Commercial Package Policy (CPP)
Commercial Package Policy: This combines a Declarations Page (shows your limits), a Cause of Loss Form (basic, broad or special) that describes what the policy covers and includes exclusions and limitations, two condition forms (Commercial Property and Common Policy), and any desired endorsements. A commercial property coverage part may be used as a monoline (single policy) or combined with other commercial lines coverage parts to form a commercial package policy.
Policy Coverage Forms:
- In brief, the Basic Form covers the named perils of Fire, Lightning, Explosion, Windstorm or Hail, Smoke, Aircraft or Vehicles, Riot or Civil Commotion, Vandalism (excluding damage to glass and theft damage), Sprinkler Leakage, Sinkhole Collapse, and Volcanic Action. The Basic Form is the least expensive of the coverage forms;
- The Broad Form covers the 11 causes of loss listed above plus 4 additional coverages: Glass Breakage, Falling Objects, Water Damage, and Weight of Snow, Ice or Sleet.
- The third form is the Special Form (sometimes called “All Risk”). The language in this form reads, “Insures against risks of direct physical loss to property.” Coverage isn’t defined by a list of loss causes, but by the exclusions and limitations listed in the form.
Contractors Business owners Coverage: Many companies have developed business owner type policies for the contractor, primarily artisan, contractors, plumbers, electricians, inside carpentry, masonry, concrete, etc. These policies combine some special coverage that cover perils common to the construction business.
Building: This includes any additions, alterations, and repairs in progress. Additionally, all permanently installed fixtures, machinery, and equipment owned by the insured that are part of the building. (Note: South Carolina is an “agreed value” state, so the amount paid for a total loss is shown in the property declarations.
Fixtures: These are things that are permanently attached to the building that cannot be removed without affecting either the value or the aesthetics of the structure, and can include everything from intercoms and public address systems to permanently installed blinds, drapery fittings, or hardware.
Property of Premises in Transit: Except for stock, any covered property temporarily at a location not owned, leased, or operated by the insured is insured up to $5,000. This extension specifically excludes:
- Property in or on a vehicle
- Property in the care, custody, or control of salespersons
- Property located at fairs and exhibitions
- But coverage does extend to property off-premises for repairs, property which the insured lends to others, and tools/equipment at a job site. As with other policies, additional coverage can be purchased in the forms of Equipment & Tools floater, Installation Floater, etc.
Master Pac, Secure Pac, etc: All companies have enhancement forms that, when applied, add additional or increased coverage to their property coverage form. Each company form can be different and must be reviewed to see what additional coverage is provided.
Business Interruption with Extra Expense, also known as Business Income Insurance: The following is a simplified discussion of business income and related coverages. Business income or “time element” coverage was written over a century ago. In the 1940s the name changed to “business interruption,” and this has been replaced by the term “business income” insurance.
The purpose of business income insurance is to do for the insured what the business would have done had no loss occurred. Loss of business earnings, the prime source of money for continuing operating expenses as well as profit (if any), is the subject of this coverage. This coverage applies to the loss of gross earnings minus charges.
Recovery only applies for the time required to repair or replace damaged property with the exercise of “reasonable speed,” so normal operations can be resumed.
Some businesses can’t afford to be out of operation and the extra expense form was written to help get businesses back in operation as soon as possible to reduce the loss of business income. But even after normal operations are resumed, there is a period of time until the business is operating at the level it did before the loss. This feature is built into the current form to extend the period of indemnity for 30 days – with an option to increase the number of days.
Today, many forms cover “actual loss of business income.”
Extra Expense: Some businesses by their very nature will make every effort to continue operation using other facilities, etc – no matter how serious the damage to their own property and regardless of the cost. Examples are newspapers, banks, and broadcasting stations. For such risks, the principal need is extra expense insurance.
Machinery and equipment: This includes drive-on scales, refrigerated lockers, pulleys, etc. An item doesn’t need to be a part of the building structure for it to be considered “permanently installed.” “Permanently” means stable, and “install” commonly means to set up for use or service. For example, a refrigerated locker is permanently installed if it is set up for use in the insured’s building with the intent that it should remain there “without change” as long as the insured is in business at that location.
Business Personal Property: This is furniture and fixtures, machinery and equipment, stock, and any other personal property owned by and used in the insured’s business. It is covered when the property is located in or on the insured building, in the open as well as in vehicles on the insured premises, and within 100 feet of the premises. Note: In South Carolina, after a loss, you must establish the value of the personal property. It can be valued at actual cash value or replacement cost, and the loss will be paid accordingly – up to the limit shown on the declaration page.
Stock: This is defined in the form as merchandise held in storage or for sale, raw materials, and in-process or finished goods, including supplies used in packing or shipping goods. The Commercial Property (CP) 00 10 form doesn’t specify whether goods sold – but not yet delivered – are always treated as the insured’s business personal property rather than the property of others. Whether non-delivered, sold goods belong to the insured or the customer depends on several factors. The provisions of the bill of sale may state how such property is to be treated, or state variations on the Uniform Commercial Code (UCC) may also clarify the issue. If the property is considered to be property of others and the insured has not bought this coverage, only $2,500 additional insurance is available under an extension of the business personal property coverage. If the property is still owned by the insured, it’s covered for the limit that applies to business personal property.
Tenant’s Use (interest in improvements and betterments in a leased property): is protected as a facet of the Business Personal Property coverage of the Building and Personal Property Coverage Form. The 1990 edition of the coverage form provides coverage for leased personal property for which the insured has a contractual responsibility to insure.
Business Personal Property of Others: This is property of others in the insured’s care, custody, or control. The same conditions apply as to insured’s property. An extension limit of $2,500 is automatically provided by coverage extension, but additional coverage can be purchased.
Off Premises Power Interruption: This coverage can be purchased by endorsement. Almost all business operation is dependent on power. A power surge, spike, or outage can cause damage to equipment, loss of perishable goods, and downtime, which results in loss of revenue. This endorsement covers this type of peril, and by the addition of CP 15 45, you can add coverage for loss of business income. There is a long list of property endorsements; some provide very important and necessary coverage.
