LIABILITY INSURANCE

What Is Liability Insurance?

Liability insurance is compose of three types:

For Care Facilities, Commercial Liability Insurance are usually compose of three types of liability coverage: (General Liability, Professional Liability, and Physical Abuse/Sexual Molestation Liability)

 

Commercial Liability

Commercial liability composes of 4 main points:

 

• General Liability
• Protects your business against liability claims from bodily injury and property damage arising out of premises.
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• Personal & Advertising Liability
• Provides coverage for accusation of slander and libel of someone else or business while advertising liability provides coverage for inadvertent mislead or false advertisement.
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• Each Occurrence Limit
• Maximum amount of liability coverage per incident.
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• General Aggregate Limit
• Maximum amount of liability coverage for multiple claims within the policy period.

 

Professional Liability (E&O)

Professional Liability provides coverage for you and your caregivers against act, negligence, error or omission due to giving or failure to give proper professional services to your residents or clients. This may include counseling, disbursement of foods, medications or professional care.

 

Physical Abuse/Sexual Molestation Liability

Physical Abuse Coverage provides coverage against physical abuse including alleged act, error and omission, and misconduct of abuse. Sexual Molestation coverage is similar to physical abuse as it relates to sexual or non-sexual alleged act, act or misconduct of abuse to the residents or clients.

 

As a facility operator, you definitely want to have all the liability coverage: general, professional, and abuse/molestation coverage because your operation is at risk when dealing with residents. Of all the listed liability coverage, the two most frequent liability claims on care facilities are professional liability and abuse/molestation claims. Since you are caring for residents, you want to make sure your liability coverage is broad in definition, coverage, and high policy limits.

Business Insurance

Workers' Compensation

Commercial Property

Commercial Auto

Commercial Umbrella

Surety Bond

Employment Practice Liability

Employee Benefits

Not All Commercial Liability Insurance Carriers And Coverage Are The Same

Insurance carriers are all different. Here a few differences on liability insurance carriers, forms, limits, and definitions:

Admitted Insurers, Non-Admitted Insurers, and Risk Retention Group & Insurance Carrier Rating

Insurance Carriers

When comparing insurance insurers and policies, make sure you understand the difference among: Admitted Insurance Carrier, Non-Admitted Insurance Carrier and Risk Retention Group.  All three types of insurance carrier/groups are approved to conduct business of insurance in any states, but state laws and regulations apply differently.

 

• Admitted Insurance Carrier
• An admitted insurer has been authorized by the state department of insurance (i.e. California Department of Insurance) to issue policies which comply to all that state insurance laws and regulations.  In California, the admitted insurance carrier is a member of the California Insurance Guarantee Association (CIGA) which protects policyholders or insureds if the insurer becomes insolvent or bankrupt.  This means the state would step in to pay for covered claims from a reserved insurance fund.  An admitted insurer is subjected to the CA State Department of Insurance reporting of schedule rating, policy forms, claim audits, underwriting audits, and financial statements.
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• Non-Admitted Insurance Carrier
• Also known as Excess and Surplus Lines Carriers.  Each carrier is subject to its domiciled insurance laws and reporting procedures, but not to other states insurance laws and regulations when conducting insurance business (i.e.an Ohio insurance carrier must comply with Ohio’s insurance laws, but not CA insurance law when conducting business in California). A California non-admitted insurance carrier does not need to comply with California Department of Insurance’s laws and regulations regarding policy forms, schedule rating, underwriting audits, or financial examinations.  This flexibility allows a CA non-admitted insurer in schedule rating, coverage, price and customization of policy forms comparing to an admitted carrier.  Also, a non-admitted insurance carrier does not have to contribute in the California Insurance Guarantee Association (CIGA) to protect insureds if an insurance carrier becomes insolvent or bankrupt, but are usually listed on CA Department of Insurance (DOI) website as “List of Eligible Surplus Lines Insurers”.  Since these are still insurance carriers, they are rated by A.M. Best Company for financial stability.
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• Risk Retention Group (RRG)
• RRG is a corporation or limited liability association formed by its members to provide liability risk insurance to its group members.  In essence, an RRG is a self-insured company governed by Risk Retention Act to provide insurance only to its members with similar risks and businesses.  This flexibility enables RRGs to design insurance policies to favor their members.  However, RRGs do not need to participate in the California Insurance Guarantee Association (CIGA), thus an insured has no financial protection if an RRG becomes insolvent.  RRGs are allowed to provide insurance in all states, but are not required to adhere to the state insurance laws and regulations regarding schedule ratings, policy forms, underwriting audits, and financial conditions.  Since RRGs are not considered as a typical insurance carrier, there is no A.M. Best Company’s financial rating.

