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Telcoms RMC 2009 Boston MA Telecommunications Operational Activities and the Resulting Exposures they Create Presented by Peter J. Elliott, CPCU, President.

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Presentation on theme: "Telcoms RMC 2009 Boston MA Telecommunications Operational Activities and the Resulting Exposures they Create Presented by Peter J. Elliott, CPCU, President."— Presentation transcript:

1 Telcoms RMC 2009 Boston MA Telecommunications Operational Activities and the Resulting Exposures they Create Presented by Peter J. Elliott, CPCU, President & CEO Telcom Insurance Group

2 Seminar Topics Insurance Basics and Definitions Means to Exposure Analysis Operational Exposures of a Telecommunications Provider and Coverage Analysis

3 Definitions Exposure The state of being subject to the possibility of a loss. Risk- Probability or threat of a damage, injury, liability, loss, or other negative occurrence, caused by external or internal vulnerabilities, and which may be neutralized through pre-mediated action. Risk Management Analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, or transferring it, usually by insurance or another contract.

4 Definitions Insurance A formal social device for reducing risk by transferring the risks to a third party known as an insurer. The insurer agrees, for a consideration, to assume, to a specific extent, the losses of the insured. Insurance A Contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril. "Insurance" comes from the Latin word for "Security". The word "Policy" comes from the Italian language meaning "Promise".

5 Definitions Liability The state of being liable, that is legally responsible for an act or omission. Legal liability Responsibility imposed by law as opposed to liability arising from contracts or agreements. In law a legal liability is a situation in which a person is financially and legally responsible, such in situations of tort concerning property or reputation and, therefore, must pay compensation for any damage incurred; liability may be civil or criminal. Insurance law Liability is often used to refer to blame worthiness that is used to apportion responsibility for repairing damage caused.

6 Quotes about Exposure Analysis Have you found Jesus yet, Gump? I didn't know I was supposed to be looking for him, sir. Stupid is as stupid does. My momma always said, Life was like a box of chocolates. You never know what youre gonna get.

7 Tools for Exposure Analysis Physical Visits Interviews with all Departments of the Organization Financial Statements Use of Checklist and Calculators Personal Knowledge Internet Searches

8 Tools for Exposure Analysis Sample of a physical visit tool- a schematic flow of service(s) from starting point to end-user to find exposure. Sales Contract Review Provider ISP Reseller Advertise- ment Reviews Equipment Sales Practices Review Sales Contract Reviews delivery Installation Review Equipment Internet Warnings Protection Customer Data Protection Service Standards Service Visit Procedures Training Billing Service Standards Training 3 rd Party Termination Process Review

9 Tools for Exposure Analysis Worksheet Example Information Technology Business Income Worksheet This worksheet completed by: Date FRAUD WARNING NOTICE LIST Location 1 or all Locations Combined Location 2 Location 3 Figures for year Projection for yearFigures for year Projection for yearFigures for year Projection for year ending GROSS REVENUE / INCOME (Enter) License Fees $0.00 Development Fees $0.00 Maintenance Fees $0.00 Professional Services $0.00 Systems / Equipment Sales $0.00 Support Fees $0.00 Consulting Fees $0.00 Installation Fees $0.00 Training Fees $0.00 Other $0.00

10 Tools for Exposure Analysis Personal Knowledge If you have heart disease and need to have an angioplasty performed, do you go to a general practitioner or even worse to your landscaper? It is hard to argue against the fact that specialists are able to produce more consistent and favorable results. Those who trust to chance must abide by the results of chance.--Calvin Coolidge

11 Tools for Exposure Analysis Internet Search of Company Website Indemnification. You agree that the Company shall not be responsible for any third-party claims against the Company that arise from your use of the services. Further, you agree to reimburse the company for all costs and expenses related to the defense of any such claims, including attorney's fees, unless such claims are based on the Company's willful misconduct or gross negligence. This provision will continue to apply after the agreement ends. Liabilities of the Company. Except as stated in this Section 8, the Company shall have no liability for damages of any kind arising out of or related to events, acts, rights or privileges contemplated in this Agreement.