Business Owners Policy
Business Owners Policy: This inclusive policy was created for certain classes of small to mid-sized commercial accounts in order to compete with the commercial property and liability policies. The BOP premium is calculated based on building construction, area fire protection class, and territory location. The BOP combines property and liability into a package like the commercial property and liability package policies, but it offers extended coverages in many areas: business income limit of actual loss up to twelve months, employee dishonesty, transit coverage, money and securities, as well as other coverages, that when quoted separately, could cost much more under the Commercial Package Coverage.
Under most Business Owners Policies, the carrier does not perform annual audits, and the premium is not usually based on sales.
In the past, Insurance carriers limited eligible classes and generally these classes had less exposure to loss. So BOPs offered significant benefits, but only select classes were eligible.
In 1987, the Insurance Service Office’s Business Owners Program expanded the eligible classes that could be written. There have been several revisions in forms and coverage, and many companies have expanded their eligible classes. The Business Owners Program is definitely the best coverage for the dollar. In fact, many carriers felt the BOP offered too much coverage for the premium they collected. This controversy has gone back and forth over the past decade with some companies expanding and some companies contracting their Business Owners Program
However, the Business Owners Program is alive and well, appearing to be the format of choice for many insurance carriers who write small to mid-sized business accounts. In fact, many of our carriers have expanded eligible classes from office, retail, wholesale, service, and some artisan contractors to include restaurants, manufacturers in metal and plastic, dry cleaners, and florists, to name a few. We represent the leading carriers who offer new coverages and competitive pricing to the consumer. New coverages, such as Employee Benefit Liability and Employee Practices Liability (discussed under the Liability section) have been added and are now included or provided as options in some carriers’ policies.
Eligibility requirements vary by carrier: a maximum of $5,000,000 in combined property per location – most policies can handle up to five locations – and a sales maximum of $200,000 to $10,000,000 per location. Minimum BOP premiums vary per carrier between $250-$750 dollars per year. These carriers will also write other coverages such as auto, inland marine, workers compensation, and umbrella coverage.
Call and ask us about our expanded business owners markets and classes. In today’s market the business owners program does offer the best value.
General Liability: This provides coverage for both bodily injury and property damage occurring on the insured’s premises or damage due to the insured’s operations in progress or completed operations. It consists of multiple components to ensure broad based coverage of the risk to which businesses are exposed.
Premises Operations: This coverage encompasses liability for accidental bodily injury or property damage that results from either a condition or operation on the insured’s premises.
Products & Complete Operations: The Products Liability Hazard exists for any insured that manufactures, sells, handles, or distributes goods or products – the hazard being the insured’s liability for bodily injury or property damage that arises out of such goods or products. The Completed Operations Hazard is the insured’s potential liability for bodily injury or property damage that arises out of the insured’s completed work.
Commercial General Liability: This coverage also provides protection to the insured in other areas. The Insuring agreement refers to the insured’s legal obligation arising out of Personal Injury. “Personal” is defined differently from bodily injury. Personal Injury not only includes bodily injury, but also includes injuries such as humiliation, loss of reputation, false imprisonment, arrest or restraint, malicious prosecution, libel, and slander.
Medical Payment: This is provided under the Commercial General Liability coverage providing premises and operations medical payments. This coverage pays for medical expenses incurred by a person as a result of bodily injury arising from the named insured’s premises or operations covered by the policy without regard to negligence.
Advertising Liability: This coverage is important to businesses, because it applies to injuries arising out of libel, slander, defamation, violation of privacy, unfair competition, or infringement of copyright, title, or slogan that occurs in the course of the insured’s advertising activities.
Computer Services & Omissions: With the development of highly complicated and sophisticated electronics data processing equipment has come a variety of new types of service organizations that perform various computer-related functions for other businesses. Firms in this field offer data processing, consulting systems maintenance, and of course development, marketing, distributing, and installation of computer hardware or software products. Firms may be involved in one, or all or a combination of these activities. All these firms are vulnerable to loss from error, malfunction, or mistake and the cost of these claims can be enormous. The coverage provided by this policy is the computer service and software organizations resulting liability to others caused by its negligent act, errors or omissions committed in the performance of services or the providing of products. Covered business activities include performing computer services for others including data processing, system analysis, programming and consulting. Other computer-related business activities such as developing, distributing, marketing, licensing, selling, and maintaining computer hardware and software products are also covered. The term insured, includes the named insured, but also any partner, executive officer, employee director, or stockholder acting within the scope of his or her duties.
Fire Legal Liability: This provides insurance with respect to property damage to structures or portions of structures (including permanently attached equipment) rented by or leased to the named insured if such damage is caused by fire. The basic limit is $50,000; but additional coverage can be purchased or is included in some policies. This coverage is excess over other valid and collectible insurance (meaning the other insurance would pay first and then this coverage would pay on any unpaid balance).
Professional Liability: A professional liability exposure stems from rendering or a failure to render any professional service such as one provided by an accountant, engineer, insurance agent, broker, doctor, dentist, or attorney. Two liability policies are needed: the General Liability Policy and the Professional Liability Policy. Professional Liability or “Error & Omissions” covers the acts or failures of the professional in conducting their business.
Directors & Officers Liability: Under common law, and under the statures of some jurisdictions, directors and officers owe certain duties and standards of care in managing the affairs of the corporation they serve. If failure to perform these duties – with due care – results in financial damage to the corporation, they can become personally liable to make restitution, because of their mismanagement, to the corporation’s stockholders or in some cases to parties outside the corporation such as creditors. The other liability policies discussed have no coverage against liability for the financial loss described,and it is outside the scope of conventional homeowners or personal umbrella policies that the director might carry.
Coverage Territory: The Commercial General Liability (CGL) coverage applies only to bodily injury or property damage that occurs within the policy territory. The Policy territory is defined as the United States, its territories and possessions such as Puerto Rico, and in to Canada. Also international waters and air space between these regions are included in policy territory “provided the bodily injury or property damage does not occur in the course of travel or transportation to or from any other country, state or nation.” With respect to the named insured’s Products the CGL covers bodily injury that occurs anywhere in the world, subject to two limitations: first, the product must have been sold for use in the United States, its territories, possessions, or Canada (the coverage territory); second, the original suit for damages must be brought within these regions. Note: the “worldwide” feature applies only to products, and not to completed operations. An insured whose completed work goes abroad, such as a company that repairs airplanes or boats, has no coverage under the CGL for accidents caused by its faulty work if the bodily injury or property damage occurs outside the policy territory. If an insured has this exposure, which could exist for any insured that repairs any kind of portable property, the insured should seek to have the policy territory amended to provide the same worldwide scope for completed operations.
