Most companies obtain basic liability coverage through a
Commercial
General
Liability (CGL) form.
The CGL covers four types of injuries:
- bodily injury that results in actual physical damage or loss
- property damage or loss
- personal injury
- advertising injury
Slander or damage to reputation falls under personal injury. Advertising
injury protects companies from charges of negligence that result from the
promotion of its own
goods or services.
Supplemental coverage
Most companies will need to supplement their CGL with at least two other
types of coverage: automobile insurance (aka fleet insurance) and workers'
compensation.
Also, if your company risks facing particular types of claims - if, for
example, you sell or serve alcohol, pose an environmental threat, or produce
goods that could be
subject to product recall
- you may have to obtain
special coverage.
Companies requiring higher levels of coverage than provided with their
CGL often augment the policy with an umbrella liability insurance policy.
Umbrella insurance provides additional coverage for areas where you are
not insured, coming into effect once a certain deductible, or self-insured
retention level, is met.
Contracts for umbrella insurance are usually
tailored to each account, and the risks covered are generally negotiated.
How is Coverage Defined?
Probably the most important decision you will need to make regarding
liability insurance is how you will define your coverage.
The key question: Should a claim be covered by a policy that was in
effect
- at the time the incident occurred, or
- at the time the claim was filed?
Time of occurrence. Traditionally, liability insurance has been
based on the time of occurrence. This means the policy in effect at the time
of the incident is responsible
for handling any resulting claims - even if
you are
no longer with the insurance firm that originally provided coverage.
With this coverage, it is obviously critical to keep good track of your
policies.
Linking coverage to occurrences, however, does have its downside. Unlike
property claims, liability claims can be filed years after the actual
occurrence - years that don't
necessarily take into account inflation or
today's
the-sky's-the-limit attitude toward legal awards.
As a result, the limits you originally purchased for coverage may be too
low for today. Moreover, time passage usually makes the actual date of an
incident difficult to pin
down - and responsibility for coverage that
much more difficult to assign.
Claims-made. Claims-made insurance is an alternate way to
establish liability coverage. With these policies, coverage is linked to the
policy in force when a claim is filed
and reported. This minimizes the
tracking and
claim inflation problems that can occur with occurrence policies.
To limit the total risk to the insurance company, claims-made policies do
place some limits on when an incident had occurred in order to qualify for
coverage. Typically,
claims-made policies will cover incidents that
occurred as long as seven years before the policy began. They also normally
provide coverage of claims made shortly after
the policy expires.
If a new claims-made policy refuses to extend coverage to occurrences far
in the past, you may need to purchase coverage from your previous insurer.
This is known as
a supplemental ERP, or tail-end coverage.
Tail-end coverage does not tend to be a very good deal for a company,
since the insurer typically knows you have nowhere else to turn for
coverage. It can, however,
be used to fill gaps in coverage that cannot be
otherwise addressed.
Gaps and Overlaps
If your company needs several types of liability insurance, pay special
attention to any gaps or potential overlaps in coverage.
This is particularly important for claims falling in the realm of both
automobile and general liability coverage. Rather than finding yourself
caught between an "it's your claim"
tiff between carriers, it is probably
safer
to have one insurer write both policies.
Even if this is done, though, be careful to see where you might have
overlapping coverage. When more than one policy covers a given incident, the
insurer may try to assign
the claim to the policy
providing - surprise! - less coverage.
Try to avoid this
by making sure any overlapping coverage results in fairly equal
reimbursement levels, or by having clearly defined policies to minimize
these redundancies.
To obtain a quote for Commercial General Liability Insurance please fill out
the form below and we will contact you quickly with more information.
