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Insurance protecting the income/earnings derived from your business activities if you suffer a business closure or must operate at a reduced level because of a fire or other covered peril. For the purpose of this insurance coverage, “earnings” are defined as the actual loss sustained as a direct result of business interruption necessitated by damage or destruction of real or personal property. The damage or loss must be caused by covered perils. “Business income“ is defined as the sum of total net profit, payroll expense, taxes, interest, rents, and all other operating expenses. The amount of coverage provided is established on the basis of either the limit of insurance and applicable coinsurance %, or the actual loss sustained (see separate definition) for the period of business interruption.
Business Income/Business Interruption
nsures the structure of the place of business and includes the building, and permanently installed equipment and fixtures. It does not include the value of the land. As such, the building coverage limit will not match a bank mortgage appraisal. Building coverage limits are a function of the construction type, age, and total square footage of the building, among other things. The intent of the coverage is to provide the financial means to reconstruct the building and its fixtures.
An insurance contract provision limiting the maximum liability of an insurer for a series of losses in a given time period, e.g., a year or for the entire period of the contract. Sometimes called "annual aggregate limit."
Aggregate limit of liability
Insures against loss of revenue when debts cannot be collected because accounts receivable records are destroyed by an insured peril. This can include all sums due to the insured from customers, providing you are unable to effect collection as a direct result of a covered loss or damage to records of accounts receivable. Coverage commonly includes any extra expense to recapture or reconstruct records, and payment of interest on loans needed to cover the interim period reduction in collections. Insurance may be arranged to cover electronic records as well as paper.
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E & O coverage is a type of professional liability insurance protecting the insured against claims caused by the alleged professional or technical incompetence of the insured. Many businesses have professional liability exposures. Some common examples of course include doctors, yoga instructors, accountants, insurance agents, real estate agents, etc. but E & O is also an important coverage for many other types of businesses that could be sued for alleged professional or technical incompetence. Professional liability claims are specifically excluded by most General Liability policies.
E & O (Also known as Errors & Omissions, Professional Liability, or Malpractice)
A standard insurance policy issued to business organizations to protect them against liability claims for bodily injury and property damage arising out of premises, operations, products, and completed operations; and advertising and personal injury liability. The CGL policy was introduced in 1986 and replaced the "comprehensive" general liability policy.
Commercial General Liability (CGL) Policy
is an arrangement by which the insured, in consideration of a reduced rate, agrees to carry an amount of insurance at least equal to a specified percentage of the total value of the property insured. Typically, an insured guarantees to carry insurance up to 80% or 90% of the value of their building and/or contents, whatever the case may be. If the building and/or contents values are found to be inadequate at the time of a covered loss, the insurer pays claims only in proportion to the amount of coverage that was carried.
A type of Commercial General Liability insurance form that responds only to claims for injury or damage that are reported to the insurer during the policy period (or during a designated extended reporting period beyond expiration). The creation of this type of coverage was in response to “long tail” claims, such as those related to asbestos exposure, carrying over many years and multiple layers of coverage limits. Contrast this with coverage provided on an “occurrence” basis, covering injury or damage occurring during the policy period even if a claim is brought months or even years later.
Claims Made Form
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A contractual relationship that exists when one party (the insurer) for a consideration (the premium) agrees to reimburse another party (the insured) for loss to a specified subject (the risk) caused by designated contingencies (hazards or perils). The term "assurance," commonly used in England, is considered synonymous with "insurance."
provides your company with physical damage coverage similar to comprehensive & collision in the event that a vehicle you rent or leased is damaged. A Hired Auto is a non-owned auto that is borrowed, rented, or leased by the insured.
Hired Auto Physical Damage
extends liability coverage for vehicles rented or leased in the business name. It does not provide collision or comprehensive coverage on rented vehicles (see separate discussion on Hired Auto Physical Damage). Hired Auto Liability can replace or augment the liability coverage offered by auto rental agencies. Coverage is provided to protect the company, not the employee driving the rented vehicle. Coverage is “excess” over the personal auto liability coverage carried by the driver of the vehicle.
Hired Auto Liability
protects you for damage caused by fire to property you lease or rent caused by your negligence. General Liability policies typically exclude damage to property in your care, custody or control, therefore this coverage is needed if you lease or rent a building.