Premium Basis: In most cases the premium you pay for your CGL coverage will be based on the classification of your business. Many businesses carry more than one CGL classification (example, store sales and also installation). The premium basis for each classification is different; it may be based on sales, payroll, area of premises per 100 square feet, and per unit basis, to name a few. Since it is difficult to project the amount of sales or payroll in some businesses, most CGL policies are written on an auditable basis which means you pay a deposit premium during the policy year. At the end of the year an audit is performed, and the premium is adjusted up or down based on the actual figures. Certain types of policies may be written on a non-auditable basis.
Occurrence vs. Claims-Made Coverage: Each is written with a different CGL coverage form. The basic difference between the two coverage forms is the “Triggers.” The trigger of each form is the event that must happen during the policy period in order for the policy to pay the claim.
The trigger of the occurrence form is bodily injury (BI) or property damage (PD). So, if someone is injured by the insured’s product today, the occurrence policy in effect today will apply to the loss whether the claim is made this year or next year. There are pitfalls to the occurrence policy, which aren’t discussed here; to avoid these pitfalls the claims-made coverage was introduced.
The trigger of the Claims-Made Form states that the insurance applies to bodily injury and property damage as long as the injury or damage did not occur before the “retroactive date,” if any (shown in the declarations and occurs during the policy period). A “retroactive date” can go back to when you first started in business (full prior acts coverage) or can be set the day the policy is written. This is up to the discretion of the insurance company writing the policy. Both policy forms are used today; however the Occurrence Form is probably most common with the Claims-Made Form reserved for certain business or coverages.
Employment Practices Liability (EPLI): Sometimes it appears employers are facing an attack on two fronts. Employees’ emerging eagerness to sue over any perceived employment-related wrong is placing an increasing burden on employers; and in the harsh realities of a tough economy American companies need to operate leaner, more efficient organizations to remain competitive in the marketplace. In some industries, “company loyalty” and “employee loyalty” seem to be a thing of the past. Streamlining, downsizing, and restructuring may help the bottom line, but they can also contribute to an increasingly adversarial employment relationship.
Heightened awareness of employee rights – coupled with passage of the American with Disabilities Act of 1990 and the Civil Rights Act of 1991 – increased the likelihood that employees will sue for a variety of disputes. Additionally, as the courts are broadening the definitions of discrimination and harassment, claim frequency can be expected to rise. A major insurance industry study reported that the average employee claim exceeded $247,000, excluding defense cost. In South Carolina punitive damages are awarded – and are covered by insurance – for bad intent. It is the awarding of punitive damages that have really increased the cost of EPLI claims. The many costs associated with such EPLI claims can have a serious financial impact on any business – large or small. More employers are becoming aware of the need for insurance protection for this type of claim.
Employment Practices Liability Insurance Coverage: On behalf of the Insured, EPLI will pay loss for which the Insured becomes legally obligated to pay on account of any claim made against them individually or as the employer during the Policy Period, or if exercised, the Discovery Period (an extension of the reporting period that can be purchased after policy period), for a Wrongful Employment Practice taking place after any retroactive date and during the Policy Period.
Employee Claim: This is defined as a written demand against an insured for monetary damages, a civil proceeding started by service of a complaint, an administrative or arbitration proceeding against any insured commenced by a complaint or similar document, or a criminal proceeding against any insured commenced by a return of an indictment.
Wrongful Employment Practice: This means any actual or alleged: 1. violation of federal, state or local statue, or any common law, prohibiting any kind of employment-related discrimination; 2. employment-related harassment, including any type of sexual harassment as well as religious, racial, sexual orientation, pregnancy, disability, age, or national origin-based harassment including workplace harassment by non-employees (vendors such as salesman and/or service people who are not employed); 3. abusive or hostile work environment whether based on gender, religion, age, disability, or other areas as mentioned in #2 above; 4. wrongful discharge or termination of employment whether actual or constructive; 5. Breach of implied employment contract; 6. failure or refusal to hire; 7. employment-related misrepresentation; 8. failure to provide equal opportunities; 9. employment-related defamation, libel, slander, or invasion of privacy; 10. failure or refusal to promote, including failure to train, advance or grant bonuses, and failure to make partner; 11. wrongful demotion; 12. negligent hiring or negligent supervision of others; 13. failure or refusal to adopt or enforce adequate workplace or employment practices, policies, or procedures; 14. wrongful, excessive, or unfair discipline of employees; 15. employment-related wrongful infliction of emotional distress; 16. retaliation against employees, including retaliation for exercising protected rights or supporting anothers’ exercise of protected rights.
Employment – Related Claim: These are becoming a reality of doing business today and are a potential hazard for which some businesses have failed to plan. With workplace changes and the expanding definitions by the courts, all indicators seem to point to an increase in these claims frequency and severity.
Several Actual Examples: The controller of a large corporation believed he was fired for refusing to sign a misleading annual report. He felt the annual report, which was to be filed with the Securities and Exchange Commission, failed to disclose certain conflicts of interest and misuse of corporate assets. The controller brought a wrongful termination complaint against the company and its chairman alleging he was terminated for his refusal to violate federal laws and regulations. The jury awarded $124.4 million in damages.
A legal secretary at a large law firm brought a complaint against the firm and a senior partner of the firm alleging that she had suffered sexual harassment by the partner. Other women also complained. Although the firm contended the charges had been investigated and taken seriously, the jury found the firm “failed to take all reasonable steps to prevent the sexual harassment of the plaintiff from occurring” and awarded $7.2 million.
A female worker brought a complaint alleging that she had suffered sex discrimination, sexual harassment, and wrongful termination. The company argued the woman was terminated for excessive absenteeism. The woman countered that other employees were not dismissed, although they had poorer attendance records. The jury awarded the plaintiff $1.1 million in damages.
