Understanding Employee Practices Liability Insurance (EPLI) and Commercial Crime Coverage, Exams of Commercial Law

Download Understanding Employee Practices Liability Insurance (EPLI) and Commercial Crime Coverage and more Exams Commercial Law in PDF only on Docsity! CIC Comme rcial Multiline Exam Questions and Answers 2024 Update. Identify and describe the three primary purposes of excess liability/umbrella policies (LO1) - Correct answer 1. Provide additional limits that are excess over underlying limits of insurance 2. Provide primary coverage when underlying policy does not respond because its aggregate limits of insurance are exhausted. 3. Provide broader coverage than the existing underlying insurance Excess liability coverage forms and commercial umbrella liability policy - Correct answer 1. Follow forms - Hella short - "basically what underlying says but more money" - does NOT provide broader coverage 2. Excess liability - own insuring agreement and stuff - could be the same, narrower, broader 3. Commercial umbrella liability policy - own insuring agreement and stuff - Broader coverage Define "Self-Insured Retention" (SIR) and apply it (LO2) - Correct answer SIR is the dollar amount listed in the declarations paid by the named insured before the excess insurance becomes applicable Applies only when the excess policy provide broader insurance protection Does not apply when the umbrella drops down over exhausted limits or when exceed over underlying limits. SIR may be written per occurrence or policy period basis Explain the importance of concurrent dates and be able to provide solutions for non- concurrency situations (LO3) - Correct answer Concurrent date’s means the policy period of the excess/umbrella policy are the same as those of the underlying insurance policies The declarations of the excess liability has a schedule of underlying insurance that indicates the required limits that are to be in effect at its effective date. The underlying limits must be unimpaired at the effective debate of the excess liability Describe the underlying insurance requirements of excess liability/commercial umbrella policies and apply the in a practical applications. (LO4)*** - Correct answer Coverage Most insures typically require CGL, Business Auto and Employer Liability Other liability policies may be required for other known exposure such as aircraft, Liquor liability, and watercraft Limits of Insurance Limits required by varies by insurer Some exposures require higher underlying limits The required limits must be in full effect at the effective date of the policy period Compare and contrast the insuring agreement known as pay on behalf and indemnify (LO5) - Correct answer Pay on Behalf of - The insure has stricter control of defense, investigation or settlements - The insurer pays damages directly to third party on behalf of -The insure has the duty to defend when the underlying does not provide coverage Indemnify - Strict indemnity (insured uses their own funds directly to pay claims and insurer reimburses) - based on legal obligations to pay (insured still has control but indemnity is based on legal obligation to pay - insurer write checks to insured) Types of damages, defense costs, and ultimate net loss in Excess liability and umbrella policies What is the coverage area - Correct answer damages? - follow form follows underlying - Excess liability/commercial umbrella (pay because of bodily injury and property damage as defined or pays because of personal advertising injury as defined) Defense - Duty to defend - Not duty to defend in some cases (still right to defend) - Defense cost included within the SIR is often referred to as first dollar defense Ultimate net loss (different ways to pay this- what the court says must be paid) - All sums paid or payable in settlement - All sums paid or payable as damages Coverage area - Worldwide or anywhere in universe, could also be limited Exclusions for excess and umbrella - Correct answer - aircraft - Watercraft - Contractual liability - Liquor liability - Pollution - Damage to property A. Pays for the cost of retaining a public relations firm to protect or restore the named insured reputation due to negative publicity resulting directly from a cyber-related event or security breach. 