Regd Prop: Central Brokerage Services Pty Ltd (ABN: 19 008 801 241)
52 Melville Parade, South Perth WA 6151 PO Box 408, South Perth WA 6951 Ph: (08) 9368-8999 Fx: (08) 9367-5335 Web:
www.centralins.com.au
AFSL: 241187
Risk Management of a Policy AS AT 10/01/2010 This is a General review of an Insurance Policy (without consideration of the nature of each Product type).
TOPICS 1. Quote cover request 2. Critical policy issues
- minimum data - what to know about a policy structure
Insured entity Intended Industry/use/operation Policy divisions Level of cover Sections of cover Items insured Indemnity types Claims
(Insurable Interest) (Hazards of Risk) (Part A - asset and/or B - liability) (Bronze, Silver, Gold) (Single or Multiple pak) (Subject Matter) (Basis of Settlement) (Trigger Wording and Procedure)
3. Risk Management
- Loss prevention
4. Cross Related products
- other policies to consider
5. Product FAQ’s
- Frequent asked Questions
6. Industry Indexes
- Products Cross matched to Industry
7. Brochure Material www.centralins.com.au established: 1980 Excellence in Service standards • Large enough to pack a punch • Our Teams are Business Owners
Page 2 1. Quote cover request data (general only not product specific) Date To Insurer Our Team and Person Quote Required by
Current Insurer
Insured Name Legal Entity: Business/Use/Operation: Location Any Diversification in Use/Operation from the "NORMAL" THIS YEAR = ______ Turnover
Wages & Sub.Contracts
LAST YEAR Staff
Turnover
PREVIOUS YEAR
Wages & Sub.Contracts
Insurance Contracts Disclosure Questions.. last 5 years
Staff
Turnover
Wages & Sub.Contracts
Staff
Any Claims (this type of Risk) Rejected
Y/N
Any Proposals/Renewals declined or cancelled
Y/N
Any Extra or Adverse conditions imposed
Y/N
Any Previous Claims for this Category of Risk
Y/N
Any Criminal Charges or been Bankrupt
Y/N
Answers to above Disclosure Questions
Import/export
Y/N
Work at/in mines or on water/air craft
Y/N
Does client issue "Disclaimers"
Y/N
Experience Other Part A] ASSETS - Your Property Part B] LIABILITY - to others A] ASSETS (include accessories)
INSURANCE PRODUCTS Level of Cover: Silver (DE) Defined Events, GOLD (APL) Accidental Physical Loss Level of Cover: Silver (DE) Defined Events, GOLD (BF) Broadform Liability S. INSURED EXCESS
POLICY CLASS COVER ITEM INSURED
Base Prem
0
Fire Service Levy
GST
Stamp Duty
UW Fee
B] LIABILITY PRODUCTS (include Extensions) POLICY CLASS COVER ITEM INSURED
Base Prem
Fire Service Levy
GST
Total
0
+ Broker Fee
Limit
Excess
0 0
Stamp Duty
UW Fee
Total
+ Broker Fee
TOTAL OF ABOVE Placement INSURER
CR Number
Date "WEF"
TIME
CN DAYS Usual or 30
Subject always to the insurers usual terms and conditions of acceptance.
Page 3 2. Critical policy issues
Insured entity Intended Industry/use/operation Policy divisions Level of cover Sections of cover Items insured Indemnity types Claims
(Insurable Interest) (Hazards of Risk) (Part A - asset and/or B - liability) (Bronze, Silver, Gold) (Single or Multiple pak) (Subject Matter) (Basis of Settlement) (Trigger Wording and Procedure)
The following is for "General" issues - you need to refer to each individual Risk topic for specific details: INSURED ENTITY (Insurable Interest) If not accurate there can be exposures under the POLICY DIVISIONS.
