals can be liable for negligent misstatement that they knew would be relied upon by third party - special relationship - forseeability - advice acted upon causing loss Hedley Byrne v Heller and Partners (1963) Slide 21

Negligence – Breach of duty Fails to do what a reasonable man would do or does what a reasonable man would not do: • Magnitude of risk (likelihood and severity) • Ease at which can be eliminated/reduced • Current state of technical or scientific knowledge • Nature and age of the victim • Desirable activity? Slide 22

Negligence – Causation Damage too remote if not reasonably forseeable Overseas Tankship (UK) Ltd v Mort’s Dock and Engineering Co. Ltd (‘The Wagon Mound’) (1961) Slide 23

Nuisance • ‘A wrong done to a man by unlawfully disturbing him in the enjoyment of his property, or, in some cases, in the exercise of a common right’ • The law protects the use and enjoyment of land • Nuisance is usually continuous and must result in some kind of damage (or inconvenience) or threat of damage • Examples include emission of noise, smells, encroachment of tree roots, overflows from blocked drains and buildings in poor repair falling onto adjacent property Slide 24

Trespass • to person – assault – battery – false imprisonment • to goods • to property – Slide 25

Defamation • The law of defamation is designed to protect a person’s reputation • A defamatory statement exposes them to hatred, ridicule or contempt • There are two categories: – Libel – where the defamation is in a permanent form, such as in writing or on television etc. – Slander – where the defamation is in a non-permanent form, e. g. made verbally • There is no requirement to prove that damage has resulted from the libel Slide 26

Breach Of Intellectual Property • • • Copyright Patent Trademark Passing off Broadcasting rights • Music rights Slide 27

Strict Liability - Common Law Rylands v Fletcher (1868) Slide 28

Breach of Statutory Duty Must prove: • Statute was intended to allow a civil remedy • Imposed a duty on defendant • Statutory duty was owed to claimant • There was a breach of duty • Damage suffered was caused by breach and kind which was contemplated by statute Slide 29

Liabilities in tort • • • Slide 30 Negligence Nuisance Trespass Defamation - Libel and slander Breach of Intellectual Property e. g. copyright, patent Strict Liability Breach Of Statutory Duty Breach of Confidence Breach Of Privacy Breach of Fiduciary Duty/Trust

Defences in Tort • • Self defence Necessity Statutory Authority Act of God Consent and “volenti fit injuria” Contributory negligence Limitation Slide 31

Contributory Negligence HELP! Law Reform (Contributory Negligence) Act 1945 Slide 32

What liabilities are most relevant Type Of Liability Policy Principal Sources Of Liability General Liability Negligence, Nuisance, Contract, Strict Liability Products Liability Strict Liability, Contract, Negligence Professional Indemnity Contract, Negligence, Breach of confidence, defamation , intellectual property Motor/Auto Negligence Slide 33

Impact of Contracts Contract v Negligence Breach Of Contract Or Negligence Customer Defendant Third Party Negligence Slide 34

Requirements For A Valid Contract • Offer & acceptance • Consideration • Intention to create a legally binding agreement • Capacity to contract Contracts Do Not Need To Be In Writing Slide 35

Implied v Express Terms Breach Of Contract Breach Of Implied Term Definition Contractual term which Contractual term is implied by relationship expressly agreed by whether or not parties have expressly agreed it Example Professional uses reasonable skill and care Good must be fit for purpose Slide 36 Breach Of Express Term Professional guarantees performance of work. Product must meet certain specification to deliver work by certain date.

