Commercial Insurance

The commercial lines sector of the property/casualty insurance industry generally provides insurance products for businesses as opposed to the personal lines sector, which offers products for individuals and households. However, the division between commercial and personal coverages is not precise. For example, inland marine insurance, which is included in the commercial lines sector, may cover some personal property such as expensive jewelry and fine art.

Leading Companies

Workers Compensation Insurance And Excess Workers Compensation

Workers compensation insurance provides for the cost of medical care and rehabilitation for injured workers and lost wages and death benefits for the dependents of persons killed in work-related accidents. Workers compensation systems vary from state to state. Workers compensation combined ratios are expressed in two ways: calendar year results reflect claim payments and changes in reserves for accidents that happened in that year or earlier; and accident year results only include losses from a particular year. Excess workers compensation, a coverage geared to employers that self-insure for workers compensation, comes into play when claims exceed a designated dollar amount.

Marijuana use and workers compensation issues

As of June 2019, more than 30 states, the District of Columbia, Guam and Puerto Rico have programs that allow qualifying patients to access medical marijuana products. Another 13 states permit non-intoxicating medical products. Eleven states and D.C. permit recreational marijuana for adults over the age of 21. The laws and regulations governing the use of legal marijuana vary by state, and have impacts on workplace safety, employer duties and obligations, and workers compensation insurance. Federal law prohibits marijuana for any purpose.

Marijuana as an intoxicant has raised concerns about workplace safety where medical and recreational marijuana is legal, according to the Insurance Information Institute’s white paper, Haze of Confusion. The complications in determining user impairment from marijuana intoxication and a lack of reliable data on workplace marijuana use make it difficult to determine how marijuana might affect workplace safety. Marijuana potency is linked to THC, the active chemical that induces intoxication from marijuana. A key issue in determining the prevalence and effects of workplace marijuana impairment is “THC persistence,” the length of time THC is detectable in the blood. Unlike alcohol, THC levels in a user’s body may not be an accurate indication of impairment (see Marijuana and impaired driving). While most studies agree that marijuana intoxication impairs coordination, memory, attention, cognitive flexibility and reaction time, it is not currently possible to determine worker impairment based on THC levels alone. However, marijuana’s intoxicating effects have caused concern that workers using marijuana, whether off-duty or on-duty, may endanger themselves and their colleagues, particularly in safety-sensitive occupations.

There are conflicting findings concerning marijuana and workplace accident risks. A RAND Corp. survey of studies concluded that “the proportion of occupational injuries attributed to acute substance use [of marijuana and other drugs] is relatively small.” A 2017 National Academies of Science, Engineering and Medicine (NASEM) study concluded that there is “insufficient evidence to support or refute a statistical association between cannabis use and occupational accidents or injuries.” However, according to the U.S. National Institute on Drug Abuse, some evidence supports that workers who test positive for marijuana are more likely to be involved in a workplace accident, while a 2018 study in the International Journal of Drug Policy found evidence that medical marijuana legalization may be associated with a decline in workplace fatalities among workers aged 25 to 44. Also clouding the picture is THC persistence, which makes it difficult if not impossible to determine whether a worker with a positive test was intoxicated at the time of an accident.

Medical use

No state that permits medical marijuana requires employers to accommodate on-duty marijuana use and possession, or to tolerate impairment. States will often explicitly make clear that medical marijuana laws do not affect an employer’s drug-free workplace policy. States do differ on whether an employer must accommodate off-duty medical marijuana use, with various courts taking conflicting positions. About 13 states protect patients from discrimination or adverse employment actions based solely on their off-duty marijuana use or on their status as medical marijuana cardholders. Some states also require employers to provide “reasonable accommodations” to medical marijuana cardholders with some conditions, and these laws may fall under state disability laws.

No state protects on-duty recreational marijuana use. State laws will often explicitly state that recreational marijuana laws do not affect an employer’s drug-free workplace policy.

Implications for insurers

Coverage under employment practices liability insurance (EPLI) policies, which cover businesses against claims by employees alleging discrimination or wrongful termination, could be affected as marijuana and employment issues evolve, especially if states and/or courts begin to take a more affirmative stance that disability laws and other accommodation laws cover medical or recreational marijuana use.

Workers compensation insurers need to address these issues related to marijuana use:

• Whether workers compensation covers a workplace injury in which the injured employee has tested positive for marijuana
• Whether workers compensation reimburses medical marijuana expenses incurred by an injured employee, and if so, how reimbursement works

The answers to these questions will largely depend on state law, as workers compensation is regulated on the state level and medical marijuana regulations vary by state. Workers compensation boards and courts can also interpret state statutes differently.

Most states restrict benefits if an employee was intoxicated at the time of injury or if the intoxication was a “proximate cause” of the injury. Some states limit compensation if an injured employee refuses to take a drug test. However, as stated previously it is difficult to determine whether an injured worker was impaired by marijuana when an accident occurred because THC levels in a user’s body may not be an accurate indication of impairment.