A female stenographer brought a claim for constructive discharge against her employer, a steel company. The woman had reported what she considered racial and sexual harassment to management, but the harassment continued. After suffering a breakdown, the woman resigned. In her complaint, the woman alleged that her civil rights had been violated and that the company was negligent in its failure to investigate incidents she had reported. The jury awarded the employee $1.64 million.
A customer service representative brought a wrongful termination complaint against his employer. The employee, a 60 year old man, alleged he was terminated because of age. The company contended he was laid off as a result of workforce reduction. The customer service representative argued he was replaced by a 28-year-old employee. The jury awarded the employee $1.5 million in damages.
Errors & Omissions: This is defined as a “negligent act” in giving counsel to employees with respect to “employee benefits;” interpreting “employee benefits;” handling or records in connection with “employee benefit” or effect in enrollment, termination, or cancellation of employees under “employee benefits.”
Employee Benefit Liability: Liability coverage is extended to cover errors & omissions which occur in the administration of employee benefit programs such as major medical (health insurance), 401K’s, Pension Plans, etc.
Commercial Crime Program was introduced in 1986 and has undergone numerous revisions. There are seventeen coverage forms in the program. The seventeen forms are listed with brief descriptions. One or more of these forms can be issued as a monoline (stand alone) policy or as a “coverage part” of a commercial package (a combination of coverage forms as discussed previously).
Coverage Form A – Employee Dishonesty: Losses caused by employee dishonesty, regardless of the type property involved, are not covered under regular property insurance. So, a crime policy with employee dishonesty should be considered by any business with employees. Many packages such as BOP (Business Owners Program) and CBOP (Contractors Business Owners Program) contain employee dishonesty coverage or offer it as an option. Businesses that do not fit into these classifications (BOP or CBOP) should consider crime policy. For example, an employee who is given a company vehicle to drive home in connection with his job duties is trusted by his/her employer. The vehicle and its equipment is for the employee’s use to conduct the business of the employer. Since the employer allows the use of this vehicle, it is not considered a “theft” in terms of the employer’s insurance coverage if one day the employee decides to take the vehicle, tools, and equipment. Being that the employer voluntarily parted with the vehicle, he/she can’t recoup loss unless the employer has crime coverage for employee dishonesty.
Coverage Form B – Forgery or Alteration: This provides coverage on out-going instruments such as checks, drafts, promissory notes, bills of exchange, or similar documents drawn against the insured’s account.
Coverage Form C – Theft, Disappearance, and Destruction: This provides protection against theft, disappearance, and destruction. It is an extremely broad coverage. Theft is defined as “any act of stealing,” including robbery, burglary, sneak theft, etc. Disappearance is undefined. There is no requirement that the disappearance be “mysterious” or have a presumption of theft. For example, if a messenger carrying a bag of money over a bridge accidentally drops the bag into the river and the bag cannot be recovered, the loss is covered. Destruction, also undefined in the policy, is a broad term, encompassing loss by any cause that destroys money or securities. Protection against fire loss to money and securities is a principal benefit to the insured. Of course, destruction does not include loss by nuclear reaction, war, governmental action, or any other cause of loss excluded in either the Crime General Provisions Form or Coverage Form C itself.
Coverage Form D – Robbery & Safe Burglary, Other than Money and Securities: This provides two coverages. Section 1 covers actual or attempted robbery and safe burglary inside the premises, and Section 2 covers loss from robbery or attempted robbery of a messenger outside the premises. Under form D there isn’t coverage for taking property due to burglary of the rest of the premises, i.e., from other than a safe or vault. Coverage forms D, E, and H cover the same type of property, but for different perils or causes of loss. Coverage H provides broader coverage than forms D and E.
Coverage Form E – Premises Burglary: This provides coverage for burglary and robbery of a watchperson inside the premises. Form E does not provide any protection outside the premises.
Coverage Form F – Computer Fraud: “Computer Fraud”’ means theft of property following and directly related to the use of any computer to fraudulently cause a transfer of that property from inside the “premises” or “banking premises” to some one or some place outside the premises. The form does not cover simple vandalism of files or other information by those who gain unauthorized access to computer files. For example, a person might use his own computer to “break into” the computer of a business and issue instructions to pay a certain amount of money to someone. If the check is successfully cashed there would be a loss payable under coverage form F.
Coverage Form G – Extortion Crime: This insures against loss of money, securities, and property other than money and securities, resulting directly from “extortion.” Extortion means the surrender of property away from the premises as a result of a communication threat to do bodily harm to the insured or relative held captive.
Coverage Form H – Premises Theft and Robbery Outside the Premises, Other than Money and Securities: This form is used if a business wishes to insure property inside the premises and outside the premises, other than money and securities, against actual or attempted theft. Form H Section 1 provides inside premises theft, while Section 2 provides the same coverage for robbery if a messenger is outside the premises. This form would provide better coverage than the narrower coverage of burglary form D and Robbery form E.
Coverage Form I – Lessee of a Safe Deposit Box: Section 1 insures securities for theft, disappearance, or destruction while inside the insured’s safe deposit box in a vault (depository premises), or during the course of deposit or removal from the safe deposit box. Section 2 covers property other than money and securities in depository premises but only against actual or attempted burglary, robbery, or vandalism.
Coverage Form J – Securities Deposited with Others: This covers theft, disappearance, or destruction of securities deposited with others such as banks or trust companies. The coverage applies both inside and outside while being conveyed by a custodian. For coverage to apply, the custodian and the depository must be named in the Form J schedule. Unlike most other coverage forms, this form cannot be amended or modified by endorsement.
Coverage Form K – Liability for Guests’ Property, Safe Deposit: This is used by lodging facilities to provide legal liability coverage for guests’ property. It covers legal liability for guests’ property stored in an insured’s safe deposit box. This form contains no limitations on the type of property covered. Any property belonging to guests of the insured is covered while in a safe deposit box on premises.
Coverage Form L – Liability for Guests’ Property, Premises: This is used by lodging facilities to provide legal liability coverage for guests’ property. It covers the insured’s legal liability for guests’ property while on the premises or in the insured’s possession. Any property is covered, unless it is “excluded property.” Excluded property is defined as samples or articles carried or held for sale or delivery, any vehicle – including equipment and accessories, or any property contained in or on a vehicle. Coverage for samples and articles held for sale can be purchased by endorsement to the policy. These are strictly legal liability policies and do not provide coverage against loss of property if the insured is not legally liable.
