Another insurance question

[logcabinmomma]

My husband and I were discussing business stuff yesterday and the topic of the woman who sells on ebay being sued came up. While we were on the subject, he asked an interesting question I could NOT find the answer for- if I sell a candle and have insurance when I sell it, but 2 years later for whatever reason, I'm no longer in business and have no insurance and company is dissolved, what happens if that same candle causes a fire (through customer error). If I no longer have insurance am I liable? If you can't hide behind an LLC and the only safety net is insurance, but the product doesn't cause a problem til years down the road, then what?

I'd LOVE to hear your answers on this!!!

-Kristi

[TeriM]

if you had a policy in force at the time of the loss... it would be covered... unless you had a claims made policy and not an occurrence policy....

here's the difference:

Occurrence form - This form provides coverage for claims arising out of an accidentwhich results in bodily injury or property damage neither expectednor intended. The form covers such claims that occur during thepolicy period irrespective of when the claim is made against you

Claims made - Under a claims-made form, an incident must have happened and be reported to the insurance company while the policy is in force. Once the policy has been terminated, coverage no longer exists. If coverage is desired for claims reported after the policy has been terminated, then an Extended Reporting Endorsement (known as a "tail") must be purchased.

[logcabinmomma]

So if you didn't have the extended reporting endorsement added during the policy term, you wouldn't be covered if a candle caused an accident after coverage was terminated? For both the occurance and the claims made types, it looks like if something happened years after coverage ended, there would be no protection from insurance unless the "tail" or endorsement for extended reporting is added on to the policy... right?

My thinking is that no coverage would be sound enough unless it covered claims that could be made against you even after the coverage was terminated... I mean, I could naively think that I'm protected but cancel after I stop selling, but then have it come back to bite me years in the future, right?

Does anyone know if the IBN policy has the ability to add that rider? Does anyone have it?

-Kristi

[TeriM]

So if you didn't have the extended reporting endorsement added during the policy term, you wouldn't be covered if a candle caused an accident after coverage was terminated? For both the occurance and the claims made types, it looks like if something happened years after coverage ended, there would be no protection from insurance unless the "tail" or endorsement for extended reporting is added on to the policy... right?

My thinking is that no coverage would be sound enough unless it covered claims that could be made against you even after the coverage was terminated... I mean, I could naively think that I'm protected but cancel after I stop selling, but then have it come back to bite me years in the future, right?

Does anyone know if the IBN policy has the ability to add that rider? Does anyone have it?

-Kristi

the only time you would need "tail" is if you hade a claims made policy - claims made means the claim has to be submitted during the policy term.

if it's occurrence - a claim could be made after the policy expired .. as long as it was in force at the time of the loss.... could be 2 years after.

If someone was going to sue you - each state has a statue of limitations on filing suit. Every state is different - in Ohio it's 2 years... so someone has 2 years to file a law suit after the incident....other states have different time limits.

[logcabinmomma]

But my question is what happens if someone buys a candle and uses it ONLY for Christmastime and they keep it in a back cabinet, but YEARS after they buy it, it causes an incident when the policy is no longer in force. Say that I have stopped making candles at that point. Does that mean that there is no coverage for a suit resulting from an incident that occurs years after I have sold the product?

See, the loss would not occur until the policy had expired, but the policy was in place at the time of the sale. Since a candle has no expiration date, do I have to have insurance the rest of my life even if I'm no longer selling candles.... see what I'm sayin'? The statute of limitations isn't applied to the sale but the incident, correct?

What if I want a policy that will protect me from lawsuits 10 years from now on goods sold this year when I HAVE insurance, even if I DON'T have insurance in 10 years when an incident COULD occur. Ya know?

This DOES have DH concerned....

-Kristi

[TeriM]

I get what you mean... let me do a little research and let you know...

[TeriM]

oaky.. maybe this will clear it up... when they speak of vendor.. it could also include a customer that would purchase a candle....

6 Reasons Why The Occurrence Policy Is Superior To The Less Expensive Claims-Made Policy

1. Your current or future contract with a vendor may require an occurrence policy in order to do business. Simply put, the occurrence policy provides better protection for your vendors. If you were to go out of business or discontinue a product, your vendor wants to be protected by your policy (ex: legal defense and payments for settlements or judgments) if there are any past injuries involving your products that could result in a future lawsuit. An expired claims-made policy is not going to respond to these past injuries, unless you have purchased the "extended reporting period option".
   
2. It is easier to change carriers at renewal. Claims-made policyholders may find it impossible to change insurance carriers once an actual claim has brought your risk potential to the attention of insurance underwriters. Even if you can get a quote from another insurance carrier, it will be difficult to negotiate the proper "retroactive date" (see definition in another section) to change to a new claims-made insurance carrier or "nose coverage" to change to a new occurrence carrier.
   
3. You are better protected if you can no longer afford insurance and have to go "bare" while continuing to operate. With the occurrence policy, at least you know your past policy(ies) will respond to any injuries that occurred while such policy(ies) were in effect. On the other hand, the claims-made policy (or a renewal of such policy) has to be in effect or current at both the time of the injury AND the filing of the claim in order to respond.
   
4. If you have discontinued a hazardous product line, any past injuries involving your products are covered by the insurance policy that was in force at the time of the injury; whereas; with a claims made policy, the policy (or a renewal of such policy) must be in force both at the time of the injury AND when the claim is filed.
   
5. If you go out of business and shut down operations, again, you have some comfort of knowing any past injuries involving your products are covered by the insurance policy that was in force at the time of the injury; whereas; with a claims made policy, the policy (or a renewal of such policy) must be in force both at the time of the injury AND when the claim is filed.
   
6. It is better if you sell your company. The new buyer is more likely to accept liabilities of your past products in the marketplace; whereas with a claims-made policy you are more likely to have to purchase the "extended reporting period" on your claims-made policy and be responsible for all liabilities for at least two more years.

It is important to note, that many hazardous products with a long product life may be impossible to insure with an occurrence policy. I believe this is because an insurance carrier can better cut their losses by non-renewing a claims-made policy versus an occurrence policy. Remember the two conditions that must be met in order for a claims-made policy to provide coverage – 1) the policy must be in force when the bodily or property damage occurs AND 2) the policy or a renewal of the policy must still be in force when the claim is made. With an occurrence policy only the first condition must be met so the insurance carrier could still be paying for past injuries even if they non-renewed your policy.

[logcabinmomma]

This is still clear as mud... anyone care to dumb it down? So far it *Sounds* like unless I pay a boatload when I cancel a policy to add the extended reporting period, I could possibly be screwed in the future?

I'm trying to find somewhere that says that for the occurrence policy there is no time limit to future suits? Even if the policy is no longer in place... is that true?

Does anyone know what the Ohio policy is? or the Colonial one through IBN? I can't seem to find that info anywhere despite looking...

I hate dealing with insurance issues, but I think I'd hate being sued more...

-Kristi