A handful of states hold that medical marijuana is a permissible and reimbursable treatment under workers compensation. Whether workers compensation insurers are required to reimburse medical marijuana expenses depends on the state. Many state medical marijuana laws specifically exempt certain entities from a reimbursement requirement--usually health insurance providers. It has been argued, as in New York state, that these types of exemptions do not include workers compensation insurers. Other state medical marijuana laws specifically exempt workers compensation insurers and employers from being required to reimburse medical marijuana. In contrast, some states specifically prohibit reimbursement or make medical marijuana ineligible for reimbursement.

Currently an injured worker who qualifies for reimbursement under workers compensation is responsible for any purchases from a licensed medical marijuana dispensary. The worker then bills the workers compensation insurer or employer. Reimbursement is impeded by the fact that proper dosages for medical marijuana are still poorly understood and are not standardized across state medical programs. Furthermore, the potency of available medical marijuana and the maximum permissible purchasing amount varies by state.

Other Liability Insurance

Other liability insurance protects the policyholder from legal liability arising from negligence, carelessness or a failure to act that causes property damage or personal injury to others. It includes errors and omissions, umbrella liability and liquor liability. Product liability, a separate line of insurance, protects the manufacturer, distributor or seller of a product from legal liability resulting from a defective condition that caused personal injury or damage associated with the use of the product.

Commercial And Farmowners Multiple Peril Insurance

Commercial multiple peril insurance is a package policy that includes property, boiler and machinery, crime and general liability coverages. Farmowners multiple peril insurance, similar to homeowners insurance, provides coverage to farmowners and ranchowners against a number of named perils and liabilities. It covers a dwelling and its contents, as well as barns, stables and other structures.

Medical Professional Liability Insurance

Medical professional liability insurance covers facilities, doctors and other professionals in the medical field for liability claims arising from the treatment of patients.

Fire And Allied Lines Insurance

Fire insurance provides coverage against losses caused by fire and lightning. It is usually sold as part of a package policy such as commercial multiple peril. Allied lines insurance includes property insurance that is usually bought in conjunction with a fire insurance policy. It includes coverage for wind and water damage and vandalism.

Inland Marine And Ocean Marine Insurance

Inland marine insurance covers bridges and tunnels, goods in transit, movable equipment, unusual property and communications-related structures as well as expensive personal property. Ocean marine insurance provides coverage on all types of vessels, for property damage to the vessels and cargo, as well as associated liabilities. This line also includes special coverages such as builder’s risk that protects structures and materials during new construction projects or renovations.

Surety And Fidelity

Surety bonds provide monetary compensation in the event that a policyholder fails to perform certain acts such as the proper fulfillment of a construction contract within a stated period. Surety bonds are usually purchased by the party that has contracted to complete a project. They are required for public projects in order to protect taxpayers. Fidelity bonds, which are usually purchased by an employer, protect against losses caused by employee fraud or dishonesty.

Mortgage Guaranty Insurance

Private mortgage insurance (PMI), also known as mortgage guaranty insurance, guarantees that in the event of a default, the insurer will pay the mortgage lender for any loss resulting from a property foreclosure, up to a specific amount. PMI, which is purchased by the borrower but protects the lender, is sometimes confused with mortgage life insurance, a life insurance product that pays off the mortgage if the borrower dies before the loan is repaid. Banks generally require PMI for all borrowers with down payments of less than 20 percent of the home price. The industry’s combined ratio, a measure of profitability, deteriorated (i.e., rose) significantly in 2007 and 2008, reflecting the economic downturn and the subsequent rise in mortgage defaults, and remained at high levels through 2012. The combined ratio began falling in 2012 and by 2018 had fallen to 29.2, the lowest since S&P Global Market Intelligence began collecting data on mortgage guaranty insurance in 1996.

Financial Guaranty Insurance

Financial guaranty insurance, also known as bond insurance, helps expand financial markets by increasing borrower and lender leverage. It guarantees the principal and interest payments on municipal obligations.

Financial guaranty insurers are specialized, highly capitalized companies that traditionally have the highest rating. The insurer’s high rating attaches to the bonds, thus lowering the risk of the bonds to investors. With their credit rating thus enhanced, municipalities can issue bonds that pay a lower interest rate, enabling them to borrow more for the same outlay of funds. The combined ratio climbed to 421.4 in 2008 at the height of the economic downturn. In 2013 the combined ratio fell below zero as several companies reduced loss reserves by more than $2 billion combined as a result of strains created by the financial crisis. Over the years financial guaranty insurers have expanded their reach beyond municipal bonds and now insure a wide array of products, including mortgage-backed securities, pools of credit default swaps and other structured transactions.

Burglary And Theft Insurance And Boiler And Machinery Insurance

Burglary and theft insurance covers the loss of property, money and securities due to burglary, robbery or larceny. Boiler and machinery insurance is also known as mechanical breakdown, equipment breakdown or systems breakdown coverage. Among the types of equipment covered by this insurance are heating, cooling, electrical, telephone/communications and computer equipment.

Crop Insurance

Federally sponsored multiple peril crop insurance provides coverage for growing crops against miscellaneous perils such as wind, hail and vandalism. Multiple peril crop insurance is serviced by the private market but subsidized and reinsured by the federal government through the Federal Crop Insurance Corp (FCIC). Private crop insurance provides the same coverage but is not reinsured by the FCIC.

Warranty Insurance

Warranty insurance coverage compensates for the cost of repairing or replacing defective products past the normal warranty period provided by manufacturers.