Depending on the individual risk characteristics of your business, the broker agent will present you with different coverage options for purchasing commercial insurance. A broker-agent's proposal is just that, a proposal.
When all is said and done, it is your responsibility to make an informed decision and choose the insurance that best fits your business plan. The relationship that you build with a broker agent is extremely valuable in this critical decision-making process. An experienced broker agent has dealt with hundreds of businesses similar to yours. Since commercial insurance can be complicated, you should feel free to discuss any terms, conditions, or concepts that are unclear to you with your broker agent. It is part of a broker-agent's service to answer your questions and help you understand the insurance you are purchasing.
Casualty Insurance
Casualty insurance provides coverage primarily for the liability exposure of an individual, business, or organization. Liability from the negligent acts and omissions of an individual, business, or organization that causes bodily injury and/or property damage to a third party is the subject of casualty insurance coverage. Commercial Automobile, Commercial General Liability, Commercial Umbrella, and Workers' Compensation are the most common business casualty insurance lines.
Commercial Automobile
Coverage, Classification and Limits of Insurance
Commercial automobile coverage is similar to the coverage you may carry on your personal auto; however, commercial automobile exposures can be more complex, requiring specialty coverages to be considered based on the individual needs of your business. Basically, commercial automobile coverage can protect your company from any liability stemming from automobiles used in your business or any damage to the covered automobile. A Business Auto Policy (BAP) has the flexibility to provide coverage for business, personal, non-owned, or hired autos based on the coverage purchased and applied to each scheduled auto. In other words, automobiles can be separately scheduled along with corresponding coverages. Coverage can differ by vehicle, and a symbol or multiple symbols will designate the coverage assigned to a scheduled auto. These symbols are referred to as covered auto symbols and use a simple numerical system (1-13). The automobiles are classified by weight (light, medium, heavy, extra heavy) and by type of use (private passenger, service, commercial). Unlike personal auto policies that separate bodily injury and property damage limits (split limits), BAPs commonly utilize a Combined Single Limit (CSL) for the limit of insurance. This creates higher limits for both coverages, including per-occurrence limits. Common commercial automobile CSLs are $500,000 or $1,000,000.
Commercial General Liability
Coverage
One of the key concepts of liability coverage is that it is comprehensive in nature. What this means is that the policy (insuring agreement) covers all hazards within the scope of the insuring agreement that is not otherwise excluded. It is likewise comprehensive in that it provides automatic coverage for new locations and activities of your business, which come about after policy inception and throughout the policy term.
Commercial General Liability (CGL) is the standard commercial liability policy used to insure businesses.
There are three primary coverage sections that make up a CGL policy: premises liability, products liability, and completed operations. Premises liability covers liability for accidental injury or property damage that results from either a condition on your premises or your operations in progress, whether on or away from your premises. A product liability hazard exists for any business that manufactures, sells, handles, or distributes goods or products. The hazard is the potential liability for bodily injury or property damage that arises out of your goods or products. Completed operations cover your potential liability for bodily injury or property damage that arises out of your completed work.
The major exclusions under a CGL policy include intentional injury; insured contracts; liquor liability; worker's compensation and employers' liability; pollution; aircraft; automobile; watercraft; mobile equipment; war; care, custody, and control; damage to your work; impaired property; sistership liability; and failure to perform. It is always important to read and understand all coverage exclusions; however, it is particularly critical in a liability policy. If you do not understand the coverage exclusions or limitations of the CGL policy, then contact your broker-agent and discuss completely until a working understanding is achieved.
Classification
Limits of Insurance
The CGL policy has separate limits of insurance for general liability, fire legal liability, products and completed operations liability, advertising and personal liability, and medical payments. An aggregate limit of liability is in force for the general liability, fire legal liability, advertising and personal liability, and medical payments claims. When total claims for all these areas exceed a stated annual aggregate limit of liability, the policy limits are exhausted and no more claims will be paid from the policy for the duration of the policy period. There is also a separate aggregate limit of liability in force for products and completed operations liability claims.
