Fundamentals Chapter 9.pptx

 What do you remember? Students have three minutes to write 3-4 sentences about what they remember from last class. If you can give an example, that is even better! Remember the Forgetting Curve!  CHAPTER 9 - INTRODUCTION TO LIABILITY INSURANCE WHAT LIABILITY POLICIES INSURE The...

 What do you remember? Students have three minutes to write 3-4 sentences about what they remember from last class. If you can give an example, that is even better! Remember the Forgetting Curve!  CHAPTER 9 - INTRODUCTION TO LIABILITY INSURANCE WHAT LIABILITY POLICIES INSURE The Insuring Agreement Main Insuring Agreement for most policies ○ Insurer agrees to pay all sums which insured shall become legally obligated to pay to third parties AS COMPENSATORY to a third party. ○ Must be due to an occurrence ○ Must occur during policy period ○ Must take place in the coverage territory  ANALYSIS OF INSURING AGREEMENT 1. Insure Bodily Injury & Property Damage i) Bodily Injury REFERS TO the physical injury sustained AND associated with external causes INCLUDES ○ Sickness and disease ○ Death due to such injury at a later date will be considered as part of the SAME bodily injury BODILY INJURY - BROAD DEFINITION ○ The actual harm to the body from the insured’s actions, work, or products  ANALYSIS OF INSURING AGREEMENT 1. Insure Bodily Injury & Property Damage ii) Property Damage Unintentional damage to property of others → usually covered by liability policy PROPERTY DAMAGE: ○ Physical injury to tangible property ALSO the resulting loss of use Includes loss of use to tangible property NOT physically injured ○ When there’s a claim against the insured for damage to tangible property, the wronged party often incurs OTHER significant financial loss  ANALYSIS OF INSURING AGREEMENT 2. Third Party Coverage Only For damage or injury from the insureds to third parties DEFINITION THIRD PARTY ○ Anyone or any entity NOT NAMED in policy 3. Payment Only when Insured Legally Liable Insured might feel bad (moral obligation) for the injured party, the policy ONLY RESPONDS when insured is legally liable for injury/damage Must establish negligence  ANALYSIS OF INSURING AGREEMENT 4. Coverage Provided on Occurrence Basis OCCURRENCE LIMITS DEFINITION OF OCCURRENCE (by the policy) ○ An event occurring suddenly and unexpectedly TECHNICALLY → sudden/unusual events that can be fixed in time is an ACCIDENT ○ OR an event that occurs over a long span of time Liability policies insure Bodily Injury/Property Damage (BI/PD) on an OCCURRENCE basis Limit on the policy for BI/PD is for each occurrence ○ WHAT DOES THIS MEAN If a claim has been paid THEN limit in the policy will be available again to pay future claims  ANALYSIS OF INSURING AGREEMENT 4. Coverage Provided on Occurrence Basis AGGREGATE LIMITS DEFINITION AGGREGATE LIMIT ○ The max amount paid for all valid claims during policy term ○ EXAMPLE If a policy says that Bodily Injury/Property Damage has a limit of $1,000 per occurrence and an aggregate limit of $10,000  ANALYSIS OF INSURING AGREEMENT 4. Coverage Provided on Occurrence Basis SPLIT LIMITS OR SEPARATE LIMITS OF LIABILITY Split Limits vs. Inclusive Limit ○ Inclusive Limit - $1,000,000 inclusive MEANING there is a limit of $1,000,000 ○ Split Limits - $100,000/$200,000/$50,000 $100,000 is limit for BI per person $200,000 is for total BI for ALL claimants OR for more than one person (still limited to per person $100,000) $50,000 is the limit for PD per occurrence USED OFTEN with minimum limits applicable to auto insurance in USA  ANALYSIS OF INSURING AGREEMENT 5. Pays Compensatory Damages Only Liability policies pay for COMPENSATORY DAMAGES ONLY DEFINITION COMPENSATORY DAMAGES ○ Damages intended to compensate the third party (Plaintiff) for the injury OR damage caused by insured (defendant) Other types of damages awarded by the courts ○ Payment of punitive or exemplary damages ○ Damages to punish defendant for actions and also deter others from similar behaviour in the future ○ Payment of punitive/exemplary damages is the SOLE RESPONSIBILITY of the insured  DUTIES IN EVENT OF AN OCCURRENCE, CLAIM OR ACTION Liability insurers have many obligations on insureds in the event of an occurrence, claim OR action INSUREDS MUST Provide insurer with prompt notice of any occurrence which MAY lead to a claim or action ○ Time, place circumstances of accident ○ Names, addresses of witnesses and potential injured persons ○ **Prompt notice Allows insurer to quickly assess potential for successful action against insured Gives insurer the chance to collect all facts on the accident while still fresh in insured’s mind  DUTIES IN EVENT OF AN OCCURRENCE, CLAIM OR ACTION INSUREDS MUST Immediately provide copies of ANY legal documents received to insurer ○ It is the insured’s responsibility to inform the insurer immediately AND provide copies of all legal documents received (Notice Of Claim) ○ Gives insurer the chance to declare its intention to the court to defend action against insured Authorize insurer to obtain records/other info ○ Written reports filed with police, fire, other authorities  DUTIES IN EVENT OF AN OCCURRENCE, CLAIM OR ACTION INSUREDS MUST Help in the investigation, settlement, OR defence of claim OR action Sometimes insured knows plaintiff and may be “on their side” SO insurer may have difficulties during: ○ Investigation - insureds are reluctant to cooperate, insurer may be denied information ○ Settlement - insureds might resist attempts by insurer to settle a claim out of court USUALLY BECAUSE insureds feel they are not legally liable for the injury/damage caused ○ Defence - when insurers decide to defend action against insured, they usually think there is no legal basis for the claim Insured might have to give testimony Refusal by insured to provide testimony could undermine the insurer’s case  DUTIES IN EVENT OF AN OCCURRENCE, CLAIM OR ACTION INSUREDS MUST Help in the investigation, settlement, OR defence of claim OR action DO NOT (except at own cost) voluntarily pay, assume obligation OR incur expenses (other than first aid) without consent of insurer ○ Right to investigate, defend, settle claims belongs to insurer ○ Any payments made/promised to plaintiff by insured is prohibited ○ Only financial obligation passed to the insurer without consent are for first aid at time of accident  SUPPLEMENTARY PAYMENTS Limit of insurance provided by policy for BI/PD is RESERVED FOR payment of claims Additional expenses for investigating, settling, defending a claim are under Supplementary Payments COSTS INSURED BY AGREEMENT i) Costs of defence ○ Legal costs to conduct a defence can be very expense ○ Insurer might hire independent adjusters to investigate and negotiate settlement ii) Reasonable expenses incurred by insured at insurer’s request to assist in investigation/defence of claim  SUPPLEMENTARY PAYMENTS COSTS INSURED BY AGREEMENT iii) Court costs assessed against insured ○ Court may decide cost is borne by plaintiff OR defendant OR BOTH iv) Interest from date judgement was rendered BUT ONLY ON amount within the limit of insurance provided by the policy ○ Insurer liable for payment of interest costs from date of judgement ○ Supplementary payments - important for all insureds ○ Usually not limited to a specific amount ○ Provided in addition to other coverage limits in policy LIABILITY POLICIES RESTRICTED TO SPECIFIC ACTIVITIES Liability policies → deal with specific activities; not designed for insuring ALL exposures faced by insureds  Write a question Students take two minutes to write a question about any of the concepts that we went over so far in class, in the chat window. No question is too simple! Remember the Forgetting Curve!