Insurance Illustrated | June 26, 2020

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for the week of June 26, 2020

Education + Analysis for the Independent Agent

Contractual Risk Transfer / Additional Insureds / Certificates of Insurance

The Anatomy of a Hold Harmless and Indemnity Agreement

Although we know that interpreting contracts is a matter of law, because our customers routinely execute hold harmless and indemnity agreements with all manner of entities, knowledge of these contractual provisions is of primary importance. It is important that you have insight to help you better understand the workings of these agreement and how your customer’s CGL policy may or may not provide coverage for the liability created by such agreements.

Insured Status is VERY Complicated – Until You Understand It!

If the person or entity causing injury or damage to a third party is NOT an insured in the policy, guess what – there is NO coverage. Who is an insured, and not an insured, in the CGL, BAC and work comp must be understood, because if this is wrong, all the great work in designing coverage is useless!

Additional Insured vs. Indemnitee: Are Contractual Liability Coverage and AI Status the Same Thing?

Agent question: “We have not been individually adding Additional Insured endorsements, relying on them being an indemnitee in the ‘insured contract’ wording of the CGL or BOP policies, which gives them AI status without endorsing that on the policy.” Could this agency have a problem, along with their customers?

Crime

Coverage for Loss Due to Credit Card Fraud

Your insured accepted an order via the internet for products that he sells. He verified that the credit card was valid through a service that he uses. It was not until several days later that the service that he uses advised him that the credit card had been stolen. He shipped the product that he sold and is now without the product and lost the income. Is there any insurance product out there to cover this exposure?

Some Employers Shortchanged On Employee Dishonesty Coverage

Agents and insureds often think employee dishonesty coverage on a BOP is the same as coverage provide by Commercial Crime policies or forms. Unfortunately, that’s not the case. This article provides a real-life example of where more is less.

Email Phishing Scam: Coverage for Social Engineering

With perhaps the exception of ransomware, the largest source of cyber loss for insurance carriers is phishing scams, commonly known as business-email-compromises (BECs), whereby an insured is tricked into sending money by wire transfer to a bank account controlled by a criminal organization. Some losses are seven-figures; some represent death by a thousand wounds. During the last two years, many courts have found for the existence of Computer Fraud coverage for such loss in somewhat complex and sometimes head scratching decisions.

Flood

HOA, NFIP, RCBAP, GP

If a homeowners association (HOA) is not established as a condominium, the Residential Condominium Building Association Policy (RCBAP) can’t be used. This can create several problems, particularly if someone tries to use the RCBAP anyway.

RCBAP and Insurance to Value

Insurance professionals should explain the benefits of insuring to 100 percent of the replacement cost on the RCBAP (as well as all type of policies) covering buildings or personal property. The least expensive choice at the time of application may turn out to be the most expensive choice at the time of loss.

Flood Insurance and the 30-Day Wait

An insured wanted to buy a flood policy even though it was not required by the lender. The WYO underwriter said that since the policy was not required by the lender for a loan closing, there was a 30-day wait for coverage to become effective. Is the underwriter correct?

Trends & Insights

Are You One of ‘Those’ Agents?

I asked underwriters from all over the country to recount some of the strangest, most unusual, or simply irritating situations involving agents. Here are some of their responses.

3 Questions That Measure Your Professionalism

About the time you become satisfied with your knowledge level, figuring you know all there is to know, you become a danger to yourself and everyone else. For example, the most dangerous time for any pilot or insurance practitioner is that point when they begin to feel comfortable in themselves and their knowledge.

Debating Ambiguities in Insurance Contracts

Every insurance practitioner knows what happens when there is an ambiguity in policy language, the insured is supposed to win. But what makes a provision ambiguous? Is an ambiguity created simply by disagreement, or is more required? Guess what, creating ambiguity requires more than simple disagreement over a policy provision.

Miscellaneous & Professional Liability

ISO's Professional Liability Forms

Effective June 1, 2017, Insurance Services Office (ISO) introduced the new Miscellaneous Professional Liability Policy (MI 00 01) along with a multitude of endorsements. This is the first in a series of insurance programs designed to address the professional liability needs of various risk types. These new forms are housed in Division Sixteen – Professional Liability – Other Than Medical of the ISO Commercial Lines Manual.

Why Do Insureds Need D&O Insurance?

It's relatively easy to convince a prospect they need CGL coverage. However, it may be difficult to convince them that they may need other forms of liability insurance such as Directors & Officers, Errors & Omissions, Employment Practices Liability, etc. The problem often involves a lack of understanding between the differences in these coverages and the exposures that trigger them.

Danger! Watch Out for Changing Entity Types

You cannot assume the entity type you insured last year is the same entity type that exists this year. When insuring small businesses, you are fighting against several unseen entities – namely accountants and lawyers. These other professionals make changes to the small business without much thought to the problems these changes can cause your client’s insurance program.

Insurance Laws & Statutes / Coverage Resources

Auto Statutes by State

State laws vary regarding auto policies, personal and commercial. Each state prescribes its own minimum limits and other required coverages. Some state require Uninsured Motorist (UM) and some states require Uninsured and Underinsured Motorist (UM/UIM). Is it a Personal Injury Protection state (aka, No-Fault); or are you allowed to exclude a driver?

Answering Your FAQs

Does Requiring Customers to Wear Masks Have Any Effect on Legal Liability?

States are in various stages of reopening following months of COVID-19 lock downs. As the states progress through the various levels, businesses are making key decisions regarding masks, should masks be required or optional? Some legislatures have taken the responsibility for this decision away from business owners and are requiring masks be worn; but other states leave the decision to the business owners.

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