Commercial Property Insurance Chapter 10 Business Property Insurance Appendix C Building and Personal Property Coverage Form

Property Risk Management Property loss - any loss that a person or organization sustains as a result of the damaging, destruction, taking or loss of use of property in which that person or organization has a financial interest Risk Management Process 1 - Identify and analyze loss exposures 2 - Examine the feasibility of alternative risk management techniques 3 - Select the best risk management technique 4 - Implement the technique 5 - Monitor the program

Identify and Analyze Loss Exposures Property Loss Exposures 1 - The item exposed to loss Real property Personal property Valuable information 2 - The cause of loss – anything that could cause a loss to property 3 - The effects of loss Reduction in value Increased cost to repair or replace Loss of revenue Extra expense Direct loss and indirect loss

Overview of Commercial Property Insurance Insurance Advisory Organizations Insurance Services Office (ISO) American Association of Insurance Services (AAIS) Develop and file with state insurance departments: Policy forms Manual rules Loss costs

ISO Commercial Lines Program (1986) “Commercial property” Building and contents (on or within 100’ of insured location) Boiler and machinery Commercial crime Employee dishonesty, forgery, theft, burglary, robbery, extortion Commercial inland marine Elements of transportation or communication Property in transit, mobile equipment, property being installed by a contractor, bridges, radio towers Farm Commercial auto and liability

Building and Personal Property Coverage Covered Property Building - Table 10-1 Your business personal property – Table 10-2 Property owned by the insured Furniture and fixtures Machinery and equipment “Stock” All other personal property owned by you and used in your business Property owned by others Labor, materials or services furnished on property of others Improvements and betterments Leased personal property Personal property of others $2500 for property in the care, custody or control of insured

Property Not Covered under BPP Table 10-3 Buildings and other real property Land Roadways Water Retaining walls Bridges Piers Plants and outdoor property Growing crops and lawns Outdoor crops Outdoor trees, shrubs and plants Outdoor fences Outdoor signs, unless attached to buildings

Property Not Covered - continued Other personal property Deeds Evidence of debt Money Currency Accounts Bills Securities and notes Also, food stamps Vehicles, Watercraft, Aircraft Animals Valuable papers and records Property otherwise covered (BPP is excess) Contraband

Building and Personal Property Coverage Covered locations Described locations and off premises Additional coverages – Table 10-4 Debris removal Pollutant cleanup and removal Preservation of property Fire department service charge

Building and Personal Property Coverage Coverage Extensions – Table 10-4 Newly acquired or constructed property Personal effects and property of others Valuable papers and records Property off premises Outdoor property Covered only for fire, lightning, explosion, riot or civil commotion or aircraft

Covered Causes of Loss Evolution Fire Fire and lightning (Standard Fire Policy) Extended coverage (EC) Vandalism and malicious mischief (VMM)

Extended Coverage (W.C.SHAVER) Wind Civil commotion Smoke Hail Aircraft Vehicles Explosion Riot

BPP Cause of Loss Options Basic Form – Table 10-5 Fire, lightning and extended coverages Sprinkler leakage Sinkhole collapse Volcanic action Broad Form – Table 10-5 Basic form perils plus Weight of snow, ice or sleet Water damage Falling objects Breakage of glass Special Form – All Risk Includes limited coverage for theft

Concurrent Causation California court rulings of the 1980s If a loss to property can be attributed to two or more causes, as long as one of the causes is not excluded the loss is covered. Examples Flood and negligent construction of flood control structures (Palm Desert) Landslide and faulty installation of drain

Other Exclusions - Maintenance Wear and tear Rust, corrosion, fungus, decay, deterioration, hidden or latent defect Smog Settling, cracking, shrinking or expansion Insects, birds, rodents, or other animals Mechanical breakdown (except elevator collision) Dampness, dryness, changes or extremes of temperature, and marring or scratching

Other Exclusions - Theft Related Employee dishonesty Voluntary parting Unauthorized instructions Inventory shortage Unexplained disappearance Theft of building materials Dollar Limitations $2500 for furs $2500 for patterns, dies, molds and forms $2500 for jewelry,….gold, silver,.. $250 for stamps, tickets (including lottery tickets held for sale, and letters of credit

Consequential Property Coverage Business Income Coverage Business interruption Net income Continuing normal operating expenses incurred Extra expense Monthly limit of indemnity Maximum period of indemnity Payroll endorsements

Other Property Coverage Commercial Crime Coverage Inland Marine Boiler and Machinery Businessowners Policy

Inland Marine Insurance Development Regulatory restrictions on other coverages Could offer all-risk coverage Less restrictive regulations

Nationwide Marine Definition Imports Exports Domestic shipments Instrumentalities of transportation and communication (bridges, tunnels, piers, power lines, television towers) Various types of individual personal property (jewelry, furs, instruments) Various types of business property (mobile equipment, animals, computers)

General Characteristics of Inland Marine Policies Coverage for property in transit Loss exposures covered Physical loss Business income and extra expense Broad coverage of perils Valuation provisions Actual cash value, replacement cost, selling price, invoice value or agreed value