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Last Post 11/13/2009 12:32 AM by  insprojohn
Commercial Coverage
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Ray Hall
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07/17/2008 8:19 PM

I do not think this has changed. No building can have more extended coverage(named perils) than the amount of the fire insurance. This was the rule in my first training school and I think with Risk of Loss coverage the amount is level. Also in the package policy some items have specific limits like objects in the open. (outside).

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Ray Hall
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07/17/2008 8:29 PM
A liability question... In a CP form with all the bells and whistles, with an ISO company. The Liability Limit is 3,000.000.00 per occurance. The loss/claims exceed the policy limits on the primary policy. The cost of defense is 1,870,000. the underwriter is xyz in Boston. What does xyz have to pay on this claim ?

A follow up will follow on this same claim.
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Medulus
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07/18/2008 11:14 AM

Not enough info, Ray.

Though the policy will likely have a clause that limits the duty to defend once the claim has been settled or adjudicated at or above limits, it is considered bad faith handling in most situations to simply pay the limits so the insurance company can walk away without incurring the cost of defense.  The newer ISO forms do not allow for simply paying the limits and walking away from the claim.  Assuming one of the newer ISO forms is being used, xyz owes both the defense and the limits of indemnity.

I'm not sure the location of the underwriter is germane to the loss, but perhaps you have some reason for locating xyz in Boston.  A more useful fact would be the venue of the loss.

Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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Ray Hall
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07/18/2008 1:46 PM

You are 100% correct Steve. The cost of defense on a standard ISO policy (auto-GL) is outside the limit on the occurance limit. MANY of the non-admitted carriers (EU) insurors, the cost of defense is within the limit.

Now the second part of the question.The next layer is from 3 million to seven million with the cost of defense inside the limit. The jury award is 6.5 million and the excess carrier is expected to pay its pro/rata share of the defense cost of  2.56 million. You are the general counsel for the excess carrier based in Bermuda. (this is a hypo). What  total amount should the general counsel approve.

** The excess policy has the cost of defense, WITHIN the occurance  Limit**

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Medulus
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07/18/2008 5:58 PM

Now I'm getting a feeling like the old fox is getting ready to lead me into the lair.

Is the next layer an excess layer or a reinsurance layer?  I assume an excess layer since you refer to it as an excess carrier, but let me know if I am correct.  Not sure this is going to make a difference, but I want all the facts.

Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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Medulus
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07/18/2008 6:50 PM

I'm going to take a shot at this even though the esteemed Mr. Hall may have a twist or turn waiting for me. These are the facts as I see them:

1. The total of the indemnity (6.5 M) plus the expense (1,870,000.00) is $8,370,000. This clearly exceeds the 7 million available under both policies.
2. The total of the expense alone is $1,870,000.00. You mentioned that they have agreed to a pro rata share (4/7 of the total assuming there is no second layer of excess), so the pro rata share of the legal expense is $1,068,571.43.

That leaves an additional (4,000,000 minus $1,068,571.43) $2,931,428.57 of their limits that can be paid on indemnity. Their total payment would be $4,000,000.

This, however, leaves the insured still exposed for (6,500,000 minus 3,000,000 under primary coverage and $2,931,428.57 under first layer of excess) $568,571.43.

Which means the insured is going to sue everybody for bad faith and they will have to defend themselves at significant cost and risk to themselves. So it would have been much better for the first layer of excess to have paid the remaining $3,500,000 owed under the indemnity first and then pay the additional $500,000.00 remaining on their limits on the expense side. Again they are paying $4,000,000.00 but they are avoiding the bad faith exposure for everyone concerned.

Of course, I expect there is a second layer of excess hiding in the fox's den somewhere. In which case, I quote Emily Litella and say, "Never mind!"

If the offshore company is the first layer of reinsurance, the primary carrier has already paid the entire bill and the first layer of reinsurance reimburses them the 4 million and washes their hands of the matter.

Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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Ray Hall
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07/18/2008 10:02 PM

Steve to tell the truth, I dont know the answer. I did not know it when I made the post. This group of old adjusters will be able to arrive at the correct answer. This is not reinsursance. It is excess of primary insurance with the same conditions. This a hypo and no trick questions.This could be a real life situation. So...... all excess over primary liability adjusters start thinking of the best claim practice.

