Commercial Property Risk Management and Insurance (Assignment 8, 9, 10, & 11) FINA 3544

Ocean Marine and Inland Marine
Outside the U.S., marine Insurance is generally understood to mean vessels and their cargos; whoever the US marine insurance consists of these two distinct concepts:
Ocean Marine
Marine Insurance that is generally understood to mean vessels and their cargos is…
Inland Marine
This Marine insurance refers to a wide rand of land-based risks related to transportation or communication…
Development, Nationwide Definition, Current Status
Three Important background topics related to inland marine…
All Risk
Marine insurers could write “____” policies on marine exposures. Eventually extended coverage to various other land-based properties (Jewelers, communication poles, etc.)
National Marine Definition
This was created due to the expansion of inland marine insurers in the 1920s threatening fire insurers.
a. Imports
b. Exports
c. domestic shipment
d. instrumentalities of transportation and communication
e. various types of property owned or used by individuals ( jewelry, furs, etc)
f. various types of property pertaining to a business, profession, or occupation.
Non-filed Classes
when the Insurer is not required to file policy forms nor rated with state insurance department & provides insurers flexibility in insuring difficult exposures.
Filed Classes
When the Insurer must file rates & policy forms with the insurance department. In many cases, insurers can still charge higher rates to riskier exposures with the written consent of the insured ( consent to rate rules). Insurers also have some flexibility in modifying policy forms to meet their risk appetite.
property in transit or property at location
most Inland Marine Policies always provide at least some coverage for __________ or __________ off insured premises:
e.g. motor truck cargo insurance
e.g. art dealers merchandise while traveling from gallery to gallery
Floaters
Inland Marine Policies that cover mobile property are often called…..
e.g. contractors equipment, fine arts, etc.
Physical Loss, Business Income, Legal Liability for damage to the property of others
Loss exposures covered by marine policies include: (3)
Open Peril Basis & Named Peril Basis
Most Inland Marine Policies are written on a(n) _______; however, some policed are written on a(n) ________ (decrease moral hazard).
ACV/RC/Selling Price, Invoice Value, & Agreed Value Method
Valuation for Inland Marine Policies include (3):
invoice value
often used in property in transit coverages between buyers and sellers. For Inland Marine Policies, valuation is based on _________.
Advantage: amount of loss can be determined quickly without dispute.
Agreed Value Method
For Inland Marine Policy the insured and insurer usually agree on value of property at policy inception. Used to insure works of art or irreplaceable document.
Parties Involved, Ownership of goods, Carrier responsibility
Three important issues to consider when analyzing transpiration loss exposures (Inland Marine Policy):
Shipper
Person or organization shipping the goods, often the seller of the goods (Inland Marine Policy)
Consignee
person or organization that received the property being transported, often the buyer of the goods (Inland Marine Policy)
Carrier
an individual/organization in the business of transporting the property of others (Inland Marine Policy)
owns
The party that _____ the goods at the time they are damaged bares the loss.
Terms of sale determine the ownership of goods (Inland Marine Policy).
Free on Board (FOB) Vessel
International commerce: buys assumes responsibility as soon as goods are loaded on overseas vessel (Inland Marine Policy)
Free Along Side (FAS) Vessel
International Commerce: buyer assumes responsibility as soon as good are placed alongside overseas vessel in port (Inland Marine Policy)
FOB Point of Origin
Domestic Commerce: Risk of loss passes to buyer when good are accepted by carrier (Inland Marine Policy)
FOB Destination
risk of loss passes to buyer when goods are delivered to buyer’s premises (Inland Marine Policy)
Responsible
when carriers transport goods, they are _____________ for damage to goods. This provides source of recovery for owners of goods damaged in shipment (Inland Marine Policy).
Contract Carrier
Carries goods for certain customers only, often to meet special needs that common carriers can’t meet (Inland Marine Policy)
Common Carrier
offers transportation services to the general public (Inland Marine Policy).
e.g. FedEx, or a train that carries goods to everyone
1. Acts of God
2. Acts of Public Enemy
3. Exercise of public Authority
4. Shipper’s fault or neglect
5. Inherent Vice
Common Carriers of Goods by land are usually liable to the shipper for any cargo, regardless of negligence. The five EXCEPTIONS are:

