Welcome to Introduction to Commercial Lines Alison Cooper

Welcome to Introduction to Commercial Lines Alison Cooper FCII

CLASSES OF INSURANCE

Module 9 Objectives At the end of this module you should be able to: • State what is understood by commercial property • Identify risks for commercial property • Explain the cover provided by a Fire & Special Perils policy • Explain the difference between indemnity & reinstatement • Explain the reinstatement clauses • Explain the operations of the Day One clause and calculate premiums • Explain the operations of the stock declaration clause

WHAT IS PROPERTY? • Buildings • structures • surrounding property • Fixtures & fittings • Contents • machinery, office equipment, • Stock • Raw materials, work in progress, finished goods

A. B. I STANDARD FIRE & SPECIAL PERILS POLICY • FIRE – Actual ignition, fortuitous – Excluding • earthquake, subterranean fire • ‘Its’ application of heat/spontaneous combustion • LIGHTNING • EXPLOSION – Limited to? – Full (Special peril)

SPECIAL PERILS • • Aircraft Riot, Civil Commotion, Malicious damage Earthquake, Subterranean fire Spontaneous combustion Storm, Flood, Escape of Water, Sprinklers Impact – own or third party Subsidence, landslip, heave

FIRE GENERAL MARKET EXCLUSIONS Riot, Civil Commotion, War Radioactive Contamination Pollution and Contamination

FIRE GENERAL EXCLUSIONS 2 Terrorism Marine Risks Consequential Loss Profit More Specific Insurance

FIRE CONDITIONS • Subsequent to the contract – Under insurance – Contracting Purchasers – Non-disclosure – Alteration – Warranties – Reasonable precautions • Precedent to liability – Claim notification – Fraud – Reinstatement – Insurer’s rights – Contribution – Subrogation – Arbitration

BASIS OF SETTLEMENT Indemnity Reinstatement Pay value at time and place of loss less depreciation wear and tear Pay value at time and place of loss without deduction for depreciation, wear and tear Sum Insured adequate at of loss Sum Insured adequate at time of reinstatement 100% Average clause 85% Average clause

DAY ONE REINSTATEMENT • Declared Value day of policy • Insurers Liability = Costs of reinstating on first = Declared value + 50% • Premium: – Adjustable basis: add 7. 5% and 50% of difference at year end – Non-adjustable: add 15%

DAY ONE PREMIUM • Adjustable: – Day One Declared Value x Rate + 7. 5% = Deposit – £ 2, 000 x 0. 1% + 7. 5% = £ 2, 150 • Non-adjustable: – Day One Declared Value x Rate + 15% = Premium – £ 2, 000 x 0. 1% + 15% = £ 2, 300

STOCK DECLARATION • • • Sum Insured = Maximum value risk 75% deposit premium Regular declarations Premium adjustment on average declaration Beware of declaration value – Maximum SI if no declaration/high declaration – Nil can be valid

Module 10 Objectives At the end of this module you should be able to : • Explain the legal definition of Theft and the cover provided • State the exclusions and optional extensions of the standard Theft policy • Briefly describe the application of the PA assault extension • Explain the need for Goods in transit insurance and the cover provided • State the exclusions under an ‘All Risks’ policy

ADDITIONAL COSTS • Architect’s, Surveyor’s, Engineer’s fees • Debris Removal • Public Authorities Clause • incurred following an insured event providing adequate sum insured

THEFT ACT 1968 A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it. ’

THEFT COVER To indemnify the insured for loss or damage to the property insured as a result of entry or exit to the premises as a result of forcible and violent means Excluding: Methods of entry Types of property Cause of damage

PROPERTY INSURED • Stock • Contents excluding stock • Buildings if insured responsible – replacement of locks – external glazing

THEFT POLICY EXTENSIONS • • • First Loss Collusion Full Theft Temporary Removal Index Linking

THEFT UNDERWRITING

TYPES OF ‘ALL RISKS’ POLICIES • Money • Goods in Transit • Industrial ‘All Risks’ – Addition of Accidental Damage peril • Contractors ‘All Risks’ – Building works, machinery, tools, Liabilities

MONEY INSURANCE Covering ‘all risks’ of loss of money, the responsibility of the insured anywhere in the United Kingdom

MONEY EXCLUSIONS • • • Errors and omissions Depreciation Use of keys Dishonesty of employees/directors Market exclusions