Coverage Form M – Safe Depository General Provisions Form: Because safe deposit boxes are designed for the protection of valuables and that protection is expected by customers, safe deposit facilities create an important exposure for insured’s offering this service. Two coverage forms (M and N) are used and each form is written with a separate limit of insurance. Coverage Form M provides safe depository liability coverage for loss of a customer’s property arising out of the insured’s having custody of others property as well as the requirement to return it in the same condition or prove that they took reasonable steps to protect it.
Coverage Form N – Safe Depository General Provisions Form: Because safe deposit boxes are designed for the protection of valuables and that protection is expected by customers, safe deposit facilities create an important exposure for insured’s offering this service. Two coverage forms (M and N) are used and each form is written with a separate limit of insurance. Coverage Form N provides safe depository direct loss coverage that covers customers’ property against direct loss or damage. Unlike the majority of coverage forms in the Commercial Crime Program, these forms are not subject to the Commercial Crime General Provisions Form, but instead are used with a separate Safe Depository General Provision Form.
Coverage Form O – Public Employee Dishonesty Coverage: Used to cover employee dishonesty for governmental entities, Coverage Form O covers public employees on a per loss basis. It covers money, securities, and property other than money and securities against loss coerced by employee dishonesty. Employee dishonesty means “only dishonest act committed by an employee, whether identified or not, acting alone or in collusion with other persona…” The act must be committed with the manifest intent to cause the insured to sustain loss and obtain financial benefit for the employee.
Coverage Form P – Public Employee Dishonesty Coverage: Used to cover employee dishonesty for governmental entities, Coverage Form P provides coverage per employee. It covers money, securities, and property other than money and securities against loss coerced by employee dishonesty. Employee dishonesty means “only dishonest act committed by an employee, whether identified or not, acting alone or in collusion with other persona…” The act must be committed with the manifest intent to cause the insured to sustain loss and obtain financial benefit for the employee.
Coverage Form Q – Robbery and Safe Burglary, Money and Securities: This covers money and securities robbery and safe burglary inside the premises as well as money and securities robbery of messengers outside the premises. This coverage only insures money and securities. Section 1 contains two distinct coverages: one for actual or attempted robbery of a custodian inside the premises, the other for actual or attempted safe burglary inside the premises or banking premises. Section 2 covers loss outside the premises resulting from actual or attempted robbery of a messenger.
Crime Package Plans: As stated earlier, the above forms can be written as a monoline policy or in a combination with other forms to form a Commercial Crime Package. The forms are combined in each package to give a particular scope of crime coverage. The following is a brief description of the designed packages:
- Plan 1 – Commercial Crime: Any combination of Forms A through J and Q may be written. A separate limit of insurance and deductible may apply to each coverage form, coverage form section, or sub-section. Plan 1 may be written for any insured except one that is eligible for a Financial Institution Bond. However, endowment funds, foundations, and mutual funds having one employee sales representative, although eligible for a Financial Institution Bond, are eligible for Plan 1. It may not be written for public officials, political subdivisions, or any entity eligible for a Public Employee Blanket Bond, except state universities, colleges, or schools that meet certain requirements.
- Plan 2 – Combination Crime, Single Limit: This plan was withdrawn November, 1988.
- Plan 3 – Storekeepers Broad Form: This may be written for any insured with a single location and not more than four employees, other than an insured eligible for a Public Official Bond or Public Employee Blanket Bond. Coverage Forms A through E are mandatory, with a uniform limit applying separately to each form. The limit may be $1,000; $1,500; $2,000; or $2,500. No other limits are available.
- Plan 4 – Storekeepers Burglary and Robbery: This may be written for any insured. Forms D, E, and sections one and two of Form Q, are mandatory. Coverage can be changed from blanket to schedule by endorsement. As with Plan 3, a uniform limit – $1,000; $1,500; $2,000; or $2,500 – applies separately to each form.
- Plan 5 – Office Burglary and Robbery: This covers money, securities, and other property pertaining to an office against burglary and robbery. Any insured is eligible. Coverage Forms D, H, and sections one and two of Form Q are mandatory, with a uniform limit of at least $1,000 applying separately to each form. Form H must be amended with endorsement to limit covered property of office equipment. Coverage can be changed from blanket to schedule by endorsement.
- Plan 6 – Guests’ Property, Safe Deposit Box: This is available for any insured that provides lodging facilities. Coverage Form K, insuring legal liability for loss of guests’ property from safe deposit boxes, is used without any coverage amendments.
- Plan 7 – Guests’ Property, Premises: This covers legal liability for loss of guests’ property from within the premises, through Coverage Form L. Eligibility is the same for Plan 6.
- Plan 8 – Safe Depository: This is only available to insureds other than financial institutions that provide safe deposit box facilities. Either Coverage Form M or N, or both, may be used. If both forms are used, a separate limit applies to each. An endorsement may be used to reduce the limit of insurance for specified premises. Another endorsement may be used to extend coverage to the transfer of boxes between designated premises.
- Plan 9 – Excess Bank Burglary and Robbery: This uses amended Coverage Form D, covering money, securities, and other property against robbery and safe burglary. Separate limits apply to robbery of a custodian and safe burglary. Any banking or trust institution that is authorized to conduct business by the federal or state government is eligible.
- Plan 10 – Bank Excess Securities: This provides coverage for theft, disappearance, or destruction of securities of the same types of institutions eligible for Plan 9. Coverage Form C is used with an amendment.
- Plan 11 – Commercial Crime, Government Entities: Coverage Forms O, P, and B are used to cover money, securities, and property other than money and securities against public employee dishonesty. Eligible types include local government, public utility, fire district, bridge or transit authority, state university, state college or state school, school district, board of education or similar authority, or public funded hospital.
Inland Marine Coverage Forms: Commercial Property Floater Risks cover property pertaining to a business, profession, or occupation. This includes physician and surgeon’s instrument floaters, pattern and die floaters, salesman’s samples, exhibition policies (while on exhibition and in transit), builders risk and/or installation floaters, property in transit, fine arts (covers painting, etchings, pictures and tapestries), jewelry block, equipment dealers, electronic data processing, and others. Twelve individual classes constitute the current inland marine division of the rules, endorsements, and rates manuals. A brief summary of what these twelve classes cover follows: camera and musical instruments dealers, commercial articles, equipment dealers, film, floor plan, jewelers block, mail, physicians and surgeons, signs, theatrical property, accounts receivable, and valuable papers.
