Agribusiness and Farm Insurance Specialist (AFIS ) Part 3. Farm Auto, Workers Compensation, Umbrella

Transcription

1 Agribusiness and Farm Insurance Specialist (AFIS ) Part 3 Farm Auto, Workers Compensation, Umbrella 1

2 Course Overview Chapter 1: Agribusiness Vehicle Exposures Chapters 2-4: Business Auto Policy and Endorsements Chapter 5-9: Workers Compensation Chapter 10: Excess and Umbrella Insurance 2

3 Agribusiness Vehicle Exposures Chapter 1

4 Who Owns the Vehicle(s)? Farming is a combination of personal and business exposures Vehicles may be owned, leased, rented, borrowed Vehicles may be owned by individuals, partnerships, corporations, LLCs, associations Sole proprietor may be insured under a PAP or a BAP A business must have a BAP 4

5 Vehicle Exposures Private passenger autos, light & heavy trucks, farm machinery, equipment owned or leased by the insured Vehicles the insured rents or borrows from others Vehicles the insured s employee rents from others Employee-owned vehicles used in business Vehicles loaned or rented to others Insured under farm liability, general liability, PAP, or BAP Physical damage might be covered under an inland marine policy Auto versus mobile equipment 5

6 Vehicle Operation and Use Never leave the farm Local use Long-haul (commodities) Used in planting, cultivating, feeding, harvesting Used to transport livestock Loading and unloading exposure Used to transport equipment, materials, supplies, people, farm products Liability exposures, physical damage exposures, cargo exposures 6

7 Personal versus Business Auto PAP may cover owner and resident household members Business use limited to 10,000 lbs. GVW Larger vehicles must be insured under a BAP Some farms have both a PAP and a BAP Some motor vehicles are covered by a CGL or a farm liability coverage form 7

8 Overview of the Business Auto Policy and Covered Auto Symbols Chapter 2

9 BAP Structure 9

10 BAP Declarations Page Item One: The named insured, including the form of business (corporation, partnership, LLC, individual, other) Item Two: Schedule of coverages and covered autos Item Three: Schedule of covered autos owned by the insured Item Four: Schedule of covered autos hired or borrowed by the insured Item Five: Schedule of non-ownership liability (employee owned autos) Item Six: Schedule of gross receipts or mileage basis (not applicable to agribusiness risks) 10

11 Major Coverages Liability Physical Damage Specified causes of loss Comprehensive Collision Transportation expenses Loss of use expenses Medical Payments No-fault (where applicable) UM/UIM 11

12 Symbols ANY AUTO: Symbol 1 can be used only for liability coverage. When it is selected, any auto, whether owned, nonowned, or hired, is considered a covered auto. OWNED AUTOS ONLY: Symbol 2 covers all autos owned at the beginning of the policy period, plus any owned autos acquired during the policy period. If symbol 2 is used for liability coverage, any nonowned trailer attached to an owned power unit is also a covered auto. This symbol is often used to designate UM/UIM and physical damage collision coverages. OWNED PRIVATE PASSENGER AUTOS ONLY: Symbol 3 covers all private passenger autos owned by the insured, plus any such autos acquired during the policy period. The symbol is frequently used to designate auto medical payments and physical damage comprehensive coverage. If physical damage towing and labor coverage is purchased, this symbol may be used for that coverage. OWNED AUTOS OTHER THAN PRIVATE PASSENGER AUTOS ONLY: Symbol 4 covers all owned autos except private passenger autos. Similar autos acquired during the policy period are also covered. If this symbol is used for liability coverage, any nonowned trailer attached to an owned power unit is covered. The most common use for this symbol is for physical damage specified causes of loss coverage. 12

13 Symbols OWNED AUTOS SUBJECT TO NO-FAULT: Symbol 5 covers only owned autos that are required to have no-fault benefits in the state in which they are licensed or principally garaged. This symbol also indicates coverage for autos acquired during the policy period, provided they are required to have no-fault benefits. The use of the symbol is restricted to compulsory no-fault coverage. OWNED AUTOS SUBJECT TO A COMPULSORY UNINSURED MOTORISTS LAW: Symbol 6 signals coverage for owned autos that are required to have UM insurance because of the law in the state where they are licensed or principally garaged. (Some states UM laws allow vehicle owners to reject the required coverage. Symbol 6 does not apply to vehicles licensed or principally garaged in such states.) Autos acquired during the policy period are also covered autos when symbol 6 is used if they are subject to the same state UM law and the required coverage cannot be rejected. 13

