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March 2009
Part 1 - Types of Insurance Coverage
● First Party vs. Third Party Coverage
○ First party coverage protects you against damage or loss to things owned by your business. Buildings, vehicles, office equipment, etc.
○ Third party coverage protects you against claims made by other people claiming you did something wrong: Accidental damage to
something owned by others, employee mistakes, etc.
● Commercial General Liability (CGL) Coverage
○ Broad coverage protecting against many different liabilities
○ Includes coverage for most types of accidents caused by your company or a company employee, or by products or services rendered by
you.● Errors and Omissions Coverage
○ Designed to provide coverage for “professional” mistakes.
○ Generally covers the failure to give correct advice/information to customers
● Workers’ Compensation Coverage
○ Protects you against benefits you have to pay to injured employees
○ Required by Minnesota law
○ Be aware of distinction between employees and independent contractors
● Employer’s Liability Policies
○ Generally includes workers’ compensation coverage
○ Also protects against sexual harassment and discrimination claims
● Umbrella Policies
○ Policy acts as an umbrella to provide additional coverage over all policies held by a builder.
○ Umbrella policy “floats” on top of all other coverages
○ High policy limits are available at reasonable cost
Part 2 - Tips for Dealing With Insurance Issues
● Understand your obligations when you make a claim
○ Report claim immediately
○ Don’t try to resolve problem on your own, unless you have reported the claim and the insurance company tells you to do so
○ You must cooperate with you insurance company when making a claim
- This requirement is subject to special consideration if the insurance company denies coverage or defends your case under a
reservation of rights, discussed below.
○ If your insurance company accepts the claim, the insurer will pay all legal bills and any amounts needed to resolve the case, but you lose
the ability to control any litigation or settlement payments
● Obtain additional named insured endorsements from companies with which you regularly do business
○ No cost to you
○ Additional protection if a claim is made against you because of something done by someone else
● Be aware of information contained in insurance application
○ Be honest when applying for insurance
○ Misrepresentations in insurance applications can cause coverage problems later, or in extreme cases, complete denials of coverage
○ Even if your agent prepares application, review it to make sure it is correct. Don’t be tempted to “look the other way” in order to get a
cheaper premium
Part 3 - Coverage Concerns
● Denial Letters
○ After you make a claim, the insurance company denies your claim entirely for a variety of reasons.
○ You do not have to accept the insurer’s interpretation of the policy and facts of the claim. If you think the insurer is wrong, argue with
them.
○ Denial letters mean the insurance company is not going to defend the claim and that you must take immediate action to protect yourself.
- Your protection includes taking measures to defend the underlying claim asserted against you, AND getting help to apply
pressure on the insurance company to cover the claim.
● Reservation of Rights Letters
○ Insurance company temporarily accepts your claim, but reserves its right to investigate further and deny coverage later.
○ Just because the insurance company accepts the claim and defends it initially does not mean you have nothing to worry about.
○ Parts of the claim may be covered while other parts are not.
○ You may be asked to contribute some of your own money to settlement
○ If you get a reservation of rights letter, this means you may have uninsured exposure. You should get appropriate advice
about what this means and what you need to do to protect yourself.
Benjamin Bohnsack practices in the areas of construction litigation, employment litigation and general civil litigation.
© 2009 Rinke-Noonan.
This is a general discussion of legal issues and is not intended to be legal advice. We would be pleased to review the specific facts and law regarding any given legal matter.
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