(Inland Marine Policy)

bill of lading
common carrier can limit the amount of cargo liability in…… (Inland Marine Policy): the document that acknowledges receipt of goods and includes contract of carriage for goods
Release bill of lading
a _____________ charges lower freight rate if shipper agrees to accept limitations on how much shipper can recover from carrier (Inland Marine Policy)
Losses arising out of negligence
Contract carriers liability depends on contract terms. Often, they are only responsible for ______________________ (Inland Marine Policy)
Waterborne carriers
For common carriers, laws relieve carrier of more liability relative to land shipments. Contract carriers often have liability exposure similar to that of common carriers (Inland Marine Policy).
note: Contract carriage by water is “Chartering”
Air Carriers
International _____________ are not liable for losses to property if they can prove:
a. they took all necessary steps to avoid a loss
b. loss was caused by pilot error
(Inland Marine Policy)
Annual Transit, Open Cargo, Trip Transit, Mail, and Motor Truck Cargo Insurance
The five common types of Inland Marine and Ocean Marine policies used for covering transportation loss exposures are:
Annual Transit Insurance
Designed for organizations that frequently ship or receive property in transit. Covers shipments made/received by insured during policy period.
– purchased by frequent shippers (Inland Marine Policy).
Annual Transit Insurance
Primary purpose of ________________ is to cover property while being transported by carriers. Many policies also cover property shipped on a vehicle owned/operated by insured (Inland Marine Policy)
furs, jewelry, money, Inland shipments only (no covering air or water shipments), and shipments to the non continental US.
Annual Transit Insurance EXCLUSIONS (5):
invoice value or ACV
Annual Transit Insurance – property is valued either at __________ value or ________ (Inland Marine Policy)
Open Cargo Insurance
covers overseas shipments by vessel or aircraft. Covers the owner of the products/property (Inland Marine Policy)
assured
party names as insured on Open Cargo Insurance is referred to as the _____________ (Inland Marine Policy)
Open Cargo Insurance
This policy covers good described in the policy and also covers goods not specifically described, but with more restrictions (Inland Marine Policy)
General Average/Loss
________________ losses covered, expenditures or sacrifices of the cargo made in times of danger to save the voyage for Open Cargo Insurance (Inland Marine Policy)
– sue and labor clause obligates insured to preserve property at time of loss – insurer agrees to pay for cost of such measures, in addition to policy limits
date of attachment
Open Cargo Insurance, policy covers all shipments made after _______________. Policy remains in force continuously until insured or insurer cancel the policy (Inland Marine Policy)
Open Cargo Insurance
This Inland Marine Policy also provides “warehouse to warehouse” coverage:
e.g. shipments covered from point of origin to destination, even if connecting transportation is by land
HOWEVER: land only shipments are not covered
1. Free of Capture and Seizure
2. Strikes, Riots, and Civil Commotion
3. Delay Clause
Open Cargo Insurance EXCLUSIONS (3):

** Premiums are based on full value of all shipped property (100% coinsurance requirement)

(Inland Marine Policy)

Trip Transit Insurance
This Inland Marine Policy covers cargo on a specified trip. The Policy may be inland marine or ocean marine.
– commonly used to cover property such as a valuable piece of machinery/equipment being moved from place of manufacture to place of use.
– covers location in the delarations
Mail Insurance
This type of Inland Marine Policy covers property in the custody of the USPS, FedEx etc.
– cost is frequently lower than USPS
– amount of insurance at USPS is often limited
– commercial insurance provides faster claims settlement than USPS
– losses of mailed securities/valuables can also be covered
-under a parcel post policy, coverage for losses due to nondelivery is available
Motor Truck Cargo Insurance
This Inland Marine Policy covers trucker’s liability for damage to cargo of others being transported by the trucker:
Precious metals, fine arts, liquor
Motor Truck Cargo Insurance EXCLUSIONS (3):

(Inland Marine Policy)

Instrumentalities of Transportation and Communication
Refers to policies that cover a variety of property INCLUDING:
1. bridges and tunnels
2. Piers, wharves, docks, dry docks
3. Pipelines
4. power transmission and telephone lines
5. radio television equipment
6. outdoor cranes and similar equipment used to load/unload

(Inland Marine Policy)

Equipment Floaters
category of Inland Marine Policies covering equipment wherever it is located:
a. contractors equipment
b. electronic data processing equipment

(Inland Marine Policy)

Contractors Equipment Floater
Largest class of commercial Inland Marine insurance and is used to insure wide range of equipment used by contractors.

Blanket insurance is also available.

