High Cost of the US System

Currently, the system is extremely inefficient, and sometimes it is uncertain who actually benefits from the litigation process

• ____% of the tort dollar goes to compensate victims for economic losses
• ____% of teh tort dollar never reaches the victim

Global Competitiveness

Tort costs represent ____% of the US GDP, which puts the US at a significant disadvantage when compared to other countries

Global Competitiveness

Emerging markets ahve very low _________ costs?

Recent Developments

Increased/Decreased likelihood for tort reform?

Tort Liability

____________ torts: torts committed with general/specific intent to commit the tortuous act

Tort Liability

________ Tort?

• can be against a person, or can involve property or business
• Include assult & battery, malicious prosecution, defamation (liabel and slander)
• Intent to cause harm is not necessary

1. special
2. General

_________ Damagaes:

payment for actual losses sustained?

Types of Compensatory Damages:

• actual monetary losses sustained
• Has a $ amount

Types of compensatory damages:

• Has no $ amount
• Injuries are presumed to follow from the type of wrong

Compensatory

Punitive

__________ Damages:

punishment for especially wrongful act or a deterrent for future pruposes

T/F?

Both frequency and severity of punitive damages have been increasing in recent years

Defenses to Negligence? ____________ Negligence

If the plaintiff is 1% at fault, recovery is completely barred?

Defenses of negligence:

________ Negligence?

Plaintiff's recovery reduced by extent to which at fault

Defenses of Negligence:

___________  ___ ___ ________?

Plaintiff knowingly/voluntarily accepted teh possibility of harm

______________ ___ ___________ Liability?

Liability of multiple defendants collectively or individually for entire amount of damages

__________ Liability?

Liability that is not based on negligence or the intent to cause harm

__________ Liability:

• Very common with products liability, and Workers' Compensation
• Can be imposed by tort law, or by statutes
• Tort Law applies to:
  • Abnormally dangerous activities
  • Sale of dangerously defective products

_____________ Liability:

When one party is held responsible for action of a subordinate/associate becuase of the relationship between the two parties

• Began with concept of Respondeat Superious
• Applies to acts of employees, or to joint tortfeasors, and depends on the laws in the state

________ by contract:

Liability that arises b/c of an enforceable agreement between 2+ parties that creates an obligation to do, or not do, somehting

____________ Liability:

Responsibilities are prescribed by statutes and regulations (law) rather than by tort law principles, and a breach need to be intentional

• Prevalent with Workers' Compensation, pollution, and auto

Specific Liability Exposures:

___________ _____ __________

• Possibility that an organization will be held liable because of bodily injury/property damage caused by either:
  1. An accident occurring on premises owned/rented by the organization, or
  2. An accident occurring away from such premises, but only if it arises out of the organization's ongoing operations

Specific Liability Exposures:

Does premises and operations include fire legal liability?

Specific Liability Exposures:

__________ __ _________

• Arise out of injuries/damage that results from a defective product or faulty workmanship

Specific Liability Exposures:

___________ liability

• Bailee only becomes liabile to bailor when the bailee is negligent, and what constitutes negligence depends on teh circumstances of the bailment

Specific Liability Exposures:

___________ liability

Exists when a director/officer fails to act in the best interests of the shareholders

• Frequently involved with D & O claims, and employee benefit claims

Specific Liability Exposures:

____________ Liability

Organizations employing professionals face professional liability loss exposures

• Arises out of the practice of a profession, which has traditionally been associated with medicine, law, education, and clergy
• Often referred to as malpractice, or E&O
  • tend to have more "long tailed" claims than most other liability expsoures
• Professionals are held to a higher standard of care than would otherwise be required

Specific Liability Exposures:

__________ ___________ Liability

Generally involves discrimination in hiring/firing practices, sexual harassment, and wrongful termination claims

T/F?

The most frequent charges allege some form of discrimination, sexual harassment, or wrongful termination?

___________ _________?

An event/activity that activates coverage for a particular policy

_________ Policy Trigger:

policy is activated when accident occurs; common for auto?