1. Camera and Musical Instrument Dealers: Usually retailers can cover stocks of inventory under the Commercial Property Form. However, by using the Commercial Inland Marine Program, merchants dealing principally in camera and musical instrument equipment can arrange more specific, open perils coverage. Because of an optional coverage under the form allowing furniture and fixtures to be covered – where the insured has no other property exposure (such as building) – the Camera and Musical Instrument Coverage Form can stand as the insured’s only property coverage. There is no Legal Liability Coverage for the premises in this form – that would be added by endorsement. This form covers property while at the premises, in transit, and away from the premises in the custody of employees and elsewhere.
2. Commercial Articles Coverage: This form is similar to the Camera and Musical Instrument Form, but camera and musical instrument can also be covered under the Commercial Articles Form. Generally, it is intended to cover commercial property; this includes photography studios, motion picture production companies, professional musicians, boards of education, and municipalities. The form is an open peril basis, but it requires scheduling of individual items with a limit of insurance provided for each item. The form provides blanket coverage in some cases.
3. Equipment Dealers Coverage: This form is used to provide coverage for dealers of agricultural implements and contractor’s equipment, insuring the dealers’ stock in trade and similar property of others in the dealers’ custody or control on an open peril basis. Other incidental operations are covered. For example, if the dealer also sells seed, grain, and hand tools, that inventory would also be covered. The form draws a sharp distinction between the kinds of mobile equipment insurable under the Equipment Dealers Form. Note: Motor vehicles designed for use on highways are not eligible for coverage under the Equipment Dealers Form. The form can be written on a reporting (values reported each month) or a non-reporting form. The declaration page of the policy lists five separate coverage parts: A. property at the insured premises with space for three location and limits in building and outside; B. limit for property at newly acquired premises which usually only applies for 30 days and is then added to the policy; C. limit for property in transit. D. applies a limit to property not at the insured premises and not covered by A, B, or C (such as property stored at someone else premises); and E. is a total limit for all covered property at all locations.
4. Film Coverage Form: This provides broad coverage for exposed motion picture and magnetic or video tapes, including sound tracks and other sound records. Any person or firm engaged in commercial production of motion picture film, or the commercial recordings of magnetic or video tapes, is eligible for coverage.
5. Floor Plan Coverage Form: This is affordable open perils coverage on merchandise held for sale that has been financed through a lending institution. The type of merchandise is relatively expensive, individually identifiable by serial number, and subject to only moderate turnover (i.e. items expected to remain in inventory over 30 days before selling). The form is usually written on a monthly reporting form basis with payments due monthly. The policy may be written to cover the single interest of the dealers or lending institution or written to cover the dual interest of the two entities. Manufacturers or processors are not eligible.
6. Jewelers Block: This is available to retailers with average inventories no larger than $250,000. Ineligible classes are retailers with average inventories of $250,000 or over, wholesalers, manufacturers, pawnbrokers, loose diamond risks, bullion and precious metal dealers, industrial diamond risk, auction dealers, fine art and antique dealers, watch repair shops, and exhibitions, but it may be extended by endorsement to cover trade shows. The cover is written for “risk of direct physical loss.” This covers “stock in trade” consisting of jewelry, precious and semi-precious stones, and precious metals and alloys. It also includes “other stock” used in the business, so porcelains and crystal in inventory are also covered. The meaning of “covered properly” also includes property that has been sold waiting delivery. Coverage is provided in the US, Puerto Rico, and Canada.
7. Mail Coverage Form: This is used to insure valuable mail shipments made by financial and fiduciary organizations. Coverage is provided against risk of direct physical loss (accidental loss or damage) to covered property, when it is sent by first class mail, certified mail, US Postal Service, express mail, and registered mail. This form can be used by banks, trust companies, insurance companies, security brokers, and investment corporations whose business is primarily fiduciary in nature as well as corporations that act as their own security transfer agents or registrars. Covered property when sent by first class mail or other classes, include:
- Bonds, stock certificates, certificates of deposits and other securities
- Coupons if detached from bonds
- Postage and revenue stamps, postal express, and other money orders, check drafts, notes, bills of lading, etc.
Note: Other property may have coverage, but only when sent by other forms of delivery.
8. Physicians and Surgeons Equipment Coverage Form: Under the current form, professional equipment, office equipment, and tenant-insured’s interest in improvements and betterments are insured on an open peril basis subject to exclusions.
9. Sign Coverage Form: This affords open perils coverage for neon, fluorescent, automatic, or mechanical electrical signs and lamps. Ineligible risks include billboards and/or ordinary fixed signs, whether they are or aren’t directly illuminated by electric lights.
10. Theatrical Property Coverage Form: This is used to cover scenery, costumes, theatrical properties, and similar belongings to others in the insured’s care or intended to be used in a production scheduled in the policy declaration. Any theatrical productions or plays are eligible except for carnivals, circuses, rodeos, costume rental companies, or theatrical supply houses.
11. Accounts Receivable Coverage Form: This covers loss resulting from the insured’s inability to collect amounts due from customers due to a covered loss. Also covered are interest charges on loans required to offset amounts that the insured is unable to collect pending the insurer’s payment of a loss, collection expenses in excess of the insured’s normal collection expenses that are made necessary by the loss, and other reasonable expenses incurred by the insured to reestablish lost records of accounts receivable.
12. Valuable Papers and Records Coverage Form: Many businesses possess valuable papers and records such as blue prints, manuscripts, deeds, maps, or everyday business records and avoid the financial loss of such items by keeping duplicates at another location. Insureds that can do this may have little or no need for this coverage, but in some cases the document is irreplaceable or a copy won’t work. There are two methods to insure valuable papers: the Limited Amount Property Form or arranged coverage under a separate Valuable Papers and Records Form.
Other Marine: There are Marine exposures in addition to inland marine involving aircraft or ships that many businesses face, but these coverages will not be discussed here. We have carriers that specialize in physical damage and liability coverages for aircraft and ships.