LEGAL ENTITIES recognised for Insurance Purposes. It is imperative to accurately recognise the correct "Legal" entity behind the insured name. Failure to do so may result in reduced entitlements. Note: The Insurance Contracts Act provides a “giveback” clause to protect the insured where the incorrect entity is declared, however this does not apply to every policy type – Prevention is better than cure. Examples of entities: 1. INCORPORATED BODIES Pty Ltd = Private Company Ltd = Public Company NL = Non Limited Company INC Non profit / social / community groups and Clubs 2. HUMAN BODIES / PEOPLE Individual - Sole Proprietor/trader Partnerships 3. NON ENTITIES Trading Name (only used as a reference) Family Trust (must have a trustee. A trustee could be any one of the “legal entities” above) Detailed Explanation of the Entity Types:1. INCORPORATED BODY i.e., "Pty Ltd" or "Ltd" or “NL” or "Inc" The court views this type of entity as a “living being”, in other words “another person”. It is capable of taking legal action as (plaintiff) or (defendant) in it’s own name. The codes (Pty Ltd etc., shown above) indicate different category, nonetheless they all fall under the “corporations Act” which is very onerous but with the intent to control the “good conduct” of corporations. A company is created using capital invested by shareholders. The shareholders risk their capital by purchasing shares in return for a share of the profits by way of (dividends) and increased value of their share value. A shareholders Liability is limited to the value of their investment in shares and their only power/control is voting rights at a shareholder’s meeting. They could be considered a silent partner as they have no say in the activity and receive a passive return (dividends). The control/navigation of the company is at the hands of the Directors. There are specific (and harsh) Corporations Laws which govern the conduct of the Directors, and certain officers. These laws are far more onerous than consumer laws and focus on accountability against the Directors to ensure they act diligently in the interest of:o 1. The Shareholders, 2. Creditors, 3. The Public at Large and lastly themselves. Directors (and officers) need to be aware their Personal assets are exposed where the law views a breach of their “fiduciary” duty. Best practice is to record: Entity name/s… t/as (trading as) .. trading name optional.
Page 4 2. HUMAN BODIES / PERSONS
Individual / Sole Proprietor or Partnerships
These are individual/s that trade in their name or jointly in a partnership with others. Each person comprising the entity (partnership) is equally liable for any "Gain or Pain" (Asset or Liability) regardless of who (which partner) participated in the process, provided it was for the partnership.
Generally a Trading name is used however, at law, it has no legal standing. o You cannot sue a business name – it is not capable of taking legal action as plaintiff or defendant in it is; own name – it must be the “legal” entity.
Best practice is to record: Entity name/s… t/as (trading as) .. trading name optional. 3. NON ENTITIES:A trading name – is a reference name only – it is not a “Legal” entity A trust – a reference name only – it is not a “Legal” entity. CLUBS/BODY CORPORATE If the club is "Incorporated" it falls under “legal” entity type 1 (Incorporated Body) above. The legal interpretations between an incorporated entity and non incorporated entity are significant because there is a specific statute of law that applies. An Incorporated Club or Body Corporate falls under the Business Corporation law. The members are technically shareholders, whilst they have limited rights they also have limited liability. If incorporated, as Director, Secretary or certain position of office they have the same legal exposure as Directors of Corporations (their personal assets are exposed).
The degree of duty of care upon a person will relate to the position and remuneration (honorarium (remuneration) paid then that duty of Care could increase significantly.
An alarming example of exposure on officers of a club: An equipment officer takes it upon himself to save the club a few dollars and repairs some equipment however it fails and a member is injured. The Injured person or their legal guardian can sue the Officer for their Gross Negligence. The officer’s personal assets are exposed, unless the corporation has an Indemnity in their constitution to indemnify their officers and has sufficient capital or an Insurance Policy to pay the compensation. If the club is "Non-Incorporated" it falls under No 2 (Partnership) above. The club is not recognised by the court as a "being" or Physical entity. The members are deemed to be partners and therefore whilst they have rights they also have significant personal liability as they are equally and jointly liable for any legal outcome of the club including those created by other members. Best practice to record: Entity name/s (show if “Inc” ). FAMILY OR UNIT TRUST This medium is primarily for Taxation and wealth distribution. The trust, as it implies, is a filter. It is not capable of taking legal action without a Trustee which could be entity type 1 or 2 above. The trustee is the “legal entity” and therefore must be identified on all paperwork. The Trustee is, for insurance purposes, is the insured. Best practice to record: Trustee name (entity type) A.T.F (as trustee for) (name of Trust optional) T/as (trading name optional).
