Commercial 103.

Commercial 103

TWFG Commercial Business School Commercial 103
Overview Commercial Insurance Basic Terms Commercial Insurance Polices: Overview Important Auxiliary Coverages ACORD Forms Overview Commercial Lines Workflow Process Submission Checklist Post-Binding Checklist

How Does the Underwriting Process Operate? Commercial Insurance Policy Coverages: First Level Detail Silverplume Overview (Live Demo)

Commercial Lines Basics Property: COPE Commercial Lines Basics Property: Building Commercial Lines Basics Property: Business Personal Property (BPP) Module 3 Case Study

Commercial Auto Multi-Line Policy Types Workers Compensation Overview Endorsements Common to Most Policies

Learning Objectives Understand the four basic elements used in evaluating Commercial Property Understand what’s covered under Building coverage on CPP Understand what’s covered under BPP coverage of the CPP

Commercial Lines Basics: Commercial Property: COPE Why all those pesky questions Commercial property generally refers to a building and/or a business’ personal property 4 elements needed for carrier quote. COPE Construction Occupancy Protection External Exposures

Commercial Lines Basics: Commercial Property: COPE Fields on the ACORD applications are designed to capture the four elements, COPE The following slides will covered what is being evaluated

Commercial Lines Basics: Commercial Property: COPE Construction: Type of construction affects buildings performance in the event of fire or wind/hail Carriers want building and roof construction types Carriers need year built as well as any updates. Especially important on building over 20yrs old

Commercial Lines Basics: Commercial Property: COPE Construction: Frame – Typical wood construction, including wood frame with stone, brick or stucco veneer Joisted masonry – A mixture of wood and masonry construction, usually only seen in older structures from the 40’s and 50’s. The walls are masonry or solid brick with wood joists supporting floors and roofs Non-Combustible – Any type of non-combustible (not wood) non-masonry construction. The examples include metal shop buildings with steel framing, mini-self-storage units, and auto-body shops

Commercial Lines Basics: Commercial Property: COPE Construction: Masonry Non-Combustible – Exterior walls are masonry (solid masonry, concrete, solid brick) but the floors and roof are made of metal or some other non-combustible material Fire-Resistive – may be solid masonry for all components or a mixture of solid masonry and heavy, protected steel, such as a high-rise. Depending on the fire-resistive rating of the materials, these structures are classified as modified non-resistive (1 hour rating) or fire-resistive (2 hour rating)

Commercial Lines Basics: Commercial Property: COPE Occupancy: How building is occupied is used in determining susceptibility to loss. Example: Office Occupants – high volume of combustible(burns easy) materials such as papers/files/furniture Restaurant – this type of occupancy can represent an increased hazard. Example would be cooking with a deep fryer Therefore, the ACORD questions, such as whether or not the building is sprinklered, become very important

Commercial Lines Basics: Commercial Property: COPE Protections: Protection refers to fire protection. Specifically, how far are the closest fire hydrant and fire departments, what is the Property Protection Class (PPC) rating, is the property sprinklered. The better protected the building, the lower the rate that the insurance carrier can provide

Commercial Lines Basics: Commercial Property: COPE External Exposures: External Exposures refer to the building’s surroundings, and how that might affect the risk of loss. For example, a metal shop building located in a field full of high grass would represent a greater risk to fire loss than one located in a gravel paved lot

Commercial Lines Basics: Commercial Property: COPE When you understand the exposures that the carrier must consider before offering a rate, then you get a better feel for why the underwriter may be “asking so many questions.” Your understanding should lead you to gathering information up front, in order to shorten the time it takes between submission and quote

Commercial Lines Basics: Commercial Property: Building What is covered under “Building”?

Commercial Lines Basics: Commercial Property: Building Building The building itself, as described on the dec page Fixtures Included are any fixtures, such as light fixtures, including outdoors Permanently Installed Equipment Usually bolted to floor or wall. Can be included on building or BPP. Typically placed on building due to broader coverage

Commercial Lines Basics: Commercial Property: Building Some Forms of Personal Property Included is any personal property used to maintain or service the building. Examples: Fire extinguishers, outdoor furniture, floor coverings, HVAC equipment, dishwashing equipment, lawnmowers This broad definition allows a landlord to purchase building coverage only, and have all building related personal property included without also having to purchase BPP coverage

Commercial Lines Basics: Commercial Property: Building Additions, Alterations & Repairs Included are additions under construction, alterations, and repairs to the building Removes need to purchase separate Builder’s Risk coverage May need to increase limit to coverage additions and alterations Included are all materials/supplies/equipment used for alterations or repairs as long as the are within 100 of premises Typically contractors will insure materials/equipment on an Inland Marine Installation Floater. Building coverage would be excess

