Insurance liability is part of a general insurance risk financing system to protect the buyer (the "insured") from the risk of liability imposed by lawsuits and similar claims. It protects the insured in case he is sued for claims that fall within the scope of the insurance policy. Initially, individual companies facing general hazards form groups and create self-help funds to pay compensation in the case of members losing (in other words, mutual insurance arrangements). Modern systems rely on specialized operators, usually seeking profit, to offer protection against certain hazards with premium considerations.
Liability insurance is designed to offer special protection against third-party insurance claims, ie, payments are not normally made to the insured, but rather to a person who suffers losses that are not a party to an insurance contract. In general, accidentally damaged damages and contractual obligations are not covered by the liability insurance policy. When a claim is made, the insurance operator has the duty (and the right) to defend the insured. The cost of defense law usually does not affect policy limits unless the policy clearly states otherwise; This default rule is useful because defense costs tend to jump when cases are brought to justice. In many cases, the defense part of the policy is actually more valuable than insurance, as in complicated cases, the cost of case defense may be more than the claimed amount, especially in so-called "disruptions" of cases where there is no liability but the case should be retained.
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Commercial liability is an important segment for the insurance industry. With a premium income of USD 160 billion in 2013, it accounts for 10% of the global non-life premium of USD 1 550 billion, or 23% of global commercial line premiums. Insurance liabilities are much more prevalent in developed markets than in developing countries. The forward market accounts for 93% of global liability premiums in 2013, while their share of the global non-life premium is 79%.
The US is by far the largest market, with 51% of global liability premiums written in 2013. This is due to the size of the US economy and high liability insurance penetration (0.5% of GDP). In 2013, US businesses spent USD 84 billion to cover commercial liability, of which USD 50 billion is a general liability, including USD 12 billion for Errors and Negligence (E & amp; O) and USD 5.4 billion for Directors and Officials (D & amp; O). US businesses are spending another USD 13 billion on the part of multi-hazard commercial policy obligations, USD 9.5 billion for medical malpractice and USD 3 billion for product liabilities.
Britain is the second largest market in the world for liability insurance, with Rp 9.9 billion of premium liabilities in 2013. The largest sub-line of business is public and product liabilities. This is followed by professional compensation and employer liability (including work-related accidents and illnesses). There has been a significant change in the UK liability insurance sub-segment. In the past decade, the share of professional indemnity has increased from about 14% to 32%, highlighting a shift towards a service-driven economy. Manufacturers, meanwhile, comprise a lower share of liability claims as accidents related to injury and property damage have declined.
On the European continent, the largest liability insurance markets are Germany, France, Italy and Spain. Together they contribute nearly 22 billion US dollars of global obligations in 2013. Usually governed by civil law systems, these markets depend on local conditions and historical experience to determine which policies and accountabilities are available. Penetration ranges from 0.16% to 0.25%, which is low compared to common law countries such as the United States, Britain and Australia.
Japan and Australia are the largest markets in the Asia Pacific region, with premium commercial liabilities of USD 6.0 billion and USD 4.8 billion, respectively, in 2013. At 0.12% of GDP, penetration of liability insurance in Japan is far lower than in other countries. advanced economies. In Australia, penetration is much higher at 0.32% of GDP. This is due to the legal framework of the UK state derived from the law, which has increased the demand for employers' liability insurance. Australia has a mandatory blanket for aviation, maritime oil pollution and residential construction and, in certain countries, for medical practitioners, property brokers, and stockbrokers. Insurance premiums Liabilities have grown at an average annual rate of 11% since 2000.
China is the ninth largest commercial liabilities market globally, with a premium of USD 3.5 billion in 2013 and a strong average annual growth of 22% since 2000. However, penetration remains low at 0.04% of GDP. Growth has been driven by increased risk awareness and regulatory changes.
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Insurer's Duty
Insurance companies have one, two or three major tasks, depending on the jurisdiction:
- assignments to defend,
- the obligation to indemnify, and
- the obligation to settle a clear claim.
To maintain
The obligation to defend is prevalent in the United States and Canada, where most of the liability insurance policy stipulates that the insurer "has the right and obligation" to defend the insured against all "suits" applied by the policy. It is usually triggered when the insured is sued (or in some cases, given a pre-complaint notification that they will be sued) and then "tender" a defense claim to the guarantor of his obligations. Usually this is done by sending a copy of the complaint along with a cover letter referring to the relevant policy or insurance policy and demanding an immediate defense.
