Commercial Insurance


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Commercial Insurance

Bond
A Bond is a three-party contract under which the insurer agrees to pay losses caused by criminal acts (e.g., fidelity bonds) or the failure to perform a specific act (e.g., performance or surety bonds). The principal (i.e., the party paying the bond premium) is also called the obligor (i.e., the party with the obligation to perform). If there is a default, the surety (i.e., the insurer) pays the loss of the third party (the obligee). The obligor must then reimburse the surety for the amount of loss paid.

Builders Risk Policy

A Builders Risk Policy is a property insurance policy that is designed to cover property in the course of construction. There is no single standard builders risk form; most builders risk policies are written on inland marine (rather than commercial property) forms. Coverage is usually written on an all risks basis and typically applies not only to property at the construction site, but also to property at off-site storage locations and in transit. Builders risk insurance can be written on either a completed value or a reporting form basis; in either case, the estimated completed value of the project is used as the limit of insurance.

Business Owners Policy (AKA BOP)

A Business Owners Policy is a package policy that provides both property and liability coverage for eligible small businesses. BOPs are written on special coverage forms that are generally very similar to their monoline property and liability form counterparts, but they typically have some unique features that make them especially advantageous for businesses that qualify.

Commercial Auto

The entire portfolio of coverage forms that furnish auto coverage for any type of commercial entity. It includes the business auto, business auto physical damage, garage, motor carrier, and truckers’ coverage forms.

Crime policy

A crime insurance policy that is designed to meet the needs of organizations other than financial institutions (such as banks). A commercial crime policy typically provides several different types of crime coverage, such as: employee dishonesty coverage; forgery or alteration coverage; computer fraud coverage; funds transfer fraud coverage; kidnap, ransom, or extortion coverage; money and securities coverage; and money orders and counterfeit money coverage.

Crop-hail insurance

Crop and/or Hail insurance is a policy that covers hail damage to insured crops. Farmers often purchase this coverage in areas of the country susceptible to hail, particularly for high-yielding crops. Unlike federal crop insurance, the federal government does not subsidize crop-hail insurance. Licensed insurance agents sell it and the premiums depend, for a large part, on past loss experience. The coverage is township or county rated; in other words, the rate is determined by the historical hail loss experience of that particular township or county. The perils of fire and wind can be added to this coverage; although the availability of these extensions varies by state and by type of crop.

Difference-in-conditions (DIC) insurance
A Difference in Conditions policy is designed to broaden coverage by providing additional limits of coverage for specific perils when standard markets won’t provide adequate limits of coverage, providing coverage for perils that are excluded on standard coverage forms, or supplementing international policies that are written by admitted insurers in the applicable foreign countries. An all risks property insurance policy that is purchased in addition to a commercial property policy to obtain coverage for perils not insured against in the commercial property policy (usually flood and earthquake). An endorsement to a contractor’s blanket builders risk insurance policy that fills the gaps between a policy provided by the project owner and the contractor’s policy so that the contractor has insurance comparable to what it would have had if coverage had been arranged under the contractor’s builders risk program. When a project owner elects to provide the builders risk coverage for all parties with an insurable interest, the project is normally removed from coverage under the contractor’s policy. A DIC endorsement typically states that, to the extent a loss is not covered under the owner-provided policy but would be covered under the contractor’s policy, coverage will apply on an excess basis. An insurance policy that is designed to fill the gaps between the coverage provided by a multinational organization’s master insurance policies (property or liability) and coverage provided by policies purchased locally in accordance with each country’s insurance requirements so that the organization has uniformity of coverage regardless of location. This policy is referred to as a foreign DIC policy.

Directors and officers (D&O) liability insurance
Directors and Officers Insurance is a type of liability insurance covering directors and officers for claims made against them while serving on a board of directors and/or as an officer. D&O liability insurance can be written to cover the directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences. The policies contain “shrinking limits” provisions, meaning that defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Other distinctive features of D&O policies are that they: (1) are written on a claims-made basis, (2) usually contain no explicit duty to defend the insureds (when covering for-profit businesses), and (3) cover monetary damages but exclude bodily injury (BI) and property damage (PD).

Employment practices liability insurance (EPLI)
Employment practices liability insurance is a type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds. The most common exclusions are for bodily injury (BI), property damage (PD), and intentional/dishonest acts. EPLI policies are written on a claims-made basis. The forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy. In addition to providing directors and officers (D&O) and fiduciary liability insurance, management liability package policies afford the option to cover employment practices liability (EPL).

Errors and Omissions Insurance (AKA E&O)
Errors and Omissions insurance protects the insured against liability for committing an error or omission in performance of professional duties. Generally, such policies are designed to cover financial losses rather than liability for bodily injury (BI) and property damage (PD).

