Errors and omssions (E&O) is the insurance that covers you in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised result.
For doctors, dentists, chiropractors, etc., it is often called malpractice insurance. For lawyers, accountants, architects or engineers, it may be called professional liability.
This coverage is typically in force where you are providing a professional opinion or some expertise. This type of coverage is typically excluded from your standard GL policy. If you provide any type of service where you are being paid for your opinion, then it would probably be a good idea to have E&O insurance.
If you have additional questions, please feel fre to contact me.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Wednesday, February 4, 2009
Occurrence versus Claims Made
OCCURRENCE vs. CLAIMS MADE
When a policy is written on a "claims-made" basis, it means that the policy in force at the time a claim against you is made will pay for losses, regardless of when the claim actually occurred in the past. (Assuming no retroactive inception date is applied, which will be explained below).
With an "occurrence" based policy, even though the policy may have expired, provided the policy was in force at the time that the claim occurred, a claim can still be made against that old, expired policy.
Both forms of coverage have advantages and drawbacks, depending on the circumstances. It is difficult to predict whether, in any particular instance, it will be advantageous to insure using one form or the other, but carriers typically offer claims made when the odds of a claim occurring over time is more likely, such as when you sell products, or have environmental exposure.
Advantages of "occurrence" policies
* - "Occurrence" policies are sometimes like "money in the bank," in that you can go back to old policies, years after they have lapsed and put a claim against them for incidents that happened while they were in force. Old policies should never be thrown away. They should be kept in a place of safekeeping.
* - You don't have to worry about canceling an "occurrence" policy and moving to a different insurer. Coverage remains locked in for incidents occurring while the policy was in force, so long as the insurer is in business. In contrast, once a "claims-made" policy is cancelled, it is possible that purchasing insurance for past events will become difficult, expensive or perhaps not possible.
* - Sometimes courts will find occurrences in successive policies if there is continuing harm. This can have the effect of accumulating limits over a period of years. With "claims-made," only one limit applies; the limit in force when the claim is actually made.
Disadvantages of "occurrence" policies
* - Insurance companies who wrote policies in previous years may no longer be around. With "claims-made" policies, the insurer is much more likely to be around when a claim becomes payable. The length of time between an occurrence and resolution in court can be 20 or more years. An insurer in business 20 years ago may not be in business today.
* - De to inflation and other economic factors, the limits on an "occurrence" policy are likely to be inadequate if a claim is made twenty years after a policy has expired. With "claims-made" it is easier to arrange a limit which is adequate for today's exposures.
Advantages of "claims-made" policies* - Limits can be predicated on today's exposures more accurately than with "occurrence" policies, so there is less likelihood of being under insured. Previous inadequate "occurrence" basis limits can be topped up retroactively.
* - Previous inadequate coverage or more restrictive terms exceptions and conditions can be broadened out retroactively.
* - The above two advantages can be made to apply whether the insured was previously on either "occurrence" or "claims-made" policies.
Disadvantages of "claims-made" policies* - Coverage is triggered by an actual claim for damages, not a notice of an "occurrence" or "incident." However, the date of the occurrence or incident must be more recent than the retroactive date of the policy. This retroactive date determines the cut-off date for claims: if the incident occurred before the retroactive date, the insurer has no obligation and the insured no coverage. While the claim has to be made during the policy period, the occurrence which gave rise to the claim has to fall after the retroactive date of the policy. A "claims-made" policy can have no retroactive date (the broadest coverage). On the plus side, a retroactive date can pre-date the policy inception date (this may range from days to years). Ideally, it should go back at least to the expiration date of your last "occurrence" policy. If it goes back further it can be designed to provide top-up cover in the case of different limits. Ideally, you want no retroactive date or one that includes the entire period that you have had "claims-made" coverage. Anything less makes you self-insured for any claims for injuries or damage that occurred during prior claims-made policy periods which you have not reported to your insurer at the time of the occurrence (unless such claims are covered by supplemental "tail" coverage).
