Reference in-depth insurance coverage definitions and related coverage forms for the following areas:
Property and Time Element Cause of Loss
Inland Marine Coverages
Crime Coverages
Liability Coverages
Commercial Auto Coverages
Workers’ Compensation Coverages
Excess Liability Coverages
Aviation Coverages
Specialty Coverages
Bonds
INLAND MARINE COVERAGES
Inland marine traditionally has been less regulated than other types of insurance because of the
uniqueness of the items covered. In order to be consistent in its treatment, insurance regulators adopted
a Nationwide Marine Definition in 1933. While the basic definition has remained unchanged, amendments
have been added over the years to recognize changes in technology and the economy. Inland marine
coverage can be provided by standard ISO forms and by forms provided by various inland marine
carriers. While there are many common forms, the beauty of inland marine is that it was developed to
recognize and insure the unique. When “it has never been done before” and needs to be insured, the
inland marine market comes into play.
(Refer to PF&M Section 140.1)
Inland Marine Coverage—Accounts Receivable
This coverage protects against loss resulting from an inability to collect accounts receivable due to the
loss, damage or destruction of books or records of accounts. This coverage may be written using a
standard ISO Inland Marine Form.
This coverage is very important to any automotive operations that carry accounts for customers.
(Refer to ACORD 145) (Refer to PF&M Section 141.2)
Inland Marine Coverage—Difference in Conditions (DIC)
This type of insurance is written to expand on other property coverages in place. Its purpose is to provide
primary coverage against causes of loss normally excluded in standard property forms, such as flood,
water damage and earthquake. It can also be used to expand a named perils contract to provide
additional coverage comparable to risk of direct physical loss. There is no coinsurance but there is a
coverage cap and normally high deductibles. There is no standard form to provide this coverage but
generally it is offered through both inland marine and property markets. The keys to comparison are the
limits, deductibles, exclusions, territory and method of capping.
Insurance Coverage Definitions
Automotive operations that are located in unusual buildings could have exposures that are not
anticipated. The broad aspects of the DIC can prove helpful for the unforeseen. In addition, there are the
added causes of loss of flood and earthquake that may be needed.
(Refer to PF&M Section 142.5)
Inland Marine Coverage—Electronic Data Processing
Covers loss to electronic data processing equipment and media owned, leased or used by the insured.
Computerized production equipment may be insured as well as conventional ‘computer’ equipment.
Coverage may include or exclude breakdown and power interruption. This coverage is available through
the inland marine markets and coverage is not standardized. Comparisons must be made as to
exclusions, on- and off-premises coverage and transit. Valuation basis is a consideration since most
computer systems will not be replaced with like and quality due to changes in technology.
This coverage is vital for not only the office computers but also diagnostic equipment and sales persons’
equipment.
(Refer to ACORD 148) (Refer to PF&M Section 142.6)
Inland Marine Coverage—Fine Arts
Insures specified works of art, including paintings, etchings, statuary, stained or etched glass windows,
etc., against risk of direct physical loss. The key for comparison is the on-premises limit, off-premises limit
and transit. The breakage exclusion is common but can be bought back for a significant surcharge.
Automotive operations with antique tools, special art pieces or other items that are considered art will
need this coverage in order to prevent coverage gaps.
(Refer to PF&M 142.7)
Inland Marine Coverage—Goods In Transit
Covers product that is either owned by the insured or a customer of the insured while it is being
transported. The product may be on the insured’s vehicles or on others and coverage may be for legal
liability or full coverage. Coverage is provided by inland marine carriers using their own developed forms.
The coverage may be called motor truck cargo or transportation insurance but the policies should be
similar. Key comparisons are causes of loss covered, restrictions on travel, warranties (particularly ones
regarding locked car), enclosures and alarm systems.
Only the smallest operations should consider not have this coverage.
