Webinar 2 hours Miscellaneous Commercial Coverages Part 2

Webinar (2 hours) ““Miscellaneous Commercial Coverages: Part 2” Tom Ashley, AAI, AIAM, AIP © Florida Association of Insurance Agents – 2010 11/09

You Can Ask Questions! Feel free to ask questions throughout today’s webcast by using the Question Tab.

FLORIDA Agents -Important !!! Per DFS requirements, you need to sign an Acknowledgement Form in order to receive CE credit. 1) Go to www. faia. com – Under “Education”, click “Webinar Information”. Click “Webinar Acknowledgement Form” 2) Complete all the required information and transmit the form to FAIA. 3) You have three (3) business days to submit the form.

Today’s Topics 1) 2) 3) 4) Aviation Insurance Electronic Data Liability Ins. Ocean Marine Key Person Life

Part I – separate class 1) 2) 3) 4) Employee Theft Directors and Officers Liability Pollution Liability Disability Income

Aviation Insurance

Aviation Insurance --- Not standardized. Uses adaptations of other forms, specifically fire and automobile. --- Some insurers write aviation insurance on their own contracts. Others participate in one of the several aviation pools or underwriting groups specializing in writing aircraft insurance.

Aviation Insurance Hull Coverage To protect against the risk of loss or damage to an insured aircraft itself. Two options: 1) All-risk of PD on the aircraft not in flight, and named peril coverage while in flight; 2) All-risk whether in flight or not. Typically, insurers do not offer named peril option in combination hull / liability policies.

Aviation Insurance Hull Coverage “In motion” – most common definition is “while the aircraft is moving under its own power or momentum generated therefrom. ” Of course, includes while the aircraft is in flight. In all other situations, the aircraft is “not in motion. ” Deductibles are normally a percentage of the value, 2 ½%, 5%, 10% are most common.

Aviation Insurance Hull Coverage Most aircraft hull policies are “valued” policies, but some policies are written on an actual cash value or replacement cost basis. Named perils include any or all of these: fire, stationary land damage, windstorms, crash insurance (comparable to automobile collision coverage), and theft.

Aviation Insurance Aircraft Liability Covers public and passenger liability and property damage liability. BI and PD under aircraft liability is very similar to automobile liability, with one exception: in aircraft liability, liability to passengers is treated as a separate exposure.

Aviation Insurance Aircraft Liability A typical aircraft liability policy includes: a) BI liability (excluding passenger liability) b) Passenger liability c) PD liability Also available: Single limit BI and PD (excluding passenger liability; and single limit BI and PD (including passenger liability)

Aviation Insurance Aircraft Liability Essentially, the insuring agreement states that the company will pay damages because of bodily injury, sickness or disease, including death at any time, or injury to or destruction of property, arising out of ownership, maintenance, or use of the aircraft.

Aviation Insurance Aircraft Liability Limits of liability are usually applied in the same manner as in automobile liability policies. For example: 100/300/50. Single limit, for example: $300, 000 BI and PD per occurrence. Territorial limits include: U. S. , Canada, and Mexico. Often, coverage in Mexico is limited to within 100 miles of the U. S. border. In Florida, Bahamas is usually added by amendment.

Aviation Insurance Aircraft Liability Coverage is usually extended to temporary substitute aircraft and, for private business and pleasure craft operators, the use of any nonowned aircraft by or for the named insured.

Aviation Insurance Admitted Aircraft Liability Typically written as an adjunct to Passenger Liability, not applicable to passengers for hire. It provides for principal sum payments for death or dismemberment if, 1) the named insured requests it and, 2) the company is released from further liability. Interestingly, it’s a means by which an insured by save a guest from the necessity of bringing a legal action for injuries.

Aviation Insurance Medical Payments Provides medical expenses for bodily injuries by accident, without regard to legal liability. Similar to automobile med pay in that it provides for medical, surgical, ambulance, hospital, etc. , while in, entering into, or alighting from the aircraft.

Aviation Insurance Special Aviation Insurance Coverages a) Hangarkeeper’s Liability Coverage Protects the insured against legal obligations for injury to or destruction of the aircraft or others in the custody of the insured for storage, repair of safekeeping. Covers all damage not excluded.

Aviation Insurance Special Aviation Insurance Coverages b) Airport and Air Meet Liability Similar to premises and operations liability under a CGL. Covers BI liability and PD liability. c) Product Liability Coverage for manufacturers and sales or repair organizations against liability claims which are attributable to defective products or work.

Aviation Insurance Special Aviation Insurance Coverages d) Cargo Liability Protects against legal liability for loss or damage to cargo or baggage.

Aviation Insurance Exclusions Each of these applies to all the coverages for both hull and liability sections of the policy: ● There is no coverage for aircraft not registered under a standard category airworthiness certificate, in full force and effect, by the FAA.

