Basics of Insurance LawBasics of Insurance LawPLI: Bridge the Gap IIPLI: Bridge the Gap II

Robert H. Friedman

May 26, 2005

Robert H. Friedman

May 26, 2005

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= When Your House Burns Down

First Party v. Third First Party v. Third PartyParty

• First Party

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= When You Burn Your Neighbor’s House Down

• Third Party

First Party v. Third First Party v. Third PartyParty

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Liability InsuranceLiability Insurance

• Litigation Insurance– Negligence

– Strict Liability

– Governmental Action

• Defense and Indemnity Coverage

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Personal LinesPersonal Lines

• Automobile

• Homeowners/Apartment

• Personal Umbrellas

• Life

• Health

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Commercial LinesCommercial Lines

• Comprehensive General Liability• Umbrella General Liability• Excess – Following Form• Directors and Officers• Errors and Omissions• Fiduciary/Fraud/Crime/Fidelity• Malpractice• Employer’s Liability• Employment Practices• Environmental Impairment Liability

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PrimaryPrimary

• “First Dollar”

• Cover “All Sums”

• Deductibles

• Duty to Defend

• Industry Standard Forms

• Notice of Claim – “As Soon as Practicable”

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UmbrellaUmbrella

• Cover Everything the Primary Covers Above Primary Limits

• Cover Things the Primary Does Not (“Gap Filling”)

• Separate Coverage Form

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Excess Excess

• Following Form

• Often Contain Specific Exclusions

• Respond When Underlying is Exhausted or Losses Reach Attachment Point

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Parts of General Parts of General Liability Insurance Liability Insurance PoliciesPolicies• Declarations Page

• Insuring Agreement

• Definitions

• Terms and Conditions

• Exclusions

* Endorsements

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Insuring Agreement -- Insuring Agreement -- 1973 ISO Standard 1973 ISO Standard Form (Primary)Form (Primary)I. COVERAGE A – BODILY INJURY LIABILITY

COVERAGE B – PROPERTY DAMAGE LIABILITY

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A bodily injury orB property damage

to which this insurance applies caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.

I. COVERAGE A – BODILY INJURY LIABILITYCOVERAGE B – PROPERTY DAMAGE LIABILITY

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A bodily injury orB property damage

to which this insurance applies caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.15

Insuring Agreement – Insuring Agreement – Claims Made 1996 Claims Made 1996 Environmental Environmental Impairment Policy Impairment Policy (Primary)(Primary)Coverage A:

To pay on behalf of an Insured any Loss an Insured is legally obligated to pay as a result of Environmental Impairment resulting from Covered Operations set out in the Declarations for Contractor’s Operations commenced after the Retroactive Date set out in the Declarations provided the Loss is (1) the result of a Claim first made against an Insured and (2) first reported to the Company, in writing, by the Named Insured during the Policy Period or Extended Reporting Period, if applicable.

Coverage A:

To pay on behalf of an Insured any Loss an Insured is legally obligated to pay as a result of Environmental Impairment resulting from Covered Operations set out in the Declarations for Contractor’s Operations commenced after the Retroactive Date set out in the Declarations provided the Loss is (1) the result of a Claim first made against an Insured and (2) first reported to the Company, in writing, by the Named Insured during the Policy Period or Extended Reporting Period, if applicable.

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Insuring Agreement -- Insuring Agreement -- 1997 Excess Policy1997 Excess Policy

A. We will pay those sums in excess of the limits shown in Item 6 of the Declarations Schedule of Underlying Insurance that you become legally obligated to pay as damages because of injury to which this insurance applies, provided that the underlying insurance also applies, or would apply but for the exhaustion of its applicable Limits of insurance.

B. This insurance is subject to the same terms, conditions, agreements, exclusions, and definitions as the “Underlying Insurance”, except: ...

A. We will pay those sums in excess of the limits shown in Item 6 of the Declarations Schedule of Underlying Insurance that you become legally obligated to pay as damages because of injury to which this insurance applies, provided that the underlying insurance also applies, or would apply but for the exhaustion of its applicable Limits of insurance.