Page 5
INTENDED Industry/use/Operation
(Hazards of Risk)
Arguably the foremost condition to cover is “Your duty of Disclosure”, it defines “disclosure” and “non disclosure”. This clause is recited on all primary Insurance documents. Its intended purpose is to set a minimum level of fairness between the Insurer and the Insured.
The insurer offers cover on the "Common Knowledge" principle of the "Intended Use/Operation" thus the "degree of Risk" is known. If there is deviation from what is the "normal" (common knowledge) and not disclosed the insurer can reduce their liability (up to 100%).
ACCURATELY IDENTIFY THE USE/OPERATION There are 2 primary categories: 1. Business/Commercial, divided into 3 income earning categories 2. Domestic - Personal and non income activities 1. BUSINESS = 3 income earning categories, being:SERVICE INDUSTRY PI (Professional Indemnity) exposure Those that gain their income (major component) where their service is of a specialised kind and wholly advisory or representative by nature. ie., , Doctors, Dentists, Lawyers, Real Estate Agents, Insurance Brokers, Drafting NB: This is the primary definition to "PI" risks. This Industry does not have a material (physical) product to sell, they don’t need “Product” Liability however they need “PI” Professional Indemnity” Note not everything is so simple, example:Doctors/Dentists and the like prescribe drugs, if they apply them it’s an exposure covered under their “PI” (professional Indemnity) policy. Hairdressers/Beauticians If they sell goods – it’s covered under their “PL” (Public Liability) policy if they have “Products Liability. If they apply them (the goods) they will need an extension to cover under their “PL” policy called “Treatment risk” Petcare services If they sell goods – it’s covered under their “PL” policy if they have “Products Liability” If they apply them (the goods) they will need an extension to cover under their “PL” policy called “C.C.C”. (Custody, care and/or control). GOODS INDUSTRY “Product Liability Exposure” Those that gain their income (major component) from the Manufacture, Purchase/Sale of goods (of a tangible/physical nature). I.e., Manufacturer, Wholesale, Retail of physical items NB: Emphasis is income from "goods" as opposed to the "trade" TRADE INDUSTRY - “Product Liability Exposure” Those that gain their income (major component) from manual Labour to supply and/or install “products”. I.e., Mechanic/Earthmoving/Building trades NB: Emphasis is income from "trade" as opposed to the "goods" Please remember the foremost condition - DISCLOSURE • Note – within each Industry there are specific Occupations with specific/Unique Hazards which would be “Known” or ”Common Knowledge”. You ONLY NEED to declare/disclose details where there is diversification from the “known” or “Common knowledge” of the Occupation.
Page 6 2. Domestic - Personal (Residential, Non commercial) earning activity Note. The same “Common Knowledge” principle, if there is diversification from the usual. Example: Home cover: Most policies might include a sub-limit for home office equipment (a study) but not for the Liability of the business activities. Motor vehicle: Rated on the known driver or use but if any driver has adverse history it must be disclosed or if the use as not “domestic” (refer definition in the policy) it must be disclosed.
POLICY DIVISIONS (Part A - asset and/or B – liability) Part a] Your Property Part b] Liability to 3rd Parties (people &/or Property) Static Assets; Liabilities from the activity including use of the Physical items, people & activities Static/Mobile Assets and those people representing the insured either directly or indirectly (sub Mobile Assets; Physical items, people & contractors) activities
LEVEL OF COVER
(Bronze, Silver, Gold)
Part a] Your Property
Part b] LIABILITY to 3rd Parties
BRONZE = RE "Restricted Events" (Catastrophe only)
------
SILVER = DE "Defined Events"
SILVER = DE "Defined Events"
GOLD = ALD "Accidental (Physical) Loss &/or Damage"
GOLD = BFM "Broadform" wording
(Wider cover)
SECTIONS OF COVER (Single or Multiple) Various depending on "Level of Cover" and policy taken.