Equipment breakdown insurance
Equipment breakdown insurance provides coverage for loss due to mechanical or electrical breakdown of nearly any type of equipment, including photocopiers and computers. Coverage applies to the cost to repair or replace the equipment and any other property damaged by the equipment breakdown. Resulting business income and extra expense loss is often covered as well. Equipment breakdown insurance is increasingly replacing traditional boiler and machinery (BM) insurance, in part simply because the title is more descriptive of the coverage provided. Also, today’s equipment breakdown policies typically provide slightly broader coverage than traditional BM policies, and they usually do not use the specialized terminology found in traditional BM policies.

Garage liability insurance
Garage Liability is insurance covering the legal liability of franchised and non-franchised automobile, truck, truck-tractor, motorcycle, recreational vehicle, and trailer dealers for claims of bodily injury (BI) and property damage (PD) arising out of business operations. It includes two separate insuring agreements, “who is an insured” provisions, and “limit of insurance” provisions—one dealing with garage operations involving the ownership, maintenance, or use of autos and the other dealing with all other garage operations.

Commercial General Liability
General Liability is a standard insurance policy issued to business organizations to protect them against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability.

Inland Marine insurance
Inland Marine insurance is a form of property insurance for property in transit over land, certain types of moveable property, instrumentalities of transportation (such as bridges, roads, and piers, instrumentalities of communication (such as television and radio towers), and legal liability exposures of bailees. Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called “floater” policies.

Liquor Liability Insurance
Liquor Liability is a common law liability imposed on those selling alcoholic beverages, as well as the statutory liability established in some states, which is excluded in general liability policies.

Host liquor liability

Liability for bodily injury (BI) or property damage (PD) arising out of the serving or distribution of alcoholic beverages by a party not engaged in this activity as a business enterprise. Host liquor liability exposures are insurable under standard general liability policies.

Medical malpractice insurance
Medical malpractice insurance provides coverage for the acts, errors, and omissions of physicians and surgeons, encompassing physicians professional liability insurance, hospital professional liability (HPL) insurance, and allied healthcare (e.g., nurses) professional liability insurance. Although the majority of policies are written with a claims-made coverage trigger, such coverage is sometimes available on an occurrence basis. Typical exclusions are for: intentional/criminal acts, punitive damages, sexual misconduct, and specialized procedures (e.g., radial keratotomy) for which coverage may be “bought back” in return for additional premium. In addition to commercial insurers, medical malpractice coverage is also available in most states through physician-owned insurance companies known as “bedpan mutuals.”

Owners & contractors protective (OCP) liability coverage
OCP coverage is a stand-alone policy that covers the named insured’s liability for bodily injury (BI) and property damage (PD) caused, in whole or in part, by an independent contractor’s work for the insured. The contractor purchases the policy to provide coverage for vicarious liability the client (project owner) incurs as a result of the contractor’s acts or omissions on the project. The OCP policy also responds to liability arising out of the insured’s own acts or omissions in connection with its general supervision of the contractor’s operations.

Professional Liability
Professional Liability is a type of liability coverage designed to protect traditional professionals (e.g., accountants, attorneys) and quasi-professionals (e.g., real estate brokers, consultants) against liability incurred as a result of errors and omissions in performing their professional services. Although there are a few exceptions (e.g., physicians, architects, and engineers), most professional liability policies only cover economic or financial losses suffered by third parties, as opposed to bodily injury (BI) and property damage (PD) claims. This is because the latter two types of loss are typically covered under commercial general liability (CGL) policies. The vast majority of professional liability policies are written with claims-made coverage triggers. In addition, professional liability policies contain what are known as “shrinking limits,” meaning that unlike CGL policies (where defense costs are paid in addition to policy limits), the insurer’s payment of defense costs reduces available policy limits. Accordingly, when attempting to determine appropriate policy limits, insureds must consider the fact that because defense costs are often a high proportion of any claim settlement or judgment, they must usually purchase additional limits. The most common exclusions in professional liability policy forms are for BI, PD, and intentional/dishonest acts.

Commercial Property
Property insurance is an insurance policy for businesses and other organizations that insures against damage to their buildings and contents due to a covered cause of loss, such as a fire. The policy may also cover loss of income or increase in expenses that results from the property damage (PD).
Windstorm / Hurricane Coverage

Florida law requires property insurance policies to include coverage for damage caused by wind during a storm that the National Hurricane Center declares to be a hurricane. Policyholders are eligible for premium discounts for installing certain wind resistant features on their homes. Policies may include a separate deductible applicable specifically to damage caused by a hurricane.

The Florida legislature created a state run insurance safety net, Citizens Property Insurance Corporation, to provide insurance to homeowners who cannot find insurance in the private market. The legislature also created a state administered reinsurance program (a reinsurer insures insurance companies) called the Florida Hurricane Catastrophe Fund to provide a stable and ongoing source of reimbursement to insurers for a portion of their catastrophic hurricane losses.