12 Exposures and Liabilities Operations General Liability Employee Benefits Intellectual Property Telephone Directory Alarm Liability Contractors Protective Failure to Supply Errors and Omissions Broadcasters Liability Communications/Media Network Security/Data Directors Liability Employment Practices Fiduciary Liability Employers Liability Automobile Liability Pollution Liability Umbrella Liability

13 Exposure and Insurance Commercial General Liability Under this form of insurance and regarding a covered occurrence, the company will pay all sums the insured becomes legally obligated to pay as damages due to: 1. Bodily Injury (Coverage A) 2. Property Damage (Coverage B) 3. Personal Injury (Coverage C) 4. Advertising Injury (Coverage D) 5. Medical Payments (no legal liability required) 6. Tenants Legal Liability

14 Exposure and Insurance Commercial General Liability…Concepts Bodily Injury…does it include sole allegations of mental anguish? Personal Injury (Coverage C) This insurance coverage protects against false arrest, detention or imprisonment, or malicious prosecution; libel, slander, defamation, or violation of right of privacy; and wrongful entry, eviction, or other invasion of right of private occupancy. What is missing from PI?

15 Exposure and Insurance Commercial General Liability Advertising Injury (Coverage D) means injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan. How does this differ from Intellectual Property?

16 Exposure and Insurance Employee Benefits Liability Protects the insured employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the insured's employee benefits programs. The term "employee benefits programs" is defined to include group life insurance and group accident and/or health insurance; profit sharing plans; employee stock subscription plans; and workers compensation, unemployment insurance, social security benefits, disability benefits, etc.

17 Exposure Analysis Intellectual Property… Concepts IP is a legal field that refers to rights related to creations of the mind such as musical, literary, and artistic works; inventions; and symbols, names, images, and designs used in commerce, including copyrights, trademarks, patents, and related rights. Under intellectual property law, the holder of one of these abstract properties has certain exclusive rights related to the creative work, commercial symbol, or invention by which it is covered.

18 Exposure Analysis Intellectual Property… Concepts Intellectual property rights are a bundle of exclusive rights over creations of the mind, both artistic and commercial. Artistic is covered by copyright laws, which protect creative works, such as books, movies, music, paintings, photographs, and software, and gives the copyright holder exclusive right to control reproduction or adaptation of such works for a certain period of time. Commercial are typically created and used for industrial or commercial purposes. A patent may be granted for a new, useful, and non-obvious invention and gives the patent holder a right to prevent others from practicing the invention without a license from the inventor for a certain period of time. A trademark is a distinctive sign which is used to prevent confusion among products in the marketplace.

19 Exposure Analysis Intellectual Property and the Law The earliest use of the term intellectual property appears to be in an October 1845 Massachusetts Circuit Court ruling in the patent case, in which Justice wrote that "only in this way can we protect intellectual property, the labors of the mind, productions and interests are as much a man's the wheat he cultivates, or the flocks he rears." (1 Woodb. & M. 53, 3 West.L.J. 151, 7 F.Cas. 197, No. 3662, 2 Robb.Pat.Cas. 303, Merw.Pat.Inv. 414).

20 Exposure and Insurance Intellectual Property and the CGL Are intangible/intellectual property liability exposures covered by the Commercial General Liability (CGL) policy? The CGL covers bodily injury, property damage, personal injury, advertising injury and medical payments. Many, if not all, intangible loss exposures are driven by allegations of financial loss…so the answer is?

