Delaware Casualty Insurance

Casualty insurance protects individuals and businesses from liability claims and lawsuits. Delaware businesses face various liability exposures requiring comprehensive casualty coverage.

General Liability Insurance

Commercial General Liability (CGL)

Purpose:

• Protects businesses from liability claims
• Covers bodily injury and property damage to third parties
• Includes legal defense costs
• Essential coverage for most businesses

CGL Coverage Structure

Coverage A: Bodily Injury and Property Damage Liability

Bodily Injury Liability:

• Injuries to customers, clients, or visitors
• Medical expenses, lost wages, pain and suffering
• Legal defense and court judgments

Examples:

• Customer slips on wet floor in retail store
• Client injured by falling merchandise
• Visitor trips over equipment at business premises

Property Damage Liability:

• Damage to others' property
• Repair or replacement costs
• Loss of use of damaged property

Examples:

• Contractor damages client's property during work
• Employee accidentally damages customer's belongings
• Fire at your business spreads to neighboring property

Legal Defense:

• CGL pays defense costs in addition to policy limits
• Defense costs do not reduce policy limits
• Insurer provides legal representation

Coverage B: Personal and Advertising Injury

Personal Injury Coverage:

• False arrest, detention, or imprisonment
• Malicious prosecution
• Wrongful eviction or entry
• Slander, libel, or defamation
• Invasion of privacy

Advertising Injury Coverage:

• Defamation in advertising
• Copyright infringement in advertising
• Misappropriation of advertising ideas
• Infringement of title or slogan

Examples:

• Security guard falsely arrests shoplifter
• Business uses copyrighted image without permission in ad
• Negative review constitutes defamation

Coverage C: Medical Payments

Medical Payments Coverage:

• Pays medical expenses for injured persons regardless of fault
• Goodwill coverage to avoid lawsuits
• Typically $5,000-$10,000 limit
• No admission of liability

Covered Expenses:

• Doctor and hospital bills
• Ambulance costs
• Medical equipment and supplies
• X-rays and diagnostic tests

CGL Policy Limits

Occurrence Limits:

• Per Occurrence Limit: Maximum for single event (e.g., $1,000,000)
• General Aggregate Limit: Maximum for all claims in policy period (e.g., $2,000,000)
• Products-Completed Operations Aggregate: Separate aggregate for these exposures
• Personal and Advertising Injury Limit: Per person or organization (typically equals per occurrence)
• Medical Expense Limit: Per person (typically $5,000-$10,000)

Example Limits:

• $1,000,000 per occurrence
• $2,000,000 general aggregate
• $2,000,000 products-completed operations aggregate
• $1,000,000 personal and advertising injury
• $5,000 medical expense per person

Occurrence vs. Claims-Made

Occurrence Trigger:

• Covers claims arising from incidents during policy period
• Coverage applies even if claim filed years later
• More common and generally preferred
• Example: Injury in 2024, claim filed in 2026 → Covered by 2024 policy

Claims-Made Trigger:

• Covers claims made during policy period for incidents on or after retroactive date
• Requires continuous coverage
• Tail coverage needed when switching carriers
• Common for professional liability
• Example: Injury in 2024, claim filed in 2026 → Covered by 2026 policy (if retroactive date is 2024 or earlier)

Key Differences:

Exam Tip: Occurrence policies cover incidents happening during the policy period, regardless of when claims are filed. Claims-made policies cover claims filed during the policy period, regardless of when the incident occurred (as long as it's after the retroactive date). Claims-made policies require tail coverage when switching insurers.