Coverage also often includes rental reimbursement – pays the cost of renting substitute equipment if covered property is damaged/destroyed.

Computer Equipment Floater
This Inland Marine Policy covers various types of computer equipment. Advantages to the Inland Marine Policy over the BPP:
a. coverage is on open peril basis – less exclusions and covers mechanical/electrical breakdown
b. covers property in transit
c. covers data and media losses
d. covers virus losses if attributable to covered loss
e. covers extra expenses if operations depend on computers.
Builders Risks Policy
This Inland Marine Policy typically provides broader coverage than the commercial property version.

Covers the structure under construction, temporary structure, or building materials (only covered if they are on location, in transit, or in storage).

Earthquake, flood, theft of materials not installed = covered

Collapse due to defective materials/methods = covered

Installation Floaters
This floaters are typically purchased by contractors & subcontractors.

Covers property in transit and while being installed/tested at the work site.

coverage ends when the financial interest ceases or purchaser accepts property at complete or policy expires/canceled

(Inland Marine Policy)

1. warehouse operators legal liability policy
2. Bailees’ customers policy
two important bailee coverages:

(Inland Marine Policy)

warehouse operators legal liability policy
this Bailee Coverage covers the owner/operator of warehouse for damage of property of others.

only responds if Bailee is legally required to pay

coverage similar to special causes of loss form

(Inland Marine Policy)

Bailees’ customers policy
this Bailee Coverage covers damage to the customers’ property regardless of legal liability.

(Inland Marine Policy)

1. Pattern and die floater
2. Processing floater
Two important Bailor coverages:

(Inland Marine Policy)

Pattern and Die Floater
This bailor coverage covers patterns, dies, and other tools of a manufacturer at a subcontractor’s facility.

Available for other types of property such as manuscripts or artwork

(Inland Marine Policy)

Processing Floater
this bailor coverage covers insured goods while in transit to, and at, a subcontractor’s premises

(Inland Marine Policy)

Dealers Policies
This policy covers inventory and personal property of various types of dealers.
e.g. computer dealer, cell phone dealer, jeweler, bicycle dealer, musical dealer, etc.

Often called “black policies” when covering jewelry and fur

covered while on insured’s premises, in transit, located elsewhere

exclusions: theft from unlocked safe, employee dishonesty, unexplained disappearance.

(Inland Marine Policy)

Sign Coverage
This policy covers all types of detached signs and is used by many businesses because signs excluded under CP forms.

Typically a 100% coinsurance provision applies

TWO EXCLUSIONS:
1. breakage during transportation, installation, or repair
2. losses caused by short circuit or other artificially generated current

(Inland Marine Policy)

Accounts Receivable Coverage
This policy covers the sums the insured is unable to college when records of AR are destroyed meaning they do not cover customer defaults. Covered on agreed value basis.

(Inland Marine Policy)

Discovery Form
This form covers losses discovered during the policy period, even though they may have occurred before the policy period.

(basics of crime insurance)

Loss Sustained form
This form covers losses actually sustained during the policy period and discovered no later than one year after policy expiration – most common is the version of the Commercial Crime Coverage Form

(basics of crime insurance)

1. Employee Theft
2. forgery or alteration
3. inside the premises – theft of money and securities
4. inside the premises – robbery of safe burglary of other property
5. outside the premises
6. computer fraud
7. funds transfer fraud
8. Money orders and counterfeit money
Insuring Agreement: policy/ form includes eight insuring agreements:

(basics of crime insurance)

** insured my select one or more of the agreements; however, the premium is going to increase

Theft
this is the unlawful taking of money, securities, or other property to the deprivation of the insured

Money= currency, coins, checks, money orders, etc.
Securities= socks, bonds, stamps, etc.
other property = all other property that has an intrinsic value

EXCLUSION: copyrights, patents, intellectual property.