(Refer to ACORD 143, 193) (Refer to PF&M Sections 142.11 and 142.14)
Inland Marine Coverage—Signs
Covers neon, fluorescent, automatic or mechanical electric signs against a risk of direct physical loss or
damage. This is offered using a standard ISO Inland Marine Form. If regular wooden sign coverage is
needed, the Building and Personal Property Coverage Form must be used.
Insurance Coverage Definitions
Automotive operations often have significant signs and will need this coverage.
(Refer to ACORD 144) (Refer to PF&M Section 141.11)
Inland Marine Coverage—Valuable Papers And Records
The policy insures on a risk- of- direct- physical- loss basis, including misplacement or mysterious or
unexplained disappearance of documents that have no duplicates. There is a standard ISO Inland Marine
Form to provide this coverage. There is a limited amount of coverage provided in the ISO property forms
and most other form extensions offered by a variety of carriers. This limited coverage is not as broad as
the Inland Marine Form.
There can be many types of valuable paper in automotive operations. The exposure should be carefully
considered especially if titles are held on customers’ vehicles.
(Refer to ACORD 145) (Refer to PF&M Section 141.13)
CRIME COVERAGES
The need for crime coverages arose from exclusions found in commercial property forms. Most risks of
physical loss of commercial property forms cover theft of merchandise and business personal property by
other than the employee. Theft of money, computer fraud and employee dishonesty are not usually
covered except in minimal amounts in Business Owners packages and similar products. Crime coverage
forms fill in the gaps.
Crime Coverage—Computer Fraud
Covers money, securities, and property other than money and securities against theft directly related to
the use of any computer to fraudulently cause a transfer of the insured’s property to another person. The
coverage is provided as a part of the ISO Commercial Crime Coverage Form.
Any automotive operation that regularly transfers funds through the computer should consider this
coverage.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
Crime Coverage—Employee Dishonesty
This coverage is the only place where dishonest acts of the employee are covered. The coverage
includes any items of the employer that the employee takes. Coverage may be provided using either a
standard ISO form or a Surety Association Form.
Automotive operations provide multiple opportunities for employee dishonesty, starting with the ordering
of supplies and parts, continuing with the cash register and ending at the back door as monies, services
and items are disbursed. This coverage is a must.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
Insurance Coverage Definitions
Crime Coverage—Employee Dishonesty Including Customer’s Property
This coverage is the only place where dishonest acts of the employee are covered. The coverage
includes any items of the employer that the employee takes. Some businesses have employees who
regularly operate at a client’s premises. If so, they need coverage for dishonest acts of the employee at
that client’s premises – CR 04 01.
This coverage may be needed if employees operate on customer’s premises for any reason especially if
pick- up and delivery of vehicles is a service offered.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-2)
Crime Coverage—Extortion
Covers loss of money, securities and other property resulting directly from extortion. Covered persons
and covered territories are determined by the insured when they purchase the coverage. Coverage is
available through a standard form through ISO but also may be purchased through specialty markets if
the territories are particularly dangerous.
Automotive operations often have owners as part of their TV and radio commercials, who then can
become local celebrities. This could make them a target for kidnap and extortion.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-4)
Crime Coverage—Forgery Or Alteration
Covers when someone—not an employee or owner—forges a signature on a check or other monetary
instrument in order to obtain money that belongs to the insured. Coverage may be provided using either a
standard ISO form or a Surety Association form.
Automotive operations are very busy places with many people milling around. Even with the best of
intentions, doors are left unlocked or ex-employees may enter with a key. There are many opportunities
for checks to be taken and then forged. This protection could be very important.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
Crime Coverage—Lessees Of Safe Deposit Boxes
Covers the loss of securities or other property (NOT MONEY) that is in the insured’s safety deposit boxes
at a specific location. The loss of securities may be caused by theft, disappearance or destruction while
the loss of property other than securities must be due to burglary, robbery or vandalism. The coverage is
provided by ISO Endorsement CR 04 09.
