Basics of Insurance Law PLI: Bridge the Gap II Robert H. Friedman May 26, 2005 Robert H. Friedman May 26,

= When Your House Burns Down First Party v. Third Party First Party 2

= When You Burn Your Neighbors House Down Third Party First Party v. Third Party 3

Liability Insurance Litigation Insurance –Negligence –Strict Liability –Governmental Action Defense and Indemnity Coverage 4

Personal Lines Automobile Homeowners/Apartment Personal Umbrellas Life Health 5

Commercial Lines Comprehensive General Liability Umbrella General Liability Excess – Following Form Directors and Officers Errors and Omissions Fiduciary/Fraud/Crime/Fidelity Malpractice Employers Liability Employment Practices Environmental Impairment Liability 6

Primary First Dollar Cover All Sums Deductibles Duty to Defend Industry Standard Forms Notice of Claim – As Soon as Practicable 8

Umbrella Cover Everything the Primary Covers Above Primary Limits Cover Things the Primary Does Not (Gap Filling) Separate Coverage Form 9

Excess Following Form Often Contain Specific Exclusions Respond When Underlying is Exhausted or Losses Reach Attachment Point 10

Parts of General Liability Insurance Policies Declarations Page Insuring Agreement Definitions Terms and Conditions Exclusions *Endorsements 11

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Insuring Agreement ISO Standard Form (Primary) I.COVERAGE A – BODILY INJURY LIABILITY COVERAGE B – PROPERTY DAMAGE LIABILITY The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of A bodily injury or B property damage to which this insurance applies caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the companys liability has been exhausted by payment of judgments or settlements. 15

Insuring Agreement – Claims Made 1996 Environmental Impairment Policy (Primary) Coverage A: To pay on behalf of an Insured any Loss an Insured is legally obligated to pay as a result of Environmental Impairment resulting from Covered Operations set out in the Declarations for Contractors Operations commenced after the Retroactive Date set out in the Declarations provided the Loss is (1) the result of a Claim first made against an Insured and (2) first reported to the Company, in writing, by the Named Insured during the Policy Period or Extended Reporting Period, if applicable. 16

Insuring Agreement Excess Policy A. We will pay those sums in excess of the limits shown in Item 6 of the Declarations Schedule of Underlying Insurance that you become legally obligated to pay as damages because of injury to which this insurance applies, provided that the underlying insurance also applies, or would apply but for the exhaustion of its applicable Limits of insurance. B. This insurance is subject to the same terms, conditions, agreements, exclusions, and definitions as the Underlying Insurance, except:... 18

Property Damage ISO Standard Language (Primary) Property damage means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period. 19

Definition of Bodily Injury – 1973 ISO Occurrence Standard Form (Primary) Bodily injury means bodily injury, sickness or disease sustained by any person which occurs during the policy period including death at any time resulting therefrom. 21

Definition of Personal Injury – 1986 ISO Occurrence Standard Form (Primary) Personal injury means injury, other than bodily injury, arising out of one or more of the following offenses: a.False arrest, detention or imprisonment; b.Malicious prosecution; c.Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies: d.Oral or written publication of material that slanders or libels a person or organization or disparages a persons or organizations goods, products or services; or e.Oral or written publication of material that violates a persons right of privacy. 22

Definition of Advertising Injury-1997 Indemnity Policy (Primary) Advertising injury means injury arising out of one or more of the following offenses: a. Oral or written publication of material that slanders or libels a person or organization or disparages a persons or organizations goods, products or services; b. Oral or written publication of material that violates a persons right of privacy; c. Misappropriation of advertising ideas or style of doing business; or d. Infringement of copyright, title or slogan. 23

Definition of Occurrence – 1973 ISO Standard Form Occurrence means an accident, including conditions or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. 24

Notice Provision-1982 Indemnity Policy (Primary) 4. Insureds Duties in the Event of Occurrence, Claim or Suit. (a)In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agent as soon as practicable. (b)If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative. 25

Managing Defense & Settlement What defense rights did you buy? Who controls the defense? Duty to Cooperate Control of Settlement 26

2003 Insuring Agreement from Indemnity D&O Policy (Coverage A) The Underwriter will pay on behalf of the Insured Persons Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts, except for Loss which the Company pays to or on behalf of the Insured Persons as indemnification. 28

2003 Insuring Agreement from Indemnity D&O Policy (Coverage B) The Underwriter will pay on behalf of the Company: (1) Loss from Claims first made during the Policy Period against the Insured Persons for Wrongful Acts which the Company pays to or on behalf of the Insured Persons as indemnification; and (2) Loss from Securities Claims first made during the Policy Period against the Company; and (3) Loss from Securities Claims first made during the Policy Period against the Offering Underwriter which the Company pays to or on behalf of the Offering Underwriter as indemnification pursuant to the terms and conditions of an Underwriting Agreement. 29