Business Auto: This can be one of the greatest loss exposure areas for most employers. That’s why it is important to have a hiring policy for employees who drive a company vehicle. Because of the Privacy Act of 1994, the employer must have the applicant or employee’s written permission to obtain their driving record or any health information that might be pertinent to the performance of the job. We recommend getting a permission form signed before hiring an employee. The driving record should at least be checked for the previous three years. A ten year check is better.
This is so important, because the employer can be held “vicariously” liable for the negligent act of his employees. A jury can hold an employer guilty of negligence if he/she allows an employee with a bad driving record to drive a company vehicle and may even award punitive damages for the employer’s negligence. These awards usually involve large sums of money.
So how can the employer protect his/her business assets? How much coverage is enough? The first step is to carefully check each employee whose job will require driving a company vehicle. Clear guidelines should be outlined in the company manual. A driver with a poor record can adversely affect the cost of the business auto coverage for any employer. An employer should purchase enough liability coverage to protect the assets of his/her business or enough to cover what he/she can’t afford to lose. Consider the number of vehicles on the road, the length of time on the road, and how much risk the employer is willing to self insure, because it will all influence the amount of auto liability that should be carried. The type of vehicles, the age and cost of each vehicle, and the use and experience of the drivers also factor into employer cost.
Uninsured Motorist Coverage is required by South Carolina law. You can purchase an amount of coverage up to the liability limit. If you are involved in an accident with another vehicle that is uninsured, and they cannot pay for your damages, you would file an uninsured motorist claim against your insurance policy. There is a property damage deductible. After settling your claim, your insurance carrier should try to recover your deductible and damages from the other driver whose negligence caused the damage. A judgment can be obtained until the other party pays the claim, and then the claim would be removed from your record. Until there is a recovery, the claim would affect your auto premium.
Underinsured Motorist Coverage is not required by South Carolina law. This coverage works like uninsured motorist coverage, except in this case the other driver does not have enough liability coverage to pay for all the damages. You could file a claim against your insurance carrier, or you could sue the responsible party yourself. If you file a claim and a payment is made, it will affect your auto insurance premium until recovery is made from the responsible driver. As uninsured motorists you may purchase up to the limits of your liability policy. The limits for both uninsured and underinsured motorists must be the same, and there is a property deductible which is applied to both coverages. The premium for this coverage has gone up faster than uninsured motorist because of the number of claims. With the low limits required by SC ($15,000/$30,000 for Bodily Injury and $10,000 for Property Damage) there often isn’t enough money to pay all the damages that result from an accident.
Physical Damage Other Than Comprehensive and Collision: Physical Damage includes coverage for comprehensive or collision losses. Comprehensive Loss “Other than Collision” (OTC) includes fire, theft, vandalism & malicious mischief, missile, or projectile (rock), falling object (tree), hitting an animal, or glass breakage. A Collision Loss includes impact with another object. In most cases your Business Auto includes liability losses as excess over other collectable insurance. Physical Damage must be purchased on the Commercial Auto Policy prior to the loss.
Loading and Unloading a Business Vehicle: If an employee causes damage while making a delivery to a customer’s house then the loss is paid under the Commercial Auto Policy. This can cause a problem for your auto coverage. For example, if an appliance is being delivered on a hand truck, and while being pushed into position, tears the vinyl floor, the claim is paid under the Commercial Auto Policy. Several of these losses can cause a problem at renewal. The exception to this rule is when the delivery is being unloaded with a mechanical device such as a fork lift that is carried on the back of the truck. If the unloading is done by mechanical device the claim is handled under the General Liability Policy.
Commercial Auto Drivers Age and Record: Most insurance companies prefer commercial vehicle drivers to be over 21. Certain vehicles require a special commercial driver’s license. A driver’s age and driving record can cause an employer problems obtaining and keeping insurance coverage at a reasonable cost. It is important to regularly check your employee driving records.
Use Deductibles as in Health Insurance to Lower Premiums: Shop deductibles for liability and physical damage coverage to find out where you get the best bang for your dollar. Deductibles help lower premiums and if your willing to pay the smaller claims it will help to hold down your auto premiums and keep coverage in effect. Be sure to check to see if the savings are worth taking a larger deductible.
Temporary Substitute Vehicle: Your commercial policy does not work like your personal auto policy. Under your personal auto policy if a vehicle is in the shop for repairs, a rental vehicle becomes a temporary substitute. It temporarily acquires the coverage that was on the insured vehicle but only while your vehicle is in for repairs. Most personal auto policies extend this coverage to physical damage coverage and liability. However, the commercial policy only includes liability coverage unless you purchase physical damage coverage for the rented/non-owned vehicle. In most cases your liability coverage would be excess to other collectable insurance, however, in some states such as Texas, your coverage is primary. You can purchase physical damage coverage on your Commercial Auto Policy. The premium is usually based on rental receipts. Your policy is worded to comply with state law. If you are traveling out of the country, you should check with your agent. While coverage extends to the continental United States, its territories, and Canada; you should purchase insurance at the border before traveling in Mexico.
South Carolina’s Workers Compensation law was written in the 1930s and based on North Carolina law. The law allowed workers to make a claim for medical benefits and lost income, while giving up the right to sue the employer. This kept both employer and employee out of the court systems and was beneficial to both.
South Carolina’s Workers Compensation Pool
The South Carolina Assigned Risk Pool is now handled by the State Department of Insurance. Two insurance companies provide coverage for employers in the SC Pool. These companies are Capitol City Insurance and Companion Property & Casualty. You may be in the Pool for several reasons:
- You are a new start up business, and the standard markets don’t want to cover you without two or three years of business experience and prior workers compensation coverage.
- You are in a business that is particularly hazardous, and most carriers do not want the exposure. Examples are roofer, rough carpentry, siding installation, asbestos abatement contractor, etc.
- Your agent does not represent any standard market companies that normally write workers compensation coverage in South Carolina. Many captive agents and/or direct writers don’t write workers compensation coverage, and the only market they have is the pool.
- You had some losses requiring you to go into the pool.
- After a couple of years in the pool, your agent has not bothered to shop the current market.
Advantages of the Pool: Coverage when you can’t obtain other coverage.