14 Symbols SPECIFICALLY DESCRIBED AUTOS: Symbol 7 provides coverage only for autos that are specifically described in a schedule of covered autos in the policy declarations. If this symbol is used for a particular coverage, a newly acquired auto will be included for that coverage only if the insurer already provides that coverage on all autos the insured owns, or the auto replaces one that was previously owned and insured for the same coverage and the insured informs the insurance company within 30 days after acquiring it that coverage is desired on the new auto. When symbol 7 is used for liability coverage, liability arising from nonowned trailers attached to a power unit described in item 3 of the declarations is covered. *7* 14

15 Symbols HIRED AUTOS ONLY: Symbol 8 applies coverage only to autos that the insured leases, hires, rents, or borrows. It does not include any auto that is leased, hired, rented, or borrowed from an employee of the insured or a partner in the business, or members of their households. NONOWNED AUTOS ONLY: Symbol 9 gives covered auto status to autos used in connection with the insured s business if they are not owned, leased, hired, or borrowed by the insured. This symbol includes autos owned by the insured s employees or partners, or members of their households while such autos are used in the insured s business or personal affairs. Symbol 9 is used for liability coverage only. 15

16 Symbols MOBILE EQUIPMENT SUBJECT TO COMPULSORY OR FINANCIAL RESPONSIBILITY OR OTHER MOTOR VEHICLE INSURANCE LAW ONLY: Symbol 19 applies to land motor vehicles that would qualify under the definition of mobile equipment if they were not subject to a compulsory insurance or other motor vehicle insurance law in the jurisdiction in which they are principally garaged or licensed. This could apply to an accident involving farm machinery and equipment that takes place on public roads and triggers the state s financial responsibility or other motor vehicle law. These vehicles would then be treated as covered autos. CUSTOM SYMBOL: This symbol allows for any designation that is agreeable between the insured and the insurer. It is used to either include or exclude any category of owned autos not precisely described by any of the other standard symbols (e.g., autos with book values below a specified amount) from physical damage coverage. Use of this symbol requires the attachment of the covered auto designation symbol endorsement filled in to describe the custom symbol. 16

17 Auto Liability Insurance Chapter 3

18 When Does Liability Coverage Apply? BI or PD is caused by an accident Defined to include repeated exposure The BI or PD results from the ownership, maintenance, or use of a covered auto An insured is legally responsible for the loss Defense costs are also covered 18

19 What Vehicles are Covered Autos? If symbol 1 is selected (as it should be), any auto is a covered auto for liability Otherwise, it depends on the symbol chosen Additional covered autos Newly acquired autos Trailers with a load capacity of 2,000 lbs. or less Mobile equipment carried or towed by a covered auto Temporary substitute auto 19

20 Who is an Insured? Named insured Permissive users, except Owner of a hired or borrowed auto Employee, partnership partner, or LLC member using personal vehicle Auto business worker Non-employee loading or unloading a covered auto Omnibus clause (anyone liable for the conduct of an insured) An additional insured endorsement is redundant but available due to demand 20

21 What Exclusions Apply? Expected or intended injury Contractual liability* Workers compensation and other statutory obligations Employee indemnification/employers liability Injury to a fellow employee Owned property/care, custody, or control* Loss resulting from the handling of property Loss resulting from the movement of property by an unattached mechanical device* Mobile equipment* Completed operations Pollution* War Racing, demolition, or stunting events * See subsequent slides 21

22 Contractual Liability Exclusion Does not exclude Liability that would exist even without a contract Liability assumed in an insured contract : A lease of premises (e.g., an auto accident on the premises) A sidetrack agreement An easement or license agreement (except in connection with construction or demolition operations on or within 50 feet of a railroad) An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality That part of any other contract or agreement pertaining to the named insured s business (including an indemnification of a municipality in connection with work performed for a municipality) under which the named insured assumes the tort liability of another to pay for bodily injury or property damage to a third party or organization That part of any contract or agreement entered into, as part of the named insured s business, pertaining to the insured s rental or lease of any auto 22