__________ Policy Trigger:

• Policy in force when wrongdoing occurred is activated
• no limits on length of time

_________-_______ Policy Trigger:

• Policy in force when claim was made is the one that pays
• Very common for long-tail claims lines of business

__________ Limits:

Generally separated by occurrence limits, and annual aggregate limits

_________ Costs

• Normally responsiblity of insurer, who has a comparative advantage
• Can be in addition to the limit, or included in teh limit

_________ Liability:

Coverage on top of a single, specific underlying coverage

__________ Liability:

Coverage on top of multiple underlying catagories of coverage

Umbrella Liability Policies:

Included or excluded?

Commercial General Liability

Umbrella Liability Policies:

Included or excluded?

Business Auto coverage

Umbrella Liability Policies:

Included or excluded?

Employers' Liability- for employee injuries in the workplace if not covered by WC

Umbrella Liability Policies:

Included or excluded?

Liquor Liability- liquor provider can be sued if intoxicated patron injures another (dram shop)

Umbrella Liability Policies:

Included or excluded?

Workers' Comp

Umbrella Liability Policies:

Included or excluded?

Aircraft/Watercraft

Umbrella Liability Policies:

Included or excluded?

Pollution

Umbrella Liability Policies:

Included or excluded?

Product Recall

Umbrella Liability Policies:

Included or excluded?

Care, Custody, and Control- of property of others

Losses Covered by Umbrella Policies (T/F?)

• Losses that are above the single (occurrence) or aggregate limits in primary policy
  • loss is covered but limit is exhausted
• Losses outside of the primary policy, in which case umbrella pays after retention (self-insured retention/SIR)

Umbrella Policies

Is there a gap between primary policies and umbrella policies?

Types of Contractual Liability Transfers?

Risk ________ Transfers:

• moving activity around
  • incorporation- shifting liability through law
  • leasing
  • subcontracting
  • waivers- effective, but may not always be enforceable

Types of Contractual Liability Transfers?

Risk ________ Transfers:

• Without the presence of all three, any risk financing measures are doomed.  Insurance provides financial assets in teh event of losses, but insureds cannot control third party's exposures
  •  
    • Insurance- primary method
    • Hold-Harmless Agreements
    • Indemnity Agreements

Extent of Responsibility Transfered (Contractual Liability Transfers)

<Limited, moderate, or broad>?

• Restating Law
• clarifying contract terms

Extent of Responsibility Transfered (Contractual Liability Transfers)

<Limited, moderate, or broad>?

• Shifting Responsibility for Joint Fault
• Both parties responsible, but only one pays

Extent of Responsibility Transfered (Contractual Liability Transfers)

<Limited, moderate, or broad>?

• Shifting all responsibility
• no responsibility for one party, but still pay
• If shift is contrary to public policy, courts will normally not uphold

Management of Contractual Transfers:

Factors Affecting Use

• ___________- insurance policies are Contracts of Adhesion, which means any ambiguity is construed agaist the writer of the contract

Directors & Officers legal liability

Strongly influenced recently by ______________-________: builds more oversight into corporate governance

• No fiscal limit on liability
• Must convince regulators of a backup plan

Directors and Officers Legal Liability

Exposures to Loss:

• Basic __________ Duties:
  • hiring
  • appointing
  • managing firm

_____________ Suit:

brought by shareholders on behalf of the company for harm to the company

___-__________ suit:

Can come from a multitude of different parties (class-actions common form)

Common policy features of D&O insurance

_______-______ Basis:

• Policy in force when claim is made, regardless of hwen act committed, is teh policy that will pay for losses

D&O insurance

Discovery clause has a ___ month tail?

D&O Insurance (covered?)

dishonest acts

D&O Insurance (covered?)

bodily injury to any person

D&O Insurance (covered?)

pollution

D&O Insurance (covered?)

defamation

D&O

Are some issues:

• Wrongful termination
• inadequate/inaccurate disclosures
• Merger/Acquisition activities?

Liability Automobile Exposures

What is the most common activity that leads to liability, or ways liability can arise?

Business Auto Coverage (BAC)

Is pollution a covered liability?

Business Auto Coverage (BAC)

Is mobile equipment a covered liability exposure?

Auto Physical Damage Insurance

Comprehensive OTC (other than collision) is usually written on what type of basis?

