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General Liability

22 Aug

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What is the Difference Between General Liability and Professional Liability?

August 22, 2016 | By |

Most of my clients are familiar with general liability and the need to protect their companies against general liability losses. Yet, professional liability is often just as important, but much less understood. In this article, I’ll give a brief description of general and professional liability and point out some of the key differences between them.

General liability is intended to cover damages to a third party resulting from bodily injury or property damage. General liability policies include coverage for premises liability, and often include coverage for products liability. Some examples of common general liability claims include slips, trips and falls at a business premises. Other examples include property damage or bodily injury caused at a customer’s home or place of business, or damages caused by a product that is manufactured or distributed by a business.

Professional liability, sometimes used interchangeably with errors & omissions (E&O), covers professional mistakes that result in economic loss to a third party. For example, if a professional is hired to make recommendations to improve a process and the recommendations result in financial loss rather than gain to their customer, the customer may claim economic damages.

There are several differences between general liability and professional liability. Here are  3 key differences:

1. Coverage Triggers-The coverage triggers that obligate an insurer to respond to a general liability claim are bodily injury or property damage. Simply put, there must be bodily injury or property damage in order for general liability coverage to apply.

In comparison, the trigger for professional liability is the notice to the insured of economic damage claimed by a third party.

2. Coverage Period-General liability policies are usually written on an “occurrence” basis, which means that the policy responds when a third party suffers bodily injury or property damage, regardless of when the claim is filed for damages. In other words, a claim could be filed for a policy that was in effect several years prior if the incident that resulted in damage occurred during the prior policy period.

In contrast, professional liability policies are often written on a “claims-made” basis, which requires that a claim be made during the policy term or within a specified period following the policy term. In other words, the incident must occur during the policy period and the claim must be reported within the policy period. Thus, if a claim is brought after the policy term in which the incident occurred, and there are no changes to the current policy to cover prior acts, there would likely be no coverage in place.

3. Retention-General liability policies often do not require a deductible or out-of-pocket expense in the event of a claim. Although, some general liability policies do include a small deductible.

In contrast, professional liability policies generally include a “retention,” commonly ranging between $1,000 and $10,000. The retention must be paid by the insured before the policy responds.

In summary, general liability coverage protects a business from claims resulting from bodily injury or property damage suffered by a third party. Professional liability protects a business from economic damage claims resulting from professional mistakes.

The examples above are some of the key differences between general liability and professional liability. However, it is important to discuss the unique insurance needs of your business and the specifics of your business coverage with a licensed insurance professional. At Pioneer Business Insurance Agency, we work hard at being accessible, helpful, and result-oriented. Learn more about us at PioneerBusinessInsurance.com. How can we put our expertise to work for you?

25 Jul

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What You Should Know Before Adding an Additional Insured to Your Policy

July 25, 2016 | By |

I often receive requests from my clients to add an additional insured endorsement to their commercial general liability (CGL) policy due to a contract requirement. It is not uncommon for a general contractor, a customer, a mortgagee or a lessor to require that they be named as additional insured to a policy. However, the policyholder should understand the endorsement and how it modifies their CGL policy before adding the endorsement.

What is an Additional Insured endorsement?

An additional insured endorsement allows a person or organization that would not normally be covered on a CGL policy to be added as an insured on the policy. The endorsement modifies the policy to afford general liability coverage to the additional insured.

Those requesting to be added as an additional insured generally see the endorsement as further protection should a claim be brought against them for damages caused by the policyholder. However, there are several additional insured endorsements, and whether the endorsement provides the coverage that the requester is actually looking for depends on the actual endorsement that is added.

What are the different types of additional insured endorsements?

The additional insured endorsement used most commonly today is the Additional Insured Endorsement CG 20 10. While this endorsement provides coverage to an additional insured for ongoing operations, the endorsement does not cover completed operations. Prior to 1985, the CG 20 10 included coverage for an additional insured “with respect to liability arising out of ‘your work,’” which encompassed both ongoing operations and completed operations. However, in 1985 the endorsement was changed and removed coverage for completed operations.

If coverage for completed operations is desired, the Additional Insured Endorsement CG 20 37 should also be added. This endorsement provides coverage for completed operations, but needs to be added along with the CG 20 10 endorsement if both ongoing and completed operations are to be covered.

Organizations who have the CG 20 10 11 85 endorsement (the endorsement used prior to 1985) added to their policy do not need to add the CG 20 37 to their policy because the pre-1985 endorsement covers both ongoing and completed operations.

Blanket Additional Insured Endorsements

Some insurance companies offer a blanket additional insured endorsement, which allows automatic coverage for an additional insured under certain conditions. The automatic coverage applies to additional insureds for whom the insured is performing work, and for whom the insured has a written agreement in place which requires additional insured status. While the blanket endorsement offers convenience, the requirement for a written contract needs to be understood by the policyholder and the person or organization being added as an additional insured. Should there be upstream parties, such as a general contractor that does not have a direct relationship or contract with a sub-contractor, there is also an additional form that can be added to cover the upstream party.

What else should you consider before adding an Additional Insured endorsement to your CGL policy?

When an additional insured is added, the person or organization named as an additional insured has access to the coverage provided by your policy. In other words, your policy limits could potentially be exhausted in the event that an additional insured seeks coverage for a claim under your policy.

Further, the policy could cover losses that the policyholder is not intending to cover. There have been documented cases of the additional insured endorsement being interpreted by courts to include coverage for damages that the were not caused by the negligence of the policyholder.

In conclusion, it is important to understand additional insured endorsements before requesting that one be added to your policy. Asking questions to determine what coverage is needed, considering the scope of coverage provided, and considering potential consequences prior to adding coverage will help you to be selective when adding an additional insured endorsement and manage your risk wisely.

At Pioneer Business Insurance Agency, we work hard at being accessible, helpful, and result-oriented. Learn more about us at PioneerBusinessInsurance.com. How can we put our expertise to work for you?