Commercial Lines Insurance and Term Glossary
Commercial Lines Insurance address the liability assumed or property that is owned and or used by or in the course of doing business. Descriptions of the customary definitions and coverage which may be obtained are listed below.
Commercial Package Policy is a convenient assembly of several coverage forms packaged together and commonly called the CPP. The CPP includes a minimum of two of the following coverage parts; commercial liability, commercial property, commercial automobile, inland marine (including electronic data processing coverage) and commercial crime coverage. The insurance companies will usually provide added premium discounts to encourage clients to incorporate as many coverage’s as possible in a single policy. This type of policy is typically written on more complex insurance risks.
Business owners Policy commonly called a BOP is a homeowners approach to combining numerous coverage’s into a convenient package. The BOP is designed for the small to medium sized business with limited exposures like offices, small retail outlets or a specified number or service or processing businesses. The premium rating basis for the BOP is typically the amount of business personal property being covered.
General Liability Insurance is necessary for all commercial businesses as it provides third-party bodily injury and property damage coverage. This form typically includes coverage for both premises and products and completed operations exposures.
Commercial Property Insurance applies to structures owned (or where coverage is required by lease) as well as fixtures, permanently installed machinery and equipment, personal property used in the course of doing business as well as inventory or stock. Upon request it may also extend by endorsement to property of others while on premises. Depending on the insurance contract the coverage may extend to from within 100 to 1000 feet of the premises.
Business Income Coverage pays for the loss of business income occurring within a covered event happens in which the primary location for doing business becomes unusable. There are two forms available: Business Income with Extra Expense and Business Income without Extra Expense. Extra expense is a valuable coverage for moving expense, expediting the replacement of equipment or inventory or the expense of having product temporarily processed elsewhere until the business can return to operation. Coverage in the CPP form mentioned above is typically written on a monthly limit of indemnity based on the requirements of the entity. The BOP form normally includes 12 months of coverage as part of the basic package.
Inland Marine Insurance is designed to cover property generally considered to be high risk of theft or other causes of loss and is also subject to movement or transportation. A prime example of this is contractors who may be moving material from the office location to a building site. Coverage may be extended by endorsement to cover property on the construction site while waiting to be permanently installed.
Electronic Data Processing Equipment Coverage covers against loss or damage to electronic data processing equipment and media owned or leased by the insured. It is also the recommended form to cover computerized production equipment, photocopiers, expensive phone systems, plotter or any other electronic equipment, photocopiers, expensive phone systems, plotter or any other electronic equipment. Regular backups of any computer systems are highly recommended with the backup data being removed from the premises on a daily basis. Granted this can be a minor inconvenience however in the event of a computer crash can mean the difference between being up and running with little or no lost data in a day or weeks to months of data reentry. Crime Coverage comes in various forms and may be customized based on the client protocols and risk management techniques as well as their tolerance for risk. The most common forms are blanket employee dishonesty covering dishonest acts or theft by employees and money coverage providing coverage for money and securities on premises (while in the building) and off premise (possibly en route to a bank) with the amount of coverage for both being determined by the clients idea of a worst case scenario.
Equipment Breakdown Coverage previously called Boiler and Machinery Coverage has three separate parts, damage from an accident to covered items, damage to other property of the insured as a result of the accident and loss of income due to the damaged items covered. The coverage will typically apply to production equipment, equipment used for refrigerated products as well as heating and cooling units. The loss must be sudden and accidental; wear and tear is not included.
Business Auto Coverage provides coverage for loss against third party bodily injury or property damage caused by accident, and arising out of the ownership, maintenance, or use of motor vehicles. Depending on how the policy is written the liability coverage can apply to owned autos only; autos owned, leased or hired by the insured or all autos. The “all auto” designation is the recommended (provided the business is a corporation) coverage as it also includes exposure to autos owned by employees or partners and allegedly used on behalf of the insured. Other optional coverage’s include collision (for breakage or vandalism), medical payments and uninsured and under-insured motorist’s coverage. Other endorsements available include Broad Form Drive Other Cars (where the business owners only vehicle is the company vehicle with no other personal auto coverage in place) and Hired Car Physical Damage to cover loss to rented cars for though the insurance company will pay for the damage to the rented vehicle the insured may still be responsible for rental charges while the vehicle is being repaired as well as a term “diminished value” which would apply at the time the rental car is solid and represents the differ4ence between what the vehicle would have sold for had there not been an accident. Garage Coverage covers liability associated with auto repair serve station or parking exposures for accidents occurring on the premises in the course of operations. For repair operations this coverage should be combined with Garage-keepers insurance to cover automobiles in the care custody or control of the business. Dealers Blanket is a separate coverage with when added to garage liability policy insures the interest of a dealer in autos held for sale by the dealer.
Workers Compensation and Employers Liability insures against claims for work related disease and injury suffered by the employee. Though owners of a company may exclude themselves, by Arizona law workers compensation is mandatory for all employees.
Employment Practice Liability protects against lawsuits brought by employees (past, present or prospective) or government entities against the employer for unlawful discharge, sexual harassment or discrimination, actual or alleged. The coverage is a backup to a strong policy and procedure manual which describe what will and will be allowed in the workplace.
Directors and Officers Liability insures directors and officers or a corporation against claims of mismanagement usually brought by stockholders.
Professional Liability sometimes called “errors and omissions coverage” is designed to defend and pay claims against actions taken that stem from their professional capacity and training. Examples of companies typically in need of this coverage include doctors, lawyers, engineers and architects.
Flood Coverage applies to direct loss or damage to buildings and their contents due to a flood. There are “Flood Zones” in Arizona and often time a lender will require that flood insurance be provided in addition to a standard property form prior to closing a mortgage. This coverage can be purchased through an insurance agency or The National Flood Insurance Program.
The Internet (Cyberspace) Liability provides “errors and omissions” as well as liability for companies that are operating on the internet. There are various forms available and some provide coverage to defend against patent infringement, virus introduction or violation of confidentiality. At this time there is no standard from therefore policies need to be compared and contrasted. If an insured has an active web presence the possibility of loss is real and coverage should be considered.