 

A.M. Best Rating Company

Insurance companies financial rating are usually reported by A.M. Best Company.  This company provides a rating similar to academics;  A++ as the best and F is the worst.  Please note not all admitted insurance carriers are rated A++ and not all non-admitted insurance carriers are rated below A++.   Rate letters are based on A.M. Best Company’s criteria on an insurance carrier’s history, financial stability, and contract obligations.  Each “letter” assigned can change over the course of time as their financial situation changes.  An insurance carrier can move up for better financial reporting and move down for below financial reporting.

 

Which Insurer Is Best For My Facility?

Each insurer (Admitted, Non-Admitted, RRG) has a purpose to provide insurance in the marketplace.  Each insurer has its own pros and cons regarding how insurance is served.  By understand each insurer and how it could apply to your situation, you can evaluate which insurer is best for you.  At Protégé, we understand that each client varies regarding the insured’s business goals, financial obligations, coverage and insurance requirements.  Our recommendation on insurer and policy will depend on you and your facility needs.

Different Type Of Insurance Policies

Claims-Made versus Occurrence Forms

There are two types of insurance polices: Claims-Made and Occurrence Forms.

 

• Claims-Made
• A claim must be made to the insurance company during the policy period to have coverage. For example, you have a policy with an effective date 1/1/2014 and an expiration date of 1/1/2015, a claim must be filed within those dates to be covered.
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• Occurrence Form
• A loss or claim incident must occur during the policy period, but an actual claim filed could happen after the expiration date. In the above example with an expiration date of 1/1/2015, you can still file a claim after 1/1/2015 even though your coverage ends on 1/1/2015.

 

Insurance carriers created both claims-made and occurrence form to provide flexibility in premium, cost, and options for the insured. For the insured, you must be aware of the difference between the two types of policies. To have continuous coverage on claims-made, the policy needs to have a "retroactive date" (date stated on the policy when coverage begins). Occurrence Form will always give you longer protection since a claim can be filed after the policy expires. Given the longevity of filing a claim, majority of care facility owners favor occurrence over claims-made policy.

 

Switching from a claims-made policy to another claims or occurrence form policy

If you plan to switch polices to another insurance carrier, you need to consider either Prior Acts Coverage or Extended Reporting Period.

 

• Prior Acts Coverage

Can add Prior Acts Coverage to the new claims-made or occurrence form to provide coverage back to designated "prior date". If you have a prior acts coverage of 1/1/2011 on above policy period of 1/1/2014 to 1/1/2015, then you could file a claim on new claims-made or occurrence form back to 1/1/2011.

 

• Extended Reporting Period Endorsement (Tail Coverage)

Helps to extend the current claims-made coverage beyond its expiration date on the new policy. For the above policy period 1/1/2014 to 1/1/2015, coverage would continue beyond 1/1/2015 expiration date; thus allowing a claim to file on the old claims-made policy.

Understanding What Is Included In Your Policy

Limits Amounts, Insurance Policy Terms, Endorsements and Exclusions

To verify policy limits, you should review the commercial liability insurance policy's Declaration Pages (Dec Pages) to summarize the coverage and its limits. However, please be aware that Declaration Pages may be similar among insurance carriers, but their limits, coverage and definitions could be different. An insurance coverage form from an admitted line, non-admitted line or risk retention group could be completely different based on the supporting ISO Forms, Endorsements, and Exclusions on the policy.

 

To differentiate one insurance carrier from another, most insurance carriers will add endorsements and exclusions to the standardized ISO forms. By doing so, an insurance carrier can broaden its coverage term, policy limits, and definition of a loss to enhance more coverage. Conversely, an insurance carrier can narrow its coverage term, policy limits, and definition of a loss to reduce potential claims. This is why not all insurance carriers and insurance policies are the same. As a consumer, you need to be aware the insurance policy you are purchasing.

Difference In Claims

Inside versus Outside: Claims and Legal Expenses

Insurance carriers can define their claim and legal expense as inside or outside the liability coverage limits:

 

• Inside Policy Limit

If claim and legal expenses are inside the liability coverage limits, then the legal fees and insurance expenses of the claim will reduce the policy limit.  For instance, you have legal fees and insurance expenses of $100,000, it will reduce the total liability coverage limit of $1 million coverage to $900,000.

 

• Outside Policy Limit

Claim and legal expenses are separated from the policy limit.  For Instance, a $1 million liability limit will remain the same regardless of what claim and legal expenses are.

 

Depending how the policy is designed on claims and legal expenses, the overall insurance premium is affected. Policies that include claims and legal expenses outside the coverage limit tend to be higher than premium comparing to policies that include claims and legal expenses within the coverage limit.