21 Exposure and Insurance Intellectual Liability (IP)- The CGL Changed in 1986 The most commonly issued CGL policy, anything after 1986, changed the definition of "advertising injury", which was a common place for coverage, to cover specified offenses, such as defamation, invasion of privacy, misappropriation of advertising ideas or style of doing business, and "infringement of copyright, title or slogan". It is significant that the 1986 and most later editions of the form deleted piracy and unfair competition from the definition of "advertising injury. Note copyright was covered by for advertising and trademark coverage and was determined to be in place by courts 50% of the time.

22 Exposure and Insurance Intellectual Property Insurance Coverage Intellectual Property Insurance coverage protects companies for copyright, trademark or patent infringement claims arising out of the company's operation. You need Intellectual Property insurance if the threat exists that you could be sued by a competitor for infringing on an idea or intellectual property belonging to someone else. An Intellectual Property policy will pay the costs to defend you if someone tries to claim the rights to the same business model, process, or application.

23 Exposure and Insurance Telephone Directory Liability Protects against allegations of personal or advertising injury violations and errors and omissions. The standard CGL will exclude coverage if the insured is a publisher of the books. However, even if they are not, the coverage is a shade of gray at best.

24 Exposure and Insurance Alarm Operations Liability Installation, monitoring and design all create an exposure. Installation needs to be rated for but is covered under the CGL, unless a designated activity exclusion is applied. Monitoring is excluded by endorsement but can often be added back and coverage is granted for BI/PD. The design exposure created by installation is excluded and only a specialty liability policy will provide coverage.

25 Exposure and Insurance Independent Contractors…Concepts Sometimes it is cheaper to out source work than to add staff whether the task is permanent or temporary. This is generally regarded as true when looking at the hard dollar costs. But what happens if you include the soft costs like absorbing a bodily injury claim of an uninsured contractor? In some forms of insurance, like workers compensation, it is virtually impossible to avoid the claim if you have not managed the risk. What about the CGL?

26 Exposure and Insurance Commercial General Liability A few policies will extend named insured status to persons or organizations for your work as required by written contract. Most policies will require you to look at the insured contract coverage found in the contractual liability exclusion or at the leased workers definition.

27 Exposure and Insurance Commercial General Liability Insured Contract… Coverage exists for liability that would have existed in absence of a contract Coverage exists for insured contracts which includes…a contract pertaining to business under which tort liability of another is assumed to a third party. Leased worker is a person leased to you by a labor leasing firm under agreement and it does not include temporary workers. Temps are furnished to replace an employee on leave or to meet short term needs.

28 Exposure and Insurance Commercial General Liability…Concepts Failure to Supply Exclusion: This insurance does not apply to bodily injury or property damage arising out of the failure of any insured to adequately supply, gas, oil, water, electric or steam and sometimes communications. This exclusion does not apply if the failure results from sudden and accidental injury to tangible property owned or used by the insured. Removes- intentional and E&O exposure

29 Exposure and Insurance Commercial General Liability…Concepts Care Custody and Control of Property Exclusion Most Liability Insurance policies exclude coverage for damage to property in the care, custody, or control of the insured. In some cases this type of coverage is not available. In other cases, it can be purchased through liability extensions for leased property damage and certain forms of Inland Marine Insurance, like Installation Floaters, Garagekeepers and in some cases this exclusion can be made less restrictive by adding a Broad Form Property Damage Endorsement.

30 Exposure and Insurance Commercial General Liability…Concepts Errors and Omissions: Coverage for liability resulting from errors or omissions in the performance of professional duties. Applicable as a general rule to professional business activities such as banking, accounting, law, insurance and real estate. These types of losses normally generate financial losses. There is an exposure in general telecommunication operations and it can be covered elsewhere as the CGL does not offer protection.

31 Exposure and Insurance Error and Omissions…Concepts Advice v. Professional Assistance Computer Services Network Design Others- Special certifications and knowledge that the general public does not have creates an exposure

32 Exposure and Insurance Errors and Omissions Insurance You can purchase a stated activity policy where the insured will be covered for wrongful acts based on what activities they list on their application or some insurers will provide enterprise wide coverage which covers most activities that are professional in nature with the standard expected exclusions like medical malpractice and architect and engineer design. An E&O Policy can pick up programming errors that an insured commits while working on a computer of a customer, but any tangible damage will be covered by the CGL property damage section.