* - The first claim for damages determines which policy applies. If a person first makes a claim for medical payments in 1986, then files for additional damages in 1988, both claims activate the 1986 claims-made policy.
With "claims-made" basis of coverage, should the policy ever be allowed to lapse or be cancelled, the insured is generally given the option of purchasing coverage, (extended reporting period or "Tail") With "occurrence" policies you don't have to worry about past incidents when lapsing coverage or changing insurers.
* - If coverage terms ever become more restrictive on subsequent renewal of a "claims-made" policy, the new terms apply retroactively to the original retroactive or inception date.
Limits of Liability and need to project into the future
* - Once an Insured is hooked on a "claims-made" policy it is difficult to get off. The Insured can purchase a "tail" coverage extension which can sometimes be extended for years, but even this is at the option of the Insurer, and is not under the control of the Insured.
There are many more complex differences to consider between these two policy types. For the sake of brevity, I have stopped short of continuing, but would be happy to continue this dialog with anyone who has more specific questions.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
When a policy is written on a "claims-made" basis, it means that the policy in force at the time a claim against you is made will pay for losses, regardless of when the claim actually occurred in the past. (Assuming no retroactive inception date is applied, which will be explained below).
With an "occurrence" based policy, even though the policy may have expired, provided the policy was in force at the time that the claim occurred, a claim can still be made against that old, expired policy.
Both forms of coverage have advantages and drawbacks, depending on the circumstances. It is difficult to predict whether, in any particular instance, it will be advantageous to insure using one form or the other, but carriers typically offer claims made when the odds of a claim occurring over time is more likely, such as when you sell products, or have environmental exposure.
Advantages of "occurrence" policies
* - "Occurrence" policies are sometimes like "money in the bank," in that you can go back to old policies, years after they have lapsed and put a claim against them for incidents that happened while they were in force. Old policies should never be thrown away. They should be kept in a place of safekeeping.
* - You don't have to worry about canceling an "occurrence" policy and moving to a different insurer. Coverage remains locked in for incidents occurring while the policy was in force, so long as the insurer is in business. In contrast, once a "claims-made" policy is cancelled, it is possible that purchasing insurance for past events will become difficult, expensive or perhaps not possible.
* - Sometimes courts will find occurrences in successive policies if there is continuing harm. This can have the effect of accumulating limits over a period of years. With "claims-made," only one limit applies; the limit in force when the claim is actually made.
Disadvantages of "occurrence" policies
* - Insurance companies who wrote policies in previous years may no longer be around. With "claims-made" policies, the insurer is much more likely to be around when a claim becomes payable. The length of time between an occurrence and resolution in court can be 20 or more years. An insurer in business 20 years ago may not be in business today.
* - De to inflation and other economic factors, the limits on an "occurrence" policy are likely to be inadequate if a claim is made twenty years after a policy has expired. With "claims-made" it is easier to arrange a limit which is adequate for today's exposures.
Advantages of "claims-made" policies* - Limits can be predicated on today's exposures more accurately than with "occurrence" policies, so there is less likelihood of being under insured. Previous inadequate "occurrence" basis limits can be topped up retroactively.
* - Previous inadequate coverage or more restrictive terms exceptions and conditions can be broadened out retroactively.
* - The above two advantages can be made to apply whether the insured was previously on either "occurrence" or "claims-made" policies.
Disadvantages of "claims-made" policies* - Coverage is triggered by an actual claim for damages, not a notice of an "occurrence" or "incident." However, the date of the occurrence or incident must be more recent than the retroactive date of the policy. This retroactive date determines the cut-off date for claims: if the incident occurred before the retroactive date, the insurer has no obligation and the insured no coverage. While the claim has to be made during the policy period, the occurrence which gave rise to the claim has to fall after the retroactive date of the policy. A "claims-made" policy can have no retroactive date (the broadest coverage). On the plus side, a retroactive date can pre-date the policy inception date (this may range from days to years). Ideally, it should go back at least to the expiration date of your last "occurrence" policy. If it goes back further it can be designed to provide top-up cover in the case of different limits. Ideally, you want no retroactive date or one that includes the entire period that you have had "claims-made" coverage. Anything less makes you self-insured for any claims for injuries or damage that occurred during prior claims-made policy periods which you have not reported to your insurer at the time of the occurrence (unless such claims are covered by supplemental "tail" coverage).