Aviation Insurance Exclusions The policy will not cover while insured aircraft is: 1) Maintained for any purpose other than the use classification permitted in the policy's Decs. 2) Operated while in flight by: a) Other than the pilot named or described in the declarations (or pilot endorsement); or b) By a declared pilot operating outside the limitations imposed in the declarations; or

Aviation Insurance Exclusions c) In flight under any conditions requiring special permit or waiver from the FAA even if such permit or waiver has been granted. In addition to these general policy exclusions, the following exclusions apply also to hull insurance: 1) There is no coverage for loss caused by conversion, embezzlement or secretion by …

Aviation Insurance Exclusions …any lessee or any other person in possession of the aircraft under a bailment lease, conditional sale, mortgage, or other encumbrance. 2) All risks coverage exclusions common to other physical damage insurance apply: wear and tear, deterioration, freezing, mechanical or electrical breakdown.

Aviation Insurance Underwriting Some considerations: 1) Pilots – qualifications and experience 2) Size – light or heavy aircraft 3) Type – land plane, seaplane or helicopter; and 4) Age and condition

Electronic Data Liability Insurance

Electronic Data Liability Insurance In 2004, ISO developed CG 00 65, Electronic Data Liability as a stand-alone coverage part – to provide standardization. Remember, forms offered by specialty or nonstandard insurers may be quite different (broader or narrower) than this ISO form.

Electronic Data Liability Insurance Four terms unique to this coverage: 1) Computer products or services -- manufacturing, developing, designing, creating, selling, handling, marketing, distributing, licensing or disposing of computer or electronic goods performed either by or on behalf of an insured business. Goods include hardware, software, components, peripherals, communications or broadcasting equipment, industrial or robotic equipment. Includes non-vehicular containers.

Electronic Data Liability Insurance Four terms unique to this coverage: 1) Computer products or services -- “products” refers to manufacturing, developing, designing, creating, selling, handling, marketing, distributing, licensing or disposing of computer or electronic goods performed either by or on behalf of an insured business. Goods include hardware, software, components, peripherals, communications or broadcasting equipment, industrial or robotic equipment.

Electronic Data Liability Insurance Four terms unique to this coverage: 1) Computer products or services -- “services” addresses eligible activities that may create a loss for a third party. Installation, testing, service, maintenance, technical support, repair, integration, networking, consulting or analysis of or training for computer software or computer programming, electronic or computer equipment, components or peripherals, communications or broadcasting equipment, …

Electronic Data Liability Insurance Four terms unique to this coverage: 1) Computer products or services -2) … or industrial or robotic equipment. Other services include processing, storage, transmission or other handling of electronic data for others, providing broadcasting or communication services for others, or consulting, evaluating or advising on such services using TV, cable satellite, radio, internet, wireless or cellular transmissions.

Electronic Data Liability Insurance Four terms unique to this coverage: 2) Electronic data --- broadly defined to mean information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, hard or floppy disks, CDROMs, tapes, drives, cells, data processing devices or any other media used with electronically controlled equipment.

Electronic Data Liability Insurance Four terms unique to this coverage: 3) Electronic data incident --- refers to an accident, or negligent act, error or omission, or a series of casually related accidents, negligent acts, or errors or omissions, which results in “loss of electronic data. ”

Electronic Data Liability Insurance Four terms unique to this coverage: 4) Loss of electronic data --- damage to, loss of use of, corruption of, inability to access, or inability to properly manipulate, “electronic data”.

Electronic Data Liability Insurance Insuring Agreement The ISO form makes the insurer responsible for paying damages caused to third parties through the loss of certain types of electronic data. Coverage applies only if the data loss is caused by an “electronic data incident”, takes place in the coverage territory, and did not occur before the Retroactive Date, if any, or after the end of the policy period. If no Retroactive Date is shown, . . .

Electronic Data Liability Insurance Insuring Agreement … the ISO form may provide coverage for claims occurring before the policy inception date. Policy is claims-made. Territory is worldwide, but lawsuits must be filed in the U. S. , including territories and possessions, Puerto Rico, or Canada.

Electronic Data Liability Insurance Exclusions a) Expected or intended loss b) Contractual liability c) Computer Products or Services Exclusion – “loss of electronic data” arising out of a negligent act, error or omission, by or for you, or anyone acting on your behalf in providing “computer products or services. ”

Electronic Data Liability Insurance Exclusions d) Bodily injury, property damage, or personal and advertising injury e) Damage to your data f) Performance of a contract (failed to or delayed) g) Infringement of intellectual property rights h) Unauthorized use of electronic data i) Violation of an antitrust law j) Criminal or fraudulent acts

Electronic Data Liability Insurance Deductible The ISO form does not provide for a deductible.

