With regard to underwriting, insurers ordinarily require that a prospective insured complete a detailed application questionnaire. The questionnaire addresses a wide range of information that provides the insurer a comprehensive picture of the applicant's employment situation. Areas of paramount importance are loss history, including present or anticipated claims, financial condition, and the firm's human resources practices. Some examples of typically asked questions are turnover rate, potential plans for growth, layoffs, etc., human resources training, availability of human resources manuals, handbooks, etc., general composition and salaries of the existing employee force, and pending claims or lawsuits. The questions are designed to enable the insurer to make a well-reasoned decision as to the acceptance of the risk and the premium charge.
Coverage is written on a claims-made basis.
AAIS has filed the ERPL form, as an endorsement to its BOP and Artisans policies, in all states that have approved those programs. Insurance departments in several states, however, have required coverage modifications to the countrywide form. As a result, changes have been made to the form in these states to comply with state requirements. The changes for the most part involve cancellation, offers for the extended reporting period option, coverage of punitive damages, and separate limits for defense coverage. The AAIS endorsement is a complete coverage option with its own definitions, exclusions, and aggregate and per-claim limits.