“Hurricane coverage” is coverage for loss or damage caused by windstorm during a hurricane. It includes ensuing damage to the interior of a building, or to property inside a building, caused by rain, snow, sleet, hail, sand, or dust if the direct force of the windstorm first damages the building, causing an opening through which rain, snow, sleet, hail, sand, or dust enters and causes damage. “Windstorm” means wind, wind gusts, hail, rain, tornadoes, or cyclones caused by or resulting from a hurricane that results in direct physical loss or damage to property. “Hurricane” means a storm system that has been declared to be a hurricane by the National Weather Service’s National Hurricane Center. A hurricane includes the time period (1) beginning when the National Hurricane Center issues a hurricane watch or warning for any part of Florida, (2) continuing for the time period during which the hurricane conditions exist.

Business Income
Commercial property insurance covering loss of income (AKA Business Income or BI) suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs for a specified number of days. There are two business income coverage forms: the business income and extra expense coverage form and the business income coverage form without extra expense. Business income coverage is also referred to as business interruption coverage.
Extra Expense: Commercial property insurance that pays for additional costs in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss. Extra expense coverage can be purchased in addition to or instead of business income coverage, depending on the needs of the organization.

7 Steps for Determining Business Income

-Add together the money brought in from sales or services. Only include revenue that the business has earned and received, not income that is expected or accounts receivable.
The result is the company’s gross revenue.
-Calculate the money that the company does not expect to collect, returns and allowances. This could be from accounts unsuccessfully recovered through collection, returns or refunds.
-Sum up the various kinds of inventory and operating expenses. This includes the cost of goods sold, salaries and overhead. Do not include the cost of inventory that has yet to be sold.
-Calculate asset depreciation. If the business has assets such as machinery, tools and furniture that will be used for a long period of time, it can spread its costs over the life
of the asset. There are several methods for calculating depreciation, such as straight-line and expedited. Discuss with an accountant the best method to use for your business’
specific circumstances.
-Add up the company’s expenses with the additional expenses. The result of these two numbers is the company’s total expenses.
-Total the amounts computed for Steps 2, 3, 4 and 5 to come up with the total expenses.
-Subtract the company’s total expenses from the gross revenue. This final number is the company’s net income, or business income.

Truckers policy
A Truckers Policy is a commercial auto policy designed to address the needs of the “for-hire” motor carrier (i.e., trucking) industry. Coverages available include auto liability, trailer interchange, and auto physical damage; other coverages are available by endorsement.

Umbrella Liability Policy
An Umbrella policy is designed to provide protection against catastrophic losses. It generally is written over various primary liability policies, such as the business auto policy (BAP), commercial general liability (CGL) policy, watercraft and aircraft liability policies, and employers’ liability coverage. The umbrella policy serves three purposes: it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims; it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and it provides protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).

Workers Compensation and Employer Liability Policy
The system by which no-fault statutory benefits prescribed in state law are provided by an employer to an employee (or the employee’s family) due to a job-related injury (including death) resulting from an accident or occupational disease.

This policy provides coverage for an employer’s two key exposures arising out of injuries sustained by employees. Part One of the policy covers the employer’s statutory liabilities under workers compensation laws, and Part Two of the policy covers liability arising out of employees’ work-related injuries that do not fall under the workers compensation statute.

Coverage Requirements For Florida Employers

1. Construction Industry: An employer in the construction industry who employs one or more part or full-time employees must obtain workers’ compensation coverage. Sole proprietors, partners, members of a limited liability company (LLC) who owns at least 10% of the business, and corporate officers are considered employees. Corporate officers, and members of an LLC who own at least 10% of the business, may elect to exempt themselves from the coverage requirements of Chapter 440, F.S.

A construction industry contractor, who sub-contracts all or part of their work, must obtain proof of workers’ compensation coverage or a Certificate of Election to be Exempt from all sub-contractors, prior to work being done. If the sub-contractor is not covered or exempt, for purposes of workers’ compensation coverage, the sub-contractor’s employees shall become the employees of the contractor. The contractor will be responsible to pay any workers’ compensation benefits to the sub-contractor and its employees.

2. Non-Construction Industry: An employer in the non-construction industry, who employs four or more part or full-time employees, must obtain workers’ compensation coverage. Corporate officers and members of an LLC who own at least 10% of the business are considered employees, unless they elect to exempt themselves from the coverage requirements of Chapter 440, F.S. Sole proprietors and partners in the non-construction industry are not considered to be employees unless they elect to be employees. The Notice of Election of Coverage, form DWC 251, must be submitted to the Division. Once approved the individual is considered an employee until a Revocation of Election of Coverage, form DWC 251-R is filed with, and accepted by the Division.

3. Agricultural Industry: Agricultural employers with six or more regular employees and/or 12 or more seasonal employees, who work for more than 30 days, must obtain workers’ compensation coverage for those employees.

4. Out-of-State Employers: Any construction industry employer having one or more part- or full-time employees performing work in Florida is required to obtain a Florida policy through a Florida-licensed insurance company. The company must use the Florida job classification codes, approved manual insurance premium rates, rules, and manuals prior to beginning work in Florida. If the construction industry employer has an out-of-state policy, the insurance company must be licensed in Florida, and Florida must be listed in Section 3A of the policy. A Non-construction industry employer is required to obtain a Florida policy through a Florida-licensed insurance company once it has 4 or more employees working in Florida.