* - The first claim for damages determines which policy applies. If a person first makes a claim for medical payments in 1986, then files for additional damages in 1988, both claims activate the 1986 claims-made policy.
With "claims-made" basis of coverage, should the policy ever be allowed to lapse or be cancelled, the insured is generally given the option of purchasing coverage, (extended reporting period or "Tail") With "occurrence" policies you don't have to worry about past incidents when lapsing coverage or changing insurers.
* - If coverage terms ever become more restrictive on subsequent renewal of a "claims-made" policy, the new terms apply retroactively to the original retroactive or inception date.
Limits of Liability and need to project into the future
* - Once an Insured is hooked on a "claims-made" policy it is difficult to get off. The Insured can purchase a "tail" coverage extension which can sometimes be extended for years, but even this is at the option of the Insurer, and is not under the control of the Insured.
There are many more complex differences to consider between these two policy types. For the sake of brevity, I have stopped short of continuing, but would be happy to continue this dialog with anyone who has more specific questions.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
What is EPLI?
Employment Practices Liability Insurance (EPLI) covers businesses against claims made by workers who allege that their legal rights as employees of the company have been violated.
While most suits are filed against large corporations, no company is immune to such lawsuits.
EPLI provides protection against many kinds of employee lawsuits, including claims of:
* Sexual harassment
* Discrimination
* Wrongful termination
* Breach of employment contract
* Negligent evaluation
* Failure to employ or promote
* Wrongful discipline
* Deprivation of career opportunity
* Wrongful infliction of emotional distress
* Mismanagement of employee benefit plans
The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit, with liabilities covered by other insurance policies such as workers compensation excluded from EPLI policies. These policies typically do not pay for punitive damages or civil or criminal fines.
To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
* Create effective hiring and screening programs to avoid discrimination in hiring.
* Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
* Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
* Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
While most suits are filed against large corporations, no company is immune to such lawsuits.
EPLI provides protection against many kinds of employee lawsuits, including claims of:
* Sexual harassment
* Discrimination
* Wrongful termination
* Breach of employment contract
* Negligent evaluation
* Failure to employ or promote
* Wrongful discipline
* Deprivation of career opportunity
* Wrongful infliction of emotional distress
* Mismanagement of employee benefit plans
The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit, with liabilities covered by other insurance policies such as workers compensation excluded from EPLI policies. These policies typically do not pay for punitive damages or civil or criminal fines.
To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
* Create effective hiring and screening programs to avoid discrimination in hiring.
* Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
* Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
* Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Monday, January 19, 2009
What is Gap insurance?
When you buy or lease a new car, and have a claim, the insurance company will only pay what the car is worth. As you drive the car, its value reduces signifigantly, espescially in the first year or so. If the car were to be damaged or stolen, it would be very likely that you would owe more to the bank than the car is actually worth.
So as an example, if you bought a $25,000 car, and had an accident 6 months later, the insurance company might pay for the car, at about $16,000. But you had only made a few payments, so the bank is still owed lets say, another $7,000. The insurance company won't pay them that money. You are responsible for this "gap" in coverage.
A gap policy will pay this difference for you, so you wont lose anything on the back end.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Wednesday, January 14, 2009
Whats is a Deductible? What is an SIR?
Deductibles and Self-Insured Retentions (SIR) in liability insurance serve the same purpose: They can offer a cost savings to an insured who anticipates small and infrequent losses, and they can reduce an insurer’s reluctance to write an account with a loss frequency problem.
The fundamental difference between a deductible and a SIR is how the claims are adjusted. With a deductible approach, the insurer adjusts all claims, and then bills the insured for his deductible amount. Wtih an SIR approach, the insured is responsible himself for adjusting claims up to his SIR, which means that the insured will probably require the services of a third-party administrator (TPA). After the SIR is consumed, then the inurance carrier is brought in to handle the remaining amounts of the claim.
