What is Commercial Casualty Insurance?
Casualty insurance is a broad category that is mostly comprised of liability coverages. It is the liability half of property/casualty insurance. Property insurance covers financial losses that result from damage or destruction of physical assets like buildings or furniture. Casualty insurance covers damages or settlements an insured is obligated to pay because of an accident that injured a third party.
Coverages Included in Commercial Casualty
There are many types of commercial liability insurance. Here are the ones most commonly purchased by businesses.
- General Liability Insurance. This is basic business liability insurance. It protects businesses from claims or suits by customers, clients, and other third parties for bodily injury, property damage, or personal and advertising injury.
- Errors and Omissions Insurance. Also called professional liability insurance, this coverage is important for any business that performs a service or provides advice in exchange for a fee. Two examples are medical professional and accountants E&O insurance.
- Management Liability Insurance. Is a subcategory of E&O insurance that covers the risks of managing a business. Includes directors and officers liability, employment practices liability, and fiduciary liability coverages.
- Cyber Liability Insurance. Once purchased only by technology companies, cyber liability insurance is now a necessity for many types of businesses.
- Workers Compensation Insurance. A mandatory coverage in most states. Pays the benefits required by law to employees injured on the job.
- Employers Liability Insurance. This coverage is generally included in a workers compensation policy. In monopolistic states, however, it is typically provided via an endorsement.
- Commercial Auto Insurance. Includes commercial auto liability, and other coverages included in a business auto policy.
- Excess Liability. Includes commercial umbrella and excess liability policies. Both provide extra limits, but only umbrellas afford broader coverage than primary policies.
- Foreign Casualty Insurance. Covers injuries that occur outside the U.S. Includes foreign liability, foreign auto, and foreign workers compensation coverages.
- Specialty Coverages. Cover exposures that are unique to certain businesses. Examples are special event insurance, media liability, and entertainer liability
Includes Some First-Party Coverages
Some types of insurance are considered casualty coverages even though they don't cover third-party claims. An example is commercial auto physical damage insurance. This coverage is actually a type of property insurance as it protects a business against physical damage to property (autos) the business owns. Auto physical damage insurance is classified as a casualty coverage because it is usually provided in combination with commercial auto liability insurance.
There are other types of auto insurance that are considered casualty coverages even though they don't apply to third-party liability. These include uninsured and underinsured motorist and no-fault coverages. Uninsured motorist (UM) coverage protects you against auto accidents caused by drivers that have no liability insurance. Underinsured motorist (UIM) coverage protects you when the at-fault driver has some insurance, but the limit is insufficient to cover your losses. Both are a hybrid of first and third-party coverages. They pay damages to the insured for injuries caused by an uninsured driver.
No-fault auto insurance pays benefits to an injured party whether the injured person or someone else caused the accident. While no-fault laws generally allow third-party suits under certain circumstances, no-fault benefits (often called personal injury protection) are paid regardless of fault.
Workers compensation insurance also falls under the category of casualty insurance even though it isn't really a liability coverage. It pays benefits to workers injured on the job on a no-fault basis. Injured workers need not file a lawsuit against their employer to obtain workers compensation benefits.
Some types of insurance were considered casualty coverages in the past but are now classified as property coverages. These include commercial crime, and boiler and machinery coverages.
Crime insurance protects a business against loss or damage to physical property, including money, perpetrated by criminals. Examples of crime insurance are employee theft, and money and securities coverages. The old "boiler and machinery" insurance has been expanded and renamed equipment breakdown insurance. It provides protection against loss or damage caused by a breakdown of machinery or equipment, such as a refrigerator or boiler.
Liability Coverages Classified as Property
A few coverages qualify as property insurance even though they cover liability exposures. An example is legal liability insurance. This coverage protects tenants against lawsuits filed by landlords due to accidental damage to the leased property. Legal liability coverage has elements of both liability and property insurance. It covers damages for which the insured is legally liable because of direct physical loss to covered property. For the loss to be covered, it must result from damage caused by an accident by a covered cause of loss (peril).
Like a liability policy, legal liability insurance covers expenses the insurer incurs to defend the insured against a covered lawsuit. These costs, called Supplementary Payments, are covered in addition to the policy limit.
A surety bond doesn't really qualify as either a property or a casualty coverage. Surety bonds are guarantees of performance, not insurance policies. They must be purchased from a surety, not an insurer. Nevertheless, many property/casualty insurers offer bonds through subsidiary companies that operate as sureties.