Alaska Commercial Liability Insurance

Commercial General Liability (CGL)

Overview of CGL Coverage

Commercial General Liability (CGL) is the foundation of business liability protection:

CGL Coverage Parts

Coverage A: Bodily Injury and Property Damage Liability

Covers:

• Third-party bodily injury claims
• Third-party property damage claims
• Legal defense costs (supplementary payments)

Occurrence Form (CG 00 01):

• Covers claims arising from incidents during policy period
• Regardless of when claim is filed
• Most common for general liability

Example:

• Slip-and-fall in Alaska retail store on January 15, 2026
• Customer files lawsuit on March 1, 2027
• 2026 policy covers claim (occurrence in 2026)

Coverage B: Personal and Advertising Injury Liability

Covers:

• Libel and slander
• False arrest or imprisonment
• Wrongful eviction
• Malicious prosecution
• Copyright infringement in advertising
• Use of another's advertising idea

Example:

• Alaska business publishes false statements about competitor
• Competitor sues for defamation
• Coverage B defends and indemnifies

Coverage C: Medical Payments

Covers:

• Medical expenses for persons injured on premises
• Regardless of fault (no-fault coverage)
• Typically $5,000 - $10,000 per person

Purpose: Goodwill coverage to prevent lawsuits

CGL Exclusions (Critical for Exam)

Key CGL Exclusions:

Exam Tip: Know what CGL does NOT cover. Questions often ask about situations requiring separate policies (auto, workers' comp, professional liability).

CGL Limits Structure

Standard CGL Limit Structure:

How Aggregates Work:

• Each occurrence limited to per-occurrence limit
• All occurrences in policy year limited to aggregate
• Products claims have separate aggregate

Example:

• Policy: $1M per occurrence / $2M aggregate
• Claim 1: $800,000 - Paid
• Claim 2: $600,000 - Paid
• Claim 3: $700,000 - Only $600,000 paid (aggregate exhausted)
• Remaining aggregate: $0

CGL Rating Factors

Premium Calculation: $\text{Premium} = \text{Rate} \times \text{Exposure Base}$

Exposure Bases by Business Type:

Alaska-Specific Considerations:

• Higher rates in remote areas (claims adjustment costs)
• Seasonal business adjustments
• Tourism-related exposure in summer months
• Weather-related liability considerations

Alaska Workers' Compensation Insurance

Mandatory Coverage

Alaska Requires Workers' Compensation for:

Critical: Alaska requires workers' comp starting at ONE employee - no "3 or more" or "5 or more" exemption. This is stricter than most states.

Limited Exemptions

Workers Who May Be Exempt:

• Sole proprietors (can opt in)
• Partners (can opt in)
• Corporate officers (can opt out with proper election)
• Certain domestic workers
• Certain casual employees (very limited)
• Independent contractors (if properly classified)

WARNING: Alaska aggressively investigates worker misclassification. Calling someone an "independent contractor" doesn't make them exempt if they're actually an employee under Alaska law.

Workers' Compensation Benefits

Four Types of Benefits:

1. Medical Benefits

• All reasonable and necessary medical treatment
• No deductible or copay
• Includes physical therapy, prescriptions, equipment
• Continues as long as medically necessary

2. Disability Benefits

Spendable Weekly Wage: Gross wages minus federal and state taxes

3. Vocational Rehabilitation

• Retraining for new occupation
• Job placement assistance
• When cannot return to prior work
• Up to 2 years typically

4. Death Benefits

• Burial expenses: Up to $10,000
• Survivor benefits: Percentage of wages to dependents
• Duration: Until remarriage (spouse) or age 19 (children)

Exclusive Remedy Doctrine

Key Concept: Workers' compensation is the exclusive remedy for workplace injuries:

• Employee CANNOT sue employer for negligence
• Exchange: Guaranteed benefits regardless of fault
• Employer protected from tort lawsuits
• Employee gives up right to sue for guaranteed coverage

Exceptions Where Lawsuit Allowed:

• Intentional acts by employer
• Injuries caused by third parties (not employer)
• Employer lacks required coverage

Example:

• Employee injured by falling equipment
• Cannot sue employer (exclusive remedy)
• Can collect workers' comp benefits (no fault required)
• If equipment defective, can sue manufacturer (third party)

Workers' Comp Insurance Requirements

Coverage Structure:

Part Two Limits Explanation:

• $100,000 per accident
• $500,000 policy limit for disease
• $100,000 per employee for disease

Alaska Workers' Comp Rating

Experience Modification (Mod):