In most US and Canadian states, insurance companies generally have four main options at present, to:
- defend the insured unconditionally;
- defend the insured based on reservation rights;
- requested the decision of the declaration that he was not obligated to defend the claim; or
- refuses to defend or seek declaration decisions.
The obligation to defend is generally broader than the obligation to indemnify, since most (but not all) policies that provide such duties also specifically promise to defend against unfounded, false or deceptive claims. Therefore, the obligation to defend is usually triggered by potential coverage. The test for potential coverage is whether the complaint adequately requests at least one claim or cause of action to be covered under the terms of the policy if the claimant wins the claim in court, and also does not file a lawsuit that would completely undermine the crucial element of the coverage or trigger a complete exception to coverage. It is irrelevant whether the claimant will win or actually apply to the claim; however, the test is whether a claim if proven to be borne. Unclear or ambiguous accusations sufficiently wide to include possibilities both inside and without coverage are usually interpreted to support the potential of coverage, but the speculation about irrefutable allegations (ie, matters where complaints are completely silent) is not enough to make potential coverage. Some jurisdictions allow extrinsic evidence to be considered, either because it is clearly described in the complaint or relevant to the facts clearly stated in the complaint.
If there is an obligation to defend, it means the insurer must defend the insured against the entire lawsuit even if most of the claims or causes of action in the complaint are clearly not covered. An insurer may choose to defend unconditionally without ordering any rights, but by doing so, it relieves (or subsequently excludes) the absence of coverage in defense of the duty to defend and implicitly commit to defend the insured until the final decision or settlement is released of how long it takes (unless the policy clearly states that defense costs reduce the policy limit). In an alternative, the insurer can retain with its rights: it sends a letter to the insured who holds his right to withdraw immediately from the defense of the insured if it is clear there is no coverage or no potential coverage for all complaints, and to recover from the insured any funds issued at that time to defend against any claim or cause of a particular action that was never closed or even potentially closed to begin.
If the insurer chooses to defend, he can defend the claim with his own lawyer (if permitted), or provide a claim to an outside law firm on the "preferred" company panel that has negotiated a standard fee schedule with the insurance company in exchange for a regular workflow. The decision to defend under a reservation of rights shall be made with extreme caution in jurisdictions where the insured has the right to an independent lawyer, also known as Cumis advisor.
The insurer may also request a declarative verdict against the insured that there is no guarantee of such claim, or at least no coverage potential. This option generally allows the insurance company to protect itself from bad faith claims, in the sense that the insurance company acts in good faith when it immediately brings the dispute of coverage to the attention of the court, although it also puts the insured in an awkward position. defend yourself against two lawsuits: the original complainant of the plaintiff and the company's complaint over the declarative decision. Indeed, in some jurisdictions a well-intentioned insurance company should seek the help of a court declaration before refusing to retain the insured (eg, Illinois) or withdraw from his or her defense in accordance with the preceding rights (eg, Georgia).
Finally, the insurer can refuse to defend and also refrain from seeking a declarative verdict. If the insurer really believes that there is no coverage or no potential for coverage, then in most jurisdictions the insurance company simply maintains its defense to cover by sending a letter to the insured explaining his position and refusing to provide a defense. But this option can be very risky, because if the court then determines that there is an obligation to defend so far, it will hold that the insurance company would be in breach of that obligation, and may also argue that the insurance company is subject to a litigation suit due to poor faith. So insurance companies will often defend under reservation rights rather than covering coverage altogether.
Outside the United States and Canada, liability insurance generally does not assume the obligation to defend, in the sense of assuming direct responsibility for hiring and paying lawyers to defend the insured. Many written policies promise to replace the insured with reasonable protection costs incurred with the approval of the insurance company, but this is basically a form of indemnity (covered in the next section below), where the insured remains responsible for hiring a lawyer to defend himself. Such insurance companies often expressly have the right to defend the insured, presumably so that they can intervene to protect their own interests if the insured preferred advisors do not provide adequate protection against the underlying claims.
