Business Insurance

Business Owners Policy

 The Business Owners Policy or BOP consists of two coverage parts – Property and general liability and provides coverage for main street business’.

  • Property 

Covered Property:  Building and structures, completed additions, permanently installed equipment, business personal property, fixtures, tenant improvements and betterments, and exterior building glass.  There are 3 types of BOP Property coverage forms.  Coverage is written on an open peril (all risk) type basis. This provides the broadest coverage and do not list covered perils but include a list of what perils are not covered.   The form places the burden on the carrier to show that a specific exclusion applies.

Property Coverage Limit:  Property coverage is written based on replacement cost of item.

Business Income Extra Expense: Applies to losses of business revenues as a result the time required to repair or replace the damage property. Coverage amounts can vary by carrier.

Building Ordinance/Law: Provides coverage to bring a building up to code after a covered cause of loss.  There are three parts to this coverage and they are; Coverage A provides for loss to the undamaged portion of the building. Coverage B provides for the cost to demolish and remove the undamaged portions of the building but only if the destruction is due to the building code or ordinance imposed following a covered loss. Coverage C provides for the increased costs to repair or rebuild the property to comply with current building, zoning or land use ordinances or laws.

Deductible: The limits of property coverage are shown on the declarations page.  All BOP policies contain deductibles.  They apply to both Building and business personal property.  For a loss to be paid the loss must exceed the deductible and the insured is responsible for paying the deductible.

Property Coverage enhancements:  Some of the following coverage enhancements may be included into the Business Owners policy however, coverages and limits vary by carrier and you should discuss this with your agent.  Coverage enhancements can include debris removal, preservation of property, fire department service charge, collapse, certain water damage, business income, extended business income, extra expense, pollutant clean up and removal, civil authority, money orders and counterfeit paper currency, forgery or alteration, increased cost of construction, business income from dependent properties, glass expense, and fire extinguisher systems recharge expense.

  • Liability 

Business liability: Covers the sum of money the insured is legally obligated to pay to others because of bodily injury or property damage caused by an occurrence.

Occurrence:  An accident, including continuous or repeated exposure the substantially the same general harmful conditions.

Bodily Injury:  Pays arising from bodily injuries caused to others by the policyholder’s action(s).

Property Damage:  Physical injury or destruction of tangible
property caused by either an individual who is not the owner of said property or by natural phenomenon. 

Personal injury or advertising injury: Covers items such as false arrest, malicious prosecution, violation of privacy, libel slander, copyright infringement and wrongful eviction.

Medical payments:  Pays medical expenses to third parties for expenses incurred at the insureds premise or arising out of the insureds operations.  Medical expenses ae paid regardless of fault.

Damages to premises rented to you (Fire Legal Liability):  The most paid for property damage to premises rented to or temporarily occupied by the insured with the owner’s permission if damage arises out of fire or explosion.

Products and Completed operations:  Liability arising out of the insured’s products or business operations conducted away from the insured’s premises once those operations have been completed or abandoned.

  • Liability Limits

Per Occurrence Aggregate: The most a policy will pay out for any one occurrence in the policy period (No matter how many claimants).  The recommended limit is $1,000,000 aggregate.

Policy Aggregate: The total amount of coverage paid out in any one year.  Typically, this limit is double the per occurrence aggregate.

Personal and advertising injury: The limit for this coverage always matches the per occurrence limit of the liability.

Damage to Premises Rented to you: The most common limit for this coverage is $50,000, however, this can vary by carrier.




Workers Compensation

 

The workers compensation policy consists of 3 parts.  The three parts of the policy are the workers compensation portion, the employers’ liability portion and other states insurance.

  • Coverages

Part 1 – Workers compensation:  The intent of the part 1 of the workers compensation policy is to “Pay Promptly When Due the Benefits Required by Law.”  This is the heart of the workers comp system.  Part 1 of the policy pays benefits to an employee who was injured or suffered death during the course of employment. Benefits included are continued compensation, medical care, and rehabilitation to employees for illness, injury, or death arising out of, and in the course of, their employment whether or not the employee was at fault.

Part 2 –  Employers Liability Insurance:   Employers’ Liability Insurance protects employers against lawsuits due to employment-related injuries or illnesses. This includes liability imposed by law for injury to employees during the course of employment that is not compensable as an obligation imposed by workers comp, occupational disease or any similar laws.  The lawsuits can come from the employee, his/her family members, relatives and third parties. 

Part 3 Other States Insurance:  This section of the policy provides automatic temporary coverage for employees for new operations and incidental exposures in other states as listed in Item 3C – Other States Insurance of the declaration or information page of the policy. It is important to list the states where workers are location for Other States Insurance to apply.

  • Rating the Policy

Classifications (the type of jobs performed) are used as a rating factor.  Classifications are driven by the type of business the insured operates and is often referred to as the governing class of business. A policy may be rated on multiple classifications however, the governing class best describes the type of business of an employer’s business.