6. Replacement or Restoration of Electronic Data A. Typically pays for cost to replace or restore the named insured's electronic data. Identify who is an insured under the ISO commercial Cyber Insurance Policy (LO5) - Correct answer Named Insured Named Insured former, current, and future employees Subsidiary employees but only while acting with the scope of their duties Some may include independent contractors or per written contract. Identify and apply the insuring agreements under the ISO commercial cyber insurance policy to a loss (LO6) - Correct answer Six Insuring Agreements: Security Breach Expense Extortion Threats Replacement or Restoration of Electronic Data Business Income and Extra Expense Public Relations Expense Security Breach Liability (Third Party) Extortion Threat (LO6) - Correct answer a threat to -perpetrate a cyber-incident - disseminate, divulge info or weakness - destroy, corrupt, or prevent access - inflict ransom ware - publish personal information Extra Expense does not include (LO6) - Correct answer 1.Upgrading, maintaining, repairing, re mediating or improving a computer system as a result of a cyber-incidents or extortion threat 2. Expenses covered UN insurance agreement 2 - extortion threat. Security Breach - Correct answer - does not include confidential corporation information in the CCC of the insured - Person not authorized has access to personal information - Authorized person uses personal information in an unauthorized way Identify and apply the limits of insurance provision under the ISP commercial cyber insurance policy to a loss. (LO7) - Correct answer Policy Aggregate Limit of Insurance The most paid is the limit shown on deceleration page. The insurer's obligation or liability of any kind ends when the policy aggregate limit of insurance has been exhausted Aggregate Sublimit(s) of Insurance Subject to policy add grease limit of insurance Sublimit(s) shown in the Dec page are not in addition to the policy aggregate limit of insurance The insurer's obligation of liability of any kind ends when the aggregate Sublimit has been exhausted Identify and apply the deductibles of insurance provision under the ISP commercial cyber insurance policy to a loss. (LO7) - Correct answer Insurance Agreement 1, 2, 3, and 5 pays only the amount of loss in excess of the policy deductible amount shown in the declarations Under insuring agreement 4 business income and extra expense pays only the amount of loss that exceeds the greater of the deductible show or the amount of loss incurred the time deductible Underinsuring agreement 5 security breach liability pays only the amount of loss and defense expense in excess of policy deductible amount shown in the declarations Only the highest deductible amount applies in the even a loss is covered under more than one insuring agreement. Identify and apply the defense and settlement provision under the ISO commercial cyber insurance policy (LO8) - Correct answer Only applies to insuring agreement 6 Security Breach Liability Insurer has the right and duty to defend No coverage no defense Defense expenses are payable within and not in addition to the limits Identify and apply the exclusions under the ISO commercial cyber insurance policy. - Correct answer Exclusions are numerous and vary by insurer Lighting earthquake, hail, volcanic action or other acts of nature, War warlike action or insurrection Pathogenic biological or chemical materials nuclear radiation Bodily injury or physical damage to or destruction of tangible property including loss of use Unexplained or indeterminable failure malfunction or slowdown of the computer system or inability to access electronic data Any disruption due to insufficient capacity to process transaction or due to an overload of activity on computer system or network other than a cyber-incident. Any disruption of internet service or external telecommunication network Failure of reduction in or surge power Violation of RICO and its amendments of similar law Malfunction or failure of any atelier Oral of written material published with knowledge of falsity Contractual liability***** Patent or trade secret violations Pollutions or pollution related h Prior or pending claims Employment practices related liability Awareness that any insured had prior to the effective date of the policy Conditions found in cyber policies by the insured and insurer before, during, and after a claim or loss - Correct answer - subrogation - Representations (must be correct) - Changes in exposure (acquisitions or creation of organization, acquisition of named insured, cessation of subsidiaries) - Other insurance (may be excess coverage) - Separation of insured’s (2 named insured’s for ex) - Duties in the event of claim or loss - Valuation (USD) - Confidentiality (cannot say you have extortion coverage) - Territory (worldwide, limited worldwide, universe) Identify and describe the sources of liability that can result in an employee not-related practices claim. (LO1) - Correct answer A. Workplace Torts - Workplace torts may be based on negligence (reasonable person: foreseeability) or intentional torts - Preserves full right of action if a federal case falters - Too many think it is only a federal issue and "right-to-work" protect them in certain states B. Breach of Contract - Written contacts (including employment contract and collective bargaining agreements) - Implied contracts (job offer letter, employee manual, oral promises, evaluations, tenure) C. Violation of Statutes Regarding Employment Practices - Some small businesses are exempt Examples of workplace torts (LO1) - Correct answer - Bullying, humiliation or other types of infliction of emotional distress - Invasion of privacy - Coercion - Libel, slander, defamation of character - Negligent hiring practices - Negligent supervision - Retaliation - Wrongful or negligent evaluations, criticism, demotions, discipline - Wrongful detention or imprisonment - Wrongful termination Determine whether a person or organization qualifies as an insured person in the event of a claim situation and whether an exclusion or limitation applies (LO2) - Correct answer Named Insured Organization indicated on the declarations -not covered for unauthorized property transfer -small limits ($2.5k) Identify the 7 Insuring Agreements included in the Commercial Crime Coverage Form (Loss Sustained Form) as well as the Commercial Crime Coverage Form (Discovery Form) - Correct answer 1.) Employee Theft 2.) Forgery or Alterations 3.) Inside Premises- Theft of Money & Securities 4.) Inside Premises-Robbery or Safe Burglary of Other Property 5.) Outside the Premises 6.) Computer & Funds Transfer Fraud 7.) Money Orders & Counterfeit Money - Some of these can be modified by endorsements Explain how the trigger of coverage under the Commercial Crime Coverage Form (Loss Sustained Form) will apply to claims situations - Correct answer Loss Sustained is triggered when a loss occurred during the policy period AND is discovered during policy period or the extended period of discovery (1 yr.) Explain how the Commercial Crime Coverage form (Loss Sustained Form) applies to claims situation that occur partly or entirely during prior policies - Correct answer Same Carrier -Loss must be covered under current policy -current policy must be effective on the cancellation date of the prior insurance (NO Gap) -Settles losses from current policy backwards -highest limit of Insurance applies w/ Current deductible Different Carriers -Pays lowest limit with current deductible Explain how the trigger of coverage under the Commercial Crime Coverage Form (Discovery Form) will apply to claims situations - Correct answer Discovery coverage is triggered for a loss that occurred at any time during the current policy period AND is discovered during the extended Discovery period (60 days) - includes Retro date: if an occurrence happened before the established date= NO COVERAGE Describe and apply the coverage provided by the Insuring Agreement A.1. Employee Theft - Correct answer 1. Covered Property= money, securities, other property from direct theft from an employee. 2. Property could be held by N.I. or something they are legally liable for 3. Coverage applies per loss; not per employee 4. Employee theft includes forgery by employee under this insuring agreement - Coverage terminates immediately when the named insured or any of its partners learn of any dishonest act or theft by employee Describe "money" "securities", other property., "theft" and "employee" as found in the Commercial Crime Coverage Form - Correct answer money- coins, cash, has a face value; traveler's checks and money orders; deposits in insured's account at financial institution Securities- Tokens, Tickets, revenue, other stamps; Other property- tangible property, No Electronic Data Theft- unlawful taking of property to the deprivation of the insured. Employee: -Current or past (30 day window) - MUST be compensated AND you have direct control over services performed for you -Temp/leased -Former Employee who is now a consultant -intern -Merger or Consolidated employees -Managers, directors, trustees NOT EMPLOYEES: AGENTS, BROKERS, FACTORS, CONSIGNEES, INDEPENDENT CONTRACTORS Endorsements used to modify the definition of employee - Correct answer 1. Volunteer Workers as employees- meant for Gov't workers or nonprofit groups when working as fund solicitors during franchise campaigns 2. Employee theft- named employees have more coverage 3. Exclude designated person or classes of persons as employees 4. Include designated agents as employees 5. Include computer software contractors as employees Exclusion and endorsements applicable to all 7 insuring agreements for crime - Correct answer 1. Theft or dishonest acts committed by you, your