Breach Of Contract Claims Injury Breach Causes Damage Pure Economic Loss Slide 37

Impact Of Contracts Liability Clauses Indemnities Warranties Implied Contra ctual Liabilty Express Contractual Liability Implied Contractual Liability Tort Liability e. g. Negligence Limitations Exclusions Slide 38

Impact Of Terms In Contracts • May increases insured’s duties to other party • May extend liability beyond tortious duties – Contractual guarantee, indemnity clauses • May restrict right of recourse against the other party – Hold harmless clauses • May limit insured’s liability to other party – limitation, exclusion clauses Slide 39

Health & Safety Risk Assessment Step 1 Step 2 • Look for hazards that can cause harm • Decide who might be harmed e. g. employees, visitors • Evaluate risks and decide whether precautions are adequate or actions required Step 3 Step 4 • Record findings • Update assessments regularly or when workplace changes Step 5 Slide 40

Limitation Slide 41

Session 3 Principles governing the award of damages

Principles governing the award of damages • Basis of damages for property damage, personal injury and economic loss • Compensatory v punitive/exemplary damages and their insurability Slide 43

Damages Compensatory Economic Slide 44 Punitive Non-Economic

Compensatory Damages – Personal Injury – Economic Losses Special • Loss of earnings (pre-settlement) • Cost of medical care (pre-settlement) General • Future Loss of Earnings • Cost of future medical treatment and care Slide 45

Compensatory Damages – Personal Injury - Non. Economic Losses General • Pain and suffering • emotional distress • Loss of Amenity (loss of enjoyment of life including loss of consortium and companionship) • Loss of expectation of life ? • Other non-tangible losses Slide 46

Damages In Contract • To place the claimant in the position he would have been had the contract not been breached • Consequential losses must be foreseeable • Liquidated damages – pre-agreed penalties must have been drawn to the attention of the defendant when contract was formed • Liability insurance usually excludes liquidated damages Slide 47

Punitive Damages • • Also known as “exemplary” damages Damages awarded to plaintiff to punish the claimant above compensatory award Designed to punish and deter acts/acts of bad faith, fraud, malice, oppression, outrageous, violent, wanton, wicked, and reckless. • Not a feature of U. K. law usually but awarded in other jurisdictio e. g. US • Often excluded Slide 48

Punitive Damage Case BMW of North America Inc. v Gore (1996) Slide 49

International Considerations • Legal systems vary • Law of contract and negligence common features • Strict Liability for Products in many territories • Litigation process varies • Some countries more litigious than others Slide 50 u slide

US Legal System • Higher awards • Class Actions • Punitive Damages • Costs not awarded against losing claimant • Contingency fees • Plaintiffs’ bar • Jury trials • Strict Liability in some states • Workers Compensation system encourages Product Liability claims • Litigious environment • Consumer protection oriented society • State and Federal Law – possibility of forum shopping Slide 51 51

Damages Compensatory Economic Slide 52 Punitive Non-Economic

Session 4 General principles of liability insurance

General principles of liability insurance • Compulsory policies • What liability policies pay • Triggers - claims made v causation v occurrence v reported occurrence • Costs in addition v costs inclusive • Limits and deductibles • Underwriting the risk Slide 54

Compulsory liability policies Policy Motor Compulsory Workers Compensation Most countries Nuclear liability Marine Energy Professional indemnity for some professionals Common General Liability, Products Liability, Environmental liability Less common Slide 55 Almost everywhere

What Liability Policies Pay • Compensation/Damages • Defence costs • Claimants’ costs • Other costs? – Court attendance costs – Criminal defence costs – First party costs occasionally Slide 56

Liability Policy Triggers • Causation - Injury caused during the Period of Insurance • Occurrence – would cover a loss that occurs during the Policy Period • Claims Made – ‘claim first made (and reported? )against the Insured during the Policy Period’. N. B. claims made after policy period arising from circumstances first advised during the period also covered • Occurrence Reported – ‘occurrence first reported by the Insured to underwriters during the Policy Period • Manifestation - claims manifesting themselves in the policy period Slide 57

Claims Caused - U. K. Employers Liability Asbestos Inhaled 1965 Asbestosis Claim Made Develops 2007 2008 2009 1965 EL Policy Responds? Slide 58

Claims Occurring – General/Public/Products Liability Explosion Claim Made Occurs 2006 2007 2008 2009 2006 GL/PL Policy Responds Slide 59

Claims Made Building Claim Made Collapses Design Provided 2007 2008 2009 2010 Professional Indemnity Policy Responds Slide 60

Claims Made Clauses • Retroactive Dates • Extended reporting periods/Discovery Periods - “Tail” Coverage • Run off Slide 61