(basics of crime insurance)

unlawful taking
this is an act that is not authorized by law or is a violation of a civil/criminal law

(basics of crime insurance)

Employee
a person that meets all of the following criteria is considered a ___________.
– person must be currently employed by insured or be an ex-employee who was terminated within 30 days.
– person much be compensated by the insured with salary, wages, or commissions
– person must be subject to control/discretion of insured

EXCLUSION: agents/brokers, consignee, independent contractor, similar representative, or a volunteer

(basics of crime insurance)

1. an individual act
2. combined total of all separate acts whether or not related
3. series of acts committed by an employee acting alone or in collusion with other persons
One occurrence of employee theft is defined as (3):

** pre-occurrence limit of insurance for employee theft is shown in the decs

(basics of crime insurance)

1. Termination as to any employee conditions states that the insured must automatically terminate any employee who has committee a dishonest act
2. the insurer can cancel coverage with respect to any employee by providing 30 days notice to the insured
3. coverage territory is extended to cover losses from employees temporarily outside of the US for no more than 90 days.
Employee Theft EXCLUSIONS (3) on the conditions form:

(basics of crime insurance)

1. inventory shortage
2. trading exclusion
3. warehouse receipts
Employee Theft EXCLUSIONS (3):

(basics of crime insurance)

Forgery or Alteration
Insuring agreement that covers losses resulting from ___________________ of insured’s checks, bank drafts, etc.
-DOES NOT cover losses incurred by insured due to the acceptance of a forged check
-DOES NOT apply to losses resulting from forgery by the insured’s employees/representatives
-endorsements are available to cover _______________ of credit/debit cards, personal accounts, warehouse receipts, etc.

(basics of crime insurance)

Inside the premises – theft of money and securities
This policy covers losses to money or securities against the broad scope of perils including theft, disappearance, and desctuction within.

** must happen inside the premises/banking premises for coverage to apply

(basics of crime insurance)

the premises
the interior of the portion of any building the named insured occupies in conducting business

(basics of crime insurance)

bank premises
the interior of the portion of the building occupied by the banking institution or similar safe depository.

(basics of crime insurance)

covered
the following are covered or excluded under the inside the premises – theft of money and securities policy:
– disappearance/destruction of property if not resulting from an unlawful act
-burglary & Robbery
-money destroyed in a fire
-mysterious/unexplained disappearance of property

(basics of crime insurance)

Robbery
unlawful taking of property by someone who has caused/threatened bodily harm or committed an obvious unlawful act witnessed by another person

(basics of crime insurance)

custodian
the names insured, manager, or any employee having care/custody/control of property – note this does NOT include “watch persons” and “janitors”

(basics of crime insurance)

inside the premises – robbery or safe burglary of other property
This policy covers losses to other property from inside the premises; however, needs to be evidence of a forced entry to get coverage

(basics of crime insurance)

$5K
Coverage Limit for a robbery/theft of precious metals, precious stones, pearls, or furs, manuscripts, drawings, or records of any kind:

(basics of crime insurance)

Outside the premises
This policy covers money, securities, and other property while outside the premises and in the care/custody/control of either a messenger or an armored vehicle.

(basics of crime insurance)

Messanger
the insured, an employee, or other partners/officers in the business having possession of property off premises
e.g. the policy would cover theft of a business’ cash from an employee walking from the office to the bank

(basics of crime insurance)

computer fruad
This policy provides coverage for loss of covered property due to use of a computer to fraudulently transfer covered property to the wrongdoer.
ex. hacking into inventory and having products shipped to a different location

EXCLUDED: related theft by employees and losses resulting from fraudulent credit/debit card transactions.

(basics of crime insurance)

Funds Transfer Fraud
this policy covers loss of money and securities from in insured’s account at a financial institution due to:
– fraudulent electronic/telephone/cable etc instructions by someone without the insured’s knowledge or consent
-forged written instruction
-fraudulent instruction to the insured that were believed to be from an employee (their pretends to be CEO and instructs accounting department to transfer money into the thief’s account)

** losses are due to use of a computer to fraudulently transfer funds are EXCLUDED.

(basics of crime insurance)

Money Orders and Counterfeit Money
this policy is an insuring agreement that covers losses due to the insured’s good-fair acceptance of money orders issues and not paid upon presentation or counterfeit money.

** for coverage to apply, insured must have accepted the money order/counterfeir money in exchange for merchandise, money, or services.

Many firms do not purchase this coverage because of loss control techniques

(basics of crime insurance)

1. Lessees of safety deposit boxes
2. securities deposited with others
3. guests’ property
4. destruction of electronic data or computer programs
Available Endorsements for Crime Insurance (4):
lessee
customer paying for use of safety deposit box

(basics of crime insurance)

lessor
bank or depository

(basics of crime insurance)

lessees of safety deposit boxes
endorsement that covers property kept in a safety deposit box on premises or at a bank:

the bank is liable only for losses to customer’s property resulting from negligence => leaving the doors open etc.