MONEY POLICY LIMITS • On premises - out of business hours in safe Loss/damage to safe/strong-room PDH directors/ employees • In transit • employees security company • Non-negotiable money • Any other loss • Clothing/P. E. Insured, Director, Employee £ 250 safe limit Unlimited £ 500 £ 5, 000 £ 20, 000 £ 250, 000 Specified £ 500

PERSONAL ACCIDENT ASSAULT • Accidental bodily injury as a result of an attempt to steal money • Benefits – Death – Loss of limb/ eye – Permanent Total Disablement – Temporary Partial Disablement • Medical Expenses

GOODS IN TRANSIT COVER

TYPES OF POLICY • Specified Vehicle Limit agreed per vehicle • Declaration policy Limits anyone consignment/loss Adjustable

G. I. T EXCLUSIONS • Wear, Tear, Gradual deterioration • Confiscation • Consequential Loss • Specified ‘hazardous’ goods • Excess

G. I. T. EXTENSIONS • Debris removal • Tarpaulins, ropes, chains • Sea Transits

INDUSTRIAL ‘ALL RISKS’ • Accidental loss, destruction or damage to the property of the insured • Special Machinery • All property • Exclusions of causes of damage very important

‘ALL RISKS’ EXCLUSIONS ABSOLUTE OTHER CLASSES DELETE WITH CARE BUY BACKS War Terrorism Radioactive Marine Aviation Motor Property in the open Unoccupied premises Sonic Bang Pollution Livestock Theft Money Goods in Transit Computers Jewellery Subsidence Glass

Module 11 Objectives At the end of this module you should be able to : • Explain the intention of a Business interruption policy • Define Gross Profit on a difference basis and calculate the figure from simple accounts • Identify the sum insured and insurer’s liability under a Declaration Linked policy • Explain indemnity period • Illustrate the impact of time on the required sum insured • Explain & outline cover

BUSINESS INTERRUPTION To indemnify the insured for the effect which damage to property has on the income of the business

ACCOUNTS • Record of business’s transactions in a snapshot of time • Trading Account – Items relating directly to costs of production – Difference between two sides = Accountant’s Gross Profit • Profit and Loss Account – Reflects the indirect costs of production – Difference between two sides = Accountant’s Net Profit

TURNOVER ‘The money paid or payable to the insured for goods sold and delivered and for services rendered in the course of the business at the premises’

TURNOVER Profit Other costs Raw Materials Salaries Packing/ carriage Wages Utilities

GROSS PROFIT DIFFERENCE BASIS Sum of: Turnover plus closing stock and work in progress Less the sum of: Opening stock and work in progress plus Uninsured Working Expenses

DIFFERENCE BASIS Gross Profit

INDEMNITY PERIOD The period beginning with the occurrence of the damage and ending not later than the Maximum Indemnity period during which the results of the Business have been affected in consequence of the damage

INDEMNITY PERIOD T B A Fire T= Turnover A = level of turnover equal to level at date of damage B = level of turnover equal to ‘would have been position’

I. P. FACTORS • • Availability of alternative premises Ease of repair existing premises Availability of raw materials Lead time on machinery Inter-group assistance Seasonal business Recover market position

ADEQUATE SUM INSURED £ 1, 000’s Limit Required 300 Growth 200 100 Growth Calculated Gross Profit Year of accounts Growth Current Year Policy Year Indemnity Period Time

DECLARATION LINKED • Declared Value = Insured’s Estimated Gross Profit for the period of insurance • Insurer’s liability 133. 3% of declared figure • Average does not apply • 75% Deposit premium, adjust within 6 months • Maximum return – 50% of deposit

B. I. OPERATIVE CLAUSE • IF - after payment of the premium any building or other property used by the INSURED at the PREMISES for the BUSINESS be DAMAGED DESTROYED by an INSURED PERIL and the business be INTERRUPTED • then Insurers will PAY the amount of the LOSS in accordance with the policy TERMS AND CONDITIONS

B. I. PERILS • Standard policy: – Fire – Lightning – Explosion – Domestic & production boilers & domestic gas • Additional perils: – As per Material Damage policy – All Risks – Engineering risks – Notifiable disease, Vermin, Defective sanitation, Murder, Suicide

MATERIAL DAMAGE PROVISO • Material damage policy in force that – has paid for material damage – has admitted liability – would have paid but for large excess • Because – Funds to rebuild and minimise effect of interruption – Warranties of property policy apply – Claim investigated