Claims Made – Retroactive Date Building Claim Made Collapses Design Provided Retroactive Date 2007 2008 2009 Claim Not Covered Slide 62 2010

Claims Made Run Off Design Provided Architect Retires Claim Made 2006 2007 in 2008 2009 Run Off Covers Claim Slide 63

How Much Is Covered? • Any One Claim/Occurrence or Annual Aggregate • Costs in addition/Costs exclusive or Costs inclusive • Excess/Deductible (is it inclusive or exclusive of costs? ) Slide 64

Costs In Addition v Costs Inclusive GBP 5 M Costs inclusive Damages + Damages Claimants’ Costs + + Claimants’ Costs Defence Costs Slide 65 GBP 5 M Costs in Addition No Limit Defence Costs

Liability Programme Structure GBP 50 M GBP 25 M Excess GBP 25 M GBP 20 M Excess GBP 5 M Primary GBP 5 M Excess/Deductible Slide 66

Underwriting the risk – determining the rate Factors to consider Overheads Slide 67 Claims costs IBNR Profit

Limit considerations Activity Cost US exports Slide 68 Size Legal requirement

Increased Limits Limit of % of primary £ 1 m £ 0 100% £ 5, 000 30% £ 10, 000 35% £ 25, 000 Limit £ 25 M = 165% of £ 5 M limit premium Slide 69

Excess Layers – Follow Form GBP 50 M GBP 25 M Attachment point GBP 25 M Excess GBP 25 M GBP 20 M Excess GBP 5 M Primary GBP 5 M Could also use coinsurance or facultative reinsurance Slide 70

Excesses/deductibles Limit Excess/deductible Each loss or aggregate Encourage risk management Avoid attritional losses Slide 71

Session 5 Employers Liability

Employers Liability • • Slide 73 Different Employee Compensation systems Employers Liability in the U. K. Employers Liability policy coverage Underwriting Employers Liability

Employee Compensation Systems • Fault (Employers Liability) v No Fault (“Workers Compensation”) Slide 74

Workers’ Compensation And Employers’ Liability Systems WC • No fault EL • Fault - based • Medical expenses • Loss of earnings • Specified diseases • ‘full compensation including pain and suffering Slide 75 • Any disease

Compensation Systems • “No- fault” Government funded through social security e. g. New Zealand, France, Italy, Spain • “No fault” insured with private insurers e. g. Belgium, USA States, Denmark Australia • “Fault” based through private insurers e. g. Ireland, U. K. Many systems are a blend e. g. U. K. some payments made by government but supplemented by EL system Slide 76

Who Can Sue? • The employee or their dependents – Can sue in tort e. g. Ireland, U. K. – May have to forego right to sue under Workers Compensation system – May only be able to sue for “gross negligence” • The state can sue for recovery of benefits • Other insurer Slide 77

Duties of Employers • Employ competent employees • Provide and maintain – – Slide 78 Safe place of work Safe system of work Safe and suitable plant Compliance with statutory duty

U. K. Compulsory Employers Liability Insurance 1998 regulations amended 1969 Act Limit of Indemnity Certificates • Minimum Limit of Indemnity £ 5 m • • • Inclusive of costs and expenses Slide 79 Issued within 30 days Record Limit if less than £ 5 M Record excess Layers Supply copies on demand Electronic copy now allowed

EL Compulsory Insurance Regulation 2 of 1998 Regulations prohibits exclusions of liability for: • Any breach of the policy by the insured following an event (e. g. late claim reporting) • Any lack of reasonable care • Any breach of statute by the employer • Any failure to keep records in connection with the policy • Any excess or deductible Can include a condition stating that the Insured will repay insurers all amounts insurers pay which they would not have been liable but for the regulation Slide 80

Where Is Employers Liability Insured? • As part of Workers Compensation policy – USA • As separate policy – unusual – U. K. Ireland, Cyprus • As part of General Liability policy – commonly Slide 81