23 Owned Property/Care, Custody, or Control Exclusion Precludes coverage for damage to Property owned or transported by the insured Property in the insured s care, custody, control Damage to a rented or borrowed vehicle 23

24 Loss Resulting from the Movement of Property by an Unattached Mechanical Device Does not exclude coverage when the loading/unloading device is attached to the covered auto or is a hand truck Example: a hoist attached to a truck 24

25 Mobile Equipment Exclusion While used in the field farm equipment has farm exposures While farm equipment is being driven to the field its exposures resemble auto exposures ISO definitions of auto and mobile equipment focus on the vehicle s primary use Premium is charged for auto but not for mobile equipment Gray areas are a good reason to place auto and general liability coverages with the same insurer 25

26 Pollution Exclusion Almost absolute; two exceptions: Escape of pollutants being transported, loaded, unloaded, or stored in the covered auto Discharge of fuel, lubricants, fluids, exhaust from the part of the auto that is designed to hold them Pollution Liability Broadened Coverage for Covered Autos (CA 99 48) endorsement Provides coverage for direct (not contractual) liability from transporting, loading, unloading pollutants 26

27 Motor Carrier Act Coverage Federal Motor Carrier Act of 1980 imposes financial responsibility requirements on firms transporting hazardous materials MCS 80 endorsement (Motor Carrier Act endorsement) does not add coverage but guarantees to 3 rd parties that the insured will respond to pollution claims 27

28 Limits of Liability Combined single limit For BI and PD Applies per accident Regardless of the number of covered autos, insureds, premiums paid, claims made, or vehicles involved in an accident NO aggregate limit 28

29 Policy Conditions 29

30 General Conditions No benefit to bailee physical damage coverages Example: car stolen from parking valet. Insurer will pay and subrogate against the valet, who does not benefit from the BAP Other insurance BAP is primary for owned autos, excess for nonowned autos Proportion to limits if both policies have same other insurance provision Premium audit Insurer audits actual fleet after expiration and adjust premium Policy period, coverage territory US, US territories, Puerto Rico, and Canada NOT Mexico 30

31 Size Classifications Light truck size class: Trucks that have a GVW of 10,000 pounds or less. A half-ton or threequarter-ton pickup, for example, would be in this size class. Medium truck size class: Trucks that have a GVW of 10,001 to 20,000 pounds. Crawler type trucks are also in this class. A 1-ton or 1½-ton vehicle, for example, would be in this size class. Heavy truck size class: Trucks that have a GVW of 20,001 to 45,000 pounds. A 2- or 3-ton vehicle would be in the heavy truck size class. Extra-heavy truck size class: Trucks that have a GVW over 45,000 pounds. A 4-ton or larger vehicle would be in the extra-heavy size class. Truck-tractor: A motorized auto with or without body designed for carrying commodities or materials; equipped with fifth wheel coupling device for semitrailers. Heavy truck-tractors have a GCW of 45,000 pounds or less; extra-heavy truck-tractors have a GCW over 45,000 pounds. Semitrailer: A trailer equipped with a fifth wheel coupling device for use with a truck-tractor, with a load capacity over 2,000 pounds (includes bogies used to convert containers into semitrailers). Trailer: Any trailer with a load capacity over 2,000 pounds, other than a semitrailer. Service or utility trailer: Any trailer or semitrailer with a load capacity of 2,000 pounds or less. 31

32 Business Use Classifications Retail use: Vehicles used to pick up property from or deliver property to individual households Commercial use: Vehicles not classified as either retail use or service use Service use: Vehicles used for transportation of insured s personnel, tools, equipment, and incidental supplies to or from a job location 32

33 Radius* Classifications Local: 50 miles or less Intermediate: >50 miles up to 200 miles Long distance: >200 miles *Straight-line radius, not road miles 33

34 Business Auto Endorsements and Other Policies Chapter 3

35 Pollution Liability Broadened Coverage for Covered Autos Endorsement (CA 99 48) Provides coverage for one situation: pollution cleanup costs arising out of cargo being transported by an insured If an insured wants full pollution coverage it must be obtained from an environmental insurer 35