33 Exposure and Insurance Errors and Omissions Insurance Some E&O policies will add back coverage for personal injury and advertising injury of Internet Service Providers, which is a common CGL exclusion (policies need to be read to determine if this applicable). A side benefit is that Internet E&O could be covered by a policy. This could be claims related to website design, hosting or services that are provided depending on stated activities or enterprise coverage.

34 Exposure and Insurance Broadcaster Liability Robust policies will not only add back coverage for personal and advertising injury excluded by the CGL for those in the business of broadcasting (to transmit or make public by means of television) but they also will pick up potential Errors and Omissions claims that the content was erroneous in advice offered.

35 Exposure and Insurance Communications and Media Protects against claims or suits for damages resulting from the unauthorized use of another party's copyrighted or trademarked intellectual property, whether it's in an electronic or print format. It also covers the unauthorized use of any advertising material, or any slogan or title, of others in the advertising of the business of others. Finally, it covers exposures resulting from plagiarism of a literary or artistic format, character, or performance in a company's material.

36 Exposure and Insurance Breach Definition Personal information that is in a format that can be easily read and used by thieves is stolen and personal information is in unauthorized hands. Who Is Held Accountable? Board of Directors and Senior Management By Contract-- 3 rd Parties? -IT Services Providers

37 Exposure and Insurance What Data Do You Keep? Credit Card Information on Customers Social Security Numbers- Employees or Customers Bank Routing Numbers- Employees and Customers Drivers License Data- Employees Credit Reports- Employees or Customers Background Checks- Employees and potential hires

38 Exposure and Insurance Known Breach Data As Of ITRC breaches with 11.6 million records exposed breaches with 35.6 million records exposed breaches with 127 million records exposed breaches with 20 million records exposed breaches with 64.8 million records exposed.

39 Exposure and Insurance Federal Laws There are bills under consideration- Senate's Notification of Risk to Personal Data Act and Personal Data Privacy and Security Act as well as the Data Accountability and Trust Act, Social Security Number Protection Act, and Prevention of Fraudulent Access to Phone Records Act -- all of which are under consideration in the House.

40 Exposure and Insurance State Laws State Security and Data Breach Laws- New laws are literally being passed on a monthly basis but as of the date of this presentation the following states have laws: AK, AR, AZ, CA, CO, CT, DE, DC, FL, GA, HI, ID, IL, IN, IA, KS, LA, MA, MD, ME, MI, MN, MT, NE, NV, NH, NJ, NY, NC, ND, OH, OK, OR, PA, PR, RI, SC, TN, TX, UT, VI, VA, VT, WA, WV, WI and WY.

41 Exposure and Insurance Beyond the State-Federal Trade Commission- FTC/FCC Originally, this consumer protection agency reasoned that a companys failure to follow a published policy was a deceptive act and should be regulated by the FTC. Later, the agency expanded enforcement under the theory that a companys failure to take reasonable measures to protect customers personal information is, in itself, an unfair practice. They will levy fines, requiring higher security and also the payment of the FTCs legal costs. CPNI and Red Flags Rules…

42 Exposure and Insurance Commercial General Liability and Breaches Common Injuries: Bodily Injury (BI) CGLProperty Damage (PD) CGL Personal Injury (PI) CGLAdvertising Injury (AI) CGL Special Damages CGL Why not under PD or PI?

43 Exposure and Insurance Commercial General Liability and Breaches It is not PD or PI? PD is limited to coverage from loss to tangible property. The PI section of policies does not cover damages due to failure to protect data, the coverage territory might be limited to the US only, subcontractors are not automatically part of the named insured definition on most policies, and there is no claims trigger for financial loss (only that is not part a result of a covered allegation).

