FREQUENTLY ASKED QUESTIONS
ABOUT OFFICE INSURANCE PACKAGES

What are the basic coverages provided by standard office insurance package policies?

What's the difference between General Liability and Professional Liability Insurance?

What's the difference between Claims Made and Occurrence Policies?

What should I look for when shopping for insurance coverage?

What do I do when I have a claim?

What Insurance Solutions are there for the Telecommunications Industry?

What are Return to Work Programs?

What is E & O Insurance?

What is the coverage for terrorism and Acts of War?

What triggers a Business Interruption Insurance policy?

 

What are the basic coverages provided by standard office insurance package policies?

  • Fire and theft coverage on office equipment and inventory.
  • Trip & fall and lawsuit coverage, in the event someone claims that something you did caused them to become injured.
  • Lots of other related benefits, often utilized by small businesses. Two examples are:
    • Certificates Of Insurance
    • Additional Insured Endorsements

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What's the difference between General Liability and Professional Liability Insurance?

The two main types of liability insurance for professionals are General Liability insurance and Professional Liability insurance. Both coverages are important to properly protect a professional organization from financial loss.

General Liability insurance will protect an organization in the event the insured causes bodily injury or property damage to others and becomes legally obligated to pay damages. Liability for Bodily Injury can occur when a physical injury to a person is caused by third party. Liability for Property Damage can occur when a third party causes direct or indirect damage (such as loss of use of property) to another person's property.

General liability insurance is standardized and relatively easy to obtain. It is often provided in a package policy with other coverages, sometimes called a business office package policy. Most general liability policies issued to professional organizations contain exclusions for professional liability claims.

Professional Liability insurance is designed to provide coverage to professionals for claims arising out of their professional activities or services provided to clients. It is also called errors and omissions insurance or E&O (or medical malpractice for doctors). Coverage is typically provided by stand-alone professional liability policies and includes coverage for the defense costs associated with a claim. Coverage is not usually provided for intentional or dishonest acts.

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What's the difference between Claims Made and Occurrence Policies?

There are two primary forms of liability insurance policies - claims-made and occurrence policies. Most professional liability insurance, including directors and officers and employment practices liability insurance, is written on a claims-made basis.

An occurrence policy obligates the insurance company to pay for claims arising out of occurrences during the policy period regardless of when the claim is reported. The policyholder is covered for any incident that occurs during the term of the policy regardless of when the claim arising from the incident is reported to the company. In some situations the claim might be made many years after the incident occurred. This leads to uncertainty for both the insured and the insurer.

A claims-made policy protects an insured against claims or incidents that are reported while the policy is in force. Normally, a claims made policy provides coverage for acts occurring prior to the claims-made policy period. Coverage for acts occurring prior to the policy period is called "prior acts coverage," and the period prior to the policy period for which claims are covered is called the prior acts period. Prior acts coverage is usually only provided when a claims-made policy has been in force immediately prior to the current claims-made policy on a basis consistent with the prior policy. Prior acts coverage is defined as "full prior acts", covering acts occurring at any time prior to the current policy period, or is defined by a "retroactive date." When a retroactive date is used, prior acts coverage is provided from the retroactive date to the current policy period.

"Tail coverage," also called an "extended reporting period," provides protection for claims that are filed after a claims-made policy has been non-renewed or canceled. This coverage is optional, and the need can arise if the professional organization is acquired or goes out of business, or a decision is made not to purchase insurance. The terms and pricing for tail coverage vary greatly and are usually defined in the policy.

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What should I look for when shopping for insurance coverage?

