Chapter 6 Study Notes – Insurance Wordings and Coverages
CRIME INSURANCE
Although broad form property wordings generally provide some insurance for losses caused by crime, it can be insufficient to fully protect the client.
Crime insurance is therefore a necessary component of a more complete insurance program
Crime exposures arising from outside sources include:
- burglary
- robbery
- theft
- disappearance/destruction of valuable property
Crime exposures arising from inside sources comprise most dishonest acts of a clients employees including embezzlement and theft.
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Selecting Wordings
As with other coverages, the client selects the form and limits of coverage. Your knowledge can help in the selection.
The wording selected will depend on the type of property to be insured and the risks it is exposed to
Crime insurance policies generally provide protection from external exposures and fidelity insurance provides protection from internal risks.
Your duty is to explain the differences in coverages, premiums and deductibles available under the various policy forms.
Theft
The felonious taking of property with or without force or violence while the insured premises are open or closed.
It is an extremely broad peril, encompassing most ways property can be misappropriated. Since the absence of visible marks or forcible entry/exit are necessary to prove than an insured loss has taken place, crime policies rarely offer theft as a peril. When they do, coverage is restricted by exclusions.
More commonly, crime policies insure specific perils such as burglary, robbery, mysterious disappearance, safe burglary or fidelity separately or in various combinations.
Inside/Outside Robbery – coverage insures the loss of money and other property described in the policy wording as a result of a robbery (holdup) either on the premises of the insured (inside) or while away from the premises (taking money to the bank; in the home of the custodian)
Damage to the insured premises caused by an actual or attempted robbery is also insured (outside)
Robbery is defined as the taking of insured property from a custodian by a person(s) who have:
- caused or threatened to cause the custodian bodily harm
- committed an overt unlawful act witnessed by the custodian
- taken such property from a custodian who has been killed or rendered unconscious
Underwriter concerns include amount of cash and securities on the premises; how often bank deposits are made; who makes them; what protection is provided while transporting the cash and securities.
Generally this coverage is purchased by retail or office clients through it can be useful to any type of client.
Safe Burglary – insures loss of or damage to the safe or vault as defined and described in the policy; loss of contents of the save/vault and damage to the premises as a result of the break in.
Client has the option of insuring money; securities; other specified property or some combination of all three.
Underwriters require a full description of the type and class of save/vault which is then included in the policy declarations and it must have a combination lock. Depending on the degree of hazard (size of potential loss) underwriters may insist on specific physical protection or a particular level of burglary alarm protection.
Money and Securities – combines and expands the insurance provided by inside/outside robbery and safe burglary. Coverage applies both inside and outside the policyholder’s premises. This wording provides coverage for destruction of money (cash) by the peril of fire.
Coverage is subject to exclusions that should be reviewed in light of the client’s operations and exposures to determine appropriate coverage.
Stock Burglary – available alone for limited to moderate amounts of insurance or it can be included as part of a broad form property wording.
Insures the loss/damage to stock and equipment caused by burglary or robbery of a watchman; or by vandalism or malicious mischief committed on the same occasion; and damage to the premises if the insured is owner or is liable for the damage.
Coverage applies while the premises are not opened for business; except a limited amount available for losses any time within showcases or show windows. Wording excludes losses arising from pilferage or inventory shortfall.
Underwriters require information on the physical protection of the risk to assess and rate the exposure.
Generally only used when the client deems the costs of insuring all stock as prohibitive or they expect only a limited amount of stock to be stolen. Insurers tend to charge higher premiums for low amounts of stock burglary insurance.
Damage to Building By Burglary or Robbery – insures against damage caused to the premises by actual or attempted burglary or robbery or by vandalism or malicious mischief committed on the same occasion.
It can be used where the client is owner of the premises or is contractually liable for damage to the premises.
Will supplement the perils of a named perils property wording or augment an all risk wording by removing the deductible on the building insurance
Other coverages:- forgery and counterfeit paper; employee dishonesty; and document forgery purchased as part of the comprehensive dishonesty, disappearance and destruction (3-D). Extortion or computer fraud are generally written as extensions of the D-D wording.