Workers' Compensation Insurance

Delaware Workers' Compensation Requirements

Mandatory Coverage:

• Delaware requires workers' comp for most employers
• Threshold: Employers with 1 or more employees must carry coverage
• Includes full-time, part-time, and temporary employees
• Family members working in business may be covered

Exemptions:

• Sole proprietors (no employees)
• Some agricultural workers
• Certain casual laborers
• Independent contractors (not employees)
• Some domestic workers

Workers' Compensation Benefits

Part A: Workers' Compensation

Provides benefits to injured employees:

1. Medical Benefits

• All reasonable and necessary medical treatment
• No dollar limit on medical care
• Covers doctors, hospitals, surgery, rehab, prescriptions
• Employee may choose treating physician

2. Disability Benefits

• Temporary Total Disability: Unable to work temporarily
• Permanent Total Disability: Unable to work permanently
• Temporary Partial Disability: Can work in limited capacity
• Permanent Partial Disability: Permanent impairment but can work
• Typically 2/3 of average weekly wage

3. Death Benefits

• Benefits to dependents if work injury causes death
• Burial expenses (typically up to $6,000-$10,000)
• Ongoing benefits to surviving spouse and children

4. Rehabilitation Benefits

• Vocational rehabilitation
• Retraining for new occupation
• Job placement assistance

Part B: Employer's Liability

Protects Employer from Lawsuits:

• Employees generally cannot sue employer for work injuries (exclusive remedy)
• Part B covers lawsuits not covered by Part A
• Covers suits by employee's family members (loss of consortium)
• Covers third-party over claims

Standard Part B Limits:

• $100,000 per accident
• $500,000 disease policy limit
• $100,000 disease each employee
• Can be increased if needed

Delaware Workers' Compensation Process

Injury Reporting:

1. Employee reports injury to employer immediately
2. Employer files First Report of Injury with insurance carrier
3. Insurance carrier investigates claim
4. Carrier determines compensability
5. Benefits begin if claim accepted

Dispute Resolution:

• Delaware Office of Workers' Compensation (OWC) handles disputes
• Mediation and hearings available
• Industrial Accident Board (IAB) adjudicates claims
• Legal representation allowed

Workers' Compensation Premiums

Premium Calculation:

• Based on payroll and classification codes
• Different occupations have different risk classifications
• Experience modification factor adjusts premiums

Formula: \text{Premium} = \frac{\text{Payroll}}{100} \times \text{Rate per }$100 \times \text{Experience Mod}

Example:

• Annual payroll: $500,000
• Classification rate: $3.50 per $100 payroll
• Experience mod: 0.90 (10% credit for good experience)
• Premium: ($500,000 ÷ 100) × $3.50 × 0.90 = $15,750

Experience Modification:

• Factor reflecting employer's loss history
• 1.0 = average experience
• < 1.0 = better than average (credit)

• 1.0 = worse than average (debit)

Professional Liability Insurance

Errors and Omissions (E&O) Insurance

Purpose:

• Covers professional negligence claims
• Protects against errors, omissions, or failure to perform professional duties
• Essential for professionals providing services or advice

Who Needs E&O:

• Insurance agents and brokers
• Real estate agents
• Financial advisors and accountants
• Consultants and engineers
• Architects and designers
• Technology and software professionals

E&O Coverage

What E&O Covers:

• Professional negligence (errors or omissions)
• Failure to perform professional services
• Misrepresentation of facts or advice
• Breach of professional duty
• Legal defense costs

Examples:

• Insurance agent fails to procure requested coverage
• Accountant makes error in tax return causing penalties
• Real estate agent misrepresents property condition
• Consultant provides incorrect advice causing client losses

What E&O Does NOT Cover:

• Intentional wrongdoing or fraud
• Criminal acts
• Bodily injury or property damage (covered by general liability)
• Breach of contract (unless related to professional services)

Claims-Made Basis

E&O policies are typically claims-made:

• Claim must be made during policy period
• Incident must occur after retroactive date
• Continuous coverage essential
• Tail coverage (extended reporting period) needed when switching carriers

Extended Reporting Period (Tail Coverage):

• Allows reporting of claims after policy expires
• Covers incidents during policy period, claims after
• Expensive but necessary protection
• Typically 1-3 years or unlimited

Umbrella and Excess Liability

Umbrella Liability Policy

Purpose:

• Provides additional liability coverage above underlying policies
• Broader coverage than underlying policies
• "Umbrella" covers gaps in underlying coverage

How Umbrella Works:

1. Underlying policy pays first (up to its limit)
2. Umbrella pays excess (above underlying limit)
3. Umbrella may cover some claims not covered by underlying

Example:

• Auto liability limits: $250,000
• Umbrella policy: $1,000,000
• Judgment against you: $800,000
• Auto policy pays: $250,000
• Umbrella pays: $550,000 (excess above auto limit)

Umbrella Coverage Features

Coverage Provided:

• Excess over auto liability
• Excess over homeowners liability
• Excess over business liability
• Covers some claims not covered by underlying (with retention)

Retention (Self-Insured Retention):

• Deductible applied when umbrella pays without underlying policy
• Typically $1,000-$10,000
• Example: Claim not covered by underlying, umbrella pays above retention

Typical Umbrella Limits:

• $1,000,000 (most common)
• $2,000,000
• $5,000,000 or higher
• Relatively inexpensive for coverage provided

Underlying Insurance Requirements

Umbrella policies require minimum underlying limits:

Typical Requirements:

• Auto liability: $250,000/$500,000 or $300,000 CSL
• Homeowners liability: $300,000-$500,000
• Business liability (if applicable): $1,000,000

Why Underlying Limits Matter:

• Umbrella insurer wants primary coverage to pay first
• Higher underlying limits reduce umbrella insurer's exposure
• Umbrella provides excess, not primary coverage

Exam Tip: Umbrella policies provide excess liability coverage above underlying auto, homeowners, and business policies. They also offer broader coverage, covering some claims not covered by underlying policies (subject to a retention). Umbrella policies require minimum underlying liability limits.

Delaware Business Liability Considerations

Delaware Business Environment

Key Industries:

• Financial Services: Banks, credit card companies, insurance companies
• Healthcare: Hospitals, medical practices, pharmaceutical companies
• Hospitality: Hotels, restaurants, tourism in coastal areas
• Manufacturing: Chemical, automotive, food processing
• Professional Services: Legal, accounting, consulting firms

Industry-Specific Liability Exposures

Restaurants and Hospitality:

• Foodborne illness claims
• Slip and fall accidents
• Liquor liability (dram shop exposure)
• Premises liability

Healthcare Providers:

• Medical malpractice (professional liability)
• HIPAA privacy violations
• Premises liability for patients and visitors
• Workers' compensation (healthcare workers)

Retail and Service Businesses:

• Customer slip and fall accidents
• Product liability for sold goods
• Parking lot accidents
• Employee liability

Contractors and Construction:

• Property damage during construction
• Bodily injury at job sites
• Completed operations claims
• Workers' compensation (high-risk occupation)

Liquor Liability

Dram Shop Liability:

• Liability for serving alcohol to intoxicated persons or minors
• Restaurant or bar may be liable if intoxicated patron causes accident
• Delaware has dram shop laws holding establishments liable

Liquor Liability Coverage:

• Separate coverage or endorsement to general liability
• Covers claims from serving alcohol
• Essential for bars, restaurants, and event venues

Examples:

• Bar serves obviously intoxicated patron
• Patron drives drunk and causes fatal accident
• Victim's family sues bar for damages
• Liquor liability coverage responds

Additional Casualty Coverages

Cyber Liability Insurance

Growing Importance:

• Data breaches and cyberattacks increasing
• Ransomware, hacking, and data theft
• Regulatory compliance (GDPR, state laws)
• Business interruption from cyber events

What Cyber Coverage Includes:

• Data breach notification costs
• Credit monitoring for affected individuals
• Legal defense and regulatory fines
• Business interruption losses
• Cyber extortion payments (ransomware)

Employment Practices Liability (EPL)

Coverage:

• Wrongful termination claims
• Discrimination and harassment claims
• Retaliation claims
• Wage and hour violations

Delaware Businesses:

• Growing employment litigation
• Federal and state anti-discrimination laws
• EPL coverage increasingly important
• Separate policy or endorsement to CGL

Directors and Officers (D&O) Liability

Purpose:

• Protects corporate directors and officers from personal liability
• Covers wrongful acts in managing company
• Shareholder lawsuits and regulatory investigations

Delaware Incorporation:

• Delaware is leading state for corporate incorporations
• Many companies incorporated in Delaware for favorable business laws
• D&O coverage critical for Delaware corporations
• Protects personal assets of directors and officers