Commercial Umbrella
When a liability claim goes above the aggregate limit of liability, the policy limits are exhausted. By purchasing a commercial umbrella, you can protect your business from being liable for this excess liability judgment. A commercial umbrella covers the amount of loss above the limits of a basic liability policy. Commercial automobiles, CGL, workers' compensation, or any liability policy can be covered by a commercial umbrella. A commercial umbrella may also provide coverage if a basic liability policy is not in force. Also, commercial umbrellas can provide coverage for gaps in coverage under basic liability policies. When a commercial umbrella provides coverage for basic liability loss, it does not pay the loss from the first dollar. It is common to have a Self-Insured Retention (SIR) amount of at least $10,000. SIR is similar to a deductible. If there is a commercial umbrella loss and there is no corresponding underlying policy in force, you must pay the first $10,000 of the loss before the umbrella policy responds.
Workers Compensation
When an employee suffers a work-related injury or illness, workers compensation insurance steps in to provide benefits based on the type of illness or injury sustained. Workers' compensation is based on a no-fault system, which means that an injured employee does not need to prove that the injury or illness was someone else’s fault in order to receive workers' compensation benefits for an on-the-job injury or illness.
As a California employer, you are required under California Labor Code Section 3700 to provide workers compensation insurance from a licensed insurance company or through the State Compensation Insurance Fund (State Fund). Employers may also have the option to self-insure. Your broker-agent can assist you workers' purchasing workers compensation from a licensed insurance company and can assist you with information on State Fund and self-insurance.
State Fund was established by the state legislature and is California’s largest provider of workers’ compensation insurance. The company is charged with being an available market for all California employers and competing fairly with other insurers. The State Fund plays a stabilizing role in the economy by providing fairly priced workers’ compensation insurance, keeping costs down by helping to make California workplaces safe, and restoring injured workers. You may contact State Fund directly. See the “Resources” section of this brochure for information.
Coverage Sections
Worker's compensation insurance is divided into two coverage sections. In worker's compensation part one, the insurance company agrees to promptly pay all benefits and compensation due to an injured worker by workers' compensation laws of the state listed on the declarations page of the policy. In employer's liability part two, the employer is protected against situations where an employee can sue for injuries suffered under common law liability (i.e., consequential bodily injury, loss of consortium, dual capacity, or third party over actions). These types of injuries in the course of employment are not covered under workers' compensation law and are therefore not condensable under the worker's compensation part one coverage.
Classification and Rating
Classification of workers' compensation insurance is based upon the specific duties that your employees perform in the course of their employment with your company. These classifications are developed and assigned by the Workers Compensation Insurance Rating Bureau (WCIRB) in most cases. Your worker's compensation insurance company when working with the WCIRB must use the classification codes the WCIRB provides when rating your specific policy. Insurance companies can develop and submit their own classification system to the CDI for approval, but this is uncommon. Each classification is assigned a specific rate by the insurance company, which helps determine the overall premium for your policy. The WCIRB also generates the experience modification that must be applied to your policy. The experience modification is calculated from loss information your insurance company is required to submit to the WCIRB on an annual basis. The WCIRB provides a policyholder ombudsman who is available to answer questions from employers on classification, experience modification, and rating issues. Please see the “Resources” section at the end of this brochure for contact information on the WCIRB and their policyholder ombudsman.
Claims
It is important to note that workers' compensation claims do not come under the jurisdiction of the CDI. The California Department of Industrial Relations, Division of Workers Compensation can assist you with questions or concerns regarding workers' compensation claims. You can contact the California Department of Industrial Relations by using the information provided in the “Resources” section of this brochure. Also, you should be able to discuss any general workers' compensation claims issues with your broker-agent or discuss issues on a specific claim with the claim adjuster that has been assigned to the case by your insurance company.
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EPIA inc. is a private Insurance Agency with no ties with legal entities. The information contained in this article is based on information provided by the Medicare Official Website.