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HuskerCat
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07/19/2008 2:37 AM

'We chickens need to be a little bit wary, Steve.......the fox laid out the bait & strung up the snairs.  But all of a sudden, it seems like the fox might be retreating.  It Mr Fox comes back with more bait, us chickens might stick our necks out.  BokBok!!!

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Ray Hall
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07/19/2008 3:07 PM

I am not a fox, just an old rooster trying to be of service  large flock of chickens. ert the ert er......

I do not know the correct answer.... may not be one.... but I have the option to refine my thinking when I listern . The most recent book I have on Insurance Coverage Disputes was printed in October 1992 when I was doing large liability claims.

Here go's the primary insurer pays 3 million. The excess pays 3.5 million on the Liability cover to settle the judgement/settlement. It was apparent when the trial started each carrier would have a duty to furnish best defense possible. The combined legal expense was2.56 million. I think like Steve that the first excess 3-8= 4 million would pay their 3.5 Mil, plus the additional 500,000. remaining under their {inside the limit} cover. This is the problem with ISO liability polices mixed with non ISO policies.

This will be a problem with excess of primary flood insurance layered up with CP's forms with flood limits,in the event of the insured bringing suit after 2 or 3 handoffs.

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Medulus
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07/21/2008 2:51 PM

OK Brer Fox,

Here's one for you. 

In the same liability scenario above, it is still within the statute of limitations and one of the parties involved in contribution to the liability was previously unidentified.  New evidence is developed and the additional party is identified.   This party contributed to the loss to the tune of 25% in a comparative liability state.

Can the claimant file suit against the newly identified party even though he/she has collected fully from their two insurers based on the verdict already rendered?  Can the two insurers who have already paid subrogate or seek contribution against the newly identified party?  Can they file a cross-complaint?  If there is any recovery from the newly identified party, who gets to take the first bite of the subrogation apple if one company is primary and one is excess?  If one company is reinsuring the other, who gets the first subrogation money then? 

And the most important question of all -- Is there any real life jurisdiction where the legal system moves fast enough that the statute of limitations might still be open after a file has made its way through the court system?

Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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Ray Hall
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07/22/2008 1:26 PM

Steve gland I read this before I stated cutting the grass in 97 degrees with sunshine. Texas has changed for the better the joint and several liability law. This 3rd party liability claim  was tried and a jury did not find but one defendent negligent. If more than one defendent was negligent the jury would have found the percentage and applied it to the verdict. I think many states have modified j& S liability in some manner. They use to stick Exxon, Halliburton & Grey Wolf Drilling and let Nub Welder off as he did not have insurance. The negligence would shake out. 1. Nub 50%, Grey Wolf 40%, Halliburton 5 %, Exxon 5%. Lawyers are having to work for thier fee's in Texas today.

A jury verdict is final , unless it appealed in civil cases, I think.

Insureds and insurance companys should never try to lay off blame-coverage on another insurance carrier, BY reading and determining another person contract.

Oh by the way Nub is 50 and got his nickname when he was 18 when he burned two fingers off with a welders rod at age 17 when he was a roughneck.

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Medulus
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07/22/2008 4:32 PM

Well my canid friend,

You at least implied the right answer.  It depends on the jurisdiction how most of my questions would be answered.  Under joint and several liability any one at-fault party can be held responsible for the entire loss.  But in a pure comparative state (e.g. California) a party can only be held responsible for that part of the loss that represents their percentage of negligence.  In contributory negligence jurisdictions (e.g. Pennsylvania) one can be barred from recovery if their contributory negligence is 50% or more. 

For the most part you don't get to try a case a second time and blame it on someone else this time.  That would certainly be grounds for an appeal on the part of the original defendents.    But, then, law is rewritten from time to time by judges who think it is within their authority.  Sometimes it turns out that it is when the appellate division upholds it.

As to whether the insurance company can file a cross complaint -- my answer is "No" because a cross complaint is filed to bring another party into the action.  After the trial is too late for a cross complaint.