Package policies – retail store; office packages – providing a selection of crime coverages on one inclusive form. Offered for low limits and each insurer customizes its own package.
Fidelity
A three part agreement whereby one part the surety (insurance company) agrees to reimburse the oblige (the employer) for a loss arising out of a dishonest act or fraud by the principal (an employee) of the bond.
A fidelity bond protects the insured against the loss of money, securities or other property resulting from the dishonest act(s) of an employee alone or in collusion with others.
Coverage is on a discovery basis – loss is covered if discovered during the policy period.
Can take the form of Individual or blanket bond, each form subject to conditions, limitations and exclusions.
Individual fidelity bonds insure a single employee for a defined amount – can be a person or specify the position bonded (bonds any individual who occupies that position) Both require signed applications by the person being bonded.
Blanket fidelity bonds insure all employees of the insured for loss of money or other property stolen by the employee acting alone, in concert with other employees or in collusion with others outside the business.
Two forms of blanket fidelity:
Primary commercial bond – provides a specific limit per loss for all employees, regardless of how many of them are involved in any one loss. Client assesses the maximum amount that could potentially be lost in any one occurrence, regardless of how many people are involved and insures accordingly. The wording includes a discovery period usually one year after the expiry of policy. Some insurers are willing to extend the discovery period if necessary.
Blanket position bond – provides a specific limit per employee. Client assesses the maximum amount accessible to each employee and purchases a limit per loss accordingly. Losses are subject to a two year discovery period. The amount of claim is split between the number of employees involved. Employer has to show the amount stolen by each employee.
Risk assessment and loss prevention techniques are key to reducing or eliminating fidelity losses. These can include:
- clients hiring practices – quality of employees is proportional to interview/investigation procedures
- control of stock and money to reduce/eliminate the opportunity for loss. Adequate records and controls on money and inventory such as:
o regular physical inventories of stock compared with book entries
o stock control methods to prevent pilferage
o review of banking and accounting procedures
o balancing bank accounts by some not authorized to withdraw from those accounts
o countersigning of all cheques at the time of issue.
3-D Policy – comprehensive dishonesty, disappearance and destruction policies combine crime and fidelity insurance on one form.
Containing 5 insurance agreements each with its own specific customizable limit of insurance:
Insuring agreement I – employee dishonesty: two options: Form A which corresponds to the primary commercial blanket bond and Form B which corresponds to the blanket position bond
Insuring agreement II – loss of money and securities while inside the premises
Insuring agreement III – loss of money and securities while outside the premises
Insuring agreement IV – money orders and counterfeit paper currency: insures losses arising from acceptance of falsified money orders or counterfeit Cdn or US
Insuring agreement V – depositors forgery: insures losses that occur if the recipient of a cheque from the insured alters it to increase the amount or cashes a forged cheque against the insured’s bank account.
Insuring agreements II and III fulfill the same function (and the same wordings) as broad form money and securities insurance.
Clients who have stock, money or other valuable property in their custody would have exposures insurable under this form.
Each of these coverages can be purchased separately or in various combinations of insuring agreements and limits depending on the clients exposures.
Extensions to the 3-D policy include extortion and computer fraud
Extortion – loss due to the surrender of money, securities, or other property due to bodily harm to any person or damage to premises or property owned by the insured in any capacity or due to the threat of such injury or damage.
Can be added by amending existing exclusions to bring the peril within definition of either Insuring Agreement I or III. Insurer usually requires the client to participate in 20% of any loss and to contact the police a soon as it is safe to do so.
Computer fraud – Not excluded in insuring agreement I by employees but is excluded by outsiders. Very few insurers will agree to amend the exclusion. This additional coverage protects the insured against the loss of money, securities and other property through computer fraud without having to provide that an employee caused the loss.
SURETY
Is the business of agreeing to guarantee the debt or the performance of an obligation of one party to another. It is a guarantee of contract.
In a surety bond, the three parties are defined as:
- Principal: party whose obligation is guaranteed
- Obligee: beneficiary under the terms of the bond
- Surety: the guarantor, the party who guarantees fulfillment of the principal’s obligation
Suretyship is security for another contract, indebtedness or promise of faithful conduct. Surety is not insurance – it’s a contractual guarantee. If a claim is filed, it is the third party (customer; supplier; regulatory body) that is protected while the client will be required to reimburse the surety for any claims paid
It is contingent – a surety will be required to make good one party’s obligation to another only if the first party fails to make good on it.