Not only do deductibles and SIRs differ in claims adjustment approach, there are usually other differences, so making an "apples-to-apples" comparison can require soem additonal research.
Here are some key factors to be aware of:
1. Loss Adjustment Expense (LAE). Some insurers using deductibles or SIRs apply the deductible or SIR amount only to the actual claim itself (BI/PD), while others also include LAE. This is often noted in the quote as "LAE inside" or "LAE outside." This is the same concept as "defense inside" or "defense outside."
2. Per Claim/Per Occurrence. Another variable is whether the deductible or SIR apply per claim, or per occurrence. Obviously, this could make a huge difference to the insured, depending on the circumstances of a particular loss. A per claim deductible or SIR would produce a lower premium quote, since the insured has assumed more of the potential loss, but the insured could face a considerable amount of up-front expenses.
3. Third Party Administrator (TPA). If an SIR is used, the insured will need a TPA to assist with the claims adjustment process. The insurer will usually provide an approved list of TPAs that the insured can use. The TPA will review the insured’s loss runs, as well as consider the nature of the insured’s business, and provide a cost per claim pricing. In some cases, the TPA will also require a deposit at policy inception.
4. Appeal of deductible vs. SIR. As you noted in your question, some insurers prefer a deductible approach, some prefer the SIR, some offer both, and some don’t offer either. One difference between the two that insurers often like is that with an SIR, the insured "has some skin in the game." That is, there is an incentive for good loss control, since the insured must pay up front for claims (and often LAE also) which are below the SIR. With a deductible, the insurer pays the money first, but has to bill the insured for their contribution, which can produce a delay in the insurer receiving reimbursement from the insured.
Feel free to hit me with any other questions as well.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
The fundamental difference between a deductible and a SIR is how the claims are adjusted. With a deductible approach, the insurer adjusts all claims, and then bills the insured for his deductible amount. Wtih an SIR approach, the insured is responsible himself for adjusting claims up to his SIR, which means that the insured will probably require the services of a third-party administrator (TPA). After the SIR is consumed, then the inurance carrier is brought in to handle the remaining amounts of the claim.
Not only do deductibles and SIRs differ in claims adjustment approach, there are usually other differences, so making an "apples-to-apples" comparison can require soem additonal research.
Here are some key factors to be aware of:
1. Loss Adjustment Expense (LAE). Some insurers using deductibles or SIRs apply the deductible or SIR amount only to the actual claim itself (BI/PD), while others also include LAE. This is often noted in the quote as "LAE inside" or "LAE outside." This is the same concept as "defense inside" or "defense outside."
2. Per Claim/Per Occurrence. Another variable is whether the deductible or SIR apply per claim, or per occurrence. Obviously, this could make a huge difference to the insured, depending on the circumstances of a particular loss. A per claim deductible or SIR would produce a lower premium quote, since the insured has assumed more of the potential loss, but the insured could face a considerable amount of up-front expenses.
3. Third Party Administrator (TPA). If an SIR is used, the insured will need a TPA to assist with the claims adjustment process. The insurer will usually provide an approved list of TPAs that the insured can use. The TPA will review the insured’s loss runs, as well as consider the nature of the insured’s business, and provide a cost per claim pricing. In some cases, the TPA will also require a deposit at policy inception.
4. Appeal of deductible vs. SIR. As you noted in your question, some insurers prefer a deductible approach, some prefer the SIR, some offer both, and some don’t offer either. One difference between the two that insurers often like is that with an SIR, the insured "has some skin in the game." That is, there is an incentive for good loss control, since the insured must pay up front for claims (and often LAE also) which are below the SIR. With a deductible, the insurer pays the money first, but has to bill the insured for their contribution, which can produce a delay in the insurer receiving reimbursement from the insured.
Feel free to hit me with any other questions as well.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
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