$\text{Premium} = \text{Manual Premium} \times \text{Experience Mod}$

• Mod = 1.00: Average loss experience
• Mod < 1.00: Better than average (discount)
• Mod > 1.00: Worse than average (surcharge)

Example:

• Manual Premium: $50,000
• Experience Mod: 0.85 (good safety record)
• Actual Premium: $50,000 × 0.85 = $42,500

Factors Affecting Mod:

• Claim frequency (more impact than severity)
• Claim severity
• Company size (more credibility for larger employers)
• Industry comparison

Alaska Workers' Comp Market

Coverage Options:

1. Private Insurance - Most employers
2. State Fund - Alaska does not have a state fund
3. Self-Insurance - Large employers meeting financial requirements
4. Assigned Risk Pool - Employers unable to find coverage

Major Alaska Workers' Comp Carriers:

• Alaska National Insurance Company
• Liberty Mutual
• Travelers
• Hartford
• Various regional carriers

Professional Liability (E&O) Insurance

Errors and Omissions Coverage

Professional Liability (E&O) covers:

• Negligent acts in professional services
• Errors in advice or recommendations
• Omissions (failure to do something required)
• Misrepresentation in professional capacity

Who Needs E&O:

Claims-Made vs. Occurrence

E&O Uses Claims-Made Trigger:

Claims-Made Example:

• Error made: 2024
• Policy in force: 2024-2025
• Claim filed: 2026
• 2026 policy covers claim (if retroactive date allows)

Importance of Retroactive Date:

• Covers claims for acts back to retroactive date
• If no retroactive date = no prior acts coverage
• Maintain coverage continuously to protect retroactive date

Tail Coverage (Extended Reporting Period)

When Needed:

• Retiring from profession
• Changing insurers (if new policy has later retroactive date)
• Closing business

Tail Coverage Provides:

• Extended period to report claims
• For acts during policy period
• Typically 1-5 years or unlimited

Cost: Often 100-200% of annual premium

Producer Protection: Insurance producers should maintain E&O coverage with adequate limits ($1M+ recommended) and ensure continuous coverage to protect retroactive date.

Commercial Umbrella Insurance

Umbrella Coverage Overview

Commercial Umbrella Policy provides:

• Excess Liability: Additional limits above underlying policies
• Broader Coverage: May cover gaps in underlying policies
• Drop-Down Coverage: When underlying coverage exhausted

How Umbrella Works

Underlying Insurance Requirements:

Coverage Layers:

1. First: Underlying policy pays up to its limit
2. Second: Umbrella pays excess up to umbrella limit
3. Total: Underlying limit + Umbrella limit

Example:

• CGL limit: $1,000,000
• Umbrella limit: $5,000,000
• Claim: $4,000,000
• CGL pays: $1,000,000
• Umbrella pays: $3,000,000
• Total protection: $6,000,000 available

Self-Insured Retention (SIR)

SIR: Deductible-like amount umbrella insured must pay when:

• Underlying coverage doesn't apply
• Claim not covered by underlying but covered by umbrella

Example:

• $10,000 SIR
• Claim covered by umbrella but not CGL
• Insured pays: $10,000 SIR
• Umbrella pays: Remainder up to limit

Alaska Umbrella Considerations

Why Alaska Businesses Need Umbrella:

• High verdict potential
• Tourism liability exposure
• Transportation accidents (long distances)
• Aviation-related activities
• Remote area operations

Recommended Limits:

Commercial Auto Insurance

Business Auto Coverage

Business Auto Coverage Form (BACF) covers:

• Owned vehicles
• Hired vehicles (rented/borrowed)
• Non-owned vehicles (employee vehicles on business)

Symbol System

Covered Auto Symbols:

Alaska Commercial Auto Requirements

Minimum Liability:

• Same as personal: 50/100/25
• Higher limits common for commercial
• Motor carriers have federal requirements

Common Commercial Auto Coverages:

• Liability (required)
• Physical damage (comprehensive/collision)
• Hired auto liability
• Non-owned auto liability
• Cargo coverage (for transported goods)
• Trailer interchange

Alaska-Specific Commercial Auto Issues

Fleet Considerations:

• Long distances between service areas
• Extreme weather driving conditions
• Higher repair costs in remote areas
• Wildlife collisions (moose, caribou)

Seasonal Operations:

• Tourism-related fleets (summer heavy)
• Construction vehicles (seasonal)
• Fishing industry vehicles

Rural Exposure:

• Limited emergency services
• Extended response times
• Increased claim severity