Differences between insurance and suretyship are summarized:
| Insurance | Surety Bond |
| Is a two-part contract | Is a three-party contract |
| Carries a duty of utmost good faith | Is subject to ordinary contract law with respect to disclosure |
| Is cancelable | Is usually non-cancelable |
| Premium is calculated based on losses | Presumes no loss will occur – a fee is charged for service |
| Involved the transfer of risk | No risk transfer occurs |
| Does not require reimbursement from the insured | The principal reimburses the surety |
Surety bonds are split into two major categories: bonds used in the construction industry (majority of all bonds) and all other bonds (known as miscellaneous bonds)
Miscellaneous bonds are generally classified into the following subcategories:
- License and Permit Bonds – guarantee obligations imposed by consumer protection acts and regulations
- Customs and Excise Bonds – satisfy compliance with respect to federal and provincial tax acts and regulations
- Court and Fiduciary Bonds – required by the judiciary as security for court costs, to release liens, and to comply with probate and bankruptcy laws
- Lost Document Bonds – guarantee that the owner of a lost document will reimburse the issuer of the document for any loss incurred should the original document later turn up and be cashed or presented for payment.
- Financial Guarantee Bonds – specifically guarantee repayment of a loan, payment of rent or other similar commitment.
LIABILITY INSURANCE
Protects against legal liability arising out of the clients actions or inactions. Unlike property which is tangible, liability insurance protects your clients assets against intangible threats, such as financial loss resulting from a lawsuit.
Commercial General Liability (CGL)
Insures the clients legal liability arising out of the day-to-day exposures of their premises, operations, products and completed operations. All commercial clients require CGL
Insures clients legal liability for bodily injury and property damage arising out of their use or ownership of premises, their operations, products they make or sell and completed operations for services they have provided.
Insuring agreement provides compensatory damages for damages arising out of the insureds legal liability and the additional insuring agreements provide for defense, defense costs, settlement of claims and cost of investigation of losses.
Coverage is subject to limitations, conditions, exclusions and deductibles.
Most insurers use their own wordings that are a variation of IBC’s so you must familiarize yourself with the insuring agreements, definitions, limitations, conditions and exclusions of any wording you’re using.
The aggregate amount represents the total limit payable in any one policy period. It can apply to the entire policy or may only apply to losses arising from specific sections of the policy. Unlike property policies, there is no automatic reinstatement of the limits of insurance under the CGL – once the aggregate limit is exhausted there is no more coverage.
The named insured is the party contracting with the insurer. They enjoy the benefits of the policy, has duties and obligations and is named on the policy’s declaration page. Confirm the policy wording extends to provide protection to all entities the client wants insured.
Although the named insured is commonly one person or entity, a policy may include multiple named insured. Review clients corporate structure to determine who requires insurance. (parent companies; holding companies; joint ventures; affiliated and subsidiary companies).
A subsidiary is any company where 50% or more is owned by the parent company (an operating division operating under a different name)
Cross Liability (severability of interest, separation of insured clause) – most commercial liability wordings contain this clause – the intent is to provide cover as if each named insured had a separate policy. It allows one insured to bring an action against another. All other terms/conditions are in full effect. Limits of liability are not compounded.
Except with respect to the limits of insurance and any rights/obligations assigned to the first named insured, this insurance applies:
- as if each named insured were the only named insured; and
- separately to each insured against whom claim is made or action is brought
Some businesses operate under a trading style – the operating name but generally not the legal entity and therefore cannot enter into a contract. Clients who are best known by the trading style may prefer to include this name as part of the named insured.
If there are past products or discontinued operations still in the marketplace, for insurance protection, either add the closed company as an insured on the current policy or arrange separate insurance for past liability exposures.
It is advisable to insure all entities on one policy to ensure continuity of coverage and to permit a common defense in the event of a loss.
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Additional insured is an entity that is insured with respect to liability arising out of the operations of the named insured only. The policy doesn’t extend to insure any other separate unrelated operations of the additional insured – they will require their own CGL.
