Rhode Island Liability Insurance

General Liability Insurance

Purpose of Liability Insurance

Liability insurance protects the insured against:

• Legal liability for bodily injury to others
• Property damage to others' property
• Personal and advertising injury
• Medical payments to injured parties
• Defense costs for lawsuits

Commercial General Liability (CGL) Coverage

Coverage Triggers

Occurrence Basis

Occurrence policy covers claims for injuries that occur during the policy period:

• Coverage trigger: When injury/damage occurs
• Claims can be filed years later
• Policy in effect when injury occurred pays claim
• Tail coverage: Not needed (policy continues to cover past occurrences)

Example:

• Policy period: 2025
• Injury occurs: July 2025
• Claim filed: March 2027
• Coverage: Yes (2025 policy covers because injury occurred in 2025)

Claims-Made Basis

Claims-made policy covers claims made during the policy period:

• Coverage trigger: When claim is filed
• Both must occur during policy period: injury AND claim
• Retroactive date: Sets earliest covered injury date
• Tail coverage: Often needed when policy cancelled

Example:

• Policy period: 2025 (retroactive date: January 1, 2023)
• Injury occurs: July 2024
• Claim filed: March 2025
• Coverage: Yes (injury after retroactive date, claim during policy period)

Extended Reporting Period (Tail Coverage)

When claims-made policy ends:

• Tail coverage extends reporting period
• Covers prior acts after policy ends
• One-time premium for extended period
• Essential when switching carriers or retiring

Professional Liability Insurance

Errors & Omissions (E&O) Insurance

Professional liability insurance protects against:

• Negligent acts in professional services
• Errors in professional work
• Omissions (failure to act)
• Breach of professional duty
• Failure to perform as promised

Rhode Island E&O Requirement for Producers

All resident insurance producers in Rhode Island:

Exam Tip: Rhode Island REQUIRES all resident insurance producers to carry and maintain Errors & Omissions insurance. This is mandatory, not optional.

Professionals Who Need E&O Insurance

Liability Limits

Split Limits vs. Single Limits

Split Limits (e.g., 100/300/100):

• Per Person: $100,000 bodily injury per person
• Per Occurrence: $300,000 bodily injury per occurrence
• Property Damage: $100,000 per occurrence

Single Limit (e.g., $500,000):

• Combined Single Limit (CSL): $500,000 per occurrence
• Applies to any combination of bodily injury and property damage
• More flexibility in claim payments

Aggregate Limits

Example Policy Limits:

• Per Occurrence: $1,000,000
• General Aggregate: $2,000,000
• Products-Completed Operations Aggregate: $2,000,000

This means:

• Maximum $1 million per claim
• Maximum $2 million total for all claims during policy period

Rhode Island Liability Laws

Modified Comparative Negligence

Rhode Island General Laws § 9-20-4 establishes modified comparative negligence:

• Plaintiff less than 50% at fault: Can recover damages reduced by fault percentage
• Plaintiff 50% or more at fault: Cannot recover any damages
• Jury determines: Percentage of fault for each party
• Damages reduced: By plaintiff's fault percentage

Joint and Several Liability

Rhode Island limits joint and several liability:

• Economic damages: Joint and several liability applies
• Non-economic damages: Several liability only (proportionate to fault)
• Defendants pay: According to their percentage of fault
• Exception: Defendants more than 50% at fault may be jointly liable

Statute of Limitations

Time limits to file liability claims in Rhode Island:

Business Liability Exposures

Premises Liability

Business owners liable for:

• Slip and fall accidents on premises
• Inadequate maintenance causing injury
• Inadequate security (assaults, attacks)
• Dangerous conditions not corrected
• Failure to warn of known hazards

Products Liability

Manufacturers and sellers liable for:

• Defective products causing injury
• Design defects making product dangerous
• Manufacturing defects in production
• Failure to warn of product dangers
• Breach of warranty

Completed Operations Liability

Contractors liable for:

• Faulty work discovered after completion
• Injuries from completed work
• Property damage from completed operations
• Away from premises coverage needed

Liquor Liability (Dram Shop)

Rhode Island General Laws § 3-14-7 addresses liquor liability:

• Licensed establishments can be liable
• Serving intoxicated persons who cause injury
• Serving minors who cause injury
• Must prove establishment knew or should have known
• Separate liquor liability policy usually required

Umbrella and Excess Liability

Excess Liability Insurance

Excess liability provides:

• Additional limits over underlying policies
• Same coverage as underlying policies
• Follows form of underlying policy
• Drops down when underlying limits exhausted

Umbrella Liability Insurance

Umbrella liability provides:

• Broader coverage than excess
• Fills gaps in underlying coverage
• Self-insured retention (SIR) for claims not covered by underlying
• May cover claims excluded by underlying policies
• Higher limits at lower cost per dollar

Defense Costs

Duty to Defend

Liability policies obligate insurer to:

• Defend the insured against covered claims
• Hire attorneys at insurer's expense
• Investigate claims
• Negotiate settlements
• Go to trial if necessary

Defense Costs vs. Limits

Within limits policies:

• Defense costs reduce policy limits
• Limits depleted by defense + settlements
• Less money available for damages

Outside limits policies:

• Defense costs do not reduce limits
• Full policy limits available for damages
• More valuable to insured

Exam Tip: Most CGL policies pay defense costs IN ADDITION to policy limits, meaning defense costs do not reduce the amount available for damages.

Liability Insurance Exclusions

Common CGL Exclusions

Additional Insureds

Businesses often add additional insureds to policies:

• General contractors require subcontractors to add them
• Landlords require tenants to add them
• Clients may require vendors to add them
• Coverage extends to additional insured
• Primary or excess depends on endorsement wording

Claims-Made Policy Considerations

Retroactive Date

• Earliest date of covered acts
• Acts before retroactive date not covered
• Usually set to policy inception date
• May be earlier if continuous coverage

Extended Reporting Period Options

When Tail Coverage Needed

Essential when:

• Switching carriers (new carrier may have later retroactive date)
• Retiring from profession
• Closing business
• Policy non-renewed by insurer
• Coverage cancelled

Exam Tip: Extended Reporting Period (tail coverage) is critical for claims-made policies. Without it, claims filed after the policy ends are not covered, even if the act occurred during the policy period.