44 Exposure and Insurance Network Security and Data Liability and CPNI/Red Flags It will pay for damages incurred by claimants from a breach and the expense incurred due to the violation. It will also cover the regulatory fines from failure to abide by laws and regulations and this will include CPNI, Cable TV Operators, and any applicable state issues. Generally, punitive is covered if allowable by state law. It is more than identity theft which is a veneer of protection. ID theft is partial help after a loss of data occurs, but it is not protection before an event happens.

45 Exposure and Insurance Network Security and Data Liability Network and Data Liability standard coverage exclusions include: fraud, SEC violations, fiduciary claims, RICO and collusion events, ERISA, EPLI, D&O, insured vs. insured, war, terrorism, pollution, and BI/PD. Network and Data Liability coverage enhancements include: PR expenses, crisis management expense, paper breaches, laptop and peripheral carriers, and notification expense.

46 Exposure and Insurance Liability…Concepts Claims Made- liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered. Occurrence Coverage- liability coverage only for injury or damage that occurs during the policy period, regardless of when the claim is actually made. For example, a claim made in the current policy year could be charged against a prior policy period, or may not be covered, if it arises from an occurrence prior to the effective date.

47 Exposure and Insurance Liability…Concepts Aggregate Limit- Generally reserved for liability based policies and limits and insurers maximum exposure on the policy to the stated limit in the policy year unless a reinstatement clause has been provided. Punitive Damages- Judgments meant to teach the defendant a lesson for the pain and suffering or loss of services their actions caused.

48 Exposure and Insurance Liability…Concepts Protective Policies: Most common are railroad and contractors protective policies. Quite often these entities want their own limit that is not shared for a specific project and they want the additional control that is afforded by having the policy written in their name.

49 Exposure and Insurance Directors and Officers Liability…Concepts Insurance that protects directors and officers from liability claims arising out of alleged errors in judgment, breaches of duty, and wrongful acts related to their organizational activities. Examples of Responsibility that Create Exposures: Duty of Care Duty of Loyalty Duty of Obedience Statutory Duties 1933 SEC Act Sarbanes-Oxley 2002

50 Exposure and Insurance Directors and Officers Liability…Concepts Most lawsuits don't come from shareholders, but from creditors, contractors, competitors, government bodies, employees, and anyone else who might be affected by the decisions of directors and officers. Contrary to popular belief, these groups account for more than 50 percent of lawsuits covered by D&O liability insurance. Even if corporations have by-laws indemnifying officers and directors for suits brought against them, the corporation's balance sheet will be adversely affected by legal fees and any settlement. The possibility of the corporation becoming insolvent or going bankrupt, in which case directors and officers can become personally liable, also exists.

51 Exposure and Insurance Directors and Officers Liability…Concepts The first D&O Policy was created and written by Lloyd's of London following the stock market crash of the 1930s. As initially developed it covered just the Directors and Officers against allegations of failure to perform their duties. Common Sources of Claims- Merger and AcquisitionsDeceptive Trade Practices Contract DisputesRestraint of Trade DishonestyAnti-Trust Tax IssuesRegulatory Problems Financial PerformanceExecutive Compensation Conflicts of InterestInadequate Disclosure Faulty Financial Reporting

52 Exposure and Insurance Directors and Officers Liability Coverage A- Protects Directors that are not indemnified by the Entity Coverage B- Covers the Entities obligation to indemnify the Directors and Officers via by-laws or state law Coverage C- Entity Coverage- Protects the entity itself Side A Towers v. Entity Coverage Issue

53 Exposure and Insurance Directors and Officers Liability…Concepts Duty to Defend Pay on Behalf Extended Discovery and Supplemental Report Period Prior and Pending Continuity Date Insured v. Insured Change in Control Rescindable Outside Entity Protection Bankruptcy Exclusion

54 Exposure and Insurance Employment Practices Liability…Concepts Suits brought against businesses by allegedly aggrieved employees are a very serious problem today. Examples of covered acts include: misrepresentation, retaliation, libel, slander, humiliation, harassment, defamation, failure to employ or promote and the like. 1 in 3+ (35%) private companies will be sued according to a Chubb study from 2007.