  1. What are the principal risks being insured? Is it business interruption, property damage due to fire or flood, employee claims for harassment or unlawful discharge, director and officer liability? The list can grow quickly. You must be sure the policies you have cover the risks identified.
  2. Do your insurance policies fully cover the risk? Are your coverage limits high enough? What are the deductibles? Will losses at separate facilities or at separate times be considered a single loss or multiple losses for purposes of the coverage limits and deductibles? Are there exclusions that preclude coverage? Is the policy an occurrence policy or a claims made policy? If a claim is made, is there a retroactive date? Do the costs of defending a claim, if borne by the insurer, reduce the total limits available to cover claims?
  3. If there are gaps in coverage, can they be filled? Different insurance companies use different language in their policies. A recent review of several director and officer liability policies for a client found that coverage for negligent misstatements related to the sale of shares in a cooperative was expressly excluded in some policies and not in others. Many insurers are willing to negotiate endorsements to their policies that broaden coverage, usually for an increased premium. The trick is to recognize there is a deficiency and ask for the extended coverage.
  4. Will the policy be handy when a claim comes in? Every company should establish a means of keeping insurance policies forever. The increase of pollution claims has given rise to a cottage industry in reconstructing insurance policies, often going back decades, where businesses have failed to keep copies of their policies. Purchasing insurance is complex and not to be taken lightly. Take the time to carefully review your company's coverage requirements. Seek the guidance of experienced professionals. Working with a knowledgeable insurance broker and seasoned insurance counsel will go a long way to preparing your company for any contingency.
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What is Errors & Omissions Insurance?

 

Errors and omissions insurance is coverage that protects those people that give advice, make educated recommendations, design solutions or represent the needs of others. "E & O" is also referred to as Professional Liability or Malpractice Insurance. The original name, Errors and Omissions came from "doing something they shouldn't have done (an error) or not doing something they should have done (an omission)".

Who Needs E&O?

 

Today, many business trades and professions require the coverage. Teachers, consultants, software developers, ad copywriters, web page designers, placement services, ISPís, telecommunications carriers, inspectors, realtors, insurance brokers, lawyers, doctors and just about everyone else.

What is the difference between E&O coverage and General Liability coverage?

 

General Liability is intended to cover physical injury to people or physical damage to things (your product causes physical injury to the user of your product or your client trips over your foot and breaks their face)

E & O is intended to protect you, the consultant or designer, in the event your client alleges that something you did on their behalf was done incorrectly, which resulted in some kind of financial loss or business interruption to your client. Contracts can help to limit your real liability, but the big expense in this kind of claim is the legal defense to prove your true liability or innocence. E & O policies are designed cover many of these defense costs and ultimately the final settlement if you do not prevail.

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3rd Party Fidelity Bonds

 

REMEMBER: Always refer to your policy and review all papers carefully to be aware of any limitations or exclusions which may apply. Remember, ALL policies contain certain limitations and exclusions, a policy is nothing more than a contract between you and an insurance company. Consult your policy and ask your Agent, just to be certain that you are clear on issues which may effect you. Return to top

 

What is the coverage for terrorism and Acts of War?

 

Question: Are "acts of War" covered by normal home and business insurance?

Answer: No, such acts are normally excluded due to the catastrophic nature of war risks. "Catastrophic" risks are those that are so severe that a major occurrence could threaten the solvency of insurance companies.

 

Question: Are "terrorism acts" considered "acts of war"?

Answer: Usually not. The courts have generally held that "war" can only be conducted between sovereign governments. Acts by a radical political group, without the vestige of sovereignty, can be expected to be covered, but difficulty in identifying the responsible party could complicate coverage issues.

 

Question: If "warlike actions by a military force" are excluded by many policies, does this mean that actions by guerilla groups are excluded?

Answer: Not necessarily, but the answer may require a thorough investigation into the background of the particular group. If the group was not acting on behalf of a sovereign authority, coverage would probably apply.

 

Question: What long-term effects might result from terrorist attacks in the United States?

Answer: That remains to be seen, however, if insurance companies expect future acts to occur they may seek specific exclusions on certain kinds of policies.

 

Question: Will this mean my homeowners premium will go up, or a terrorist exclusion will be added?

Answer: Probably not. The acts of Sept. 11, 2001, were against major landmarks known to be possible targets for terrorists. It would be inappropriate for insurance companies to assume average homes and properties would be terrorist targets.

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Other Web Resources:

TSBIC Home Page
EPLI - Employment Practices Liability Insurance
Insurance for ISPs
CMA Real Estate Finance, Inc.
Restoration Central
Asanti Fine Jewellers
James W. Cox, Property Insurance Consultant

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