partners or members - Eras plan coverage amendments (protects employees benefits) - include partners as employees - include members of a LLC as employees 2. acts committed by your employees learned of by you prior to the policy period 3. Acts committed by your employees, managers directors, trustees, or reps (be already covered in employee theft) 4. Confidential or personal information - erase plan coverage amendments 5. Data security breach 6. Indirect loss (income you "would" have received 7. Legal fees, costs, expenses 8. Virtual currency - include virtual currency as money Policy exclusions pertaining to insuring agreement A.1. Employee Theft - Correct answer -inventory shortages discovered by inventory or profit loss computation - trading (can add trading coverage) - Warehouse receipts (can add warehouse receipts coverage) - erase plan. Coverage amendments (deletes trading and warehouse receipts exclusion in relation to employee benefits) insuring agreement for A.2 forgery or alteration - Correct answer - pay for loss resulting from forgery or alteration of OUTGOING checks, drafts, or promissory notes Describe and apply the coverage’s, exclusions, limitations, and definitions pertaining to Insuring Agreement A.3. - Inside the Premises- Theft of Money and Securities - Correct answer Coverage’s: -Theft on premises or financial premise -Disappears OR Destruction -damage to premises -damage to locked safe, vault, cash register Has to be inside the described and occupied premises of the Named Insured Limitations- Does not extend past the door of the premises (no 100ft rule) Insuring agreement for A.4 inside the premises - robbery or safe burglary of other property - Correct answer coverage - pay for loss to tangible property other than money and securities - Damage to premises or its exterior from actual or attempted robbery Determine whether a person or organization qualifies as an insured person in the event of a claim situation and whether an exclusion or limitation applies - Correct answer Named Insured Organization indicated on the declarations Insured Persons Directors, officers trustees of the organization Employees Volunteer or an intern Independent contractors Identify the key elements in an employment practices liability insurance policy insuring agreement. - Correct answer 1. Pays sums the insured becomes legally obligated to pay as damages 2. Resulting from a "wrongful act" 3. Right and duty to defend any "suit" seeking damages for wrongful act 4. Consent to settle Describe the insurance protection that may be provided for liability to third parties under and EPLI policy. - Correct answer 1. EPLI policies are typically written to provide coverage for claims filed by employees. 2. Coverage may not apply to a claim against the insured by a third party. Which are usually individuals that the business have contact with such as customer clients, vendors, contractors, volunteers.... 3. Some EPLI policies provide this coverage by endorsement while the majority of coverage forms have a separate insuring agreement for third party liability. 4. Coverage may be limited to only certain types of third parties and not all third parties. 5. BEWARE coverage may be limited to certain wrongful acts such as discrimination and/or harassment claims. Differentiate between filed and non-filed inland marine coverage’s - Correct answer Filed: -uniformity in exposures (exposures are similar) -agreement by insurance industry concerning rates and coverage’s - tend to be specialty coverage’s -Inflexibility in terms+ conditions -Rates are filed (standard forms) Unfiled: -not uniform with industry -exposures are unique and diverse to insurer them only on other than a case by case basis - Flexibility on how coverage will be provided -negotiable ratings -rates are not filed -coverage forms not filed What has to be involved in marine policies for them to be valid - Correct answer - goods in TRANSIT? Describe the elements of bailment, including the relationship of the parties involved in the transaction - Correct answer Bailment- one person accepts Personal Property from another for a particular purpose AND promises to return Personal Property in same or better condition Baylor- Owner of PP gives to other party Bailee- Receiver or PP, accepts the property for processing 3 types of bailment: 1.) Gratuitous bailment for Baylor- coat check; Bailee owes bailer low duty of care 2.) Gratuitous Bailment for benefit of Bailee- Borrows tools at job site; Bailee owes bailer high duty of care 3.) Mutual Benefit-Dry Cleaning- reasonable duty of care Bailee coverage’s in other contracts - Correct answer - inland marine can cover them - Floaters can cover the personal