COMMERCIAL policies do not AUTO include multiple sections, each section must be decided upon: Part a] Your Property Re: "Fixed (static) Property" 1] Fire and Extraneous Perils 2] Accidental Damage 4] Burglary 5] Money 7] Various others as required
3] Loss of Profits 6] Fixed Glass
Part b] Legal Liability to 3rd Parties - Various as demonstrated 1] GENERAL LIABILITY A standard Liability policy ONLY covers the GENERAL activities present in any business. It is then the insured's or their broker's responsibility to apply for various extensions to address the unique exposures of the insured's disclosed trade/activities. 2] PRODUCTS This means anything made, sold, serviced, Tested, and/or installed once it leaves your possession/control. 3] EXTENSIONS i. “CCC” 3rd Party Property in your “CCC” (Custody, Care and/or Control) ii. Various other extensions to be considered relevant to the Business/hazard (activities) of the insured. DOMESTIC policies include multiple sections This is some relief to the consumer knowing that MOST basic exposures are included, its then a matter of reviewing to see if the Sections and levels are enough for your needs. Refer to our Comparison charts for quick reference
Page 7 ITEM INSURED (Subject Matter) 1. Clarify the item to be insured falls within the correct policy. Example: Motor vehicle policy – accessories/attachments not covered unless they are "standard" (factory fitted) features. Home/Contents – antiques and valuables limited unless listed POLICY DIVISION Part a] - Your Property [Item Insured or Section Taken [ ] Accessories/Attachments or Sub Section/s
Level of Cover
Sum Insured
Bronze Silver Gold
See Indemnity types below
Silver Or Gold (Legal Obligation)
What limit… see below
Excess
Part b] - Your Liability [ ] Item or activity/use/operation
i. Public - General Liability Ii Products - Items Made/Sold/Installed iii. CCC - Property in your Care iiii. Other extensions - Various, as required
INDEMNITY TYPE
Part a] Your Assets
(Basis of Settlement) = 3 Types
1 Market Value
2 Agreed Value
3 Replacement
1. "Market Value" / also known as "Indemnity" This means "Current" value "at the time of the loss". Whilst this can vary considerably during the period of cover the result is the same i.e., the Market Value at that time of the loss - this is the principle of indemnity. Indemnity; The principle of indemnity operates to place the insured in the same financial position after a loss as that enjoyed immediately before the loss, without betterment improvement/profit from loss. I.e., take into account Age, condition, remaining useful life (depreciation) etc., 2. "Agreed Value" Fixed Value for the period of cover. It may be re negotiated upon each renewal for the ensuring period. 3. "Replacement Value" - New for Old Only in offered certain such as Home; Building/Contents, Fire and Perils, ISR and some Motor vehicle (sedans) and Electronic Equipment policies. To comply with settlement the precondition is you must declare a sum insured adequate for "Full Replacement" otherwise the insurer can apply Under-insurance "Average" clauses, which means proportional loss in paying a claim. FOOTNOTE: Regardless of the "Indemnity" type the insurer reserves the right to Repair, Replace or Reinstate. Therefore if you have over-insured the insurer may elect to replace the item rather than offer a Cash settlement. = 1 type 1. "Legal Obligation", at law. Part b] Your Liability Settlement is offered on the principles of "Indemnity", however the cover is afforded on the foundation that you are "Legally (not morally) Liable", within the scope of the cover. In determining the right limit for you consider a variety of issues. (maximum claimants per claim, litigation costs, years of delay in court, cost of increasing the limit is low in ratio to the premium. More information is available in our FAQ’s library.