Electronic Data Liability Insurance Conditions Seven of the nine conditions found in the ISO form are identical to those found in the CGL coverage form (CG 00 01). Two have been rewritten to address the unique EDL coverage. They are:

Electronic Data Liability Insurance Conditions 1) Duties in the event of an electronic data incident 2) The insured is required to notify the insurer when they know or suspect that a covered incident has taken place which will result in a claim. However, this notice does not qualify as notice of a claim, which is required to be reported immediately to the insurer.

Electronic Data Liability Insurance Conditions 2) Other insurance Since this form is designed to prove only as excess coverage if there is other insurance available, the insurer has no duty to defend the insured against any suit if the other insurer has the obligation to do so. If the other insurer does not defend the insured, the insurer carrying CG 00 65 will do so, but then will be entitled to the insured’s rights against the other insurer.

Electronic Data Liability Insurance Extended Reporting Period (ERP) The ISO form gives the insured the right to purchase an Extended Reporting Period within 30 days after the end of the policy period. It’s available if the coverage is cancelled or not renewed by the insurer for any reason. It starts at the end of the policy period. The ERP lasts for three years. Use CG 31 73 Extended Reporting Period for EDL Coverage.

Electronic Data Liability Insurance Rating and Premium Approaches to rating vary by carrier. ISO does not provide rates or a rating methodology. Typically, though, the insured’s receipts for computer-related operations are used as the rating exposure base. Good luck !!!

Ocean Marine Insurance

Ocean Marine --- aka “wet marine” to differentiate it from other types of marine insurance --- Ocean marine is the oldest form of insurance known to exist --- No standard forms – old terminology

Ocean Marine --- The first ocean marine insurance policies insured against the loss of a vessel or the cargo. But shippers realized that cargo sitting on the docks needed coverage as well, so ocean marine insurance was extended to cargo on the docks. --- When it was realized that cargo sitting in warehouses awaiting shipment needed coverage, then Inland Marine insurance was developed – a separate coverage.

Ocean Marine Ocean marine coverages are broadly classified as: 1) 2) 3) 4) Hull Cargo Freight Liability

Ocean Marine 1) Hull Coverage Covers loss of or damage to the vessel for perils of fire, lightning, earthquake, assailing thieves, “perils of the sea, ” jettisons, barratry of the master or mariners and “all other like perils. ” --- “barratry of the master or mariners” – an illegal act(s) by the captain or crew which puts the ship in danger, to the detriment of the owner of the ship.

Ocean Marine 1) Hull Coverage 2) --- Coverage is normally listed on a valued basis 3) --- Coverage usually limited to a specific geographic area 4) --- If ship is layed up in port for an extended period of time, the typical contract will provide for a reduced premium

Ocean Marine 1) Hull Coverage 2) Deductibles: a) “Average” – a stated flat amount b) “Franchise” – No payment by the insurance company until the loss reaches a certain limit. If loss reaches that limit, then the loss is paid in full. Franchise deductible may be either a percentage of the insured value, or be expressed in dollars.

Ocean Marine 2) Cargo Coverage Covers loss or damage to goods shipped, may be written on either of two forms: a) Floating or open form – covers goods of a certain class up to certain limits. No termination date, but either party cancel with 30 days notice. Shipments are automatically covered, but shipper reports to the insurer at regular intervals as to value of cargo. Used for shippers who ship throughout the year.

Ocean Marine 2) Cargo Coverage Covers loss or damage to goods shipped, may be written on either of two forms: b) “Voyage policy” – used for a one-time shipment. For shippers or importers who are not regularly engaged in foreign trade.

Ocean Marine 3) Freight Coverage 4) Protection for the vessel owner in the event that freight charges are not paid. The total loss of the ship may involve the loss of the freight which was to be earned on the cargo. Freight is not earned until delivery of the cargo. This coverage is often made a part of the Hull coverage rather than being written as a separate contract.

Ocean Marine 4) Liability Coverage -- two types a) “Running down clause” -- covers collision & is usually made a part of the Hull coverage. Provides protection should the ship owner be held liable for the negligent operation of the vessel in damaging another ship. Should both vessels be responsible, liability is fixed in proportion to the degree each is at fault.

Ocean Marine 3) Liability Coverage -- two types b) “Protection and Indemnity Insurance” -- covers injuries to passengers, crew members or persons on other ships, and for damage to cargo, docks or other property.

Ocean Marine Perils – frequently incl. in OM policies ● “Perils of the Sea” – wind, waves, collision, stranding, sinking, and other types of incidents. Perils such as fire are called “perils on the sea. ” ● War – not included in OM policies. To add, use endorsement known as “free of capture and seizure clause” or a separate policy may be issued.

Ocean Marine Perils – frequently incl. in OM policies ● Fire – named as a separate peril. Both direct and consequential losses as a result of fire are insured. Includes damage by water and other materials used to contain or extinguish fire. ● Enemies – includes all types of taking of the insured property by force. Some policies exclude pilferage since such losses are often the result of the shipper’s negligence through improper packaging.