property that is in the baileys care, custody, and control - Commercial property (limited coverage) - Garage keeper’s coverage Bailer coverage’s and examples Why do we need coverage for bailment exposure - Correct answer - covers the named insured property while in possession of others - written on a scheduled basis (don't trust people) Patterns and dies floater Garment contractors floater Bailment exposure is excluded in other policies like CGL exclusion J- CCC, and in many policies the no benefit to Bailee condition 2 ways to provide Bailee coverage - Correct answer -legal liability basis (to trigger coverage the Bailee must be legally liable for the damage to bailers property, what would a prudent person do is the deciding factor on if negligence was involved) - Direct damage basis (to trigger coverage the Bailee does not have to be legally liable for the damage, goodwill policy) Identify and apply Covered Property, Covered Locations, And Property Not Covered under a Bailee Policy - Correct answer Covered Property: Customers Property in Named insured CCC Has to be in CCC for processing Covered locations; -described premises -on premises of others for servicing or processing -Anywhere in covered territory while in transit --Between NI premises branches --Between NI and Servicing --Between NI and Customer Property Not Covered: -Aircraft/watercraft -contraband -Furs -Jewelry -money + securities -no charge for services -vehicles -waterborne property How can the payment of loss be handled in Bailee coverage form (4) What right does the insurer have in property of others? What right does the insurer have if the customer sues the named insured? - Correct answer - value of lost or damaged property - cost to repair the damaged property - rebuild, repair, replace property with like kind or quality (buffing) - take any part of the property at an appraised or the agreed value The insurer has the right to adjust the loss with the customer or the named insured on the owner’s behalf If the customer sues the named insured, the insurer has the right (not duty) to defend and if they do then they will pay all costs incurred in that defense Describe the interests covered under a Bailee Coverage Form - Correct answer Interests- Named insured on policy Bailee- their responsibility for the value of goods of the bailer in their CCC- Investment, time and materials invested - Usually there is a provision that allows the settlement of a claim directly with the bailer Baylor- may have their own coverage on goods bailer policy will contain provision that prevents protection from any Bailee - written on an open peril basis, extensions are extensive 40%remodel cost of building- if lower then can add endorsement 3 coverage extensions in builders risk - Correct answer - debris removal - Emergency removal (preservation of property- limits to 10 days) - Limited fungus coverage Most common way to write a single location project for builder’s risk What is the other way to assign coverage for builders risk - Correct answer completed value basis (based on actual completed value of project, if it changes or material costs increase then value goes up) Reporting form basis (either based on estimated completed value of all projects or progress value) What are the supplemental coverage’s in builder’s risk - Correct answer - expense to re- erect scaffolding - Fire department service charge (1,000) - Pollutant cleanup and removal (10,000) - Temp storage locations (10,000) - transit (10,000) Excluded perils in builders risk - Correct answer - earth movement - Flood or any water movement - Ordinance or law - Sewer, septic tank, drain backup and water below surface - Defects, errors, and omissions - freezing (unless precautions were taken) - Materials and workmanship (guy drops hammer on marble) - Mechanical breakdown Does builders risk cover testing - Correct answer - yes if supplemental coverage was bought? - If not, then no but if it causes a covered loss then that is covered What are some coverage limitations for builders risk - Correct answer - occupancy and use (need to ask permission to continue coverage) - When coverage ceases List the events that will cause coverage to cease in a Builders Risk Policy - Correct answer -Policy cancellation or expiration -project is abandoned with no plans to finish -accepted by purchaser -90 days after completion -when insurable interest ceases (contractor gets paid) - When occupied in whole or in part or its intended use What valuation rates do builders risk use - Correct answer - replacement cost - Pair or set (based on proportion damaged) - Loss to parts (will pay value of lost or damage part) How much is paid in builders risk