Automotive operations that use safety deposit boxes, particularly for securities, should consider this
coverage.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-10)
Insurance Coverage Definitions
Crime Coverage—Theft, Disappearance and Destruction – Money and Securities
Covers money and securities inside the insured’s premises or at a banking premise against theft,
disappearance or destruction. Provision is made for similar coverage outside the premises when money
and securities are in the custody of a messenger.
Automotive operations should consider this coverage since it is the broadest money crime coverage
available.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
Crime Coverage—Robbery And Safe Burglary – Money and Securities
Covers money and securities inside the insured’s premises or banking premises, while in a safe or vault,
against robbery and safe burglary, and outside the premises while in the care of a messenger, against
robbery. This is available using CR 04 07.
Automotive operations may want to consider this coverage as an alternative to the more expensive theft,
disappearance and destruction coverage.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-8)
Crime Coverage—Securities Deposited With Others
Covers securities while inside a custodian’s premises, while being transported by a custodian, or while
on deposit in a depository against loss caused by theft, disappearance or destruction. The custodian must
be named and the depository must be specifically scheduled. Coverage is provided by showing a limit, a
custodian and a depository on the dec page. Form CR 04 10 is used.
An automotive operation with securities that are kept outside the premises should consider this coverage.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-11)
Crime Coverage—Premises Burglary (Other Than Money and Securities)
Covers property other than money and securities, inside the premises, against loss caused by robbery
of a watchperson or burglary. This is covered using the ISO Standard Crime Form.
Any automotive operation that has purchased Business Personal Property Special Cause of Loss Form
would not need to purchase this coverage, but if the special Cause Of Loss Form is not available, this
coverage could provide some necessary coverage.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
Crime Coverage—Premises Theft (Other Than Money and Securities)
Covers for loss by theft, property other than money and securities that is inside the premises. This is
covered using the ISO CR 04 05. Coverage could be accomplished by using the Special Cause of Loss
Commercial Property Form.
Insurance Coverage Definitions
Automotive operations should consider this coverage when the Special Cause of Loss Form is not
available.
(Refer to ACORD 141) (Refer to PF&M Section 251.6-6)
Crime Coverage—Robbery And Safe Burglary (Other Than Money and Securities)
Covers property other than money from actual or attempted robbery or safe burglary. Coverage inside
the premises may be written to cover both robbery and safe burglary, or may be limited to either robbery
or safe burglary. Coverage outside applies to robbery of property other than money in the care and
custody of a messenger.
Automotive operations will need this coverage if the less broad theft coverage is not desired and the
Special Cause of Loss Form was not purchased on the Business Personal Property Form.
(Refer to ACORD 141) (Refer to PF&M Section 251.4-2)
LIABILITY COVERAGES
Liability Coverages include not only general liability coverage but also the common liability coverages that
are related to the premises or operations of a business.
Liability Coverage—Commercial General Liability-Occurrence Basis
This coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury,
property damage or personal and advertising injury arising from the insured’s premises, operations,
completed operations and products. The occurrence basis means that only occurrences that happen
during the policy period are covered. There is no reference as to when the claim must be presented.
Most will use the occurrence basis. They should never go without this coverage since slips and falls can
happen so quickly. The severity can be low, but it can also be high since we cannot control how a person
falls, what is damaged or how they will react to treatment.
(Refer to ACORD 126) (Refer to PF&M Section 270.4-2)
Liability Coverage—Commercial General Liability – Claims-Made Basis
This coverage will pay for damages that the insured becomes legally obligated to pay due to bodily injury,
property damage or personal and advertising injury arising from the insured’s premises, operations,
completed operations and products. The claims-made basis means that only claims that are presented
during the policy period are covered without consideration for when the occurrence happened (unless
there is a retrospective date).
The claims -made form is used only if the coverage cannot be purchased on an occurrence basis.