Auto Physical Damage Insurance (covered)?

 wear and tear or general maintenance

Auto Physical Damage Insurance (covered)?

sound reporducing/recording equipment not permanently installed in a plae where intended

Auto Physical Damage Insurance (covered)?

Sound reproducing/recording equipment if permanently installed in a place where intended?

Auto Physical Damage Insurance (covered)?

radar detectors

BAC- Car rental issues

Short term leases, those that are less than 1 year at the inception date are treated as _____ autos?

BAC

Long-term leases, those over 1 year at inception date, are treated as ____ autos for insurance purposes?

Garage Coverage Forms

_______ coverage

• general liability and auto liability combined?

Garage Coverage Forms

______________ coverage?

• for property in care, custody, and control of the named insured?

Garage Coverage Forms

_________ _________ Protection

• collision and comprehonsive available?

____________ Coverage Form

• For insureds in teh business of transporting property of others

BAC

Classifications of Covered Autos

What is the most comprehensive and most expensive type of coverage?

BAC

Classifications of Covered Autos

• Classifications 3-7 exist so organizations can target only the coverage that the ______ may mandate?

BAC

Classifications of Covered Autos

• Does owned autos only cover temporaty rentals?

BAC

Classifications of Covered?

• Does "Hired Autos only" include vehicles owned by employees?

4 Classifications of the Truckers Coverage Form

(service, retail, commercial, mobile equipment?)

• transporting the insrued's personnel, tools, equipment, and individual supplies to or from a job location?

4 Classifications of the Truckers Coverage Form

(service, retail, commercial, mobile equipment?)

• Pick up property from, or deliver to, individual households

4 Classifications of the Truckers Coverage Form

(service, retail, commercial, mobile equipment?)

• Uses other than service or retail

4 Classifications of the Truckers Coverage Form

(service, retail, commercial, mobile equipment?)

• Covered by CGL
• Inland marine equipment floaters are also available

Fleet Loss Control

• Fleet Safety Program needs to be ______, many claims/losses stem from improper _________?

Workers' Compensation

What is the reason for recent profitability in the industry?

Workers' Compensation Laws

• In most states, any employer with over ___ employees must purchase WC insurance

Workers' Compensation Laws

Types of benefits?

Normally consist of ________ bills and ____________ for lost wages

Workers' Compensation: Types of Benefits?

• Cash payments to injured workers to replace income lost because of worker's inability to return to work ot inability to return to the position he/she had before injury occurred?

Workers' Compensation: Types of Benefits?

• Basically,they are indemnity payments
• Benefits are not payable immediately after injury, must wait specified number of days

Workers' Compensation: Types of Benefits?

(Partial vs. Total)

• Injured worker can work in some capacity despite injury

Workers' Compensation: Types of Benefits?

(Partial vs. Total)

• Until recovery (if possible) injured worker is not able to work

Workers' Compensation: Types of Benefits?

(Temporary V. Permanent)

• is expected to recover

Workers' Compensation: Types of Benefits?

(Temporary vs. Permanent)

• Will never be the same as before the injury occurred

Workers' Compensation: Types of Benefits?

(Benefit levels)

• Usually expressed as a % of pre-injury wages, normally ___, but mandated by states

Workers' Compensation: Types of Benefits?

Compensation for _________

• to surviving spouses adn dependents; also vary by state
• Normally limited in time, and some states provide for a burial allowance

Workers' Compensation: Types of Benefits?

________ Benefits

• covered by almost all states
• Scope of covered medical care is broad, and coverage begins immediately after injury

Workers' Compensation: Types of Benefits?

____________ Services

• Means to reduce seriousness, and cost of disabling injuries
• Provide vocational/physical assistance to injured workers
• Often reduce ultimate losses; available even if state does not include specific provision for them

Workers' Compensation: Accidents Covered?

• Provides benefits only for _________ injuries- those that arise from worker's employment

Workers' Compensation

• What is normally required to be an accident?

Workers' Compensation: Accidents Covered?

Must arise out of and in the course of employement?

Workers' Compensation: Accidents Covered?

• Injuries that occur while commuting to/from work?

Workers' Compensation: Accidents Covered?

• Delivery injuries?