B. This insurance is subject to the same terms, conditions, agreements, exclusions, and definitions as the “Underlying Insurance”, except: ...

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Property Damage -- Property Damage -- 1973 ISO Standard 1973 ISO Standard Language (Primary)Language (Primary)

“Property damage” means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

“Property damage” means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

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Definition of Bodily Definition of Bodily Injury – 1973 ISO Injury – 1973 ISO Occurrence Standard Occurrence Standard Form (Primary)Form (Primary)

“Bodily injury” means bodily injury, sickness or disease sustained by any person which occurs during the policy period including death at any time resulting therefrom.

“Bodily injury” means bodily injury, sickness or disease sustained by any person which occurs during the policy period including death at any time resulting therefrom.

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Definition of Personal Definition of Personal Injury – 1986 ISO Injury – 1986 ISO Occurrence Standard Occurrence Standard Form (Primary)Form (Primary)“Personal injury” means injury, other than “bodily injury,” arising out of one or more of the following offenses:a. False arrest, detention or imprisonment;b. Malicious prosecution;c. Wrongful entry into, or eviction of a person

from, a room, dwelling or premises that the person occupies:

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or

e. Oral or written publication of material that violates a person’s right of privacy.

“Personal injury” means injury, other than “bodily injury,” arising out of one or more of the following offenses:a. False arrest, detention or imprisonment;b. Malicious prosecution;c. Wrongful entry into, or eviction of a person

from, a room, dwelling or premises that the person occupies:

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or

e. Oral or written publication of material that violates a person’s right of privacy.

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Definition of Advertising Definition of Advertising Injury-1997 Indemnity Injury-1997 Indemnity Policy (Primary)Policy (Primary)“Advertising injury” means injury arising out of

one or more of the following offenses:

a. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;

b. Oral or written publication of material that violates a person’s right of privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan.

“Advertising injury” means injury arising out of one or more of the following offenses:

a. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;

b. Oral or written publication of material that violates a person’s right of privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan.

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Definition of Occurrence Definition of Occurrence – 1973 ISO Standard – 1973 ISO Standard FormForm

“Occurrence” means an accident, including conditions or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

“Occurrence” means an accident, including conditions or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

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Notice Provision-1982 Notice Provision-1982 Indemnity Policy Indemnity Policy (Primary)(Primary)

4. Insured’s Duties in the Event of Occurrence, Claim or Suit.

(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agent as soon as practicable.

(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

4. Insured’s Duties in the Event of Occurrence, Claim or Suit.

(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agent as soon as practicable.

(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

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Managing Defense & Managing Defense & SettlementSettlement

• What defense rights did you buy?

• Who controls the defense?

• Duty to Cooperate

• Control of Settlement

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2003 Insuring Agreement 2003 Insuring Agreement from Indemnity D&O Policy from Indemnity D&O Policy (“Coverage A”)(“Coverage A”)

The Underwriter will pay on behalf of the Insured Persons Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts, except for Loss which the Company pays to or on behalf of the Insured Persons as indemnification.

The Underwriter will pay on behalf of the Insured Persons Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts, except for Loss which the Company pays to or on behalf of the Insured Persons as indemnification.

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2003 Insuring Agreement 2003 Insuring Agreement from Indemnity D&O Policy from Indemnity D&O Policy (“Coverage B”)(“Coverage B”)

The Underwriter will pay on behalf of the Company:

(1) Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts which the Company pays to or on behalf of the Insured Persons as indemnification; and

(2) Loss from Securities Claims first made during the Policy Period against the Company; and

(3) Loss from Securities Claims first made during the Policy Period against the Offering Underwriter which the Company pays to or on behalf of the Offering Underwriter as indemnification pursuant to the terms and conditions of an Underwriting Agreement.

The Underwriter will pay on behalf of the Company:

(1) Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts which the Company pays to or on behalf of the Insured Persons as indemnification; and

(2) Loss from Securities Claims first made during the Policy Period against the Company; and

(3) Loss from Securities Claims first made during the Policy Period against the Offering Underwriter which the Company pays to or on behalf of the Offering Underwriter as indemnification pursuant to the terms and conditions of an Underwriting Agreement.

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