1. ©2015, College for Financial Planning, all rights reserved. Session 16 Professional Liability Commercial Insurance CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Financial Planning Process & Insurance

2. Session Details Module9 Chapter(s)3 & 5 LOs9-5 9-10 Explain the different types and characteristics of professional liability insurance. Explain a characteristic related to commercial property or commercial liability coverage. 16-2

3. The Planner’s Role Identify potential areas of loss Quantify risk Helping client understand potential risk Assess coverage Refer to appropriate professionals Review annually 16-3 One of the couples you work with just started an accounting practice where he works as the CFO for small businesses that acquire federal and state contracts. His spouse has a successful catering business, employing three full-time employees and 15 contract labor employees; they cater in-home events for wealthy clients, providing the food, bar, and valet services. She has a kitchen in her home, two vans, and a large truck. What risks could destroy their financial security?

4. Professional Liability Insurance Covers failure to use due care in professional practice Malpractice: physicians, surgeons, dentists o Can cause physical harm Errors and Omissions: insurance agents, attorneys, accountants, etc. o Can cause fiscal harm 16-4

5. Business Owner Exposures Commercial liability Commercial automobile o Liability o Medical payments o Physical damage o Truckers o Garage Dishonesty o Employee o Customer Property-related 16-5

6. Commercial General Liability CGL is designed to protect businesses against non-auto liability, not involving employees. Conditions of premises – customer slips on a wet floor. Business operations – working in a customer’s home, damage is done to the home. Product liability – defective product injures a consumer. Completed operations – installed electrical fixture shorts out and causes a fire. Contingent liability – retailer’s role in selling a manufacturer’s defective product. Contractual liability – if a product is not fit for intended use it is a breach of implied warranty. 16-6

7. CGL Claims Commercial General Liability availability: 1. Occurrence basis: need only to be in effect on date that an accident causing damage occurs to trigger coverage 2. Claims made basis: trigger for coverage is date claim is made against insured 16-7

8. Business Auto Insurance Insured can pick from a wide range of coverage to meet specific business needs: Any auto Owned autos only Specifically described autos Hired (leased) autos only Non-owned autos only Other features are available to business owners to build a policy for their needs. 16-8

9. Commercial Insurance Mostly monoline coverage Two primary packages o Commercial Package Policy (CPP) larger firms basic package of property and liability coverages business customizes coverages based on needs o Business owners policy (BOP) smaller firms 16-9

10. Other Commercial Liability Coverages FormCoverage Workers’ Compensation and Employer’s Liability Part 1 covers legal liability for payment under state law Part 2 protects employer for common lawsuits by employees Commercial Umbrella Liability Insurance Can be added to a CGL policy 16-10

11. Coinsurance for Commercial Property Coverage Coinsurance requirement* usually 80% of replacement cost. This is primarily a concern in the event of a partial loss. Coinsurance requirement* usually 80% of replacement cost. This is primarily a concern in the event of a partial loss. *Insurance required is generally 80% of current replacement cost, but can vary on a company- specific basis from 70% to 90%. 16-11

12. Commercial Property Coverages FormCoverage Building and Personal Property Building or contents, or both Contents—furniture and fixtures, machinery, equipment, stock, etc. Additional coverage via endorsements Various “causes of loss” forms to specify Blanket Insurance To cover more than one type of property at more than one location Report Form Coverage To cover fluctuating needs as stocks of merchandise vary o Insured makes periodic reports of values on hand 16-12

13. Additional Commercial Property Coverages FormCoverage Consequential Loss Business interruption Contingent business interruption, extra expense Boiler & Machinery Leasehold interest Accident to insured object Transportation Ocean marine Inland marine Crime/Dishonesty Employee fidelity bonds Nonemployee crime Theft, disappearance, destruction 16-13

14. Question 1 All of the following professionals would be likely to purchase errors and omissions insurance except a.financial planners. b.accountants. c.physicians. d.attorneys. 16-14

15. Want More Review? Visit eCampus 1. Click Programs or Individual Courses tab 2. Click Online Classes tab 3. Click MyChoice Recordings to expand 4. Click Recordings link for your course Final recordings contain reviews. 16-15

16. ©2015, College for Financial Planning, all rights reserved. Session 16 End of Slides CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Financial Planning Process & Insurance