Workers' Compensation Exposures

(Funding of Obligation)

• ___________ State Fund- must purchase WC insurance from a state-approved fund?

Workers' Compensation Exposures

(Funding of Obligation)

• ___________ State Fund- state fund competes with private insurers?

Workers' Compensation Exposures

(Funding of Obligation)

• __________ Insurance- purchase insurance from private insurers

Workers' Compensation Exposures

(Funding of Obligation)

Retention is also known as _______ self insurance?

Workers' Compensation Exposures

(Funding of Obligation)

What is the lowest cost option?

Workers' Compensation Exposures

(Funding of Obligation)

_________ Risk Plans- residual markets

Workers' Compensation Laws

______________ ___ _________ _________ Act?

• Applies to longshoremen, harbor workers, and other maritime workers who are injured during course of employment, or suffer diseases caused/worsened by conditions of employement
• Provides medical benefits, compensation for lost wages, and rehab services
• Has been extended by Defense Base Act, Other Continental Shelf Lands Act, and Nonappropriated Fund Act

Workers' Compensation Laws

___________ ___________ ____________ Act?

• Enables injured railroad employees to sue employer for occupational injuries resulting from negligence, and prevents employer from asserting common-law defenses

Workers' Compensation Laws

Federal Employers Liability Act:

• Tort based Act, involves ___________ negligence on part of employer

Workers' Compensation Laws

________ Act

• For sailors on US vellels
• Allows negligence suits against the employer

Employers' Liability Exposures

Suits by Employees

• Employees can sue the employer based on the _________ _________ Doctrine, which asserts employer is serving a capacity other than an employer when teh injury occurs.

Employers' Liability Exposures

Suits by third parties

• Can suits be brought by spouses?

Employers' Liability Exposures

Suits by third parties

• Can suits be made against from consequential injuries, such as a mother pregnant with a child?

Employers' Liability Exposures

Suits by third parties

• Can suits be made by Third-Party-Over Injuries
• i.e. Employee sues employer and manufacturer, manufacturer then files EL suit on employer to recover damages?

WC/EL Insurance

Workers' Compensation Coverage is referred to as Coverage __ or part __?

WC/EL Insurance

• Employers' Liability Coverage is often referred as Coverage __ or part __?

WC/EL Insurance:

Workers' Compensation Coverage?

• Are there policy limits

WC/EL Insurance:

Workers' Compensation Coverage?

• What is the huge benefits of this type of coverage?

WC/EL Insurance:

Employers' Liability Coverage?

• Includes Dual Capacity Doctrine, i.e. allows tort suits by employees and families?

WC/EL Insurance:

Employers' Liability Coverage?

• Covers retailiation/discharge by employer

WC/EL Insurance:

_________ _______ Coverage?

• There are limits of liability
• Limits can be based on bodily injury per accident or per disease
• Per accident, per employee, and aggregate limits can apply

Other States Insurance:

(3A vs. 3C)

• States with known Operations?

Other States Insurance:

(3A vs. 3C)

• States where operations could arise?

Other States Insurance:

• Can monopolistic states be listed such as Ohio?

Other States Insurance:

• Monopolistic states only sell ___________ ___________ coverage, not ____________ ____________ coverage?

Other WC/EL Coverages:

_____________ _____________ Endorsement?

• Cannot force employee to collect, but takes place of WC in states without statues
• Employees can still sue if they choose to
• Often builds goodwill for employer

Other WC/EL Coverages:

________ _______

• EL exposure still exists in monopolistic states, so this coverage covers EL exposures in those states

Other WC/EL Coverages:

Endorsements for __________ Acts?

• Provides coverage for other, additional employees

Other WC/EL Coverages:

_________ _________ ________ Coverage?

• 30+ day overseas employees not covered under standard policy, but can use this endorsement to provide coverage
• Normally must also meed local requirements

Workers' Compensation Loss Financing

General Financing Issues:

• Predictability-loss development patterns dictate when damages are paid out
  • As they become more predictable, _____ is less valuable

Workers' Compensation Loss Financing

General Financing Issues:

IRR determines the ________ rate?

Workers' Compensation Loss Financing-

General Financing Issues:

Firms want to decrease _______ costs?