To compensate
Cases of indemnity arise when a person is obliged to pay for losses or damage incurred by another person in the event of an accident, a collision, etc. Indemnification obligations generally come from agreements between insurers and insured companies that protect the insured against any insurance. responsibility, damage or loss.
The obligation to indemnify is the duty of the insurer to pay all guaranteed amounts for which the insured shall be liable, to the extent of coverage and subject to a deductible, retained limit, self-insured retention, overpayment, or any other amount of money. where the insured is required to pay out-of-pocket as a prerequisite for the duty of the insurance company.
This is generally triggered when the final decision is entered against the insured, and it is satisfied when the insurer pays the amount covered by the plaintiff's decision. Most policies regulate monetary compensation payments as well as fees, expenses, and attorneys' fees that can be sued by the plaintiff as the applicable party.
Unlike the obligation to defend, the obligation to indemnify applies only to claims or causes of action in the plaintiff's complaint which is actually covered by the policy, since the final decision on the insured will normally be supported by factual records in court showing exactly why the plaintiff won (or failed to win) on any claim or cause of action. Accordingly, the insurer may have an obligation to defend based on only allegations that indicate potential for coverage, but may not have an obligation to indemnify if evidence supporting the final decision against the insured also takes the claim or cause of such action entirely beyond the scope of the policy.
While the duty to defend and the obligation to resolve is rarely outside the English-speaking North American, the obligation to indemnify universally is found in the liability insurance policy.
To resolve a reasonable claim
In some jurisdictions, there is a third duty, the obligation to settle a fairly clear claim against the insured. This obligation is generally triggered only if reasonable opportunities to resolve actually arise, either because the plaintiff submits a settlement offer, or the insurer knows information stating that the claimant will receive a settlement offer. The insurance company is not obliged to bid the plaintiff who is likely to refuse it, or is required to accept an outrageous offer from the claimant who filed a reckless lawsuit and can not win over the insured based on any theory.
The obligation to resolve is the largest import in the scenario where the insured may have some exposure obligations (ie, there is some evidence that seems to link the insured to the alleged plaintiff's injury), the plaintiff has evidence of substantial damage that may exceed the policy limit, and the plaintiff makes a request for settlement (either to the insured or directly to the defending company) the same or beyond the policy limit. In that situation, the insurance company's interest is against the interests of the insured, because the insurer has an incentive to not to be resolved immediately. That is, if the insurance company refuses to resolve and the case is then heard, there are only two possible outcomes: (1) the insured party loses and the insurance company must pay the next assessment of the insured to the policy limit, or (2). ) Insured win, which means both the insured and the insurance company is not responsible. If the first result happens, it is basically "nothing is missing" from the insurer's point of view, because no matter how it will pay its policy limit. (For simplicity, this analysis ignores the scorching costs in the form of defense costs incurred at the time, as well as the additional costs incurred by the insurer in defending the insured for a court decision, and the opportunity cost borne by the insured while participating in the trial.)
Although the insurance company may not care in this scenario, whether the company pays its policy limits before or after the trial, the insured is definitely not. If the first result above occurs, the insured may be held accountable to the plaintiff for a much greater sum of pretrial settlement offerings and policy limits. Then after the insurer pays the policy limits, the plaintiff may try to recover the remaining balance of the decision by applying the attachment or execution document to the insured valuable asset.
This is where the task to complete. To prevent an insurance company from gambling with an insured asset in the pursuit of a possible away from a defense ruling (where he can avoid having to pay any plaintiff), the insurance company is subject to for the task of settling a clear enough claim. The standard judicial test is that the insurer should settle the claim if a reasonable insurance company, without any policy restrictions, will settle the claim. This does not require the insurer to accept or pay a settlement offer that actually exceeds the policy threshold, but in that case, the insurance company must perform its obligation to resolve at least the effort to produce a settlement where it has to pay only. the policy limits (either because the plaintiff agrees to lower their demand or the insured or the primary insurance company or any other merit agree to contribute the difference).
Effect violation
Generally, insurance companies that violate any of the above duties will be liable for breach of contract. In most jurisdictions, the result is a decision requiring payment of the insured's expectation of compensation - the amount to be paid by the insurer in its obligation to indemnify. But this will be limited by policy restrictions, and generally will not compensate the insured for damages incurred as a consequence of a breach of an insurance company, such as the loss of a business opportunity when the money intended to be invested in the opportunity is diverted (or seized) to pay the valuation.