Injuries • • • Slide 82 Slips, trips, or falls on same level Struck by moving, including flying/falling object Handling, lifting and carrying Falls from height Exposure to harmful substances Fire and explosion Contact with moving machinery Struck by moving vehicle Trapped Drowning/Asphyxiation Electrical

Industrial Disease • Deafness • Asbestosis/ Mesothelioma • Silicosis • Industrial Asthma • RSI/ULD/HAV • Lower Limb Disorder • Stress • Sick building syndrome Slide 83 • Passive Smoking • Acoustic Shock • Cancers (Skin - Sunshine? ) • Welding Fumes • Nanotechnology

Employers Liability To indemnify the insured for their legal liability for accidental bodily injury death to employees arising out of or in the course of their employment in the business within the territorial limits including Claimants’ costs and expenses awarded against Insured Defence costs incurred with insurer’s written consent Slide 84

Who Is An Employee? Defined in policy includes • • • person under contract of service Hired or borrowed employees Labour master and person supplied by him Labour only subcontractors Self employed individuals under control of Insured Driver or operator of hired in plant Trainee or person undertaking work experience Voluntary helpers Specially agreed – Working Partners Watch Recruitment Agencies - Dacas v Brook Street (2005) Slide 85

Bona Fide Or Labour Only? • • • Slide 86 Bid for contracts competitively Provide their own materials and equipment Have authority to employ others Paid by contract rather than hourly, daily, weekly, monthly Have their own insurances Determine the way work is carried out Provide their own training and Health and Safety Remedy any defects in work Supervise the work themselves Have contracts with other employers

Employers Liability Extensions Exclusions • Unsatisfied court judgements • Court attendance expenses • Health & Safety defence costs • Indemnity to Principals • Indemnity to Other Persons • Employees temporarily abroad • Corporate Manslaughter defence Costs? • Radioactive contamination • Offshore work • Where compulsory motor insurance required • Excess Employers Liability Terrorism Slide 87

EL Rating Considerations • • • Business/Activities Historical activities/changes in business Wages (broken down) Historical payroll Claims experience – Claims by claim – Disease v Non-Disease’ – Trends – Accident records • Health & Safety policy & practice • Premium adjustable on wageroll? Slide 88

Disease Latency Exposure Illness Develops Illness diagnosed Claimant makes claim Incurred But Not Reported Slide 89 Insured notifies insurer Claim Settled How Long?

Session 6 General/Public & Products Liability

General/Public Liability • Policy coverage • Underwriting considerations Slide 91

General/Public Liability - cover To indemnify the insured for their legal liability for accidental bodily injury death or damage to material property to third parties arising from the Insured’s business in the territorial limits plus Claimants’ costs and expenses awarded against Insured Defence costs incurred with insurer’s written consent Slide 92

Products Liability To indemnify the insured for their legal liability for accidental bodily injury death or damage to material property to third parties arising out of goods sold, supplied, renovated, repaired, altered treated, tested, installed in connection with the business in the territorial limits plus Claimants’ costs and expenses awarded against Insured Defence costs incurred with insurer’s written consent Slide 93

Public & Products Liability - Usual Exclusions – other policies • • • Professional advice (given for a fee) Injury to an employee Property in care custody and control Arising from watercraft or aircraft Vehicles licensed for road use Slide 94

Public & Products - Usual Extensions • • • Court attendance costs Indemnity to Principals Cross liabilities Motor Contingent Liability Excess Motor/Auto Contingent Employers Liability • Excess Employers Liability Slide 95 • Temporary work overseas • Overseas Personal Liability • Indemnity to Employees/Directors (at Insured’s request) • Member to Member Liability (sports and social) • Advertising Liability • Vendors Liability • Financial Loss

Public & Products Liability - Usual Exclusions – other policies • • • Professional advice (given for a fee) Injury to an employee Property in care custody and control Arising from watercraft or aircraft Vehicles licensed for road use Products recall Slide 96

Public & Products Liability Exclusions - No appetite • Contractual liability • Liquidated damages, fines and penalties, punitive damages • Pollution unless arising from sudden identifiable unintended and unexpected incident • USA Pollution • Punitive damages • Damage to product supplied • War/Radioactive Contamination/Date Recognition • Terrorism • Asbestos Slide 97