55 Exposure and Insurance Employment Practices Liability Employment Practices Liability is an exposure to legal liability caused by an employee, past employee or potential employee claiming their rights have been violated. Coverage is available to protect the corporation, directors & officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote. It is not Employee Benefits Liability!

56 Exposure and Insurance Potential Claims Allegations: Wrongful termination Sexual harassment Discrimination Workplace torts What are first and third party exposure? Employment Practices Liability…Concepts

57 Exposure and Insurance Employment Practices Liability…Concepts Definition of Employee First and Third Party Exposure Hammer Clauses Individual v. Aggregate Limits Wage and Hour Claims Choice of Defense Representation

58 Exposure and Insurance Fiduciary Liability…Concepts A wrongful act includes any violation of the responsibilities, obligations, or duties imposed on fiduciaries by the Employee Retirement Income Security Act (ERISA), as well as acts, errors, or omissions in the performance of the duties of the plan administrator. The ERISA definition of a fiduciary is very broad. It is any person so named in the plan or any person who exercises any discretionary authority or control with respect to the management or administration of the plan or its assets

59 Exposure and Insurance Fiduciary Liability…Concepts The rules and regulations of ERISA include strict guidelines for fiduciaries. Failure to comply can result in lawsuits from employees, former employees, and beneficiaries, as well as the Secretary of Labor, Treasury Department, and Pension Benefit Guarantee Corp. The sponsor corporation as well as the individual fiduciaries are at risk. ERISA also has a broad definition of what is considered an employee benefit plan. It includes any plan, fund, or program established or maintained for the purpose of providing employee benefits to its participants or beneficiaries.

60 Exposure and Insurance Fiduciary Liability Under a fiduciary liability policy, the insured includes the following: The sponsor organization The plan(s) Any natural person in his/her capacity as fiduciary or administrator of the plan(s) Personal assets can be attached. This makes the last insured very important!

61 Exposure and Insurance Fiduciary Liability…Concepts Potential Claim Allegations: Benefits dispute, benefits reduction, managing plan assets, selecting service providers, misrepresentations, benefit communications, poor investments, and plan termination. LaRue v. DeWolff, Boberg & Associates authorizes individual defined contribution plan participants to sue for fiduciary breaches that impair the value of plan assets in the individuals plan account. Dr. Anthony Iorio had appointed Lafferty & Partners LLC, a New Jersey- based investment firm as the investment manager for his firm's 401(k) plan. Apparently, the owner of Lafferty & Partners (Jeffrey Lafferty) stole thousands of dollars from the plan and Iorio was charged with breaching his fiduciary duties by not adequately monitoring the activities of Lafferty & Partners. According to the article, Dr. Iorio is required to restore $32, to the plan and to pay a $6, civil penalty.

62 Exposure and Insurance Workers Compensation…Concepts Simply defined, workers compensation recompenses, gives something to a worker, one who performs labor for another, for services rendered or for injuries. This simple definition is taken in part from Webster's Ninth New Collegiate Dictionary and in studying this subject closely, we find this definition extremely accurate. Workers compensation is not "insurance", rather, it is social insurance, much the same as unemployment compensation and social security. It is however, the oldest form of social insurance.

63 Exposure and Insurance Workers Compensation…Concepts Under the various workers compensation systems, insurance is purchased or provided by employers through individual insurance companies, funds, or self insurance plans to provide the worker with the wage indemnity, medical benefits, and a source of compensation when employer liability in involved. All of these protections are required by the laws or acts of the various states or provinces for many years.