Typically they can be the parent company of the named insured or someone with whom the insured has a contractual relationship (contractor doing business with the insured, a lessor of equipment; landlord)
Adding an additional insured does not increase the coverage limit; the subsidiary and parent company share the existing policy limit between them.
Additional Named Insured is effectively the same as a named insured. Adding an entity as additional named insured means the policy provides protection for all that entity’s legal liabilities. Underwriters generally don’t like to do this as they are accepting responsibility for additional and potentially unknown exposures without adequate premium.
Employees of a company can be very broad. Ask the client for an interpretation of who works for them. They can be:
- salaried employees
- contract employees
- commissioned sales persons
- independent contractors
- volunteers
- summer students or interns
- clients children employed casually
- helpers without any formal relationship to the company
Contractual Liability
Wordings normally include insureds legal liability assumed under contract but there may be limitations. Some wordings will insure liability assumed under written contract but not oral contracts. Others require contract be reported within a certain length of time for coverage to be effective. Courts have held that just because a contract exists doesn’t mean the CGL must respond to a loss.
Policy Territory – generally coverage is for losses anywhere in the world but require suits be brought in Canada or the US
Currency and Policy Limits – generally wordings contain a currency clause specifying that the policy is written in Canadian dollars. With other jurisdictions, evaluate policy limits to determine they’ll be sufficient to protect the client when converted to local currency.
For US written policies, generally premiums charged will be based on US exposures and on the US dollar values of exposure, rather than Canadian experience and dollar values.
Determining limits of insurance under a liability policy is a complex task because liability is largely an unknown factor. The current legal environment, including judgements awarded can help the client in selecting limits. Your role is to assist the client in their selection of limits not recommend limits. You can do this by describing real losses in the industry to illustrate and appreciate the need for adequate limits.
Most CGL wordings include tenants liable liability insurance as an extension. This limit for this extension is usually selected separately and is much lower than the limits for the rest of the CGL. Coverage is on a limited named perils basis and the client has the option of extending to a broad form.
Professional Liability
Professionals are those who hold themselves out as having a special body of knowledge, skill or experience.
Many professionals have specific designations (doctors, lawyers, engineers) however, others (building inspectors, interior decorators, appraisers) who may not have a professional designation, are viewed as professionals by the public and are considered professionals by the insurance industry.
Professional liability, also known as errors and omissions (E&O) includes malpractice insurance (health practitioners) and directors and officers (D&O) liability insurance.
To determine if a client providing a professional service requires E&O insurance, check the CGL policy for exclusions, conditions or limitations – they vary from wording to wording.
Errors & Omissions – wordings are tailored according to client type and are among the least negotiable of insurance coverages. They generally have three features in common:
- they are written on a claims-made basis
- they contain an annual aggregate limit of liability
- with some notable exceptions, they usually only cover non-bodily injury or non-property damage losses.
The exceptions noted are medical malpractice and architects and engineers professional losses. Losses by these professionals are as likely to result in bodily injury or property damage as from a purely financial professional liability exposure (a design error causes a roof to collapse while the building is occupied)
The insuring agreements of the E&O policy state that the insurer agrees to pay all sums which the insured become legally obligated to pay as damages because of injury arising out of the rendering of or failure to render professional services in the practice of the profession described in the declarations.
The insurer also agrees to defend against any suit and to pay the defense costs. Usually defense costs reduce the limit of the policy however in Quebec
E&O policies are subject to exclusions, conditions and limitations and as such carefully note any exclusions in the wording that might affect either the client or the clients board of directors.
Since it is a claims-made wording the policy that responds to a claim is the one that is in force when the loss is discovered not when the loss occurred. Remind the client to report all incidents that could potentially give rise to a claim to the expiring insurer prior to renewal date, no matter how unlikely the circumstances.
When E&O insurance is required, to avoid being drawn into suits that they never intended to provide protection against, many insurers will only provide CGL insurance upon proof that professional liability insurance is in place.
Directors and Officers Liability – the law places a high standard of care on directors and officers of a corporation.
