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Casualty Insurance Part 2

Part 2 of Casualty Insurance covers five important categories:

Umbrella Liability
Excess Liability
Workers’ Compensation
Professional Liability (Medical malpractice)
Environmental liability


There is a distinct difference between an Umbrella and Excess Liability policy.  They come under the heading of casualty insurance.

Umbrella Liability provides excess limits of liability above your underlying policies.  It may also provide protection when no underlying insurance applies. This also broadens your businesses’ insurance program in order to help close gaps in coverage.


In 1855 Georgia and Alabama passed Employer Liability Acts; 26 other states passed similar acts between 1855 and 1907. These acts permitted injured employees to sue the employer.  They then  had to prove a negligent act or omission.

Workers’ Compensation is a form of casualty insurance. It provides  wage restoration and medical benefits to injured employees.

Almost every business whether large or small in the United States that has employees has to handle the problem of Workers’ Compensation. Most states essentially require employers to buy a casualty insurance policy. The purpose is to manage their obligations to workers who are injured or become ill as a result of workplace hazards.

Beginning in 1911, an historic compromise solution was devised by the various states. Wisconsin was the first.   Other states quickly followed, enacting a “no fault” system. This was intended to make sure workers received fair and speedy medical treatment and financial remuneration for injuries and illness at work. The compromise system also established limits on the obligations of employees for these workplace exposures.

Today, modern Workers’ Compensation laws provide fairly broad and specific benefits to workers who suffer workplace injuries and illnesses.

These compensations include lost income, medical expenses, death benefits and job-related rehabilitation. Employers who do not carry workers’ compensation insurance and comply with a state’s requirements, leave themselves vulnerable to paying these benefits out of their own pockets as well as facing penalty charges by the states.

The states differ in that most jurisdictions employers can meet their obligations by purchasing a casualty insurance policy from an insurance company. However, five states and two U. S. Territories (North Dakota, Ohio, Puerto Rico, the U. S. Virgin Islands, Washington, West Virginia, or Wyoming) require employers to get coverage exclusively through state-operated funds. If you are an employer doing business in any of those jurisdictions, you need to obtain coverage from the specified government-run fund. These are commonly called monopoly state funds. A business cannot meet its workers’ compensation obligations in these jurisdictions with private insurance.


Medical malpractice insurance covers doctors and other professionals in the medical field. It is for liability claims arising from their treatment of patients.

The cost of medical malpractice insurance began to rise in the early 2000s after a period of essentially flat prices. Rate increases were due in part to the growing size of claims, particularly in urban areas. Among the other factors driving up prices was a reduced supply of available coverage.  Several major insurers exited the medical malpractice business because of the difficulty of making a profit.

The frequency of claims has fluctuated. In the 1980s, the number of medical malpractice claims filed appeared to increase. Reasons for the increase are not entirely clear, but several contributing factors have been suggested. In addition to the fact that people became more litigious than in the past, the crisis of the 1970s which was extensively reported by the media, may have made people more aware of the possibility of suing for damages. Other factors were the loss of an intimate relationship between families and their doctors and the use of medical experts to testify in malpractice cases. Physicians have also accused lawyers of being excessively eager to bring malpractice suits because of the high fees the lawyers can collect when their clients win.

The cost of defending a medical malpractice lawsuit continues to climb, as does the cost of liability insurance premiums for some specialists according to a report by the American Medical Association (AMA). The average expense of defending a physician against a medical liability claim in 2010 was $47, 158 – an increase of 62.7% since 2001.

In 2010, 63.7% of closed claims against physicians were dropped, withdrawn, or dismissed without any payment. Each of these claims costs an average of $26, 851 to defend, accounting for more than one third of the total annual defense expenses.

Of the claims that reached a jury verdict, 8% were in favour of the physician or other medical provider and 0.6% were in favour of the plaintiff.

The average medical liability indemnity payment to the plaintiff in 2010 was $331, 947 – an increase of 11.5% since 2001. The portion of medical liability insurance policies with limits exceeding $1million has increased from 28% to 41% since 2001.


If a company has never in their area of business considered environmental risk mitigation, it is likely that their insurance cover excludes environmental liability. Insurers commonly exclude Environmental Liabilities, also called “Pollution Insurance”. It is cover that is specifically requested. Once in place, environmental liability insurance helps to create peace of mind for all concerned.

Deepwater Horizon created what was said to be the largest, man made oil release into the Gulf of Mexico in April 2010. Called the BP oil Spill, the oil flowed for 87 days and discharged approximately 4.9 million barrels of oil. The well was sealed on 19th September 2010. Experts said that had environmental liability insurance been in place, the accident would never have taken place, due to insurance requirements for robust risk protection measures.

Oil drilling is a risky business, but we need oil to sustain world infrastructure. Mandating environmental insurance could make energy exploration at sea unaffordable due to the high cost of putting precautionary measures in place, in order to meet the safety requirements of the insurer.