64 Exposure and Insurance Employers Liability The second coverage part of the policy. It protects the insured against liability imposed by law for injury to employees in the course of employment that is not covered as part of wage loss or medical injury. Limits determine the coverage afforded for: BI by accident per employee BI by disease per employee BI by disease per policy

65 Exposure and Insurance Employers Liability In some states, claims can be brought by spouses and dependents of injured workers for loss of consortium, companionship, comfort, and affection. Third parties are also capable/eligible to bring legal action for contributory negligence.

66 Exposure and Insurance Employers Liability…Concepts The phrase out of and in the course of employment is a crucial element to determining if coverage applies. The policy does not define this phrase so courts have the final say when the act is in question. BI must occur in the policy period and the lawsuits must be brought in the US, its territories and possessions, or Canada.

67 Exposure and Insurance Employers Liability…Concepts Despite the reasoning and goal of having workers compensation/employers liability protection there are 12 exclusions to the employers liability sections and here are a few: Intentional acts and violations of law Those assumed by Contract Fines or penalties imposed for violating state or federal law Punitive damages A general exclusion for employment practices type events

68 Exposure and Insurance Commercial Automobile Liability…Concepts Liability covers the user for designated vehicles The concept of a permissible user comes into play in liability coverage. Whereas, physical damage protection covers the auto basically regardless of who is driving. The liability protection for operation of permanently attached equipment like cherry pickers is potentially covered by the BAP but could be the CGL. On the road hazard versus operating is the key.

69 Exposure and Insurance Commercial Automobile Liability There are three parts to the liability insuring agreement: Pay all sums an insured must legally pay because of BI/PD caused by the ownership, maintenance or use of a covered auto. Pay all sums (actually very limited) for pollution clean-up that the insured is legally responsible for. Insurer agrees to defend the insured from suits that seek damages or covered pollution clean-up expense.

70 Exposure and Insurance Commercial Automobile Liability Numerical symbols are used on the policy declarations page and they show the coverage scope the insured has chosen. Liability Symbol 1 is the broadest. If symbol 1 is denoted on the policy the insured has liability for any automobile exposure and any means any auto! A common phrase is that fleet coverage applies

71 Exposure and Insurance Commercial Automobile Liability Uninsured/Underinsured Motorist- Sometimes called reverse liability or a cross between no-fault insurance and liability. Covers an injured insured person for damages caused by a third party as if that parties liability policy is responding. The third party can have no insurance, less than that required by state law, or be a hit and run driver.

72 Exposure and Insurance Commercial Automobile Liability Non-Owned Liability This covers, on an excess basis, the exposure your entity faces if an employee or anyone else for that matter is in an accident while using a personal vehicle for company business. The drivers insurance is the primary means of coverage. There is no physical damage protection

73 Exposure and Insurance Commercial Automobile Coverage Hired Car Liability This coverage is for short term (30 days or less) rental exposure. The protection can be primary and excess limits would apply in the event of a serious accident. Unless your liability limits are inadequate, there should be no need to take rental insurance at the dealers counter.

74 Exposure and Insurance Pollution Liability Pays on your behalf all sums you are legally obligated to pay as a result of emission, discharge, release, or escape of any contaminants, irritants, or pollutants into or on land, the atmosphere, or any water course or body of water, provided this results in "environmental damage." Additionally, pays to reimburse your expense for reasonable and necessary cleanup costs incurred in the discharge of a legal obligation validly imposed through governmental action, provided such expense is incurred because of "environmental damage." Pays for defense of any claim or suit that is the subject of this insurance.

75 Exposure and Insurance Pollution Liability Pollution "Environmental damage" is defined in the policy as "the injurious presence in or on land, the atmosphere, or any water course or body of water of solid, liquid, gaseous, or thermal contaminants, irritants, or pollutants.