They are required to perform their duties:
- in good faith and in a manner they reasonably believe to be in the best interest of the corporation
- they must not engage in personal activities to the detriment of the corporation
- they must not use their position to further their private interests
- they must perform their duties in accordance with applicable statues and the terms of the corporations charter.
Suits against directors and officers may be brought for many reasons – falling dividends; anti-trust violations; any actions can be construed as negligent. Plaintiffs can include shareholders; stockholders; creditors; customers; class action members; competitors.
D&O coverage provides insurance protection against the wrongful acts of directors and officers of boards when discharging their legal duties.
D&O policies are provided on a claims-made basis and are usually divided into two parts: directors and officers liability and company reimbursement.
Extensions of coverage that may be part of the wording or may be negotiated can include insurance for:
- prior acts
- former directors and officers
- legal proceedings brought beyond Canada
- defense costs for penal charges which are unsuccessful or withdrawn later.
Some insurers include employment practices liability insurance (EPLI) either as part of the standard wording or as an endorsement. This coverage provides a defense against any claims brought by an employee alleging wrongful dismissal
Your knowledge of what coverage is available and which insurers are prepared to write this insurance is invaluable. To demonstrate the need for D&O cite examples of Canadian losses in the clients industry.
Excess and Umbrella Liability
Provide added insurance in excess of any underlying policies noted on the declarations page. They can be almost any liability insurance including CGL, automobile or aircraft liability.
Coverage can be in the form of higher limits to an underlying policy (excess liability) or broader coverage than the underlying policy as well as higher limits (umbrella)
Wordings are not standard and many hybrids exist (excess or umbrella). Rely on the actual wording and not the title to determine the extent of the coverage.
Excess – supplements coverage by adding other layers of insurance above the primary of underlying policy. Excess policies respond once the primary policy is exhausted. They can be follow form or stand alone.
Follow form policies take on the wording of the primary policy. Stand alone policies are complete in and of themselves. They can be identical to the primary policy or more restrictive, a main difference between excess and umbrella forms.
Umbrella – has it’s own insuring agreements, conditions, limitations and exclusions. Generally the umbrella has three main features:
- to provide excess limits over underlying policies
- to provide additional broader coverage beyond underlying policies – subject to SIR’s and vary from company to company but generally includes
o advertising liability
o non-owned watercraft or aircraft
o coverage when the aggregate limit has been exhausted on the CGL
o automobile accident insurance outside the territory limitations on the primary auto policy
- to provide an aggregate drop down to cover losses and defense costs when the underlying policy aggregate limit has been reduced or exhausted or when a loss is excluded by the primary policy but covered under the umbrella
Defense Costs
Usually the primary insurer is responsible for all legal costs associated with defending a liability claim therefore neither the excess policy nor the umbrella are involved. However, when the umbrella policy stands in place as primary insurance, it will provide a defense. This would happen when the primary policy is exhausted or where the umbrella has broader coverage than the underlying policy
When offering to the client, make sure they understand the differences between the two forms
BOILER AND MACHINERY
Most property policies exclude losses arising from the explosion, bursting or rupture of boilers and pressure vessels; mechanical breakdown; and electrical arching as these exposures are insured under Boiler and Machinery policies subject to definitions, exclusions, limitations and conditions.
Property insured under a boiler policy can include:
- machinery
- miscellaneous electrical apparatus (MEA) such as the electrical panels distribution boxes and switch boxes
- air conditioning units
- telephone equipment
- computers
- production machinery
When explaining boiler coverage benefits, be specific as to examples that apply to the client – boiler losses can be rare but they tend to be very large.
Insuring agreements on most boiler and machinery policies provide coverage for loss to insured property directly damaged by an accident (defined in the policy). Insured property includes equipment insured; other property of insured; and property of others that is in insureds care, custody and control and for which the insured is legally liable. Insurers will generally also offer additional coverages subject to sub-limits such as mechanical breakdown and loss of freon.
All provinces have laws requiring periodic inspections of boilers and pressure vessels in the interest of public safety. In some provinces, boiler and machinery insurers are licensed to carry out these inspections which provide the client with valuable loss prevention advise and the cost is incorporation into the premium.