36 Designated Insured Endorsement (CA 20 48) Merely reaffirms omnibus clause Used to satisfy those who want additional insured status 36

37 Employees as Insureds Endorsement (CA 99 33) Can be used to provide coverage for an employee using an auto not owned, rented, or borrowed by the insured Rarely used because most employees have their own PAPs 37

38 Fellow Employee Coverage Endorsement (CA 20 55) Deletes the fellow employee exclusion 38

39 Employee Hired Autos Endorsement (CA 20 54) Clarifies that the employer s BAP s liability and physical damage coverage applies to an employee who rents a car for business as well as to the employer If the employer s BAP includes Symbol 1 or 8 39

40 Individual Named Insured Endorsement (CA 99 17) Used when an individual (typically the business owner) has no PAP; vehicles are owned by the business Protects against the use of nonowned autos by the named insured or family members Provides coverage comparable to the PAP under the BAP Mandatory when a sole proprietor s BAP covers a private passenger vehicle, pickup, or van 40

41 Drive Other Car Coverage Broadened Coverage for Named Individuals Endorsement (CA 99 10) Provides liability, med pay, UM/UIM, and physical damage coverage for an individual s personal use of a nonowned vehicle (e.g. rents a car while on vacation) Covered individual is named Spouse is automatically covered Other family members are not covered unless named Does not exclude vehicles furnished for regular use 41

42 Lessor Additional Insured and Loss Payee Endorsement (CA 20 47) Used when an auto lease agreement requires the lessee to provide primary liability coverage for the lessor 42

43 Employee as Lessor Endorsement (CA 99 47) Used when employees use their own vehicles in the insured s business and the insured agrees to provide auto insurance for the vehicle using a leaseback arrangement Might also need a DOC endorsement if employee owns no other autos Or a PAP with a named nonowner endorsement 43

44 Hired Autos Specified as Covered Autos You Own Endorsement (CA 99 16) Used when the party renting or lending an owned vehicle requires the insured renter to provide primary coverage for the owner Modifies the renter s BAP 44

45 Vehicle Coverage under the Farm Liability Coverage Form Liability coverage for mobile equipment but not autos ATVs are excluded both on and off premises 45

46 Vehicle Coverage under the PAP Individuals and married couples are eligible Can t use PAP to insure corporations, partnerships, etc. Can only be used for private passenger autos and light trucks not used for commercial purposes Less flexible than BAP regarding Nonowned auto coverage Pollution and contractual exposures Trailers 46

47 Physical Damage Coverage on Farm Vehicles Farm liability policy and CGL policy s coverage on mobile equipment does not include physical damage coverage An inland marine farm program form can provide coverage on mobile agricultural equipment Other inland marine insurers also offer coverage 47

48 Introduction to Workers Compensation Chapter 5

49 Employer s Common-law Obligations and Defenses (historical) Obligations Provide a safe workplace Provide enough competent fellow employees Provide safe tools and equipment Develop and enforce safety rules Warn employees of inherent dangers Defenses Assumption of risk Contributory negligence Negligence of a fellow employee 49

50 Workers Compensation Laws Automatic no-fault compensation Employee forfeited the right to sue employer for compensatory damages 50

51 Today s Workers Compensation Laws Covered versus elective laws Exclusive remedy Penalties for failure to insure Covered employments Independent contractors Employee leasing Sole proprietors, partners, executive officers, and LLCs Elective coverage Suits against third parties Injuries not covered Occupational disease Extraterritorial application Workers compensation benefits 51

52 Compulsory versus Elective WC is compulsory in most states WC is elective in TX and NJ NJ employers must carry either WC or EL coverage If TX or NJ employer rejects WC and employee sues for negligence, the employer may not use common-law defenses: assumption of risk negligence of a fellow employee contributory negligence In practice, few employers reject WC 52

53 Exclusive Remedy WC benefits are the sole remedy for job injuries Most states permit suits if employer did not obtain WC or qualify as a self-insurer Many states allow suits for injury intentionally caused by employer Most states shield fellow employees from negligence claims 53

54 Penalties for Failure to Secure Benefits Fines Criminal penalties in many states Executive officers may be personally liable Injured workers of a defaulting employer may be awarded increased benefits 54