Workers' Compensation Loss Financing-

General Financing Issues:

________ __________ Loads?

• Option for organizations that cannot obtain coverag ethrough voluntary market
• Charge on voluntary premiums to subsidize residuals

Workers' Compensation Loss Financing:

____________ __________ Rating Plans?

• Cost this year is what insurer believes to be expected cost of losses based on prior experience, normally an average of the past 3 years 

Workers' Compensation Loss Financing

Manual rate- applieas only to ______ policy year?

Workers' Compensation Loss Financing:

______ Plans?

• provide a refund of premiums for good (low) loss experience

Workers' Compensation Loss Financing:

Dividend Plans?

(Participating vs. Sliding Scale)

• overall experience of insured

Workers' Compensation Loss Financing:

Dividend Plans?

(Participating vs. Sliding Scale)

• somewhat loss-sensitive

Workers' Compensation Loss Financing:

________ Plans?

• More retention is build into the program

Workers' Compensation Loss Financing:

______________ _______ Plans?

• Rates based on actual losses in current year, which impact current premiums

Workers' Compensation Loss Financing:

Employee Leasing?

• Leasing firms responsible for ___ and ___ of leased employees

Controlling WC Costs:

• What are the two most common days for WC claims?

Controlling WC Costs:

________ errors are very common, need accurate data?

Controlling WC Costs:

Fraudulent claims- ____% of fraudulent claims are from providers, not employees

Controlling WC Costs:

Most recommendations for workplace injuries involve changes to ________?

Controlling WC Costs:

_____ ______ Analysis?

• Selection of critical list
• Materials handling and storage
• Repetive motion injuries

Controlling WC Costs:

Safety?

___________ Controls

• Machine guards
• Health hazards

Controlling WC Costs:

_______-_________ Control?

• EMT
• Rehab

Controlling WC Costs:

Whose responsibility is it to asses reserving practices?

Controlling WC Costs:

Assessing Reserving Practices?

• Inactivity- if a claim is open for acertain period of time, it can probably be _______?

Controlling WC Costs:

Assessing Reserving Practices?

• Reserving Accuracy (open vs. closed)- compare accuracy of reserves while claims are ______?

Controlling WC Costs:

Abnormal reserves?

• Norm= ?

OSHA Penalties:

___ _________?

• No immediate threat, but acts as a warning

OSHA Penalties:

________

• Firm has immediate threats to health
• Fines
• Prison is possible

OSHA Penalties:

____________ and ____________ are the most significant part?

Business Continuity

• Ideal solution for most businesses is to make prior arrangements for the sale fo an individual's interest ______ to the death/disability through a buy and sell agreement?

Business Continuity:

(sole proprietorship vs. partnership vs. corporations)

• is the most vulerable?

Business Continuity:

(sole proprietorship vs. partnership vs. corporations)

• usually dissolved immediately at the death of a partner, unless express agreemetn in place beforehand

Business Continuity:

(sole proprietorship vs. partnership vs. corporations)

• Are not immune from continuity issues
• A big problem is when the entity in question is a one-person enterprise

Key Person Exposures:

• Do Key persons have to be owners of the company?

Business Continuation Plans:

________ Form

• Most appropriate plan depends on this form?

Business Continuation Plans:

______-_____ Agreements

• Other owners can purchase interests of deceased partner at time of death?

Business Continuation Plans: Funding Approaches

________ Plan?

• Controlled though the business
• better when the firm has many owners
• Organization purchases life insurance on each key person

Business Continuation Plans: Funding Approaches

________ _________ Plan?

• One owner purchases life insurance for each of partners, other than himself
• Becomes complicated as # of owners increase?

Property Risks and Coverages: Policy Organization

• At the beginning of the policy and dictate the following:
  • insurance interest
  • coinsurance %
  • causes of loss forms
  • valuation

Property Risks and Coverages: Policy Organization

• An Insurable Interest must exist at the time of the ______?

Property Risks and Coverages: Policy Organization

• Coinsurance %- an _____________ penalty encourages insurance to value

Property Risks and Coverages: Valuation

• Actual Cash Value formula?