In the United States (and to a lesser extent, Canada), any insurance company that violates any of these three tasks in a particularly horrible manner may also be responsible for a bad insurance crime, in which the Insured may recovering indemnity beyond the policy limits, as well as punitive damages.
Genesis v. claim policy created
Traditionally, liability insurance is written on the basis of occurrence, which means that the insurer agrees to defend and indemnify against any expected losses "occurring" as a result of the insured's actions or omissions during the policy period. This is not a problem at first because it is assumed that responsibility for insurans liability is predicted to be limited by doctrines such as direct causes and restrictive laws. In other words, there is the assumption that no plaintiff's lawyers will sue in 1978 for a painful act allegedly committed in 1953, because the risk of dismissal is so obvious.
In the 1970s and 1980s, large quantities of toxic tort (especially those involving asbestos and diethylbbrol) and environmental responsibility resulted in many court decisions and laws that radically expanded the so-called "long tail" of responsibility pursuit policy potential. The result is that insurance companies that have long closed their books on policies written 20, 30, or 40 years before now find that their insured was hit with hundreds of thousands of lawsuits potentially involving the old policy. A legal entity has developed on which policy should respond to persistent injury or "long tail" claims, with many courts holding multiple policies implied by the application of exposure, continuous injury, or the trigger of injury-in-fact and so on. holds the prevailing policies at the time the injury or damage is found to be implied.
The insurance industry reacts in two ways for this development. First, the premium on new incident policies is skyrocketing, as industry has learned the hard way to assume the worst against the policy. Second, the industry starts issuing claims policies, where the policy covers only the first claims "made" against the insured during the policy period. The related variations are the claims policy that is created and reported, where the policy covers only the first claims made against the insured and reported by the insured to the insurer during the policy period. (Usually there is a grace period to report after the end of the policy period to protect the insured being sued at the end of the policy period.)
Policies made by claims allow insurers to sharply limit their long-term liability to individual policies and, in turn, to close their books on policies and record profits. Therefore, they are much more affordable than incident policies and are very popular for that reason. Of course, policies made by claims transfer the burden to the insured to immediately report a new claim to the insurance company. They also force insured parties to become more proactive about risk management and find ways to control their own long-tail responsibilities.
The policy claims made often include a strict clause requiring the insured to report even the claims' claims and incorporate the entire set of related actions into a single claim. This puts the insured at Sophie's choice. They can accurately report any "potential" claims (ie, every slip-and-drop in their place), even if they never become actual lawsuits, and thus protect their rights to coverage, but at the expense of making themselves look more risky and raise their own insurance premiums. Or they can wait until they are actually charged, but then they run the risk that the claim will be rejected as it should be reported back when the underlying crash first happened.
Coverage made by claims also makes it more difficult for the insured to change insurance companies, as well as to terminate and close their operations. It is possible to buy "tail coverage" for such situations, but only at much higher premiums than policies made under conventional claims, since insurers are required to re-assume the type of liability claimed by the claim policy to encourage insured to start.
Not surprisingly, insurance companies recognize what the insurance industry is trying to use policies that are made to encourage a large number of risks back to the insured, and the scope of claims made is the subject of extensive litigation in some countries throughout the 1970s, 1980s, and 1990s. This led to major decisions of the US Supreme Court in 1978 and 1993 and the Supreme Court of Canada in 1993.
Retained limit and SIR
One way for businesses to reduce their liability insurance premiums is by negotiating a policy with a preserved limit or self-insured retention (SIR), which is somewhat like deductible. With such a policy, the insured basically agrees to insure themselves and defend themselves for smaller claims, and only to demand a claim of liability that exceeds a certain value. However, writing such insurance alone is risky for insurance companies. The California Court of Appeals has stated that the major insurers on the policy with the SIR should continue to provide "direct defense, 'the first dollar" (essentially, their right to then recover the SIR amount from the insured) unless the policy expressly weighs SIR as a precondition for the task of defending.