55 Covered Employments Wyoming lists covered employments In all other states WC applies to all employments not specifically excluded Often excluded: Very small employers Certain types of work such as farm laborers or casual employees 55

56 Number of Employees Employers with fewer than a specified number of employees (e.g. 3, 4, 5) are exempt in 10 states 56

57 Type of Work Excluded categories usually include Domestic workers Agricultural employees (varies by state) Real estate brokers paid on commission Casual employments Employees not covered by WC law can sue employer for negligence 57

58 Independent Contractors State laws vary in distinguishing between employees and independent contractors Where workers compensation law is silent common-law principles generally apply 58

59 Employee Leasing State laws vary Discussed further in a later chapter 59

60 Sole Proprietors, Partners, Executive Officers, LLCs In most states sole proprietors and partners are not covered employees But may elect to be covered In most states corporate officers are covered But may elect to be excluded 60

61 Elective Coverage In most states farm employers not subject to WC can voluntarily elect to be covered Obligated to pay statutory benefits regardless of fault Limited protection from employee lawsuits (exclusive remedy) 61

62 Suits Against Third Parties Subrogation by employee and employer is permitted in all states Most states allow the injured employee to accept WC benefits and sue the responsible third party In a few states the employee must do one or the other Insurer may recover benefits from an employee who successfully obtains damages from a third party 62

63 Injuries Not Covered Noncompensable injuries, which vary by state, may include Self-inflicted injuries Injuries sustained while attempting to injure someone ele Injures sustained while committing a crime Injuries caused by employee use of drugs or alcohol Employee s willful misconduct or willful negligence Injury during voluntary recreational activities 63

64 Occupational Disease Examples: asbestosis, silicosis Difficult to determine when injury took place Must generally be a causal link between the employment and the disease Most states assign liability to the last employer that exposed the employee 64

65 Extraterritorial Application Laws vary by state Other states coverage is discussed later 65

66 Workers Compensation Benefits Medical Disability Rehabilitation Death Death benefits to survivors, that is 66

67 Medical Benefits Unlimited amounts and duration in most states 67

68 Disability Benefits Temporary total Can t work while recovering Permanent total Can t do any work for life Temporary partial Can do some work while recovering Permanent partial Will never recover but can still do some work Scheduled injuries (e.g. loss of one hand) 68

69 Rehabilitation Benefits Cover rehab and rehab-related expenses in most states 69

70 Death Benefits Payable to survivors Burial allowance and weekly income benefit 70

71 The Workers Compensation and Employers Liability Policy Chapter 6

72 National Council on Compensation Insurance Filing agency and rating organization for workers compensation insurance in most states Promulgates the standard workers compensation and employers liability insurance policy (WC A) Part One Workers Compensation Insurance Part Two Employers Liability Part Three Other States Insurance 72

73 Who Is an Insured? The employer listed in Item 1 of the information page (declarations) If a partnership, each partner is insured as an employer of the partnership s employees Corporate officers and other employees are not insureds Distinguish between being an insured (covered for liability) and being entitled to receive benefits 73

74 Covered Workplaces All workplaces listed on information page Other workplace(s) in a state listed in Item 3A of information page Unless insured elsewhere 74

75 Part One Workers Compensation Insurance Insurer is liable to pay benefits prescribed by state WC law No policy limit As long as the BI or last exposure to OD conditions occurs during the policy period Claims may be made long after a policy s expiration date Insurer has the right to investigate and settle claims or suits at its own expense May settle claims without the insured s consent 75

76 Additional Expenses Covered Reasonable expenses incurred at the insurer s request (but not loss of earnings) Premiums for bonds to release attachments and for appeal bonds Litigation costs taxed against the insured Interest on any judgments Expenses incurred by the insurer 76

77 Payments the Insured is Responsible for Excess payments due to The insured s serious and willful misconduct Includes punitive or exemplary damages Employment the insured knew was illegal Example, penalty for an illegally employed minor who is injured Injury due to the insured s failure to comply with a health or safety law Example: OSHA Discharge, coercion, discrimination against an employee in violation of WC law Example, retaliatory discharge 77