claims - Correct answer - insurable interest (insurer will not cover more than your insurable interest) - Deductible is per occurrence - Limits of insurance - Coinsurance may apply State the Purpose of coverage for "soft costs" and provide examples of covered expenses. (Builders risk) - Correct answer Soft Costs covers the financial loss resulting from a delay in the completion due to covered loss (typically added by endorsement) 2 Examples (result in no added value to building) -Legal or Accounting Fees -Financing (interest building on borrowed money) -Advertising/Promotion Expenses -Lease administrations- (Re-ego leases) -Design Fees (re-draw plans) -General Admin fee (ad’s security costs) -Lease expenses- Extend lease for contract equip -Permit Fees- impact fees -Additional Insurance Premiums Valued on an actual loss sustained basis Additional coverage’s that can be added to soft costs Additional exclusions under builders risk policy - Correct answer - extra expense - Rental income - coverage extensions can include delay caused by ordinance or law, interruption by civil authority, limited fungus coverage) - Interference by strikers - Suspension or cancellation of a contract - break of contract penalties - Changes in plans, designs, or specifications - Fines or penalties - cost to test for pollutants Why do people use installation floaters - Correct answer - covers property at temp storage locations, during transit, and during installation process? - Control of coverage (size of deductible, limits, builders risk may be insufficient Identify and apply Property Covered, Covered Locations and Property Not Covered in this AAIS Installation Floater - Correct answer Property Covered: - Named insured (your) materials, supplies, fixtures, machinery or equipment - Materials, Equipment, property in your CCC at the job site that will become a permanent part of completed installed project Covered Location: -Scheduled location -temporary storage location away from jobsite -in transit Property Not Covered: -Airborne property -building, structures, or land -contraband -trees + plants -waterborne property Perils covered and excluded in installation floater - Correct answer coverage unless excluded Exclusions - Similar to builders risk List the Events that will cause coverage to cease in this AAIS Installation Floater - Correct answer -Policy cancellation or expiration -Building put to its intended use (with exception of other subs. using it) -abandoned with no plans to finish -accepted by purchaser -30-90 days after completion -when insurable interest ceases (you've been paid!) Valuation for a pair in installation floater Endorsements for installation floater - Correct answer - will pay the value of a lost or damaged article based on a reasonable proportion of the value of the entire pair or set - Testing or commissioning - Equipment breakdown - Separate or subcontractor exclusion (excludes damage to property being installed by other than the named insured) - Separate or subcontractor coverage (include coverage for damage to covered property being installed by a subcontractor of the named insured) -method of travel -distance of travel -territory traveled -freq. of theft -subrogation possibilities -financial condition -maintenance of vehicles -loss history What are the 2 ways to writing policies for goods in transit and where does coverage apply - Correct answer - annual - Trip (one time) - depends on who's shipping it, but during transit and when goods are located in a terminal Property covered and not covered in inland marine transportation policy - Correct answer property covered - Property in a terminal - Property in transit Not covered - Art, antiques, fur - Carrier for hire - Contraband - Exports and imports - Jewelry, stones, metals - Lease agreement (can't transfer insurance) - Mail - Live animals - Money and securities - Samples - Storage Perils covered, excluded and optional coverage’s in inland marine transportation policy - Correct answer perils covered - open peril (named perils covered) Excluded - Criminal, fraud, illegal acts - Temperature/humidity - Voluntary parting - Spoilage - Improper packing/storage - Loading and unloading (be no longer in transit) Optional coverage’s - Packing or consolidating companies (Ex. FedEx) - Fraud or deceit (ex. voluntary parting due to fraud) - Loss of refrigeration or heating mechanical breakdown - return shipments Special provisions and settlements in inland marine transportation policy - Correct answer special provisions - Subrogation provisions - Permission to accept released bill of lading Settlements - Limits of insurance (deductibles, cat limits, separate limits for certain things may apply)