Type
In many countries, liability insurance is a form of compulsory insurance for those at risk of being sued by a third party due to negligence. The most common mandatory policy classes include vehicle drivers, those who offer professional services to the public, those who produce potentially harmful products, constructors and those who offer jobs. The reason for such a law is that the insured classes are deliberately involved in activities that put others at risk of injury or loss. Therefore, public policy requires that such individuals should carry insurance so that, if their activities cause harm or damage to others, money will be available to pay compensation. In addition, there are more dangers that people trust and, consequently, the number and coverage of coverage policies increases as the litigation of contingency fees offered by lawyers (sometimes based on classroom action). Such a policy is divided into three main classes:
Public obligations
Industry and commerce are based on various processes and activities that have the potential to affect third parties (community members, visitors, intruders, subcontractors, etc. who may be physically injured or property that may be damaged or both). It varies from state to state, whether good or both of employers' liability insurance and public liability insurance has been required by law. Regardless of coercion, however, most organizations include public liability insurance in their insurance portfolios even though conditions, exceptions, and guarantees included in standard policies can be a burden. A company that has industrial facilities, for example, can purchase pollution insurance to cover lawsuits resulting from environmental accidents.
Many small businesses do not get general or professional liability insurance because of the high premium costs. However, in the event of a claim, the out-of-pocket costs for legal or remedies may exceed the premium cost. In some cases, the cost of a claim can be enough to cover a small business.
Businesses should consider all potential risk exposures when deciding whether liability insurance is required, and, if so, how much coverage is appropriate and cost-effective. Those with the greatest exposure to public liability risks are invaders where a large number of third parties often relax including shopping centers, pubs, clubs, theaters, cinemas, sports venues, markets, hotels and resorts. The risk increases dramatically when alcohol consumption and sporting events are included. Certain industries such as security and cleaning are considered high risk by underwriters. In some cases, underwriters even refuse to insure the responsibilities of these industries or choose to apply substantial reductions to minimize potential compensation. Individual individuals also occupy the land and engage in potentially hazardous activities. For example, a rotten branch may fall from an old tree and injure pedestrians, and many people ride bikes and skateboards in public places. The majority of countries require motorists to bring insurance and criminalize those who drive without a valid policy. Many also require insurance companies to provide default funds to offer compensation to those physically injured in accidents in which the driver does not have a valid policy.
In many countries claims are dealt with under general legal principles established through the long history of case law and, when enacted, are made through civil action in the relevant jurisdiction.
Products
Product liability insurance is not an insurance compulsory class in all countries, but laws such as the UK Consumer Protection Act of 1987 and the EC Guidelines on Product Liability (25/7/85) require manufacturing or supplying goods to carry some form of liability insurance product, usually as part of a combined coverage policy. The scale of potential liability is illustrated by cases such as those involving Mercedes-Benz for unstable vehicles and Perrier for benzene contamination, but the complete list includes medicines and medical equipment, asbestos, tobacco, recreational equipment, mechanical and electrical products, chemicals and pesticide. , agricultural products and equipment, food contamination, and all other major product classes.
Entrepreneur
A new policy has been developed to cover any liability that may be imposed on an employer if an employee is injured in his job. In countries where such insurance is not compulsory, smaller organizations face the risk of bankruptcy when faced with an employee claim that is not covered by insurance.
In the United Kingdom, Employer Liability Insurance is mandatory, unless the sole employee is the owner of the company (which holds at least 50% of the shares) or the business is a family business that is not included as a limited company.
Similarly, worker's compensation insurance is usually mandatory in the United States unless the company can demonstrate the ability to insure itself by demonstrating adequate financial and risk management capabilities. Self insured entrepreneurs may carry excessive insurance for events that cause unacceptably large losses for employers.
The original jurisdiction over workers' compensation claims has been transferred in most of the United States to administrative proceedings outside federal and state courts. They operate as an error-free scheme where employees do not have to prove the mistakes of the employer; enough for the employee to prove that the injury occurred in the job. If a third party other than the employer actually causes an injury, the worker's compensation insurance (or self-insured employer) that is ordered to pay employee claims is usually entitled to initiate subrogation in the regular court system against third parties. party. In turn, worker's compensation insurance is set and borne separately from liability insurance. Just as the Insurance Services Office develops standard liability insurance forms and obtains approval for them from the state insurance commissioners, the National Council on Compensation Insurance (NCCI) and various state ranking agencies provide similar services in the context of workers' compensation.