78 Subrogation Insurer has the right to recover from any liable party benefits the insurer has paid 78

79 Part Two Employers Liability Insurance Applies when work-related injuries result in claims for damages outside prescribed WC benefits Suit filed by an injured employee who is excluded under workers compensation law Suit brought by an injured employee whose employer is not subject to workers compensation law because, for example, its workforce is so small Suit filed by an injured employee whose employer has elected not to accept the workers compensation law in one of the two states that allow employers to opt out Suit filed by an injured employee s spouse, claiming loss of consortium (e.g., sexual relations, companionship, and help in performing household chores and maintenance) 79

80 Coverage Criteria EL coverage applies to BI, including death, by accident or disease if the following criteria are met: BI must arise out of and in the course of the employee s employment with the insured. Injured worker s employment must be necessary or incidental to the insured s work in a state or territory for which Coverage A has been activated by its being listed on the information page. If the BI is caused by an accident, the accident must occur during the policy period. If the BI is caused by disease, the disease must be caused or aggravated by the conditions of the employment. In addition, the employee s last day of last exposure to the conditions that cause or aggravate the bodily injury or disease must occur during the policy period. The suit for damages must be brought in the United States, its territories or possessions, or Canada. 80

81 Common Types of EL Claims Third-party-over suits Loss of consortium suits Dual capacity suits Consequential bodily injury suits 81

82 Third-Party-Over Suits Insured s employee sues a third party for damages arising out of a work-related injury Third party seeks indemnity based on a hold harmless provision in a contract with the employer 82

83 Loss of Consortium Suits Suit by injured employee s spouse for loss of his or her spouse s services Many states permit suit even if the injured employee also receives WC benefits 83

84 Dual Capacity Suits Employer is sued for its involvement in the injury other than as an employer Example, farm owner manufactures equipment that injures an employee. Suit based on products liability. 84

85 Consequential BI Suits Suit by family member who suffers injury as a consequence of the employee s injury Examples: heart attack, nervous breakdown 85

86 Employers Liability Exclusions Contractual liability Punitive or exemplary damages Injury to illegally employed persons (under certain circumstances) Injuries covered by the workers compensation statute or similar laws Intentional injury Injuries sustained outside the United States, its territories or possessions, or Canada, except with respect to citizens of the United States or Canada who are temporarily outside of these countries Employment-related practices Fines or penalties imposed for a violation of a federal or state law Injuries covered under a federal compensation act (see next slide) 86

87 Migrant and Seasonal Worker Protection Act Establishes a private right of action for actual or statutory damages (as well as criminal and administrative sanctions) against employers and contractors (e.g., farm labor contractors) of migrant or seasonal agricultural workers who violate the Act s housing and motor vehicle safety requirements, motor vehicle liability insurance requirements, and job information disclosure requirements. 87

88 Limits of Liability Bodily injury by accident each accident limit Applies to all claims from any one accident Basic limit: $100,000 Bodily injury by disease each employee Most the insurer will pay for BI by disease to any one employee Basic limit: $500,000 Limits can be increased Umbrella policies can provide excess limits Insurer pays defense costs 88

89 Part Three Other States Insurance Makes WC&EL coverage available for incidental exposures in states not listed in Item 3.A. of the information page States for which other states coverage is desired must be listed separately Monopolistic fund states cannot be listed Suggested wording All states and U.S. territories except North Dakota, Ohio, Washington, Wyoming, Puerto Rico, the US Virgin Items, and states designated in Item 3.A. of the Information Page 89

90 Part Four Your Duties if Injury Occurs Notify the insurer of the injury at once Supply the insurer or the insurer s agent with the names and addresses of the injured parties and the witnesses and any other information the insurer may require Promptly give the insurer all notices, demands, and legal papers concerning the claimant s suit Cooperate with the insurer and assist the insurer, if necessary, in investigating, settling, or defending a claimant s suit Do nothing after an injury occurs that would interfere with the insurer s right to recover from others Make no voluntary payments, assume no obligations, and incur no expenses, except at the insured s own expense Provide immediate medical attention and any other services that are required by the workers compensation law 90

91 Part Five Premium Describes how premiums are calculated Multiply rate by premium basis (usually remuneration) Estimated premium shown on information page Final premium determined by audit after the policy period ends 91