Boiler and Machinery Business Interruption
A wide variety of business interruption forms are available. They include:
- loss of profits
- gross earnings
- actual loss sustained
- rent or rental value
- valued form
These forms are similar in coverage to their property insurance equivalents
The main difference is that boiler and machinery forms cover business interruption losses that result from an accident to the described insured property rather than losses from an insured peril.
COMMERCIAL AUTOMOBILE
Most risks will have some degree of automobile exposure. Automobile risks can include owned, leased, or non-owned exposures.
Since any business can have a non-owned auto exposure, recommend that the client add non-owned automobile insurance to their liability CGL to insure this exposure advising them that this is contingent insurance for their benefit as an employer. The employees still have to carry their own auto insurance.
Wordings for a commercial auto policy – whether insuring owned or leased vehicles – are generally the same as those used for personal auto policies.
Special endorsements may be required to amend or delete exclusions in the owners auto policy because of the use of the vehicle:
- when used for carrying passengers (taxi; private bus service) policy is endorsed to permit this use and provide insurance for passengers goods
- if client carries hazardous materials (explosives; radioactive material) the standard exclusion in the auto policy is amended to permit this use
- if the vehicle is leased a permission to rent or lease endorsement is added.
Premiums tend to be higher on commercial vehicles to reflect the increased exposures that business vehicles pose.
Factors for underwriters to determine risk acceptance and rating include:
- exact nature of applicant’s business including what commodities if any are being transported
- operating radius
- gross vehicle weight
- depending on insurers preference – list price new including any added equipment or acv
- drivers experience for all operators on like vehicles
- driver abstracts (MVR or MVA)
- stability of the applicant’s workforce – long term employment generally considered a good indicator of superior driver selection
- individual claims experience for each vehicle
Fleets
Where there are multiple vehicles, premiums are calculated on the basis of the overall experience of all drivers and condition of vehicles throughout the entire fleet rather than discounts or charges being based on individual vehicles and drivers.
Cars are written on a fleet bases where there are five or more vehicles under common ownership or management.
It is always best to have the client contact you when there are vehicle changes. If a large fleet and changes occur frequently, the monthly reporting basis fleet or blanket fleet endorsement can be used.
Monthly reporting endorsement coverage is provided to all vehicles that are owned by or leased on a long term basis to the insured and are licensed or required to be licensed. Client reports the amount of actual receipts, mileage or other rating basis monthly for the preceding month and insurer calculated earned premium based on this statement.
Blanket fleet endorsement provides insurance on all owned or leased vehicles. A deposit premium is charged at policy inception and all additions/deletions with their effective dates are reported at expiry when a final premium is determined.
Garage Automobile Policy
CGL policies commonly exclude exposures arising from the sale; repair; maintenance; service; storage or parking of autos. Business with these exposures incidental to their operations require coverage for such exposures
Insured Persons under a Garage Policy
Covers the named insured, and any person who drives, occupies or operates an automobile owned by the named insured with the insured’s consent. The policy also covers some non-owned vehicles, any person who drives or operates an auto in connection with the business and with the insured’s consent is covered.
Personnel employed by other garages are excluded while working on or occupying vehicles defined in the policy in the course of business, unless the person is the insured; employee or partner.
Insured Automobiles under a Garage Policy
Covers three main classes of automobiles: Owned autos; customers autos; non-owned autos
Owned Automobiles are those owned by the insured and used for pleasure or in connection with the business stated, and any automobiles sold but not delivered. Exceptions are automobiles used for an excluded use or defined as excluded automobiles.
Definition of excluded uses and vehicles vary from province to province. Examples of excluded uses include:
- an employee using their own automobile on business for which they are paid
- the loan of an automobile to a customer while the customer’s automobile is being serviced or repaired
Examples of excluded vehicles include:
- vehicles designed or modified for racing
- vehicles designed for the bulk transport of petroleum products
Customers automobiles are those being towed, pushed, driven or in the care, custody or control of the insured in connection with the business stated. Exceptions are vehicles owned, rented or leased by or to the insured and those sold but not delivered.
Non-owned automobiles are those that are neither owned nor a customer’s but are used for pleasure or in the business stated.