(Refer to ACORD 126) (Refer to PF&M Section 270.4-2 and 270.3-1)
Insurance Coverage Definitions
Liability Coverage—Directors and Officers Liability
Insures corporate directors and officers against claims, usually by stockholders, alleging loss arising from
mismanagement. Claims may also be made by other than stockholders against the corporation for
mismanagement, which would also be covered. Outside Directorship Liability Policy Form is available, as
supplementary protection, to assure sufficient limits for the exposure created when a company’s director,
officer or employee serves in an outside director position at its request. The coverage is not standard and
may vary significantly between carriers, as well as by type of business, i.e., for-profit, not-for-profit,
closely-held or publicly-traded.
Any operation with outside directors will need this coverage or risk losing the outside directors.
(Refer to PF&M Section 384.1)
Liability Coverage—Employee Benefits Liability
Covers the cost to employees that results from incorrect information provided regarding their employee
benefits. This DOES NOT INCLUDE fiduciary responsibilities or any discrimination or harassment
situations. A simple example is not providing the employee with the appropriate COBRA information
following termination that result in the ex-employee losing benefits. Coverage is provided by most carriers
on their own filed forms. Coverage is provided either with a separate coverage part or as an endorsement
to the CGL. ISO has developed a form but it is not yet in wide usage. Key comparisons are the types of
benefits covered, claims-made vs. occurrence and the employer contribution.
Any automotive operation that provides employee benefits should purchase this coverage.
(Refer to ACORD 126)
Liability Coverage—Employment-Related Practices
Covers lawsuits brought by employees (past, present or prospects), or governmental entities against the
insured employer, alleging wrongful discharge, discrimination or certain types of harassment. ISO has
developed an employment practices liability policy that can now be used as a standard of comparison.
Companies have developed their own forms and they vary tremendously. Using the ISO standard should
help agents advice insureds on the best direction to take.
Automotive operations have experienced many claims of harassment. It is often difficult to draw the line
between innocent fun and malicious abuse. This coverage is important along with regular procedures and
processes to help everyone understand what can and cannot be allowed.
(Refer to ACORD 188) (Refer to PF&M Section 369.4-2)
Liability Coverage—Owners And Contractors Protective Liability (OCP)
This liability coverage is designed to protect either a property/business owner or a general contractor for
the potential liability exposure that results from the negligent act of a subcontractor or an independent
contractor hired to perform work on the insured’s behalf. The independent or subcontractor is the actual
purchaser of the policy but the protection is for the insured who is either the property/business owner or a
general contractor for whom the work is being done. Coverage is limited to a specific location and project.
This coverage could be provided by attaching an additional insured endorsement to the contractor’s
Insurance Coverage Definitions
policy but not as completely. The separate policy allows the project owner/general contractor to better
control the policy and make sure the limits are not diluted by other claims against the subcontractor.
Any automotive operation that is having extensive works done on their premises may want to consider
requesting a contractor obtain an OCP policy in their name rather than just requiring a certificate of
insurance. The cost may be slightly higher, but the added protection may prove invaluable.
(Refer to ACORD 126) (Refer to PF&M Section 271.4-2)
Liability Coverage—Railroad Protective
This liability coverage is designed to protect a railroad, a general contractor or the project owner for the
potential liability exposure that results from the negligent act of a subcontractor or an independent
contractor hired to perform work on the insured’s behalf while working on or around railroads. The
independent or subcontractor is the actual purchaser of the policy but the protection is for the insured who
is either the railroad, property/business owner or a general contractor for whom the work is being done.
Coverage is limited to a specific location and project. The Commercial General Liability Policy Form
excludes construction or demolition projects that are at or near railroad properties including railroad
tracks, beds, trestles, tunnels and the like. This is a limited coverage liability policy to buy back coverage.
Automotive operations close to a railroad track MAY be required by the railroads to purchase this
coverage.