92 Part Six Conditions Insurer has a right to inspect the insured s workplace Policy issued for more than 1 year + 16 days applies as if a new policy were issued on each anniversary date Assignment is not permitted without the insurer s consent Cancellation procedure By insured (advance written notice required) By insurer (varies by state) 92

93 Workers Compensation Policy Endorsements Chapter 7

94 Stop Gap (Employers Liability) Endorsement Provides employers liability insurance in monopolistic states Form WC in Ohio, WC C in other states 94

95 Voluntary Compensation Endorsement (WC 00 03) Provides statutory WC benefits to employees, such as farm laborers in some states, not covered by WC law An injured employee who accepts WC benefits must sign a release If the employee sues instead, EL coverage applies 95

96 Sole Proprietors, Partners, Officers, and Others Endorsement WC is used to cover excluded proprietors, etc. if they elect to be covered Listed by name or description WC is used to exclude proprietors, etc. who elect to be excluded When permitted by state law Listed by name or description Rarely used 96

97 Migrant and Seasonal Agricultural Worker Protection Act Endorsement (WC ) Extends EL coverage to provide benefits to which injured workers are entitled under MSAWPA Some insurers are reluctant to provide this endorsement 97

98 Alternate Employer Endorsement (WC A) Used when employees are loaned or borrowed Because the borrowing employer ( special ) can be held liable for WC benefits When attached to the lending ( regular ) employer s policy, the endorsement covers employees working for the specified alternate employer as though the alternate employer were an insured 98

99 Employee Leasing Endorsements Used when the farm owner is securing the coverage. Farm Owner s Policy: Labor Contractor Endorsement (WC A) PEO s Policy: Employee Leasing Client Endorsement (WC ) or Labor Contractor Exclusion Endorsement (WC ) Used when the PEO is securing coverage in the voluntary market. Farm Owner s Policy: Employee Leasing Client Exclusion Endorsement (WC ) PEO s Policy: Alternate Employer Endorsement (WC A) Required when the PEO secures coverage in the residual market in states that have adopted the NCCI rule on employee leasing. Farm Owner s Policy: Multiple Coordinated Policies Endorsement (WC ) and Labor Contractor Endorsement (WC A) PEO s Policy: Labor Contractor Exclusion Endorsement (WC ) 99

100 Waiver of Subrogation Endorsement (WC ) Prevents the insured s WC insurer from suing another party whose negligence contributed to the insured s employee s injury 100

101 Broad Form Named Insured Endorsement Provides automatic coverage to a host of related entities Because the insured might forget to name all subsidiaries No standard NCCI endorsement exists 101

102 Rating Workers Compensation Risks Chapter 9

103 NCCI Rules Found in NCCI Basic Manual for Workers Compensation and Employers Liability Premiums are based on Covered payroll Covered employees risk classifications Usually an experience modification (mod) 103

104 Exposure Base $100 of payroll for most agricultural operations Payroll usually includes total remuneration Wages or salaries Commissions Bonuses Paid time off Etc. 104

105 Classification Categorizes employers with common exposures Numerous farm classifications are available With adequate records, payroll can be allocated between agricultural classifications based on the work being done 105

106 Calculating Estimated Annual Premium Published loss costs X multiplier determined by the insurer Experience modifier (X-Mod) based on the insured s own loss experience relative to that of other employers in the same industry 1.0 mod = average loss experience >1.0 mod = debit modifier, higher-than-average losses & premium <1.0 mod = credit modifier, better-than-average losses, reduced premium (continued) 106

107 Calculating Estimated Annual Premium Expense constant covers administrative costs that do not vary based on account size Minimum premium is charged when rating process generates a lower premium Premium discount may apply to large policies Schedule rating modifies the premium to reflect characteristics of a risk that are not reflected in experience rating 107

108 Excess and Umbrella Liability Insurance Chapter 10

109 Applicability To Insureds Involved In Agriculture Ag risks have unique catastrophe liability exposures Mix of farming, commercial and personal Owned locations with attractive nuisance hazards Land leased to and from others Owned, leased and hired autos and agricultural equipment Contractual liability for other parties Food safety Employers liability exposures for non-employees Pollution liability from operations and autos 109

