CPCU 552 Flashcards – Module 7

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[h] CPCU 552 – Module 7

[q] Director

[a] A person that has been elected to serve on an organization’s board of directors.

[q] Officer

[a] A person appointed by an organization’s board of directors to manage daily operations of the organization.

[q] Fiduciary duty

[a] An obligation of loyalty and good faith to someone or some entity that is the highest duty known to the law.

[q] Business judgment rule

[a] A legal rule that provides that a director will not be personally liable for a decision involving business judgment.

[q] Directors’ and officers’ fiduciary duties

[a] Duties:

Duty of care.

Duty of loyalty.

Duty of disclosure.

Duty of obedience.

[q] Derivative suit

[a] A lawsuit brought  by shareholders in the name of the corporation.  Any damages recovered are paid to the corporation.

[q] Nonderivative suit

[a] A lawsuit that is not made in the name of the corporation. Instead, these suits are brought about by customers, competitors, employees, creditors, etc.

[q] Class action suit

[a] A lawsuit in which one person or a small group of people represents the interests of an entire class of people.

[q] Overt discrimination

[a] An observable action that discriminates.

[q] Disparate treatment

[a] A legal basis for an employment discrimination complaint asserting individuals are treated differently because of race, sex, color, or religion.

[q] Disparate impact

[a] A legal basis for an employment discrimination complaint asserting that a neutral employment practice excludes a disproportionate number of a protected class.

[q] Harassment

[a] The creation of a hostile work environment.

[q] Employment at will

[a] A contractual relationship in which an employee can be dismissed by an employer for any reason, and without warning, as long as the reason is not illegal.

[q] Wrongful termination

[a] A situation in which an employee’s contract of employment has been terminated by the employer, where the termination breaches one or more terms of the contract of employment, or a statute provision or rule in employment law.

[q] Implied-contract exception

[a] An exception to the Employment-at-Will doctrine.  Indicates that an employer’s actions may imply that a contract exists between the employer and the employee, even if there isn’t an actual written contract.  Allows for a breach of contract suit.

[q] Employee Retirement Income Security Act

[a] A law that protects employees by safeguarding employee pension plans.

[q] Duties of a retirement plan fiduciary

[a] Duties of a plan fiduciary:





[q] Health Insurance Portability and Accountability Act

[a] A law enacted to improve the portability of health insurance after a job change.  In addition, the law impacts privacy of medical records.

[q] Directors and officers (D&O) liability insurance

[a] A policy, typically purchased by a corporation, that covers losses from wrongful acts of directors.

[q] D&O Policy – Coverage A

[a] The coverage part of a D&O policy that provides direct coverage for the directors and officers.  Limited to losses for which the corporation does not or cannot provide indemnification to the directors or officers.

[q] D&O Policy – Coverage B

[a] The coverage part of a D&O policy that insures the corporation for the amounts it is required to pay to defend or settle claims against the directors or officers.

[q] D&O Policy – Coverage C

[a] The coverage part of a D&O policy that makes the corporation itself an insured for claims made against it because of wrongful acts covered by the policy.

[q] Claims-made coverage trigger

[a] A type of coverage trigger that obligates an insurer to defend and/or pay a claim on an insured’s behalf, if the claim is first made against the insured during the period in which the policy is in force.

[q] D&O Policy exclusions

[a] Typical D&O exclusions:

Loss exposures better covered by other insurance.

Claims covered under prior policies.

Failure to effect or maintain insurance.

Insured vs. insured exclusion.

Loss exposures difficult to insure.

[q] Consent to settle

[a] A provision in a D&O policy stating that the insurer cannot settle a claim without the insured’s consent.

[q] Outside Directors Liability Policies

[a] A policy that would provide coverage for directors that are serving as outside directors for an unaffiliated organization.

[q] Employment practices liability (EPL) insurance

[a] Insurance that covers an organization, its directors and officers, and its employees against claims alleging damages because of wrongful employment practices.

[q] Broad form approach to defining wrongful acts

[a] A definiton of wrongful acts under an EPL policy that provides no specific listing of covered offenses.

[q] Named perils approach to defining wrongful acts

[a] A definiton of wrongful acts under an EPL policy that can range from brief listings of a few offenses to exhaustive lists that provide coverage equal to broad forms.

[q] EPL policy exclusions

[a] Exclusions:

Claims arising out of circumstances reported under a prior EPL policy.

Fraud or deliberate violation of regulations.

Contract liability.

Bodily injury or property damage other than emotional distress or mental anguish.

Violation of ERISA, COBRA, or similar Acts.

Workers compensation obligations.

Costs to install accommodations for disabled.

[q] Third-party discrimination coverage

[a] An optional coverage offered in many EPL policies that covers claims of unfair discrimination or harassment brought by individuals other than the organization’s employees.

[q] Workplace violence coverage

[a] An optional coverage offered in many EPL policies that covers some expenses an employer would incur in the wake of a violent attack.

[q] Reputation management coverage

[a] An optional coverage offered in many EPL policies that covers the costs of public relations efforts to restore public, investor, and employee confidence in an organization.

[q] Fiduciary liability insurance

[a] Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duties.

[q] Elements typically included in the definition of wrongful act

[a] Elements:

Breach of responsibilities imposed by ERISA or by statutory law.

Any other matter claimed against insureds because of their service as fiduciaries.

A negligent act, error, or omission solely in the administration of any insured plan.

[q] Entities insured under a fiduciary liability policy

[a] Insured:

The sponsor organization and its subsidiaries.

A director, officer, or an employee of any insured (acting in the capacity of a fiduciary).

Anyone administering an insured plan.

[q] Fidelity bond

[a] A bond that insures an organization only for losses caused by dishonesty.

[q] Professional liability insurance

[a] Insurance that covers persons engaged in various occupations against liability resulting from their services.

[q] Vicarious liability

[a] A situation in which one party is held partly responsible for the unlawful actions of a third party.

[q] Informed consent

[a] The process in which a health care provider educates a patient about the risks, benefits, and alternatives of a given procedure or intervention.

[q] Informed consent disclosures

[a] To obtain informed consent, the physician must disclose to the patient:

The nature of the patient’s condition or problem.

The nature of the proposed procedure.

The risks associated with the procedure.

The anticipated benefits of the procedure.

Alternatives to the procedure and the risks associated with them.

[q] Bad faith

[a] An insurer’s denial of coverage without cause, which can result in damages.

[q] Statute of limitations

[a] A statute that places a limit on the time period a plaintiff has to file suit.

[q] Statute of repose

[a] A statute that requires a plaintiff to file a lawsuit within a certain period of time after the defendant commits a wrongful act.

[q] Occurrence coverage trigger

[a] The event that triggers coverage under an occurrence coverage form: injury or damage that occurs during the policy period.

[q] Extended reporting period

[a] An additional period following the expiration of a claims­ made policy, during which the expired policy will cover claims.

[q] Retroactive date

[a] The date on or after which the injury, damage, or other insured event must occur in order to be covered in a claims-made liability policy.

[q] Professional liability policy coverage territory

[a] Most professional liability policies provide coverage for acts committed anywhere in the world, as long as the suit is brought in the U.S. or Canada.

[q] Typical exclusions in professional policies

[a] Typical exclusions:

Bodily injury and property damage.

Dishonest, fraudulent, or criminal acts.

[q] Securities brokers and dealers professional liability policies

[a] Policies that insure brokerage firms and registered representatives for claims alleging negligence and errors.