Commercial Lines Basics: Commercial Property: Building As you can see, there’s much more to building coverage than just the building itself

Commercial Lines Basics: Commercial Property: BPP There are 7 categories of specific Business Personal Property (BPP) that are described in the Property Coverage Form

Commercial Lines Basics: Commercial Property: BPP Fixtures & Furniture Fixtures refers to those not permanently installed. Can be removed Not the same as improvements and betterments Example: A jeweler leases a building and installs special showcases to display his products. If the tenant were to move at the end of the lease, the showcases would be disassembled and taken with him. However, if the same tenant remodeled the interior, constructing a back office and a special concrete encasement for a safe, those improvements would not be taken when the lease expired.

Commercial Lines Basics: Commercial Property: BPP Machinery & Equipment Machinery and equipment not permanently attached to the building nor used to service the building

Commercial Lines Basics: Commercial Property: BPP Stock Merchandise held for storage or sale Raw materials, in-process or finished goods All supplies used to pack or ship stock Assigning a value to stock when determining the BPP limit can be tricky if the operations of the insured are such that the value of “stock” fluctuates. The value assigned should reflect the largest amount that would occur at any one time during the policy term. Note also that this stock is tied to the location. This becomes important if the insured has multiple locations and the stock (raw materials, in-process work) moves from location to location and therefore the values fluctuate. This situation calls for “Blanket BPP” coverage—which will be discussed at a later date.

Commercial Lines Basics: Commercial Property: BPP All Other BPP Owned and used in the business Catch-all for any remaining BPP Labor/Materials/Services furnished by owner on BPP of others Includes arranged by business Ensures that the insured’s added value work to other’s BPP is also covered

Commercial Lines Basics: Commercial Property: BPP Your Use Interest as a Tenant in Improvements & Betterments Example: Suppose a tenant does $100,000 of improvements to a rented property and expects to use them for 10 years. Their use interest is $100,000 over 10 years, or $10,000 per year. After 3 years, there is a fire loss and the building is totaled. The tenant’s insurable loss would be the remaining 7 years of use or 7 X $10,000 = $70,000. Note that the owner of the building should have increased the limit of building coverage on their policy to reflect the improvements done by the tenant. It does not violate the principle of indemnity that the owner and the tenant should collect from the same loss, as their insurable interests differ, and each is the subject of a separate insurance policy.

Commercial Lines Basics: Commercial Property: BPP Leased Personal Property Leased personal property for which you have a contractual responsibility to ensure, unless otherwise insured as Personal Property of Others. The typical example here is computers, copiers and other office machines that the insured leases. The leases typically require the insured to provide insurance coverage for the leased items.

QUIZ

What does the acronym COPE stand for?

What does the acronym COPE stand for? Construction, Occupancy, Protection, Exposures

Is permanently installed equipment covered under the Building or BPP?

Is permanently installed equipment covered under the Building or BPP? It can be covered under either, but most insureds choose to cover it under the building limit

An insured sets out to add 3500 sq ft to their building. Is the work in progress covered under the CPP? If so, what should the insured do at the commencement of work?

An insured sets out to add 3500 sq ft to their building. Is the work in progress covered under the CPP? If so, what should the insured do at the commencement of work? Part 1: Yes, additions and alterations are covered Part 2: Determine the RCV of the building once the work is completed, and increase the building limit to match this value

If an insured has stock at several locations, and the value of that stock fluctuates, what form of BPP should they consider for the stock?

If an insured has stock at several locations, and the value of that stock fluctuates, what form of BPP should they consider for the stock? Blanket Coverage

An insured lease a $5000 copier. Can this be covered under the CPP? If so, under what coverage? Is there anything else the insured should consider?

An insured lease a $5000 copier. Can this be covered under the CPP? If so, under what coverage? Is there anything else the insured should consider? Part 1: Yes Part 2: BPP Part 3: Do they need to increase their BPP limit to account for the additional $5000

Future Classes February 21st Commercial 104 February 28th Commercial 101 March 6th Commercial 102 March 13th Commercial 103

Industry Segment Classes (Beginning in March) Retail & Service Farm/Ranch Artisan Contractor Excess & Surplus Commercial Auto Professional Liability Workers Compensation Umbrella Commercial Real Estate Bonds Restaurant Financial Institutions Manufacturing Hotels/Motels Agriculture Medical Technology

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Commercial 103.

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Commercial 103.

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