Third Party Liability Coverage
Covers the insured against liability imposed by law for bodily injury to any person and damage to the property of others arising from the ownership, use or operation of an owned automobile, a customers automobile or a non-owned automobile.
Exclusions are similar to those found in the automobile owners policy however the auto policy also has additional exclusions for damages covered by other forms of insurance, such as a provincial workers compensation plan.
Additional agreements of insurer and insured under a garage policy’s third party liability coverage are much like those of the auto owners policy.
Accident Benefits Coverage
Much the same extent as under an auto owners policy, the following are generally considered to be insured persons under this coverage, subject to certain conditions described in the policy:
- an occupant of an owned or customers auto and any person who is not an occupant but is struck by an owned or customers auto
- the insured, spouse and dependents of either while they are not occupants of any other auto but are struck by another auto; or while they are passengers of another auto except one used for certain commercial purposes
- any employee or partner of the insured for whose regular use an auto is provided; along with their spouse or dependent relatives, while not occupants of any other auto but are struck by another auto; or while they are passengers of another auto – subject to additional conditions described in the policy.
In Ontario
Loss of or Damage to Owned Automobile Coverage
The garage policy indemnifies the insured against direct and accidental loss of or damage to owned autos and attached equipment.
In most provinces insureds can choose from four optional coverages:
- collision or upset
- comprehensive
- specified perils
all similar to those found on the auto owners policy, however
- specified perils excluding theft – only available on a garage policy.
In Quebec
Deductibles can vary between a garage auto policy and an auto owners policy. The deductible may be applied to each auto for losses under collision coverage but to each occurrence for losses under comprehensive or specified perils coverage.
Due to the type of coverage provided by the garage policy there are some unique exclusions – consult the garage policy wordings for a complete list and description.
Loss or damage caused by theft from any open lot or unroofed space owned, rented or controlled by the insured in connection with the business is excluded (referred to open lot pilferage) – in some cases an endorsement can be purchased providing coverage for this.
Some exclusions are applicable to vehicles designed to transport other vehicles or damage to other vehicles while they are being transported by the insureds vehicle.
Additional agreements cover some expenses that often arise as a result of an auto accident (payment of fire department charges or customs duties)
Liability for Damage to Customers’ Automobiles in the Care, Custody or Control of the Insured
Indemnifies the insured for liability arising from the loss of or damage to customers’ automobiles or their attached equipment and customers’ loss of use of their automobiles for which the insured is legally liable.
Two coverages available: Collision or Upset or Specified Perils - either or both can be purchased subject to its own exclusions and limit of liability; generally stated as a limit per occurrence. Subject to a coinsurance clause which applies to the maximum number of customers automobiles in the insureds care, custody or control at any one time, generally stated as a limit per occurrence.
Garage Policy Premiums
Because vehicles can have fluctuating values determining adequate premiums at the beginning of the policy term may be difficult.
For these risks, an advance premium for the policy is generally charged at inception then adjusted at the end of the term when insured is required to provide a written statement of the current information necessary to adjust the premium (payroll; number of employees etc)
Depending on the total adjusted premium, the insured may have to pay the difference if it is greater than the advance premium or they may receive a refund if it’s less. Insurer reserves the right to audit the books at any reasonable time to determine facts relating to the insurance.
Premiums may also be compounded on a monthly average basis – the annual premium is calculated for a coverage limit based on an average of the projected monthly exposures. The advance premium is 75% of this annual premium but is adjusted at the end of the term according to the actual monthly exposures. Insured is required to file monthly reports detailing the actual monthly exposures. Failure to do so may result in premium penalties.
Endorsement to the Garage Policy
May be required to tailor coverage to the needs of your specific clients. Some are similar to automobile owners policy, others specific to the garage policy.
OTHER COVERAGES
Your goal is to provide the client with a complete insurance program.
Other coverages you may encounter occasionally include:
- crop or hail insurance
- livestock
- aviation
- ocean marine
- kidnap
- ransom and extortion
- life
- health
- accident and sickness
- benefits plans
these may require the assistance of a specialty market and/or broker.
The more complete an insurance package you recommend to your client the more likely they will turn to you for assistance; remain with you and refer you to others.
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