(Refer to ACORD 126 and 801) (Refer to PF&M Section 272.4-2)
Liability Coverage—Special Events
Special events bring about many exposures not anticipated in a normal business. However, many
businesses will participate in special events and may need special coverage during the event. In other
cases, businesses may sponsor special events and therefore bring about unanticipated exposures that
need to be addressed. Coverage for special events can be covered under a standard CGL policy. The
insured may decide to purchase another policy to prevent dilution of their own limits in order to participate
in the event. Coverage can be secured from the standard market or may need to be obtained from a
specialty underwriter.
Automotive operations that sponsor special events should consider purchasing a special policy to protect
the limits on their regular policy.
(Refer to ACORD 126)
COMMERCIAL AUTO COVERAGES
Provides all of the coverages that the insured should need if he/she owns, leases or hires vehicles. It also
covers the insured for the non-owned usage of a vehicle when an employee or volunteer uses their
vehicle on company business. The schedule allows the insured to sculpture the coverage as needed by
the use of symbols. The policy can cover all owned, leased, hired and non-owned autos or can be more
selective.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.1)
Insurance Coverage Definitions
Commercial Auto Coverage—Liability
Provides coverage for bodily injury and property damage to others who are damaged by an insured
vehicle.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Physical Damage
Collision – provides coverage for covered vehicles that are damaged by an impact with another
vehicle, object or animal.
Other than collision – provides coverage for damage to covered vehicles by any cause of loss
other than collision and other items specifically excluded.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Uninsured Motorist
Provides coverage to the insured for bodily injury that they have suffered caused by an uninsured
motorist. It does not respond if the motorist is underinsured. The limit should be equal to the limit of the
bodily injury carried on the policy.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Underinsured Motorist
Provides excess coverage to the insured for bodily injury they have suffered caused by an underinsured
motorist. It does not respond if the motorist is uninsured. The limit should be equal to the limit of the
bodily injury carried on the policy.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Personal Injury Protection
Provides coverage necessary to meet the requirements of state -mandated “no-fault” coverages.
(Refer to ACORD 127, 129, and 163) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Hired Car
Provides coverage for the insured on any vehicle that is hired by the insured. Physical damage coverage
may also be purchased. A car must be hired for less than six months in order to be considered hired and
not leased. This coverage may be purchased with owned auto coverage or as a standalone.
(Refer to ACORD 127) (Refer to PF&M 220.4-2)
Insurance Coverage Definitions
Commercial Auto Coverage—Non-Ownership Automobile Liability
Provides coverage for the employer when an employee or a volunteer uses their vehicle on the
employer’s business and causes damages. Coverage may be extended to the employee, but only
through a special endorsement.
(Refer to ACORD 127) (Refer to PF&M 220.4-2)
Commercial Auto Coverage—Garage Policy
The garage policy was developed to provide comprehensive liability coverage to protect both the general
liability and automobile liability exposure using only one coverage form in order to prevent gaps and
overlaps. The garage coverage form contains premises liability, products liability, and automobile liability
coverage. It also includes physical damage protection to vehicles (owned either by the insured or his
garage customers).
(Refer to ACORD 128) (Refer to PF&M 222.4-2)
Commercial Auto Coverage—Garagekeepers
Garagekeepers coverage provides coverage for loss or damage to customers’ cars. The coverage may
be provided on a legal liability basis or without regard to legal liability. It may be offered as direct
coverage that is excess over insurance carried by customers or as direct coverage on a primary basis.
All automotive operations that work on customers’ vehicles should carry this coverage.
(Refer to ACORD 128) (Refer to PF&M Section 220.6-4)
WORKERS’ COMPENSATION COVERAGES
Workers Compensation coverages are standard because of state mandates but variances occur because
each state establishes its own workers’ compensation statute. In addition, there are federal laws that
must be taken into consideration whenever a non-federal employer works in an area that is under the
control of the federal authorities. The coverage is definitely not one-size-fits-all.