US workers' compensation insurance generally covers only body injuries and employee deaths, but does not necessarily include others who may be injured as a direct result of bodily injury or death. US employers often carry the scope of the Employers 'Obligations (which are not always mandatory) to protect themselves from lawsuits from people who still have the right to prosecute them in court, such as employee mates who claim to lose the consortium as a result of employees' bodily injury on alleged jobs caused by employer's negligence.
Workers' compensation also does not include intangible claims that only cause emotional distress. During the 1980s, when US employees began to get judges' judgment on their superiors more often on such grounds, ISO revised the Commercial Liability insurance policy form to exclude coverage for employee-employee relations such as racial or gender discrimination. in the workplace, and the responsibility for careless supervision of middle managers who make such demands. It soon became clear that the US employers were very interested in obtaining some kind of insurance coverage for such violations, resulting in the development of Employment Obligations (EPL) in the US market.
General responsibility
General Liability Insurance is a type of coverage that provides individual protection against claims that may include bodily injury, physical damage to the car, property damage etc. arising from business operations. General Liability Insurance (GP) covers a number of business and insurance norms may vary from company to company as well as area to area. Many of the risks of public and product responsibility are often covered together under general liability policies. These risks may include bodily injury or property damage caused by the direct or indirect action of the insured.
In the United States, general liability insurance liabilities most commonly arise in General Commercial Liability policies acquired by businesses, and in homeowners insurance policies obtained by individual homeowners.
Insurable Risks
Generally, liability insurance only assumes the risk of being sued due to a strict negligence or liability claim, but no higher level suits or offenses mens rea . This is usually mandated by the policy language itself or the law of the case or law in the jurisdiction where the insured person lives or conducts business.
In other words, liability insurance does not protect against liability resulting from a crime or intentional act committed by the insured. It is intended to prevent criminals, especially organized crime, from obtaining insurance liability to cover the costs of self-defense in criminal acts carried by the state or the civil actions carried by their victims. A conflicting rule will encourage crime commissions, and allow insurance companies to indirectly benefit from them, by enabling criminals to insure themselves from the adverse consequences of their own actions.
It should be noted that the crime can not be insured per se . In contrast to liability insurance, it is possible to earn insurance losses to compensate for a person's loss as a victim of a crime.
Reading Rules
In the United States, most countries only make compulsory motor vehicle insurance. When bringing the policy is not required and the third party filed a claim for injury suffered, evidence that the party who has liability insurance is generally unacceptable in the lawsuit based on public policy, because the court does not want to prevent the parties from bringing insurance. There are two exceptions to this rule:
- If the owner of the insurance policy disputes ownership or control over the property, proof of liability insurance may be introduced to indicate that it is likely that the policy owner may own or control the property.
- If a witness has an interest in a policy that provides a motive or bias witness with respect to special testimony, the existence of the policy may be introduced to indicate this motive or bias. The federal rules of civil procedure 26 were amended in 1993 to require that any refundable or replaceable insurance policy be provided for photocopies by opposing prosecutors, although the policy is usually not the information given to the jury. The Rules of the Code of Rules of the Federal Rule 46 say that appeals may be dismissed or confirmed if lawyers do not update their notices of appearances to recognize insurance. The Cornell University Legal Institute website includes congressional notes.
In the technology industry
Since technology companies represent relatively new industries that are mostly related to intangible but highly valuable data, some definitions of liability may still be evolving in this area. Technology companies should carefully read and fully understand their policy limits to ensure coverage of all potential risks inherent in their work.
Typically, professional liability insurance protects tech companies from litigation resulting from allegations of professional negligence or failure to perform professional duties. Included incidents may include errors and omissions resulting in loss of client data, software or system failures, performance claims not performing, outrageous service, forum posting contents or emails from wrong employees or causing damage to reputation, getting rid of office equipment such as machines fax without properly cleansing their internal memory, or failing to notify customers that their personal data has been infringed. For example, some client companies have won a major settlement after subcontracting technology actions result in irreplaceable data loss. Professional liability insurance will generally cover such legal settlements and defenses, within the limits of the policy.
In addition, client contracts often require tech subcontractors working on-site to provide evidence of general liability and professional liability insurance.
See also
- Cumis Advice
- Decennial Obligation
- Professional liability insurance
References
Source of the article : Wikipedia
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