In terms of subrogation, I believe both an excess carrier and a reinsurer has the right to first recovery.  Once they have been fully compensated, at least for the indemnity portion, the primary carrier gets what's left.  It would be a very special circumstance that would allow either one to recover legal expenses. 

And -- is there any jurisdiction that actually takes a case through trial in a timely enough manner to be still within the statute of limitations?  "None with which I have any experience" is my cynical yet realistic answer.  I invite anyone to show me the error of my ways, but in my experience, the wheel of justice grinds very very slowly.

Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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Tom Toll
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07/22/2008 8:17 PM

For those adjusters who are not sure what joint and several liability is, here is what it is:

Joint and several liability is a form of liability that is used in civil cases where two or more people are found liable for damages. The winning plaintiff in such a case may collect the entire judgment from any one of the parties, or from any and all of the parties in various amounts until the judgment is paid in full. In other words, if any of the defendants do not have enough money or assets to pay an equal share of the award, the other defendants must make up the difference.

Defendants in a civil suit can be held jointly and severally liable only if their concurrent acts brought about the harm to the plaintiff. The acts of the defendants do not have to be simultaneous: they must simply contribute to the same event. For example, assume that an electrician negligently installs an electrical line. Years later, another electrician inspects the line and approves it. When the plaintiff is subsequently injured by a short circuit in the line, the plaintiff may sue both electricians and hold them jointly and severally liable.

Joint and several liability can also arise where a husband or wife, or members of an organization owe the government income taxes. In such cases, the revenue agency may collect on the debt from any and all of the debtors. In a contractual situation, where two or more persons are responsible for the same performance and default on their obligations, a nondefaulting party may hold any and all parties liable for damages resulting from the breach of performance.

A small number of states do not strictly follow the doctrine of joint and several liability. In such jurisdictions, called comparative negligence jurisdictions, liability is prorated according to the percentage of the total damages attributable to each defendant's conduct.

Success is not final, failure is not fatal: it is the courage to continue that counts.
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JimGary
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09/17/2008 6:46 PM
Does anyone have a copy of a CP NF02, Equipment Breakdown coverage.

JWG
I know the voices aren't real, but sometimes they're right!
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HuskerCat
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09/17/2008 10:26 PM

I checked my own archives, no luck.  Checked Claimspages, not there.  And last but not least, tough to find those forms on the internet more & more due to copyrights or whatever.  Used to be able to. 

Maybe someone else can help, but seems your carrier or the agent will be your best source.  On a coverage form like that, if I were the one assigning you the claim I'd have pdf'd it & sent it to you so you'd know what you're dealing with...but that's just me.

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JimGary
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09/18/2008 9:01 AM

Posted By Mike Kunze on 17 Sep 2008 10:26 PM

 On a coverage form like that, if I were the one assigning you the claim I'd have pdf'd it & sent it to you so you'd know what you're dealing with...but that's just me.


Yeah, thats what I thought, but they only sent loss report with list of endorsements. I may have to break down, spend the money for all the forms.

Thanks anyway

Jim

I know the voices aren't real, but sometimes they're right!
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Ray Hall
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10/01/2009 2:11 AM

You are deployed on a storm and the manager calls you and states a new London client called in a new loss to be assigned to one of your most senior adjusters as it is "a pure indemnity loss" on a platform in the Gulf of Mexico. Would you feel confortable to accept the loss with the attached caveat and what does it mean ?

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Ray Hall
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10/01/2009 8:28 AM

This old post about fire damage to stock on a rail road car on the side track on the insureds property was never attempeted by our good commercial adjusters since May of 1997. All you good coverage guys still taking CPCU, CIC and RPA courses?

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Ray Hall
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10/01/2009 8:52 AM

I think something is wrong with someone's puter, but here goes. Back in May 1997 I post a big fire fire loss on commercial property. Never got a taker and if we are finished swith Katrina, Rita, IKe and CPCU exams let. look at this hypo again.

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Medulus
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10/01/2009 4:30 PM
Can you post a link, Ray? Personally, I didn't discover CADO until 1998, and at that time I wouldn't have had a clue how to handle a commercial loss.
Steve Ebner CPCU AIC AMIM

"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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