What is Commercial Casualty Insurance?

Row of colored question marks
Image courtesy of [Ian McKinnell] / Getty Images.

Casualty insurance is a division of insurance that consists primarily of liability coverages. It is a broad category that includes both commercial and personal coverages. The term property/casualty insurance means all types of insurance other than life and health.

Commercial Casualty

This article focuses on commercial casualty, a category of business insurance. Commercial casualty generally includes the following:

Formerly Included

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, caused by criminals. Examples of crime insurance are employee theft and computer fraud coverages.

Boiler and machinery insurance is now known as equipment breakdown coverage. The latter covers loss or damage caused by a breakdown of machinery or equipment, such as a refrigerator or boiler.

Includes Some First-Party Coverages

Some types of insurance are considered casualty coverages even though they don't cover third-party liability. An example is commercial auto physical damage insurance. The latter is actually a type of property insurance. It covers claims filed by a business for damage to an auto owned by that business.

Auto physical damage includes both comprehensive and collision coverages. It is classified as a type of casualty insurance because it is usually provided in combination with commercial auto liability coverage.

Two other auto coverages fall into the category of casualty insurance even though they don't cover third-party liability. One is uninsured motorist and underinsured motorist coverage. (UM) coverage protects your company 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 too low to cover your losses.

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. Employers purchase workers compensation insurance to fulfill their obligation to employees under state laws. Most workers compensation policies include employers liability coverage.

The latter protects employers againstĀ  third-party suits filed by injured workers.

Liability Coverages Classified as Property

A few coverages are not considered casualty insurance even though they cover liability exposures. An example is legal liability insurance, a type of commercial property coverage. This coverage is used to protect tenants against lawsuits by landlords as a result of 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 coverage a section called Supplementary Payments. This section covers the cost of investigating a claim and defending you against a lawsuit.

Surety Bonds

What about surety? While surety is often considered part of property/casualty insurance, it doesn't really qualify as either a property or 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

Continue Reading...