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Commercial Property Insurance
Chapter 10 Business Property Insurance Appendix C Building and Personal Property Coverage Form
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Covered Causes of Loss Evolution Fire
Fire and lightning (Standard Fire Policy) Extended coverage (EC) Vandalism and malicious mischief (VMM)
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Extended Coverage (W.C.SHAVER)
Wind Civil commotion Smoke Hail Aircraft Vehicles Explosion Riot
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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
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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
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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
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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
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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
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Other Property Coverage
Commercial Crime Coverage Inland Marine Boiler and Machinery Businessowners Policy
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Inland Marine Insurance
Development Regulatory restrictions on other coverages Could offer all-risk coverage Less restrictive regulations
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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)
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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
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