When an organization decides to self-insure or retain a major part of its risk, it must determine whether to assume any or all of the administrative responsibilities. Selecting the correct servicing company becomes a huge challenge when the organization decides to outsource some service functions. The article of the month discusses the services that a service company (a third party administrator) in the property and casualty industry performs, lists the requirements that states demand of third party administrators, and presents explanations of the considerations that should be made by companies before selecting a third part administrator.

The court cases in the Dec Page deal with a dispute over whether aggregate limits or an each occurrence limit should be chosen to pay for a covered claim, claims arising out of an auto accident due to alcohol consumption, homeowners coverage and a mold-related loss, and the duty of the insurer to defend.

In the first case, the insurer moved for summary judgment, claiming that the loss was one, uninterrupted and continuing occurrence and subject to the each occurrence limit; or, if the court determined that there was more than one occurrence, the products-completed operations aggregate limit and not the general aggregate limit applies. The U.S. District Court in Oklahoma resolved this issue. In the second case, the Supreme Court of South Carolina addressed a liquor liability lawsuit and used the facts of the situation to determine if the bartenders knew or should have known that the driver of the auto that caused the accident was intoxicated, and thus, should not have been served more alcohol. The homeowners coverage case dealt with a claim for mold-related loss caused by ice-damming. The insured homeowner had a mold endorsement on the policy that provided coverage for damage caused by mold under certain circumstances. The insured thought this endorsement provided coverage for his loss, but the insurer disagreed. The appeals court in New Jersey settled the disagreement. And, in the final case, an appeals court faced the issue of when an insurer had to defend its insured. Does the duty to defend arise due to the legal theories stated by the claimant? Or because of the possible, hypothetical coverage situations propounded by the insured? Or, does the duty to defend depend on the factual allegations in the complaint made by the claimant?

Questions and Answers

The expenses involved in cleaning up after a grasshopper infestation are covered under a commercial property form. See Cleanup Cost Included in Covered Loss. If a policy does not define “vacancy,” what is its meaning under a commercial property form? See Vacancy Definition under Commercial Property Policy.

Coverage for property in transit depends on why an employee had property in his personal vehicle. See Personal Property in Transit Coverage. Directors and Officers Liability policies generally do not address contractual liability issues. See D&O Coverage and Other Insurance Provisions.

Physicians and Surgeons Equipment Coverage

The current ISO physicians and surgeons equipment coverage form, CM 00 26 03 10, is discussed. Three basic categories of property are insured under this form: professional medical, surgical, and dental equipment; office equipment; and the tenant-insured's interest in improvements and betterments. This coverage is on an open perils basis, subject to the exclusions listed in the form. See Physicians and Surgeons Equipment Coverage Form.