76 Exposure and Insurance Umbrella Liability…Concepts A coverage basically affording high limit coverage in excess of the limits of the primary policies as well as additional liability coverages. These additional coverages are usually subject to a substantial self-insured retention The term "umbrella" is derived from the fact that it is a separate policy over and above any other basic Liability policies the insured may have.

77 Exposure and Insurance Umbrella Liability Policies have two limits and two retentions: Occurrence Limit Aggregate Limit Policy Retention Self Insured Retention

78 Exposure and Insurance Umbrella Liability Policy Policies can be either a true umbrella, which can provide broader coverage than the underlying insurance, or an excess following form, which only covers above the primary policies. There are requirements on the limits that must be held on the primary policies and the quality of the insurer providing the initial protection.

79 Thank You It has always been a matter of trust… 6301 Ivy Lane Suite 506 Greenbelt, MD Phone Fax

80 Telcoms RMC 2009 Boston MA Business Income The Upstream and Downstream Exposure Presented by Peter J. Elliott, CPCU, President & CEO Telcom Insurance Group

81 Exposure and Insurance Indirect Loss a.k.a - Business Income and Extra Expense, Business Interruption, Time Element, Use and Occupancy Coverage Indirect loss insurance provides insurance for a covered incident resulting in loss of use of property for a period of time. The loss is considered to be time lost, not actual property damage. Examples of time element coverage are Business Interruption, Extra Expense, Tuition Fees, Rents and Rental Value, Additional Living Expenses, and Leasehold Interest coverage. It covers a severity exposure.

82 Exposure and Insurance Indirect Loss a.k.a - Business Income and Extra Expense, Business Interruption, Time Element, Use and Occupancy Coverage Its purpose is to replace for the insured during a period of business interruption what the business would have done had no loss occurred. It is akin to what disability insurance does for us personally should we become injured and unable to work – it protects our income stream and our ability to pay bills.

83 Exposure and Insurance Business Income and Extra Expense…Concepts Business Income is generally defined as net profit or loss before taxes, plus continuing normal operating expenses, including payroll. Coverage is usually limited to the loss of income sustained until the property is restored, or for twelve months following the physical loss or damage. Coverage is intended to be applicable for the period of recovery which should commence with reasonable speed. What covers the period when customers have not returned?

84 Exposure and Insurance Business Income and Extra Expense Exposure Analysis All the standards apply; Physical Visits, Interviews with all Departments of the Organization, Financial Statements Analysis, Use of Checklist and Calculators, Personal Knowledge, Internet Searches. An emphasis must be placed on two items; 1)The right limit of insurance/indemnification 2)The upstream and downstream identification

85 Exposure and Insurance Business Income and Extra Expense…Concepts Upstream Example: What would happen if a service you re-sell or utilities were unavailable due to a loss at the providers location? Downstream Example: How do you account for lost customers after your operation is back up and running but they left because they could not live without service? Another: Are there any key customers that would impair income if they suffered a loss and were unable to operate their business?

86 Exposure and Insurance Business Income and Extra Expense…Concepts Contingent BI- 4 Scenarios-depend on something else happening Contributing Locations - Entities that deliver material or services to the insured or to the insureds clients for that insured's benefit or account. However, these operations do not include water, communication, or power supply services Recipient Locations - Entities that accept the products or services of the insured

87 Exposure and Insurance Business Income and Extra Expense…Concepts Contingent BI Manufacturing Locations - Operations that manufacture product(s) for delivery to customers of the insured, under contract(s) of sale. Manufacturers of component parts, etc., are included in "contributing" locations on the previous slide. Leader Locations – Physical locations that attract other to your site.

88 Exposure and Insurance Business Income and Extra Expense…Concepts Can you replace the limit for a policy period to what is actually lost? How long can the extended recovery period be? Can you afford to not have this coverage and limit adequately covered?

89 Thank You It has always been a matter of trust… 6301 Ivy Lane Suite 506 Greenbelt, MD Phone Fax

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