Below is a list of some of the questions that we are most frequently asked at Craft Guard:
Q: What is “General Liability Insurance”?
A: A form of insurance designated to protect owners and operators of businesses from a wide variety of liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of an insured; products sold by the insured, operations completed by the insured and/or contractual liability.
Q: Are there policy financing options available to me?
A: Yes. Many clients find our financing options more convenient than paying for their policy in full. Craft Guard Insurance Services will help find a payment plan that works for you.
Q: What is the difference between an “Admitted Carrier” and a “Non-Admitted Carrier”?
A: While the term “non-admitted” may sound like you’re using a lesser carrier, that’s not the case.
Q: What is an Admitted Carrier?
A: An admitted carrier in California follows guidelines set forth by the California Department of Insurance (DOI). These carriers are required to file their rates with the DOI, which then approves their use. The carriers must use these filed rates and cannot deviate.
Admitted carriers are also a part of the California Insurance Guarantee Association (CIGA), which provides protection for policyholders should the carrier be declared insolvent. Claims that occurred before the carrier became insolvent can be paid up to $500,000.
Q: Why do we need non-admitted carriers?
A: Admitted carriers often do not meet all the needs of many insurance buyers. Specialty Risks, earthquake and professional liability coverages are among those that are often not written by admitted carriers. Without the non-admitted carriers, high loss-potential risks, those with loss issues or specialty risks would be uninsurable. However, because the non-admitted carriers do not have to file their rates with the DOI, they retain the flexibility to price risks according to their specific exposures.
Non-admitted carriers are often U.S.-based companies that have chosen not to become an admitted carrier in California. In fact, many non-admitted companies are owned by admitted carriers. Some of the largest insurance companies, such as Hartford Insurance, AIG and Lloyds of London have non-admitted companies they use for specialty risks.
Regardless of whether a carrier is admitted or non-admitted, the best gauge for determining the security of one’s policy is to check the financial rating of the company. The independent industry standard for rating insurance companies is A.M. Best Company. A.M. Best rates a carrier on financial strength and size based on policyholder reserves. Below is a summary of A.M. Best’s rating guidelines.
Financial Ratings
Guide to A.M. Best’s Rating
| Rating | Score | Security |
|---|---|---|
| A++ and A+ | Superior | Secure |
| A and A- | Excellent | Secure |
| B++ and B+ | Good | Secure |
| B and B- | Fair | Vulnerable |
| C++ and C+ | Marginal | Vulnerable |
| C and C- | Weak | Vulnerable |
| D | Poor | Vulnerable |
| E | Under Regulatory Supervision | |
| F | In Liquidation | |
| S | Suspended | |
Conclusion
Non-admitted carriers play an important component inside and outside the California marketplace. They provide coverage that would be otherwise unavailable or with inferior limits. The buyer should be aware of market conditions and make sure that they are buying a policy from a reputable carrier by investigating the carrier’s AM Best financial rating (available online at www.ambest.com).
Q: What is an “Additional Insured”?
A: A person other than the named insured who is protected under the terms of the contract. Usually, additional insures are added by endorsement or referred to in the wording of the definition of “insured” in the policy itself.
Q: What is a Certificate of Insurance?
A: A form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance for contractors.
Q: What is a Manifestation Clause?
A: This term applies to injury or damage that first “manifests” during the policy period. It does not apply to damage that is continuously or progressively deteriorating AND first manifests prior to the effective date of the policy.
Q: What is Primary and Non-Contributory Wording?
A: This phrase means that your General Liability policy, or any insurance policy that has this endorsement on it, will pay first in the event of a claim. The Non-Contributory part means that not only will your policy pay first, but it will pay the full amount of the claim until the limits are exhausted without your client contributing to the loss with their own insurance. Not all General Liability policies have this coverage built in and it can be quite expensive to purchase if your policy was issued without it.
Q: Do I have to have Workers’ Compensation Insurance?
A: Yes, every California employer using employee labor, including family members, must purchase Workers’ Compensation Insurance (Labor Code Section 3700). If you fail to have Workers’ Compensation Insurance for your employees, it can be expensive as the DLSE is required to issue and serve a stop order/penalty assessment prohibiting further use of employee labor until you do purchase Workers’ Compensation Insurance. Effective January 1, 2011, the penalty assessed for failure to have Workers’ Compensation Insurance is based upon the greater of (1) twice the amount the employer would have paid in workers’ compensation insurance premiums during the period the employer was uninsured, or (2) $1,500 per employee. However, there are exceptions for partnerships, if the only persons performing labor are the partners and corporations where the corporate officers are the sole shareholders; in which case, the corporation, officers, and directors come under the Workers’ Compensation provisions only by election.