RMI - Chapter 23

Personal Liability

•liability insurance protects the named insured and family members against legal liability arising out of their personal acts

-pays the amount insured is legally liable for, pays defense cost, coverage is found in Section II

Coverage E

•protects the insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured’s negligence

– The coverage is broad and based on legal liability

 – The policy contains a per-occurrence limit

Occurrence

defined as an accident which results in bodily injury or property damage during the policy period

Coverage F

•is a mini-accident policy that is part of a homeowners policy

 – Medical payments to others is not based on legal liability

 – Medical payments to others pays the reasonable medical expenses of another person who is accidentally injured while on an insured location, or by the activities of an insured, resident employee, or animal owned by or in the care of an insured

 – The policy states the situations under which coverage applies

50% of homeowners claims are dog bites

Exclusions that apply to both Coverage E and F

 – Liability arising out of the use of an auto, certain watercraft, aircraft, or hovercraft

 – Expected or intentional injury

 – Business activities, with some exceptions

 – Professional services

 – Liability arising out of the use of an uninsured location

•War or other hostile military acts

•Liability arising out of the transmission of a communicable disease

•Bodily injury or property damage arising out of sexual molestation, corporal punishment, or physical or mental abuse

•Liability arising out of the use, sale, manufacture, delivery, transfer, or possession of controlled substances

Exclusions for only Coverage E:

 – Contractual liability

 – Property owned by the insured

 – Property in the care of the insured, with some exceptions

 – Workers compensation

 – Liability arising out of nuclear energy

 – Bodily injury to an insured

Exclusions that apply only to Coverage F:

 – Injury to a resident employee off an insured location

 – Workers compensation

 – Injuries that result from nuclear energy

 – Persons regularly residing on the insured location

Claims expenses

(e.g., court costs, attorney fees) are covered in addition to the policy limits for liability damages

Insurer pays any First-aid expenses

incurred for bodily injury covered under the policy

Damage to property of others

pays up to $1000 per occurrence for property damage caused by an insured, with some exclusions

Limit of Liability under Coverage E

for all damages arising from one occurrence will not be more than the limit shown in the declarations (100,000)

Limit of Liability under Coverage F

The insurer’s total liability for medical expenses for bodily injury to one person resulting from an accident will not exceed the limit shown in the declarations (1,000)

•Duties after an “occurrence” include:

 – Written notice of the event must be provided to the insurer, including the time, place, circumstances, and names of any claimants and witnesses

 – The injured person (or his/her representative) must provide written proof of claim and authorize the insurer to obtain copies of medical records

Section II Conditions

•An insured may not sue the insurer unless the insured has complied with the conditions in Section II

•The insurance is excess over other valid and collectible insurance, with some exceptions

•No coverage is provided to an insured who concealed or misrepresented any circumstance or material fact or engaged in fraudulent conduct

Inflation-guard endorsement

provides for an annual pro rata increase in the limits of insurance in the Section I coverages

Earthquake coverage endorsement

covers earthquakes, landslides, volcanic eruption, and earth movement

Personal property replacement cost loss settlement endorsement

is added to the policy, claims are paid on the basis of replacement cost with no deduction for depreciation

Personal Article Floater

•provides additional coverage for nine classes of property (jewelry, furs, cameras, musical instruments, silverware, golfer’s equipment, fine arts, postage stamps, and rare and current coins) and the insurer agrees to pay the stated amount for a scheduled item if a total loss occurs

Personal injury endorsement

•used to extend liability coverage to legal liability arising out of personal injury, e.g., false arrest, slander

Watercraft endorsement

•provides liability and medical payments coverage on any inboard or inboard-outdrive powered watercraft; sailing vessels 26 feet or more in length; and watercraft powered by one or more outboard motors exceeding 25 total horsepower

Home business insurance coverage endorsement

•covers both business property and legal liability arising out of a home-based business

Identity theft endorsement

reimburses crime victims for the cost of restoring their identity and cleaning up their credit report

•Major rating and underwriting factors include:

 – Type of construction

 – Location of home

 – Fire-protection class, which depends on the quality of the public fire department, accessibility to the fire department, water supply, and fire hydrants

 – Construction costs

 – Age of the home

 – Type of policy and deductible amount

 – Insurance score: a credit-based score that is highly predictive of future claim costs

Comprehensive Loss Underwriting Exchange (CLUE) report

shows up to seven years of information on property claims, including the date of loss, type of loss, and amounts paid

 – The use of the CLUE report is controversial