Insurance Coverage Essentials: Fundamental Strategies for Reading & Interpreting General & Professional Liability Insurance by Theresa M. Augustauskas and Ryan M. Suerth April 7, 2011 New Haven County Bar Association
General Principles of Insurance Policy Interpretation Burden of proof insuring agreement v. exclusions Exclusions Construed narrowly, must be clear Exceptions constructed broadly Interpretation against the drafter ( contra proferentum )
Types of Insurance Policies Commercial General Liability Professional Liability Directors & Officers Employment Practices Liability Property Builder s Risk OCIP/CCIP Pollution Homeowners Medical/Dental
1 st Party v. 3 rd Party First Party Policies Homeowners Commercial Property Medical/Dental Builder s Risk Third Party Policies Commercial General Liability Professional Liability Directors & Officers Employment Practices Liability Homeowners
Occurrence v. Claims Made Occurrence-Based Commercial General Liability Commercial Property Pollution Claims Made Professional Liability Directors & Officers Employment Practices Liability
General Liability Insurance Common Features of a CGL Policy: Occurrence-based policies Insurer has two duties: Defense Indemnification Coverage restricted to bodily injury, property damage, and personal/advertising injury Usually standard-form product, endorsements added to tailor to policyholder
Analyzing a GL Policy 1. Is the claim within the insuring agreement? 2. Does any exclusion apply? If so, does an exception restore coverage? 3. Has the insured complied with all policy conditions? Notice (Prejudice)
Policy Declarations Policy Number Named Insured Policy Period Limits of Insurance Deductible or SIR Premium List of Endorsements
Limits of Insurance Aggregate v. per occurrence Defense inside/outside limits Deductible v. self-insured retention
Knowing the Difference between Deductibles & SIRs Deductible SIR Paid and reimbursed First Dollar Defense Policyholder s responsibility No defense Choice of counsel
Insuring Agreement From 2004 ISO Policy Form:
Insuring Agreement Duty to Defend Broader than duty to indemnify Insurer must defend if complaint alleges facts potentially within policy s coverage Consequences for breach We will have the right and duty to defend any suit seeking those damages.
Insuring Agreement Duty to Indemnify Based on known or established facts We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage...[that] occurs during the policy period.
Insuring Agreement Bodily Injury Bodily injury means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
Insuring Agreement Property Damage Property damage means: (a) Physical injury to tangible property, including all resulting loss of use of that property or (b) Loss of use of tangible property that is not physically injured.
Insuring Agreement Occurrence Accident is undefined Includes unintended consequences of intentional act Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Personal and Advertising Injury Personal and Advertising injury means injury (including consequential BI) arising out of: False arrest, detention, imprisonment Malicious prosecution Slander/libel Privacy violations Copyright (etc.) infringement
Typical CGL Exclusions Expected or Intended Injury Pollution Exclusion War Contractual Liability Worker s Compensation Claims Employers Liability Personal and Advertising Injury Damage to Specified Property Damage to Your Product Damage to Your Work Recall of Products or Work Damage to Impaired Property or Property not Physically Injured Professional Services
Duties of the Insured Notice (Occurrence) Notice (Suit) Cooperation No Voluntary Payments
Professional Liability Insurance Who Needs PL Insurance? Anyone who provides highly skilled or technical work may benefit from PL insurance. Examples: - Architects - Engineers - Consultants - Attorneys - Doctors, Nurses, Chiropractors, etc.
Professional Liability Insurance Common Features of a PL Policy: - Claims Made v. Claims Made & Reported - Eroding Limits - Coverage not restricted to bodily injury or property damage - Semi-custom product - Retroactive Date - Notice of Circumstance/Potential Claim
Analyzing a PL Policy 1. Is the claim within the insuring agreement? 2. Does any exclusion apply? If so, does an exception restore coverage? 3. Has the insured complied with all policy conditions? Notice (No prejudice)
Policy Declarations Policy Number Named Insured Policy Period Limits of Insurance Deductible or SIR Premium List of Endorsements
Insuring Agreement - Duty to indemnify for claims arising from negligent acts, errors or omissions with respect to professional services
Insuring Agreement Definition of Claim : Defense erodes policy limits
Coverage Period Act, error or omission must take place on or after Retroactive Date and claim must be made and/or reported during policy period No coverage for errors, etc. Prior to Retro date Extended Reporting period
Exclusions Willful or Reckless Acts Fines & Penalties imposed by Government agencies Contract Penalties/Liquidated Damages Faulty Workmanship Delay Costs Insured v. Insured Pollution
Notice Under PL Policies Policyholder has a duty to provide prompt notice of a claim and/or potential claim Extended Reporting Period may enlarge time policyholder has to report a claim after policy is cancelled or expires Automatically get 60 days to report claims post-cancellation Policyholder has option to purchase extended reporting period
Thank you! Questions? Comments? Theresa M. Augustauskas 203-287-2119 tma@sdvlaw.com Ryan M. Suerth 203-287-2115 rms@sdvlaw.com