Often you’ll find that only the minimum $100,000 - $300,000 limit that automatically comes with the policy is included. Obviously, this can create a large coverage gap. For example, if the insured is occupying a 10,000 square foot building with an estimated replacement value of $100 per square foot, then the actual exposure is $1,000,000. An automatic limit of $100,000 leaves a $900,000 coverage gap!
Legal Liability / Damage To Premises Rented To You (Also known as “Fire Legal” or “Fire Damage”)
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covers your company if sued as a result of an auto accident that you or one of your employees has in a personal vehicle (not owned by your company) while using that vehicle on company business. Common examples of this exposure are: you send an employee to pick up lunch; your bookkeeper drives to the bank to make a deposit; an employee runs some other sort of misc. errand to pick up or deliver supplies, parts, etc. This coverage does not protect the employee (his or her personal auto policy does that); rather this coverage protects your company. Further, this coverage is excess over the personal auto liability coverage carried by the employee
Non-Owned Auto Liability
The entity (an individual or firm) specifically named as insured in the insurance contract. Found on the Declarations Page of the policy, but also a separate Named Insured endorsement may be issued when the named insured is lengthy. The named insured is the entity with whom the insurance contract is made, and whose interests are protected under the policy. More than one entity may be designated as the named insured.
A general liability coverage that reimburses others, without regard to the insured's liability, for medical or funeral expenses incurred by such persons as a result of bodily injury or death sustained by accident under the conditions specified in the policy.
provides coverage for a tenant holding a favorable lease in the event the tenant’s lease is terminated or canceled as the result of direct physical damage to the premises from a covered cause of loss. Leasehold Interest provides coverage for an insured tenant’s interest in a favorable lease under which the rent paid is less than the market value of alternative premises. The coverage pays the difference between rent paid and the rental value for the remainder of the lease.
For example: Let’s assume that you hold a favorable lease with 36 months remaining. The lease is favorable because your rate is $10,000 per month whereas the going market rate for a similar facility would be $15,000. This creates a significant exposure if your lease were terminated - 36 months x $5000 (the difference) = $180,000. Leasehold Interest provides coverage for this exposure.
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provides coverage on the basis of full replacement value without deduction for depreciation, subject to other Property policy terms such as any deductible, or any coinsurance clause. Replacement Cost is often applied to various Property subjects of insurance such as Building, Business Personal Property, and other property coverage. Replacement Cost is superior to the other commonly found valuation clause (Actual Cash Value).
Usually found in various types of liability policies, a broader method of determining whether coverage is available for a specific claim than the more restrictive “claims made” form. Under an occurrence form, as long as a claim arises from an event occurring during the policy period, a carrier is responsible for coverage (subject to the policy exclusions) regardless of when the insured submits the claim. As long as the event occurred during the policy period, the claim will be covered even if it is submitted after policy expiration.
In a commercial general liability coverage form, an accident, including continuous or repeated exposure to substantially the same general harmful conditions. General liability policies insure liability for bodily injury or property damage that is caused by an occurrence
provides primary physical damage coverage to the vehicles of employees using their personal vehicles on company business. Non-Owned Auto Liability only provides liability coverage, and only to your company. Non-Owned Auto Physical Damage plugs this gap, i.e., it provides coverage to the employee’s vehicle were it to become damaged in the course of using that vehicle on company business.
Non-Owned Auto Damage
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A policy designed to provide protection against catastrophic losses. It generally is written over various primary liability policies, such as the business auto policy, commercial general liability policy, watercraft and aircraft liability policies, and employers’ liability coverage. The umbrella policy serves three purposes: it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims; it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and it provides protection against some claims not covered by the underlying policies, subject to the assumption, by the named insured, of a self-insured retention.
Also known as “All Risk” - A “peril” is the cause of a damage or loss. Special perils, (formerly and sometimes still referred to as “All Risk”), is the most comprehensive form of property insurance perils available, and can be purchased either including or excluding the peril of theft. Unlike a named perils form which specifically lists the perils that are covered, a special perils form provides coverage against risk of direct physical loss unless specifically excluded by the policy.
A provision found within professional liability policy forms written for professionals that includes coverage for claims alleging sexual abuse. Moreover, some versions of this provision also state that coverage to defend against allegations of sexual abuse is provided.
Sexual Abuse/Molestation Coverage