Workers’ Compensation Coverage—Workers Compensation and Employers Liability
Part A covers all injuries and diseases that must be covered according to the individual state workers
compensation statutes. All benefits are paid in accordance with the schedule provided by the states. Part
B covers the liability that may be imposed beyond the state statutes subject to the exclusions and
conditions of the policy. The National Council of Compensation Insurers provides a standard form that is
a model for all member companies to use. Certain states have alternatives but all are fairly similar. Part A
is mandatory and dictated by the states; however, Part B is more insurer-defined and should be
compared by carrier, particularly the exclusions.
Automotive operations should always carry this coverage if they have any employees.
(Refer to ACORD 130) (Refer to PF&M Section 280.4-2)
Insurance Coverage Definitions
Workers’ Compensation Coverage—Federal Employers’ Liability Act (FELA)
Covers not only those employees who actually work for the U.S. federal government, but also those who
work for or on railroads that cross interstate lines and may not normally be subject to state workers
compensation coverages. Coverage is provided by an endorsement to the workers compensation policy.
Automotive operations with contracts to operate on or near the railroads or who work on or near federal
bases may need to consider this coverage.
(Refer to ACORD 130) (Refer to PF&M Section 280.6-14)
Workers’ Compensation Coverage—Longshore And Harbor Workers Coverage
Covers workers or maritime employees in positions such as longshoremen, harbor workers, shipbuilders,
ship-breakers, ship repairers or other employees engaged in loading, unloading, repairing or building
vessels. It also covers employees who work on navigable waters, adjoining piers, wharves, dry docks,
terminals, building ways and marine railways. It does not cover masters, captains, or crews of vessels
unless further endorsed to voluntarily cover those positions. Coverage is provided by an endorsement to
the workers compensation policy. Automotive Operations that operate on the water, especially on
navigable waters, such as rivers and oceans, may be required to purchase this coverage.
(Refer to PF&M Section 280.6-9)
Workers’ Compensation Coverage—Stop Gap Or Employers Liability Coverage
There are gaps between the workers compensation policy and the CGL which can leave an insured
uncovered. In most states the carriers attempt to correct these by use of the employers liability coverage.
However, in monopolistic states, the workers compensation carrier is the state so the CGL carrier is the
one who attempts to fill the gap. Coverage may be offered as a stand- alone policy or as an endorsement
to the CGL policy. There is no standard policy so comparisons should be made based on the limits
offered, exclusions and limitations.
If the automotive operation is located in any of the monopolistic states they should purchase stop- gap
liability. All other workers compensation policies should include the employers liability as Part B of the
policy.
(Refer to ACORD 130) (Refer to PF&M Section 280.6-27)
Workers’ Compensation Coverage—Voluntary Compensation
Each state has a definition as to who must be covered and who is exempt under workers compensation.
The employer then has the opportunity to include the exempt employees using the voluntary
compensation endorsement.
Automotive operations should consider including all exempt employees by using this form in order to
eliminate coverage gaps.
(Refer to PF&M Section 280.6-17)
Insurance Coverage Definitions
EXCESS LIABILITY COVERAGES
Excess liability provides coverage that supplements the limits of an insured’s General Liability,
Automobile Liability, and Employers Liability policies. An Excess policy’s coverage is triggered when the
limits of the underlying insurance have been exhausted, or when a claim develops that is not covered by
an underlying policy and exceeds the self- insured retention.
Excess Liability Coverage—Excess Liability Policy
Covers only excess liability over scheduled policies. This policy is very similar to an umbrella but all terms
and conditions are defined in the underlying coverages. This policy merely extends the limits. Coverage is
provided by many carriers using their own forms. Key areas of comparisons are exclusions and following
form terms.
Automotive operations should carry either an umbrella or an excess policy. If unusual terms have been
negotiated in the underlying policy, the excess liability could provide the most complete coverage; but if
the underlying is standard, the umbrella may provide some gap coverage not available in the excess.
