Sources of Risks in Liability Insurance The Premises Risks The Operating Risk The Product Risk
Premises Risk Refers to the company’s premises including land, works, manufacturing plant, machinery, raw material etc
Operating Risk Risk lies in the particular nature of the company ie in the way in which the company offers and provides its gods or services. Closed Operations operating risk is largely confined to the enclosed work site. Open Operations works on third-party sites eg building firms, forwarding agents etc.
Products Risk Relates to what the company manufactures or what services it performs. The policy does not cover loss or damage to product but only the consequential losses. Defective matches spontaneously combust destroying customers warehouse.
Premises Risk LargeMediumSmallReason Pharmacies Chemist Manufacture of Pharmaceutical products Heating fuel trade (incl. fuel depots / tanks) Restaurant University hospital (commercial) Painting business Agriculture operations / farms
Operation Risk LargeMediumSmallReason Pharmacies Chemist Manufacture of Pharmaceutical products Heating fuel trade (incl. fuel depots / tanks) Restaurant University hospital (commercial) Painting business Agriculture operations / farms
Product Risk LargeMediumSmallReason Pharmacies Chemist Manufacture of Pharmaceutical products Heating fuel trade (incl. fuel depots / tanks) Restaurant University hospital (commercial) Painting business Agriculture operations / farms
Premises Risk LargeMediumSmallReason Pharmacies Chemist XIntensive customer traffic, rather simple, closed premises Manufacture of Pharmaceuticals XComplex buildings and installation, few visitors Heating fuel trade (incl. fuel depots/tanks) XHigh environment impairment risk (inc. fuel depots) (spills) RestaurantXMany customers, varied installations (Kitchen, etc) University hospitalXExpensive personal injury resulting from malpractice (Commercial) Painting business XLittle customer traffic, simple premises Agriculture operations / farms XFew visitors, but dangerous installation (silos, manure pit)
Operation Risk LargeMediumSmallReason Pharmacies Chemist XDanger of medicine exploding, improper storage (shelf falls) Manufacture of Pharmaceutical products XExplosion hazard, environment impairment due to chemical spill Heating fuel trade (incl. fuel depots / tanks) XHeating oil spills from storage facilities, fire hazard, poisonous vapors RestaurantXExposure of person or property due to employee negligence. University hospitalXExpensive personal injury resulting from malpractice (Commercial) Painting business XOpen operations, poisonous paints and solvents, fire hazard Agriculture operations / farms XRelatively little contact with public
Product Risk LargeMediumSmallReason Pharmacies Chemist XMedicines directly applied to persons Manufacture of Pharmaceutical products XWide variety of product claims (series – claims) Heating fuel trade (incl. fuel depots / tanks) XLow exposure (the oil will have to damage the furnace) RestaurantXFood poisoning University hospitalXFood, medicines and blood derivatives (Commercial) Painting business XPaints and varnishes can damage the surface they are applied to. Agriculture operations / farms XLosses due to impurities, milk, meat, eggs
CGL - Coverages Bodily injury and Property damage Liability Personal and advertising injury Liability Liability arising out of Travelling executives Medical Payments
CGL - Coverages Bodily injury and Property damage Liability arising out of – Premises – Operations – Products – Products – completed operations Includes “bodily injury and property damage occurring away from your premises and arising out of your product and your work.
CGL - Coverages Personal and advertising injury Liability – PI means injury other than “bodily injury” arising out of following offenses False arrest, detention or imprisonment Malicious prosecution The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy Oral or written publication that slanders or libels a person or disparages an organization goods or services Oral or written publication that violates a persons right of privacy.
CGL - Coverages Personal and advertising injury Liability – AI means injury arising out of following offenses Oral or written publication that slanders or libels a person or disparages an organization goods or services Oral or written publication that violates a persons right of privacy. Misappropriation of advertising ideas or style of doing business Infringement of copyrights, title or slogan.
CGL - Coverages Medical Payments – Indemnity iro bodily injury caused by an accident On premises On ways next to premises Because of your operations
CGL - Insured In case of: – Individuals: Insured and Spouse (in respect of conduct of business only) – Partnership: All partners, members and their spouses – Limited Liability Companies: Corporate Entity, members, managers and employees – Other Organizations : Directors, Executive Officers, employees
Various Stages of liability Claims The Initial Act – Negligence or other legal wrongdoing The injury, loss or damage The Manifestation of the injury or the loss The policy holder’s awareness of injury or loss The claim against the policy holder The notification of the claim to the insurer The final Settlement of the Claim
Various Triggers the question are we at risk Acts Committed Occurrence Manifestation Claims Made
Scope of indemnity in time Triggers Focus – Claim Made According to the Claim Made principle, the cover is triggered when the injured party makes his / her claim for compensation against the insured The applicable cover is therefore the policy in force at this time
Scope of indemnity in time Triggers Focus – Claim Made Determining a specific event to a specific policy year is a tough task The right policy year determines: applicable cover, extent of financial indemnity and (MOST IMPORTANT) the liable insurer Unclear is very often the “occurrence” principle as it leads to the triple trigger problem
Scope of indemnity in time Triggers The Triple Trigger Problem Claims free policies will be triggered after a long time High sums. 10 year ongoing renewed and each year can be triggered Accumulation of one policy holder or an entire industry It is clear now: we have not charged the right premium Reserves? Do we have enough – obvioulsy not IBNR’s?
Scope of indemnity in time Triggers CM solves this problems Eliminates / restricts room for interpretation The event of trigger is brought into the present Insurer can react faster which allows Carrier to maintain capacity over longer periods Occ. based policies may be eroded over time Older, lower limits do not fit to today’s compensation payments
Scope of indemnity in time Triggers CM - Key Elements Retroactive Date Scope of indemnity in time Discovery period Claims series clause (batch clause)
Scope of indemnity in time Triggers Retroactive Date Usually fixed on the date of the 1 st CM Policy Cover only for events happened after the retro date AND Claims related to the event has to be made during the CM policy period
Scope of indemnity in time Triggers Discovery Period It covers those events which takes place during the actual policy period but which only give rise to claims during the discovery or extended reporting period Discovery periods can vary from a few months upto several years, but usually not more than 5 years.
Scope of indemnity in time Triggers Claim Series Clause An occurrence or series of occurrence arising directly from a common cause shall be deemed to be one Occurrence regardless of the number of persons who sustain Bodily injury or Property damage All such Occurrence shall be deemed to have occurred on the day of the 1 st claim arising out of such occurrence.
Scope of indemnity in time Triggers Risks to be underwritten on CM Principle Latent losses already known Substance that have gradual of continuing effect Products that may create mass losses Risk where individual losses are difficult to allocate an exact point in time.
Scope of indemnity in time Triggers Risks to be underwritten on CM Principle Pharmaceutical risks Chemical risks Oil and Petro risks Cosmetics Professional Indemnity (A&E, MedMal etc)
Scope of indemnity in time Triggers Focus – Occurrence Principle The date of insured event: is the occurrence during the policy period Retro Date: Without time limit even when the act was committed prior to policy and loss was unknown at inception Series Clause: same as CM Limit: The limit of the year applicable at the time loss occurred, which may be too low or already eroded.
Scope of indemnity in time Triggers Focus – Deciphering Triggers This Insurance does not apply to bodily injury or property damage which occurred before the retroactive date ………. Losses are insured which are caused within the policy period and which occur within turkey ……….. This Insurance applies only to bodily injury or property damage which occurs during the policy period ……….