STANDARD B. I. EXCLUSIONS

STANDARD CLAUSES • • Professional Accountants fees Alternative trading Alterations Market conditions

Module 12 Objectives At the end of this module you should be able to : • Explain how liability arises in the UK • State the statute that created the need for EL insurance • Outline the meaning of employee, business, territorial limits and limits of indemnity for EL, TP and PL policies • Distinguish between the cover provided by Employers, Public and Product Liability policies

CHARACTERS IN LAW ? Claimant Defendant The wronged party bringing the action The party alleged to be liable Judge Power to grant damages; injunction or performance

LIABILITY ARISES • Tort – Negligence, Nuisance, Trespass, Defamation • Strict liability • Statute • Contract

NEGLIGENCE ‘The omission to do something which a reasonable man would do, or doing something which a prudent and reasonable man would not do. ’

NEGLIGENCE Claimant must prove - Duty of care - direct or indirect Duty of care broken Breach of that duty is proximate cause of the damage.

DUTY OF CARE You must take reasonable care to avoid acts or omissions which are likely to injure your neighbour ‘Neighbours’ are persons so closely and directly affected by my act that I ought reasonably to have had them in contemplation as being so affected. Donoghue v. Stevenson 1932

DAMAGES • Damages can arise from: – bodily injury – death – property damage • Limited – pure economic loss – negligent miss-statement – nervous shock

TRESPASS ‘Direct interference with the person, goods or land of another’ Trespass of person Assault Battery False Imprisonment Trespass of land Entering or remaining on land owned by another depositing material on it

NUISANCE ‘Interference with a persons use or enjoyment of land or of some right connected with it’ Public Materially effects a class of people e. g. selling unhygienic food, obstruction of the highway Private Wrongful interference with another’s enjoyment of his land e. g. noise, vibrations, emissions

DEFAMATION A defamatory statement lowers the estimation of the plaintiff in the minds of right thinking members of society generally • Libel – permanent • Slander – non-permanent

STRICT LIABILITY RYLANDS V. FLETCHER A person who for his own purposes brings on his land anything likely to do mischief if it escapes must keep it at his peril!

DAMAGES How much has been lost so far? SPECIAL How much will compensate for the future? GENERAL

LIMITATION ACT 1980 3 years – personal injuries, libel, slander 6 years – property damage from date – cause of action accrues – or of the knowledge that action caused injury/damage

EMPLOYER’S DUTIES • Common Law – Safe place and system of work – Safe plant and machinery – Competent and suitable fellow servants

EMPLOYER’S LIABILITY (COMPULSORY INSURANCE) ACT 1969 • Why? – Compensation for injured/killed employees • What? – Policy covering min £ 2 million Limit of Liability – Injury/disease death during course of employment in employers’ business – Certificate issued and displayed

EMPLOYER’S LIABILITY (COMPULSORY INSURANCE) REGULATIONS 1998 • Limit of indemnity – Increased to £ 5 million – Costs inclusive • Certificates – Record indemnity limit – Kept 40 years – Produce copies on demand

EMPLOYERS’ LIABILITY INSURANCE Indemnify the insured for sums LEGALLY LIABLE to pay as DAMAGES in respect of BODILY INJURY (including death or disease) sustained by an EMPLOYEE arising out of and in the COURSE OF HIS EMPLOYMENT in the BUSINESS during the PERIOD OF INSURANCE within the TERRITORIAL LIMITS.

COURSE OF EMPLOYMENT • When did accident happen? – On way to work – At work – Travelling on business Third EC Directive motor policies cover passenger travel in car

PUBLIC LIABILITY To indemnify the insured for their LEGAL LIABILITIES for ACCIDENTAL bodily INJURY, DEATH OR PROPERTY DAMAGE to third parties arising from the INSURED’S BUSINESS

PRODUCTS LIABILITY OPERATIVE CLAUSE To indemnify the insured for their LEGAL LIABILITIES for ACCIDENTAL BODILY INJURY, DEATH OR PROPERTY DAMAGE arising out of GOODS sold, supplied, renovated, repaired, altered, treated, tested, installed in connection with the BUSINESS during the PERIOD OF INSURANCE within the territorial limits

DEFENCES • • • Development risk Fault did not exist when originally supplied Compliance with EC and statutory requirements Supply not in course of business 10 years since supply Due to design of product in which item was included

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