110 Unique Needs Farm ownership often involves a mix of personal risks and commercial risks Commercial Umbrellas are typically written for commercial risks only Combining a Commercial and Personal (or Farm) Umbrella may provide the best solution if available 110

111 Other Liability Exposures Premises or Operations Manufacturing, warehousing, or processing products Owned, leased, or rented premises or locations Products sales Negligence claims Strict liability claims Contractual indemnification obligations Employees Direct hire Contract labor Labor contractor does not carry the entire burden of risk Some states allow tort suits against the party hiring the contract labor Family members

112 Vehicle Liability Exposures Owned, Leased or Rented U. S. Overseas Permissive Drivers Employees Direct hire Contract labor Teenagers Elderly Automobiles Personal or Business Use High value, Classic or Antique Truck or Van Personal or Business Use

113 Vehicle Liability Exposures Motorcycle Recreational Motorhome/RV ATV Snowmobile Go-cart Golf-cart Tractors (Semi) Trailers Farm implements and mobile ag equipment

114 Other Liability Exposures Aircraft Owned Chartered Borrowed Business or personal use Watercraft Owned Type Size Drivers Rented What type and where Borrowed

115 Purpose of Excess/Umbrella Policies Provide a layer of liability protection over and above that offered by primary policies such as Farm liability form CGL Business auto policy Most umbrellas also provide broader coverage and include defense costs Policies are not standardized Read the policy! 115

116 Excess versus Umbrella Excess policy provides higher limits of liability than primary underlying policies Follow form policies provide same coverage as underlying policies but for a higher limit No broader coverage than underlying Excess coverage may be narrower than underlying due to exclusions 116

117 Umbrella Terms and Conditions Indemnify versus Pay on Behalf of Pay on behalf --the insurer pays damages directly to claimant Indemnify --insurer reimburses after the insured pays the claim Defense costs Usually outside the limit Drop Down Provision Umbrella provides primary coverage when underlying policy is exhausted Coverage over SIR when umbrella is broader than underlying policy 117

118 Umbrella Terms and Conditions (cont d) Underlying insurance Maintenance of underlying insurance is required If not done, the attachment point remains the same and the insured must retain claims within the coverage gap Self Insured Retention (SIR) Total amount the insured must pay when no underlying coverage is in place or required 118

119 Insuring Agreement Usually covers personal injury, property damage, and advertising injury Personal injury defined to include bodily injury and other offenses Per occurrence coverage 119

120 Umbrella Terms and Conditions Review the policy carefully with special attention to Punitive damages exclusions Defense costs included in limit of liability ( defense inside the limit ) Personal injury definition Treatment of additional insureds (i.e., automatically included if covered in underlying) UM coverage Coverage for owned and nonowned aircraft or watercraft Definition of insured Care, custody, or control exclusion Pollution coverage and exclusions Coverage territory (most umbrella policies are written on a worldwide basis) Notification of occurrence or reduction in underlying limits Concurrency (a requirement of an umbrella policy that underlying policies have the same effective and expiration date) 120

121 Common Underlying Requirements Commercial General Liability at $1,000,000 per occurrence and $1,000,000 General Aggregate and Products and Completed Operations Aggregate Commercial Auto at $1,000,000 per accident Employer s Liability at $1,000,000 per accident/$1,000,000 occupational disease/$1,000,000 aggregate Farm Liability $1,000,000 Personal Auto Liability $500,000 CSL Homeowners Liability $500,

122 What Is Meant By The Term Concurrency? This means that any liability policy with an aggregate limit and your umbrella or excess policy(ies) should have the same inception and expiration dates All underlying policies should be concurrent It is a condition of this policy that the policies referred to in attached Schedule of Underlying Insurance shall be maintained in full effect during the policy period without reduction of coverage or limits except for any reduction in the aggregate limits contained therein solely by payment of claims in respect to accidents and/or occurrences occurring during the period of this policy. 122

123 Coverage Offers Always quote to match existing limit requirements or client request Always offer higher limits Be careful about only offering one limit Unfortunately, the only person who knows how much insurance you should buy is the person who is suing you! 123

124 Summary Umbrella, or at the least excess liability, policies are of great benefit to all insureds to protect their assets A professional agent or broker will always offer this protection and never assume the client won t buy this protection This is one of the best buys in all of insurance 124