Payroll is used as a rating component in workers compensation.  Carriers will want to know the estimated gross annual payroll of the business, broken out by classification.

Owners and officers can either be included or excluded on a policy.  Each owner is subject to a minimum and maximum payroll and this can vary by state.  Percentage of ownership can also come into play in whether an owner or officer can be excluded or must be included, and this too varies by state. 

Experience Modification is a modifier used in workers compensation.   For a business to quality for this, they must meet the term and premium thresholds set by the state they are working in. Once a business qualifies their workers compensation premiums are adjusted based on loss experience.  If the loss experience is favorable, the experience mod will reflect in a policy discount.  If the loss experience is unfavorable it will result is a debit to the workers compensation policy.

Minimum premiums are the minimum charge a carrier will charge for a specific policy.

Workers compensation policies are subject to audit.  The initial policy is based off anticipated or estimated payroll for the coming year.   This is called a deposit premium.  At year end the carrier will ask for the actual payroll and the final premium will be based off this.  If the actual payroll is more than the estimated payroll this will result in an additional premium for the difference being billed to the business.  If the actual payroll is less than the estimated payroll a return premium will result.  The difference will be refunded to the business if it is above the minimum premium charged for that policy.  It is important not to under estimate payroll at the beginning of the policy term to avoid a large audit premium due at the end of the year.  If this occurs the carrier will adjust current payroll to match that of the audit and now the business is subject two large additional premiums one for the audit itself, and one for the current term.

Directors & Officers Liability

 

Directors and officers (D&O) liability insurance protects corporate officers and directors from claims alleging they performed their duties improperly and is a type of errors and omissions insurance.   Lawsuits can be filed by shareholders, regulators, state investigators, or other third parties and this coverage is designed to cover claims based on financial injuries.

The standard Directors’ and officers’ policy provides three types of coverage.

Side A – Directors and Officers Liability Covers damages and expenses assessed against a director or officer who has not been indemnified for these costs by the corporation It protects directors’ and officers’ personal assets. A company may be unable to provide indemnification because it is bankrupt, or they are barred from indemnifying a director or officer by law. States generally prohibit indemnification of directors or officers who are in a suit filed by shareholders on the company’s behalf against directors or officers.

Side B – Corporate Reimbursement (Indemnification) is defined as protection from damage, injury, financial loss or legal liability.  In this case, Side B – Indemnification reimburses the corporation for funds it has paid to directors or officers or on their behalf, as compensation.

Side C – Entity Securities Coverage (Corporate Liability) Covers claims or suits filed directly against the corporation as a result of an offer, sale or purchase of its securities.  The scope of this coverage varies depending on whether the insured company is a private, public or non-profit corporation.

Management liability is a type of D&O policy for small and medium business.   It is structured as a package-policy and contains a range of broad coverages to protect a business and its managers from several types of claims.

The Management Liability Policy is a very cost effective. In addition to traditional directors’ and officers’ liability and corporate reimbursement insuring agreements, the following can be included in the policy:

  • Corporate liability: coverage for claims made against the entity
  • Employment practices liability: entity coverage for employment-related claims
  • Superannuation(pension) trustee liability: entity coverage for claims arising from the management of retirement, pension fund or 401k schemes
  • Crime: coverage for crime committed against the entity, such as fraud and misappropriation of funds
  • Statutory liability: entity coverage for monetary penalties and possibly fines, resulting from breaches in legislation
  • Taxation investigation: coverage for investigations undertaken by taxation authorities such as the IRS.

D&O policies are written on a claims-made form.

Cyber Liability

 Cyber Liability: Coverage for liability caused by conducting business over the Internet, other networks or using electronic storage technology.  Insurance can be bought for losses against both the first- and third-party risks. 1st party coverage is when your own information is breached and 3rd party liability is when your clients’ information is breached.  

Employment Practices

 Employment Practices Liability: Coverage for liability resulting from employment practices.  Employment practices deals with wrongful termination, discrimination, invasion of privacy, false imprisonment, breach of contract, emotional distress, wage and hour law violations and sexual harassment.  

Additional Insured Clause

 Additional insured clauses: A type of status associated with the liability portion of the policy.  This provides coverage to other individuals/groups that were not initially named as a named insured on the policy.  Once added to the policy, the additional insured will then be protected under the named insurer’s policy and can file a claim if they are sued. 

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Hired and Non-Owned

 Hired and non-owned: Provides coverage for bodily injury and/or property damage caused by a vehicle you rent or borrow or caused by a non-owned vehicle such as an employees vehicle.    

Employee Benefit Liability

 Employee Benefits Liability: Provides coverage for an employer for an error or omission in the administration of an employee benefit program, such as failure to advise employees of benefit programs.  

Medical Expenses

 Medical Expenses: The minimum limit offered is $5,000.  This may be increased depending on the carrier.