Property Risks and Coverages: Valuation

• Most attractive b/c of tax laws?

Property Risks and Coverages: Valuation

___________ Valuation?

• When MV exceeds RC, good for old buildings
• replaces with functional equivalent

Property Risks and Coverages: Valuation

__________ Value

• Suspends the coinsurance condition

Property Risks and Coverages: Policy Conditions

_____________?

• can sometimes extend the cancellation period

Property Risks and Coverages: Policy Conditions

_____________ of ___________ of Recovery?

• also called suborgation

Property Risks and Coverages: Covered Property (covered)?

• Business Personal Property- leased property considered owned?

Property Risks and Coverages: Controlling Costs

Valuation?

• You should include only values of ______ property
• Excluded property should not be included 

Property Risks and Coverages: Controlling Costs

Valuation

• For correct valuations, make sure your keep up to ______?

Property Risks and Coverages: Controlling Costs

Ratings?

• Reporting forms are used for ________ values

Property Risks and Coverages: Controlling Costs

Ratings

• Duplicate records- ______ provided if maintian backups

_________ Insurance:

Function:

• converts named-perils or all risks policy to even broader all-risks policy
• not intended to be "excess" insurance
• Manuscripted coverage

DIC Insurance (covered?):

flood and earthquake

DIC Insurance (covered?):

Indirect loss or loss in transit

DIC Insurance (covered?):

identified and unidentified perils

_______ Insurance:

Disadvantages:

• market is mroe volatile- may not always be available
• policy interpertation can be difficult

____________ __ _______ Coverage:

• Ordinances/laws increase the probability of a total loss because of requirement to meet new codes?

Ordinance or Law Coverage

(A vs. B vs. C)?

• covers reduction in value of undamaged portion that must be demolished

Ordinance or Law Coverage

(A vs. B vs. C)?

• Covers cost to demolish undamaged portion of structure and remove debris

Ordinance or Law Coverage

(A vs. B vs. C)?

• Covers increased cost to repair/replace in accordance with codes?

Inland Marine Expsoures: Accounts Recievable

• Information on documetns is valuable, not acutal ______ itself?

_____________ __________ Insurance:

• normal difference between revenues and expenses (net income + most continuing expenses)
• losses can occur due to suspension of operations

________ _________ Coverage

• For organizations that need to continue operations, even if it comes with high costs
• ex. hospitals and banks
• common limits are 40-80-100
  • % available for 30 day periods

Transit Exposures:

• CIF (Cost of Insurance & Freight) incorporates ________ for transit coverage?

Liability by type of Carrier:

_________ Carriers

• Includes companies that are in teh busienss to transfer property
• ex. UPS, FedEx

Liability by type of Carrier:

_________ Carriers

• negotiated with organization to transfer, not necessarily open to public use

Liability by type of Carrier:

_________ Carriers

• Transport goods for own business

Types of Transit Insurance:

__________ Transit Policy

• Allows for multiple shipments

Types of Transit Insurance:

_____ Transit Policy

• Single occurrence arrangement

Types of Transit Insurance:

__________ _______ Cargo Policy

• More likely for a private Carrier

___________ and _________:

• The most critical component of crime loss control, and can prevent many problems
• ex. use with money handling

Crime Coverage Forms:

• Does Employee Dishonesty cover all property including money and securities?

Crime Coverage Forms:

• Who is covered by Employee Dishonesty?

Crime Coverage Forms:

Forgery-Alteration

• Does it cover checks/drafts issued by insured
• Credit cards by endorsement?

Crime Coverage Forms:

Forgery-Alteration

• Who is covered by this coverage form?

Crime Coverage Forms:

Theft, Disappearance, Destruction

• Does it cover other items besides money and securities?

Crime Coverage Forms:

Robbery & Safe Burglary

• Does it cover any property other than money and securities?

Crime Coverage Forms:

Burglary and Robbery of a watchman

• Does it cover any property other than money and securities

Crime Coverage Forms:

Computer Fraud

• What type of property is covered?

Crime Coverage Forms:

Extortion

• Are property other than money and securities covered?

Crime Coverage Forms:

Theft (inside premises) and Robbery of a Messenger (outside)

• Does it cover any property other than money and securities?