Efficacy Exclusion of injury or damage caused by the failure of a product to fulfil its intended function e. g. fire alarm does not work fire spreads and build burns down Slide 98

Financial Loss Cover Indemnifies the insured for their legal liability financial loss not arising from injury or damage to property: Not standard difficult to obtain Often claims made Exposure for pure financial loss claims in negligence limited and often contractual liability is excluded Example Boiler breaks down. Factory loses power, production and profit. There is a claim for loss of production and loss of profit. Claim against boiler manufacturer for pure financial losses involved. Slide 99

Policy conditions • • • Reasonable care Change in risk Reporting of circumstances Claims handling Insurers right to pay limit and relinquish control Adjustment of premium Cancellation Dual insurance - Non-contribution Arbitration/disputes Interpretation Slide 100

Public Liability - Underwriting Premises - Condition and structure of building - Dangerous processes - Likelihood and number of visitors - Other tenants - Proximity to other buildings Slide 101 Work Away - Type of work (heat, height, underground) - Nature of buildings worked in - Proximity to other property

Products Liability Underwriting Considerations • • Products including packaging , instructions/advice, purpose/use Product sourcing Position in supply chain Imports (how much where from? ) Historical activities/changes in business Sales (broken down) Exports (how much? Where to? ) Risk management – quality management, systems of check, sale and purchase contracts, labelling, tracing etc. • Claims – Claims record – Recalls – Prosecutions Slide 102

Product Guarantee & Recall • • Slide 103 Liability for injury or damage Repair & Replacement – Cost of replacing, reworking, recovering products that have failed to perform their intended function due to fault design manufacture, installation Financial Loss – Suffered by customers as a result of product failing to perform its function Recall (1 st Party or 3 rd Party? ) – Costs incurred in recalling products where their continued use or consumption may cause the insured to incur a legal liability – Expenses only of recalling i. e. correspondence, advertising, transportation – Costs of examination and destruction – installation

Session 12 Professional liabilities

Professional liabilities • • Slide 105 Professional indemnity Cyber liability Directors & Officers Liability Employment Practices Liability

Professional Indemnity/Liability Indemnifies Insured against their legal liability for damages and legal costs and expenses arising out of their professional activities. Slide 106 Negligent Design Bad advice Incorrect specification

PI Purchased By…. “Old” • Medical Practitioners • Solicitors/Barristers • Accountants • Architects/Engineers • Surveyors • Valuers/Auctioneers • Estate Agents • Travel Agents Slide 107 “New” • • • Broadcasters Publishers IT consultants IT/Telecom providers Marketing & Advertising agencies • Management consultants • Financial consultants

PI Purchased Why? • Compulsory • Practicing requirement • Contractual requirement • Protection Slide 108

Professional Indemnity Rating Considerations • • • Slide 109 Type of Profession Fees –split by type of work Large clients and contracts Experience of principals Ratio of qualified to unqualified Sub-contracted work Geography Claims experience Limit/Excess Risk management (including contractual controls)

Cyber Liability • Indemnifies/pays on behalf of insured damages and legal costs as a result of their legal liability arising from their internet, extranet and email activities e. g. wrongful transmission of virus, libel and slander, breach of privacy or network security • Claims made during policy period • Limit in the aggregate for the period • Usually costs inclusive • Deductible usually applies Slide 110

Cyber Liability policies First party Third party • Damage due to hacking or virus attack • Business interruption • Cyber crime • • Slide 111 Errors and omissions Breach of copyright Defamation Breach of privacy/network security • Transmission of virus

Cyber “Liability” Policies What do they cover? • Cyber liability – viruses • Privacy liability • System damage • System business interruption • Consequential reputational harm • Regulatory actions and investigations • The policy holder’s privacy breach notification costs • Third party privacy breach notification costs • Cyber crime • Multimedia liability – libel, copyright etc. • Advertising injury • Technology errors and omissions • Court attendance costs • Crisis communication costs Slide 112