(Refer to ACORD 131) (Refer to PF&M Section 275.1)
Excess Liability Coverage—Umbrella Policy
An umbrella serves two purposes. First, it provides excess liability limit over the scheduled underlying
policies. Second, it fills some gaps in the underlying coverage. There is no standard umbrella policy.
Therefore, coverage comparison is a must. Key areas of comparison are exclusions, deductible, whether
a follow-form is offered over unusual underlying exposures, limits, and defense cost (in or out of the
limits).
Automotive operations should carry either an umbrella or an excess liability policy because of the
potential for catastrophic loss due to the number of persons in the establishments who could be
damaged.
(Refer to ACORD 131) (Refer to PF&M Section 275.1)
AVIATION COVERAGES
Aviation coverages are provided by specialty markets. These coverages are needed for any operation
that utilizes aircraft in their business. The applications are extensive and coverage is unique and more
closely associated to Ocean Marine than other types of coverage.
Aviation Coverage—Aircraft Policy
Aircraft policies are business auto policies for vehicles that fly. There are four coverages available:
o Liability for bodily injury or property damage to those hurt by the plane
o Passenger liability for bodily injury or property damage to those in the plane
o Medical Expense coverage for passengers and crew
o Hull coverage or physical damage coverage for the plane itself.
Insurance Coverage Definitions
Aircraft coverage is very specialized with a limited marketplace and few standardized forms. Automotive
operations with multiple locations over a wide geographic area may find that a small airplane is more
convenient than commercial airline flight.
(Refer to PF&M Section 331.4-2)
Aviation Coverage—Passenger Liability
Covers the bodily injury to passengers on an airplane. This is separate coverage from bodily injury to
others and is written on a per seat/aggregate basis. All airplane coverage is written by nonadmitted
carriers on forms developed by those carriers. Key comparisons are on the limits by coverage type and
exclusions.
When an aircraft is owned, this coverage should be purchased to protect any passengers that may be on
the plane.
(Refer to PF&M Section 331.4-2)
SPECIALTY COVERAGES
Specialty Coverages are unique coverages for particular types of insureds. The coverage forms used to
provide the coverage are not standardized and are generally in the excess and surplus lines.
Specialty Coverage—Environmental Impairment Liability Policy
May be written to cover the pollution exposure associated with the insured’s property and operations,
including costs of cleanup and remedial (corrective) action at third- party demand or government order.
The pollution exclusion in general liability insurance effectively eliminates coverage for damages for
bodily injury, property damage and cleanup costs arising from most types of pollution release.
Consequently, tailor-made protection for the pollution exposure of numerous insureds in this category is
essential. There are specific policies for remediation operations or abatement contractors. Coverage can
address lead-based products, asbestos or numerous other hazardous substances. Since the coverage
varies by carrier, forms should be compared based on items covered, exclusions, definitions and defense
limits in or out of the limit.
(See The Insurance Marketplace for additional details.)
Specialty Coverage—Fiduciary Liability Insurance
Pays, on behalf of the insured, legal liability arising from claims for alleged failure to prudently act within
the meaning of the Pension Reform Act of 1974. “‘Insured”‘ is variously defined as a trust or employee
benefit plan, any trustee, officer or employee of the trust or employee benefit plan, employer who is sole
sponsor of a plan and any other individual or organization designated as a fiduciary. Coverage is provided
using nonstandard forms. The important information to be obtained in any form is that it conforms to
current pension law.
When there is a pension plan, the trustees who administer the plan should purchase this coverage.
(Refer to PF&M Section 384.8)
Insurance Coverage Definitions
Specialty Coverage—International/Foreign Operations Insurance
Property and casualty insurance written on buildings, equipment and operations of companies in the
United States do not, in general, extend to plants, distribution centers and operations developed in
countries overseas and south of the border. Coverage can include property, liability, automobile,
appropriate workers compensation and inland marine as examples. Many major insurance companies
have facilities for providing international coverage or can assist in placement. Policies for property located
and land operations conducted abroad are of two kinds. Nonadmitted insurance policies are written in the
United States or a branch office of the company abroad in English. Protection may be applicable to more
than one country and premiums and losses are paid in dollars. Admitted insurance policies are products
of the insurance market of the country involved (with which the American underwriter may have a working
agreement). They are written in the language of that country and premiums and losses are paid in the
local currency. American firms that do not establish facilities abroad but do import or export products,
nevertheless, require the international coverages for risk arising from use of certain of their products.