Page 8
CLAIMS (Trigger Wording and Procedure) 1. Trigger = 4 issues 1. Must be Sudden and Unforeseen (insurance for possible not probable events otherwise there is no basis of risk for which a premium or wage is applied). 2. Must define the APPROXIMATE Cause. (Once the "cause", not the "damage" has been determined we can establish what section of the policy is applicable so that the "damage" can then be considered). • Date of Loss, Item Insured(accessories), Excess amount 3. Part b] (Liability) must be allegation of your legal liability for Breach of Duty of Care Owed 4. Part b] (Liability) who had "Control of the Risk" (delegation/Vicarious)
2. Wording = 2 Types (1 Occurrence 2 Claims Made) 1. "Occurrence" "Occurrence" wording means the "Date of Loss" is deemed to be date when the actual loss occurred and not when 1st reported. The policy must be current at the time of the loss. 2. "Claims Made" "Claims Made" wording means the "Date of Loss" is deemed to be he 1st date of notification of a claim or circumstances which may give rise to a claim, regardless of the date when the actual loss occurred. MOST IMPORTANT the claim must be reported to the insurer during the same policy period as notified to you. 3. Procedure: "What to do" A standard Policy document contains claim procedures. We, Central Insurance Brokers offers a summary checklist (Helpful Hints). When you need to make a claim please call us for professional guidance. 3
RISK MANAGEMENT - LOSS PREVENTION
Identify Key Assets to Protect - Asset Register Y/N Static or Fixed Assets & Personnel Mobile Assets & Personnel Consequential Loss of Income and trauma cost Identify Liabilities created by these Assets Do you know legal precedents ¾
What do you do “Disclosure” Critical to disclose anything “out of the normal”
The exposure What can go wrong, whilst allowing for present and future exposures
¾
Direct Liability – your activity; it’s Assets and Liabilities Indirect Liability – operations outsourced or contracted out that fall under your primary operation
¾
“what can go wrong”, translates into the Identification, the measurement and the Management of the Risk. Management has two aspects - the control of management systems in place to prevent risk occurring and if something does go wrong, to be able to deal with the damage, and the things you are more familiar (the financial side).
What is it going to cost to Outsource all or part of the risk (Insurance) Versus Your time, effort and stress
What do you know about the threat of loss, recovery and recourse (legalities)
Cross reference these issues against your current covers
LIABILITY: do you Always offer instructions (verbal/written)?, Issue a Disclaimer? Have control of the risk Directly or through sub-contractors (indirect also known as Vicariously)? Have documented procedures to verify you have a known process?
Now talk to us - your Professional Insurance Broker
Page 9 Are there any relevant considerations today and/or likely changes to the Risk/Activities/Products during the next 12 months as they can affect the Indemnity conditions of your Policy? See examples in our client manual in chapter 7 – Communications – change in risk.
Page 10 1. CROSS RELATED PRODUCTS FOR CONSIDERATION Policy Division:
A] Your Property and
B] Liability to others
[ ] STATIC &/OR [ ] MOBILE
POLICY TYPE
POLICY DIVISION
[ ] ADVANCED CONSEQUENTIAL LOSS To cover Loss of Gross Profit on Construction works i.e., ICOW and other costs (Remote areas are critical)
A
---
[ ] BUSINESS PACK To cover items at your Base (Office/Warehouse). The policy has multiple sections, which you must select:i.e., Fire, Accident Damage, Loss of Profits, Burglary, Glass, Fidelity, Liability, Motors, Spoilage
A and B
[ ] BOAT – See Marine Hull or Domestic [ ] CARGO -
listed under “Marine Transit”
[ ] CARRIERS LIABILITY – See Liability [ ] COMMERCIAL RISKS
[ ] STATIC &/OR [ ] MOBILE
A
B
[ ] CONSTRUCTION / CONTRACT WORKS To cover construction / renovations
A and B
[ ] CONTRACTORS PLANT AND MACHINERY Comprehensive cover on unregistered mobile plant
A
---
[ ] DISABILITY (See also Income Protection) A --To cover the Self Employed 24 hrs or if you are employed then for Non-Work leisure activities NB: Can also include GAP income from W/Comp. This means amounts you require above the W/Comp benefits. [ ] DOWNTIME A --Loss of income if truck in an accident which is claimable under the Truck policy. The loss of income is usually only the Finance repayments or Hire Vehicle costs. [ ] GENERAL PROPERTY A --For Mobile Assets such as "Tools of Trade". It covers static and mobile risks for Defined events such as Fire, Perils, Burglary and Transit Damage. The policy can be extended to "broader" cover as required. [ ] INCOME PROTECTION (see also Disability) A --Same as Disability policy; Accident/Illness cover however the policy has a guaranteed renewal clause, but there is an extra cost for this luxury. [ ] LEGALEXPENSE A --To cover your legal costs in respect to legal disputes as a plaintiff or defendant for General business activities, with options for Commercial Motor Vehicle and Tax Audit. [ ] LIABILITY - PUBLIC --B Resultant Damage caused by an Accident in connection with agreed activities (non-professional). [ ] LIABILITY - CARRIERS (See also Carriers) --B Resultant Damage to Customers Goods whilst in your Care and/or Custody from Pickup, Storage & Delivery [ ] LIABILITY - DIRECTORS & OFFICERS --B Resultant Damage for Breach as Director/Officer in respect to the administration of the company i.e., the health and welfare of the company. [ ] LIABILITY - EMPLOYEMENT PRACTICES --Resultant Damage as a consequence of: Wrongful Dismissal, Discrimination etc.,
B
Page 11 [ ] LIABILITY - EMPLOYERS INDEMNITY (W/COMP) --B To cover your legal liability to "workers", as defined by the special statute of law governing this exposure. Note the definition of a “worker” is much broader than you care to think so be warned… For the nominal minimum premium every business should have this policy to protect you from litigation costs. [ ] LIABILITY - MARINE HULL Resultant Damage caused by your Vessel.