Directors And Officers Liability Accounting Irregularities Indemnifies directors and Bad officers against their Acquisitions personal liability for Breach securities damages and legal costs Wrongful law and expenses arising out Trading Health & Safety of a wrongful act Offences committed in their Investigation capacity as directors and Costs officers Sexual Harassment By Director Slide 113

D&O Purchased Why? • Protection of individual directors and officers • Protection of company balance sheet if can reimburse • Some directors will not serve without it • Support of insurance company in claim Slide 114

Directors & Officers Liability • Claims made • Usually costs inclusive • Usually annual aggregate limit although some any one claim policies • Often nil deductible on personal side but deductible on Corporate reimbursement side Slide 115

D & O Rating Considerations • • • Proposal form Business – financial institutions pharmaceutical Unfair competition Acquisitions or flotations Size – assets or turnover Finance - public or private, stock exchange listings Ownership - no. of shares who owns them US shares, US operations Regulatory environment Directors - experience, role Claims & Insurance history Cover required including limit/retention Slide 116

Employment Practices Liability Sex Discrimination Indemnifies Insured against the legal liability for wrongful employment practice including damages and legal costs and expenses Race Discrimination Wrongful Dismissal Breach of Contract Age Discrimination Breach of contract Slide 117

Employment Practices Liability • • Claims made Usually costs inclusive Usually annual aggregate limit Often has deductible Management Liability Policies Including D&O EPL and Corporate Liability Now Common Legal Expenses also now cover Slide 118

EPL Purchased Why? • Protection • Support of insurance company in claim • Source of legal and employment advice Slide 119

Session 8 Key aspects of liability claims

Liability claims • Key aspects • The process • Reserving Slide 121

Property claims +$ Insurer • • • Insured Suffers Loss If policy liable/covers loss Is the cause of loss covered Did the loss occur in our policy period Did the insured comply with policy terms including disclosure How much was lost Is there any indication of fraud What information do we need to answer these questions? Slide 122

Liability claims +$ -$ Insured Insurer If insured legally liable and policy liable/covers loss • Is the claim covered • Did the loss occur/was claim made in policy period • Did the insured comply with policy terms including disclosure Slide 123 If legally liable Another party suffers loss • Did the insured cause someone injury, damage of financial loss • Are they legally liable? • How much is being claimed? • Should we and the insured defend the claim and how? • Should we settle the claim and how much?

Liability Claims Process Notification And Investigation Injuries? Claim forms? Slide 124 Appoint solicitor Necessary? Expertise? Who? Role Reserve and monitor Strategy on claim Control defence costs Negotiate Litigate Rehabilitate ADR? Settle or dispose Review

Notification Of Claim • • • Slide 125 What requires notification Injuries/Occurrences Claims Obtain Claim form Investigate early

Liability Claims Forms • What happened – the circumstances – Date/time – Name and address of person injured • • • Slide 126 Extent of injury Extent of property damage Does the insured believe they were at fault Witnesses Contact details

Excess Layers • Agree what claims should be notified • Agree what information you require on such claims to enable you to monitor claim and control the process • Get regular updates • Stay close to primary insurer Slide 127

Claims can deteriorate due to • • Optimism about liability and quantum Lapse of time between claim and investigation Wait and see approach Incorrect analysis Reacting to events Maintaining low reserves for long periods Infrequent or substantial increases in reserves Slide 128

Reserving • Throughout the life of a claim, it is essential to maintain an adequate reserve or estimate • This should reflect the likely amount of money the claim will cost the underwriter • Reserves have a direct impact on future premiums & are vital to ensure there is sufficient money to pay claims Slide 129

Assessing the value of the claim Year 6 Year 7 Year 8 Year 9 Year 10 • Reserve £ 1, 000 • Reserve £ 2, 500 Varies due to: Underwriters knowledge of circumstances Underwriters knowledge of state of law The value of money • Reserve £ 5, 000 • Reserve £ 10, 000 • Reserve £ 8, 000 Loss development Slide 130

Reserves • Sum recoverable • Claimant and other parties’ costs • Defence costs Slide 131

The end or the beginning…. ? Slide 132