Many major carriers have developed the international equivalent of the Business Owner Policy to cover
these risks.
If there is an international exposure, this coverage should be considered.
Specialty Coverage—Rain or Weather Insurance
When someone sponsors a special event, there are often nonrefundable fees and other expenses that
must be paid up -front. Rain or shine those expenses will exist and must be paid. Therefore, sponsors of
such events need some hedge against the weather. Rain or weather insurance may be purchased from
various specialty markets to cover a variety of expenses associated with a special event. The form
specifies how much rain must occur and other condition for payment.
Operations that hold or sponsor events that require an outlay of fixed expense regardless of the outcome
of the event should consider this insurance.
Specialty Coverage—Terrorism Insurance
Domestic terrorism is not excluded under any coverage form but foreign terrorism may be included or
excluded using a variety of mandatory forms created by ISO and AAIS. Insureds must be aware of the
status of coverage as it changes based on the federal legislation called T.R.I.A., the location of the
premises and the appetite of the insurance marketplace.
(Refer to PF&M Section 310.6)
Specialty Coverage—Underground Storage Tank Liability — UST
The U.S. Environmental Protection Agency (EPA), has made virtually any property owner or business
operator who has an underground storage tank containing a petroleum product on their premises, legally
required to show proof of financial responsibility should the contents of that underground storage tank
cause any bodily injury or property damage, including corrective action costs, to a third party. These
underground storage tanks include those designed for heating fuels as well as those fueling the insured’s
vehicles. Coverage may be provided using the ISO UST Policy Form that was designed with the approval
of the EPA to meet those financial responsibility requirements. Other carriers have developed their own
forms which should be compared carefully to be sure they meet or exceed the EPA standards.
Automotive operations with underground tanks must secure this coverage.
Insurance Coverage Definitions
(Refer to ACORD 126) (Refer to PF&M Section 276.4-2)
BONDS
There are many types of bonds offered by the surety market. They are separated into two primary
categories—Contract and Non-contract. The Contract bonds (including bid, contract and payment bonds)
are used when a contractual obligation is made regarding specific contracts. The non-contract bonds
(including license, permit, and judicial bonds) relate to obligations and performances that must be met but
are not due to a contract.
(Refer to ACORD 501) (Refer to PF&M Section 242.1)
Bonds—Bid Bonds
The bid process can be a long one. When it is complete the customer expects the contractor or supplier
to deliver as promised. Many times a bid bond is required that obligates the surety to honor the bid bond
by either issuing a contract bond if the contractor or supplier receives the contract or pay a penalty that
will offset the cost of reopening the bid process.
Automotive operations may enter into contracts with governments for services and supplies when a bond
is required.
(Refer to ACORD 501) (Refer to PF&M Section 242.6-2)
Bonds—Contract Bonds
Contracts are a way of doing business. One way to guarantee that a contract is performed is to require
that a bond be posted for its successful performance. The bond provides a level of security beyond the
signature on the contract. The purchaser of the services is assured that either the contract will be carried
out or a Surety will compensate him.
Automotive operations may enter into contracts with governments for services and supplies when a bond
is required.
(Refer to ACORD 501) (Refer to PF&M Section 242.6-2)
Bonds—License Bonds
Most municipalities and states require license bonds of many types of business in order to obtain permits
or licenses. This coverage is available using Surety Association forms.
(Refer to ACORD 501) (Refer to PF&M Section 243.6-1)
Source: Rough Notes, Inc