Disadvantages of the Pool:
- Rates for each classification such as salesman, clerical, etc, are generally higher than the standard market. The bottom line is workers compensation cost you more.
- If you have an experience modification above 1.00, the pool has an additional surcharge called an ARAP which applies additional premium. For example, if your experience modification is 1.27, you could have a 1.12 ARAP, which adds an additional 12% to your premium. Some standard companies will write an employer with a 1.27 experience modification if your agent can adequately explain the circumstances, is licensed with that company, and remembers to shop your coverage for a better price.
- The expense constant is higher in the pool than in the standard market. In fact, a few companies didn’t file an expense constant, so that saves you almost $200 if your agent represents that company.
- Some standard market companies still give up to 25% credit to good workers compensation accounts. There are no credits in the pool.
Experience Modification Factor: If your workers compensation premium is over $4,500 for 2 years or over $8,000 for one year, the National Council on Workers Compensation Insurance (NCCI) can formulate an experience modification. This can be a two edged sword. If you have good experience, you could have a credit modification factor and get a credit taken off your annual premium. But if you have a number of claims or a big claim, you could end up with a debit modification that would be added to your premium. You can see how important it is to keep not only the cost of claims down, but also the number of claims you have.
Monoline Workers Comp: Workers compensation losses have been down in South Carolina over the past few years, so a number of insurance carriers began to provide workers compensation coverage in South Carolina again. In 2000, Workers Compensation experience began to change and the insurance market began to “harden” as opposed to the “soft” market of the previous few years when companies were willing to write workers compensation and give additional scheduled credits to get the business.
How Rates Are Determined: The State of South Carolina has a base rate with which all insurance companies begin. Each year, every company reports their experience factor or “lost-cost” factor to the State. This factor is multiplied by the base rate to get that company’s cost for each rate classification (ex. salesperson, clerical, etc). Most companies that write workers compensation in the State also have an “ expense constant” added to the bottom-line. However, some companies did not file an “expense constant.”
Is an Employer Required to Report Every Work-related Injury?
No. Changes in the law allow an employer to refrain from reporting a work-related accident if the medical bills are $500 or less and if the employee hasn’t lost time from work.
Surety Bonds: No one bond form is appropriate for all circumstances that require a bond. Just as no one insurance policy provides all the insurance coverages that may be required. There are many different types of Surety Bonds, yet in spite of their numbers, Surety Bonds can be grouped into categories. Generally, they are broken into six classes:
- Contract Bond
- License and Permit Bond
- Public Official Bond
- Judicial Bond
- Federal Bond
- Miscellaneous Bond
We represent carriers that are ready to provide whatever bond you need. Some carriers want to see a great deal of bond activity while other carriers are satisfied with one or two bonds a year and have less restrictive requirements. Carriers need a lot of information to set up a bond line, so you establish a bond limit before you need it. Depending on the bond requirements, a carrier may require audited financials from the business and personal financial statements on the owners. Carriers vary and, depending on the bond, will accept either reviewed financial statements or accountant prepared. We have the markets, knowledge, and expertise to handle your bonding needs. We issue directly from our office.
1. Contract Bond guarantees the fulfillment of contract obligations. This contract can involve both construction and other type of work or service. Four bonds fall into these classes.
- Bid Bond guarantees an owner that a party bidding for a contract will, if the bid is accepted, enter into the contract.
- Performance Bond guarantees the owner that the job will be completed according to contract specifications and within a specific time.
- Payment Bond or “Labor and Materials” guarantees that labor and material invoices will be paid when due.
- Maintenance Bond guarantees that a principal’s faulty work will be corrected or defective materials will be replaced.
2. License and Permit Bond is commonly required to obtain license from cities, towns, or political subdivisions before the license can proceed.
3. Public Official Bond is required under statue for individuals elected to positions of public office, guaranteeing the public servant will faithfully perform their duties.
4. Judicial Bond is used for a variety of court proceedings, guaranteeing a person or firm – as the principal – will fulfill certain obligations specified by statue. There are two classes depending on the type of court action:
- Fiduciary bond
- Court Bond is required by courts of equity to settle arguments involving specific performance. The purpose is to protect persons (Obligees) against loss in the event principals don’t prove they are entitled to remedy.
5. Federal Bond guarantees that specific acts will be performed or that obligations will be met with respect to the federal government and its laws and regulations.
6. Miscellaneous Surety bond includes all those that can’t be classified into any other particular group. This is the largest number of different type bonds: auctioneer bond, insurance agent, school teacher, patent infringement bonds, and others.
What is an Umbrella Policy? Umbrella Liability Insurance provides additional liability coverage over several of the insured’s primary liability policies. Most umbrella liability policies provide coverage that is broader than the insured’s primary policies. It may be what is called a Following Form Policy, which means it is subject to the same terms as the underlying policies. Or it may be a Self-Contained Policy, which means it is only subject to its own terms. It may even be a combination of these two.
What is its purpose? Umbrella policies have three functions: 1. to provide additional limits above the occurrence limit of the insured’s primary policies; 2. to take the place of primary insurance when primary aggregate limits are reduced or exhausted; and 3. to provide broader coverage for some claims that wouldn’t be covered by the insured’s primary insurance policies, which would be subject to the policy retention. Most umbrella liability policies contain one comprehensive insuring agreement. The agreement usually states it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, property damage, personal injury, and advertising injury.
How does it pay? Read the insuring agreement carefully. Some umbrella policies promise to make direct payments on behalf of the insured for those sums of money the insured becomes legally obligated to pay because of liability imposed upon the insured by law or assumed under contract.
This is “Pay on Behalf.” Most umbrella policies are Indemnity Policies, and the language says the insurer will indemnify or reimburse the insured for money the insured is legally obligated to pay as a result of liability that is imposed upon the insured either by law or assumed under contract.
What is Retention? The self-insured retention is the amount of loss an insured must pay before the umbrella policy would be required to respond. The self-insured retention would only apply when a loss is excluded from coverage under the primary policy but not excluded under the umbrella policy.
Excess or Surplus Coverage contrasts with the umbrella policy in that it doesn’t provide blanket protection. The insured must choose where additional coverage is needed, and Straight Excess Liability is only in addition to that policy coverage (example: general liability or auto, etc).