---
B
[ ] LIABILITY - PROFESSIONAL --B Resultant Damage by a Breach of your Professional Duty i.e. of a Specialised kind and wholly advisory or Representative by Nature [ ] LIABILITY - ROAD RISKS --B Resultant Damage Caused by your Vehicle when used as a Road Vehicle - see MOTOR Registered. [ ] LIABILITY - SHIP REPAIRER --B Resultant Damage Caused by an Accident in connection with your Marine based activities. [ ] LIABILITY – STATUTORY FINES Liability for Exemplary or Punitive damages applied by the Courts [ ] MARINE HULL To cover your Boat and Liability to others [ ] MARINE TRANSIT - Cargo To cover items (yours or others) during a voyage
B
A and
B
A and B
[ ] MOTOR VEHICLE - Registered A and B Damage to your Vehicle including any specified attachments and Liability for Resultant Damage caused by your vehicle or items (Debris) attached. This includes Road Risk Liability and can include when used as a Tool of Trade (digging) but does not cover any cargo. [ ] DOMESTIC RISKS [ ] STATIC &/OR [ ] MOBILE [ ] BOAT Physical damage sustained as well as Liability to others [ ] CARAVAN Physical damage sustained as well as Liability to others [ ] HOME PAK: BUILDINGS/CONTENTS/MULTI RISK Physical damage sustained as well as Liability to others [ ] MOTOR VEHICLE Physical damage sustained as well as Liability to others [ ] W/COMP - Domestic Workers Liability to others [ ] WORKERS COMPENSATION - See Liability -Employers 5. PRODUCT FAQ (Frequently asked Questions) A Library of FAQ’s for each Product is available on request.
6. Industry Indexes – Cross matching 1. ORI (Occupation or Industry) risk Index – cross matches policies to your Industry 2. SME Basic checklist – according to your Industry These are available on our website – under “Products”
A and B A and B A and B A and B ---
B
Page 12 7. BROCHURE MATERIAL 1. "Why use a Registered "Professional" Insurance Broker". 2. Product Directory – 1 line listing of all products available 3. Product Brochures – available on request 4. Our services - listed in Client Manual under “Broker Services”.
All brochure material available on our website under “Products”
SPECIAL NOTE: Please remember, as your Broker, we act for you, but only under instructions from you. ALWAYS tell us what you have and what you need so we can offer you some sound advice. Our Objectives are firstly to "Protect your Assets" then save you money on premiums where possible.
Honestly, it's not worth saving a few dollars if it means losing $$thousands$$ on a claim so bear this in mind before you shop around for a "good price" - why not give us your confidence and allow us to manage all your insurance matters. The "value added" benefits we offer are significant, see the benefits listed under our "Services Directory".
www.centralins.com.au DISCLAIMER The material contained in this publication is general comment, it is not intended as advice. No reader should act or fail to act on the basis of material contained herein. This brokerage expressly disclaim all and any liability to any persons whatsoever in respect of anything done or omitted to be done by any such person in reliance whether in whole or in part on any of the conditions of this publication.