In the June/July 2019 issue, I discussed Section I: Property of the standard commercial insurance policy. In this issue, I will review sections II and III: Liability and common policy conditions.
Section II: Liability
A commercial general liability policy protects the identified business against claims for bodily injury and property damage arising out of the premises, operations, products and completed operations. It also offers personal and injury liability protection. You might hear insurance agents or read documents referencing these liability coverages as “BI,” “PD” and “PI,” respectively.
Commercial general liability is third-party coverage, meaning the business is protected from claims brought against it by a person or organization other than those making decisions on behalf of the business, such as an owner, board member, shareholder or employee. Clients represent the most common source of general liability claims in the veterinary setting.
Let’s examine the categories in greater detail.
1. Bodily injury is typically defined as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”
Examples of claims I have encountered include:
- A client is injured when she walks into a veterinary hospital and slips on a wet floor.
- A client is bitten by her dog as she holds it during an examination or treatment procedure.
2. Property damage is typically defined as “physical injury to tangible property, including all resulting loss of use of that property.”
Examples:
- A client’s car is damaged in the hospital’s parking lot due to inadequate maintenance. Perhaps a tire was punctured, a parking barrier was inappropriately located or a carport collapsed.
- A client’s dog jumps on another person in the waiting room, breaking the person’s cellphone.
- A veterinarian inadvertently knocks over and breaks a valuable piece of art while making a house call.
3. Personal and advertising injury is typically defined as “infliction of damage arising out of a written or oral communication that slanders or libels a person or organization, violates their privacy or infringes on another’s idea or copyright.”
Libel and slander refer to a false statement made by a person or organization about another. Whereas libel refers to a statement made in writing, slander is one made verbally that damages the reputation of another person or organization. To legally be considered libel or slander, the false statement must be hurtful and inflict demonstrated harm to the other party.
Examples:
- A practice uses copyrighted material (often photographs) in or on a hospital brochure or website without permission or payment. The hospital is then sued for copyright infringement.
- A veterinarian speaking at a continuing education event makes a false or disparaging comment about the efficacy of a new therapeutic drug. The manufacturer alleges the comment created a negative perception of the drug within the veterinary community and a loss of sales. The veterinarian is sued for slander.
When it comes to personal injury and insurance, medical payments are a type of no-fault, goodwill coverage provided to a third-party injured on your premises or as a result of your day-to-day business operations. Benefits include necessary surgical, medical and dental services. This coverage is designed to protect the policyholder and insurance company from lawsuits by quickly paying the injured party’s medical bills without requiring proof of negligence on the part of the business. Most policies have a $5,000 to $10,000 limit per occurrence.
Some common liability exposures typically are not covered by a standard commercial general liability policy. These include business automobile, professional liability and employment practices liability. They are provided through separate policies or endorsements.
Also be aware that a commercial general liability policy does not cover exposures related to valet parking. I have seen claims arise at hospitals that provided valet parking. A garagekeepers policy or endorsement provides protection for a business against damage resulting from an employee’s negligence while operating a client’s vehicle or while the vehicle was in your care, custody and control.
Section III: Common Policy Conditions
Common policy conditions are applicable to both Section I: Property and Section II: Liability in a commercial insurance policy. As the name describes, this section details the legal details related to how the policy works. They include:
- Cancellation: How and under what circumstances the policy can and will be cancelled. The most common reason I have seen is failure to pay the policy premium on a timely basis. Business owners need to appreciate that insurance policies are contracts. They are not the same as an invoice from a drug company. Failure to pay on a timely basis will void the contract, resulting in its cancellation and the insurance company’s refusal to pay claims occurring during the period in which the payment was delinquent. Furthermore, the insurance company reserves the right to reinstate coverage at its discretion.
- Changes: How changes can be made to the policy.
- Concealment, misrepresentation or fraud: Notification that the policy will be canceled in the case of fraud, intentional concealment or misrepresentation of a material fact. This most frequently comes into play with completion of the policy application and during the claims process.
- Examination: The insurance company retains the right to inspect your books and records as they relate to the policy. This is rarely seen with commercial insurance policies for veterinary entities. Records exams are more routinely seen with annual audits of workers’ compensation insurance policies.
- Inspections and surveys: The insurance company reserves the right to conduct inspections and surveys of the business at any time. By far the most common example in the veterinary setting is loss-control inspections of the insured property.
- Insurance under two or more coverages: This details the amount the insurance company will pay in the event two or more of the policies coverages apply to a loss or claim.
- Other insurance: This details how the policy will respond to claims also covered by another insurance policy. The most common example I have experienced is when a veterinarian has a personal professional liability policy and is covered by the employer’s policy. Typically, the two insurance policies split the cost of the claim.
- Premiums: This states that the premium is computed based on rates in effect at the time the policy was issued and the first named insured on the policy is legally responsible for payment.
- Premium audit: This details the rights of the insurance company to conduct a premium audit when applicable. This is typically not relevant with commercial insurance policies for veterinary facilities.
- Transfer of rights of recovery against others to us: This gives the insurance company the legal right to subrogate against another party’s liability for a loss. For example, a veterinary hospital contracted the delivery and installation of bottle gas cylinders. The bottle gas company’s employee connected a new bottle of oxygen incorrectly and the oxygen leaked into the closed room, where an open pilot light on a gas dryer was present. The resulting fire destroyed the hospital. The cause was attributed to the faulty installation of the oxygen cylinder by the bottle gas company’s employee. The hospital’s insurance company rebuilt the hospital and then subrogated back against the bottle gas company for the costs associated with the claim.
- Transfer of your rights and duties under this policy: This states that the policyholder’s duties and rights under the policy can’t be transferred without the insurance company’s written consent.
Don’t Be Afraid to Ask
Hopefully these two articles helped demystify some of the legal verbiage associated with a commercial insurance policy. Why is this important? Ultimately, you are responsible for knowing what your policy does and does not cover.
Never hesitate to engage an insurance professional who has experience with the veterinary profession if you have questions or concerns about your current policies and exposures.
Protect & Defend columnist Dr. Ed Branam is veterinary and animal services program manager for Safehold Special Risk Inc. He serves on the American Veterinary Medical Association’s Legislative Advisory Committee.