Ocean Marine Perils – frequently incl. in OM policies ● Jettison – the voluntary throwing overboard of parts of the ship or its cargo in order to save the vessel from sinking for from further damage. ● Barratry – fraud by the master or crew with intention of reaping gains at the expense of the owner (ex. , diverting the ship from course, embezzlement of cargo)

Ocean Marine Other OM Clauses and Definitions a) General Average Clause – in OM insurance, “average” means loss or damage. This clause refers to a loss which is a voluntary sacrifice of a part of the ship or cargo, made by the master of the ship to avert a common peril which might well destroy the entire ship or cargo unless this voluntary sacrifice is made. Such a sacrifice must be borne by …

Ocean Marine Other OM Clauses and Definitions a) General Average Clause b) … each interest involved in the proportion that the value of its interest bears to the total value of all interests engaged in the common venture. c)

Ocean Marine Other OM Clauses and Definitions b) Free of Particular Average Clause – losses which are accidental and do not require a contribution from other parties, the loss falling only on the particular parties with interests in the damaged property. Provides that no particular average loss will be paid unless the loss is caused by certain perils such as stranding, burning, sinking, or collision.

Ocean Marine Other OM Clauses and Definitions c) Sue and Labor Clause – requires insured to take all steps necessary to save and preserve the goods from loss, or to minimize a loss which has occurred. If insured fails to do this, it’s considered a violation of a policy condition and the insured loses the rights of recovery. Insured must incur reasonable expenses such as salvage fees, storage, etc. which will be ….

Ocean Marine Other OM Clauses and Definitions c) Sue and Labor Clause … reimbursed by the insurer, even if the expenses sustained fail to recover the goods.

Ocean Marine Other OM Clauses and Definitions d) Total Losses – Actual and Constructive 1) Actual – the property no longer exists or it is beyond salvage. 2) Constructive – the cost to salvage plus the cost to recondition exceeds the value. A constructive loss is compensated by the insurer in the same way as an actual loss.

Key Person Insurance

Key Person Insurance --- Very simple. It’s life insurance on a key employee or key executive to protect a business against interruptions caused by the loss of the key person – to offset the economic loss.

Key Person Insurance A key person is any person in an organization whose contribution to the operation and success of the business is essential.

Key Person Insurance The business: a) is the owner of the policy, and b) pays the premiums, and c) names itself as the beneficiary of the death benefit d) The business can use the death benefit (or cash value, if still living) for a variety of purposes. e) (more)

Key Person Insurance Purposes a) Business indemnification – compensates a business for any financial loss caused by the death of a valuable key person. Death of a key person could result in 1) less liberal credit terms from suppliers, 2) banks may be less willing to lend money, 3) loss of valuable accounts, etc.

Key Person Insurance Purposes b) Reserve fund – cash values increase steadily (as long as key person is still living) to provide a cash reserve fund for the business, which appears each year as an asset on the company’s balance sheet.

Key Person Insurance Purposes c) Business credit – Death of a key person can seriously affect a business’s credit. Key person insurance can impact in two ways: 1) can be shown as tangible evidence of business character, and 2) can be used as a guarantee of loan repayment upon death of the key person.

Key Person Insurance Purposes d) Favorable tax treatment – the death benefit is not taxable to the business. (But, the premiums are not tax deductible – have to pay taxes on the premiums. )

Representing Unauthorized Entities

Florida Statement The state of Florida has taken a very strong position on the issue of unauthorized entities. An unauthorized entity is an insurance company that is not licensed by the Florida department of financial services. Agents and brokers have responsibility for conducting reasonable research to ensure that they are not writing policies or placing business with unauthorized entities. Lack of careful screening can result in significant financial loss to Florida residents due to unpaid claims and/or theft of premiums.

Agents may be held liable when representing these unauthorized entities. It is the agents and brokers responsibility to give fair and accurate information regarding the companies they represent. Any question about the authorized status of a company can be checked by calling the Florida department of financial services at 877 -693 -5236 or for out of state agents, 800 -413 -3089. We urge all agents and brokers to adhere to this admonition.

For more information on unauthorized entities go to FAIA’s website at www. faia. com and under the Education section you will find a handout that you can download.

FLORIDA Agents -Important !!! Per DFS requirements, you need to sign an Acknowledgement Form in order to receive CE credit. 1) Go to www. faia. com – Under “Education”, click “Webinar Information”. Click “Webinar Acknowledgement Form” 2) Complete all the required information and transmit the form to FAIA. 3) You have three (3) business days to submit the form.

Webinar (2 hours) ““Miscellaneous Commercial Coverages: Part 2” Tom Ashley, AAI, AIAM, AIP © Florida Association of Insurance Agents – 2010 11/09