Covered for theft, disappearance, or destruction

(basics of crime insurance)

Securities deposited with others
this endorsement is used in cases where owner of securities place securities in temporary possession of another organization, protects owner of securities against theft, disappearance, and destruction of securities while in temporary custody of others.

(basics of crime insurance)

Guest’s Property
this endorsement covers _____________ for which the insured is legally liable. under common law, innkeepers are liable for losses to guest’s property.
– insurer will also pay defense costs if the insured is sued by guests for lost property

(basics of crime insurance)

destruction of electronic data or computer programs
this endorsement covers cost to restore or replace electronic data or computer programs stores in the insured’s computer system due to:
– a computer virus
-vandalism committed by a person with unauthorizes access to insured’s computer system

Acts of employees/managers/etc. are NOT excluded.

(basics of crime insurance)

K & R Coverage
this coverage is to cover ransom, expenses associated with release, cost of repatriation, and death/dismemberment benefits.
-contains a confidentiality condition

(basics of crime insurance)

General Crime Exclusions
1. acts committed by the named insured or its partners
2. acts of employees learned by the name of insured before the policy period
3. losses resulting from the unauthorized disclosure of confidential information
4. losses resulting from governmental seizure of property
5. legal fees, costs, and expenses
6. acts of war and military action

(basics of crime insurance)

the occurrance causing the loss must take place during the policy period AND the named insured must discover the loss DURING the policy period or in the time provided by the extended period to discover loss condition
For a loss to be covered under a loss sustained form (2):

(basics of crime insurance)

the name insured must discover the loss during the policy period or in the time period provided by the extended period to discover loss condition – the occurrence of the loss is not relevant
For a loss to be covered under a discovery form (1):

(basics of crime insurance)

1. applies only if policy is cancelled
2. insurer will pay for losses sustained before cancellation date, but only if insured discovers losses within a specified period following cancellation.
– loss sustained form = 1 year
– discovery form = 60 days
Extended Period to Discover Loss, known as extended discovery period (2):

(basics of crime insurance)

only honor the lower limits
Loss sustained during prior insurance NOT issued by us or any affiliate condition, most insurers will pay is___________________________________.

(basics of crime insurance)

time of cancelation to the last policy.
Loss sustained ruing prior insurance issued by us or any affiliate condition, current policy must have become effective at the ____________________.

(basics of crime insurance)

Retroactive Date Endorsement
this endorsement is to limit exposure of the discovery form for insurers. Sets a date as a limit to discover loss before the policy period had begun.

(basics of crime insurance)

Joint insured condition
This condition affecting interests insured addresses situations where more than one insured is names on a policy
– States that the first names insured acts for itself and all other insureds
– also provides employee theft coverage to every insured with respect to employees from other insureds

e.g. an employee at Sub A steals from Sub B so Sub B is covered for the loss

(basics of crime insurance)

consolidation
this condition affecting interests insured is a merger or acquisition condition.
– newly acquired/merged entity is covered for 90 days

(basics of crime insurance)

Additional Premises or Employees
This condition affecting interests insured policy automatically covers any premises or employees the insured adds during the policy period.

(basics of crime insurance)

Concealment, misrepresentation, or Fraud condition
This condition affecting claims handling: insurance is voice if insured commits fraud of conceals/misrepresents material facts
ex. improperly filling out forms/documentation

(basics of crime insurance)

Cooperation condition
this condition affecting claims handling states the insured must cooperate with insurer in all matters pertaining to insurance

(basics of crime insurance)

Deductible condition
this condition affecting claims handling states that no loss is payable unless is exceeds the deductible.

***Deductible comes off the loss NOT the limit

(basics of crime insurance)

Duties of the event of loss
this condition affecting claims handling states that for coverage to apply, insured must perform various duties including:
– prompt notification
– submit to an examination under oath
– produce all pertinent records
– provide sword proof of loss within 120 days

(basics of crime insurance)

Records Consolidation
This condition affecting claims handling states that the insured is required to keep records of all covered property. This enables insurer to verify amount of any covered loss.

(basics of crime insurance)

Transfer of your rights of recovery against others to us
this condition affecting claims handling stated the subrogation clause and the insured is NOT permitted to waive subrogation against an party after a loss.

(basics of crime insurance)

Valuation – Settlement Condition
This condition affecting claims handing states that:
– covered money is paid at face value of money ( no inflation if the money was stolen in the past).
– covered loss of securities is paid at market value of securities at close of business on day loss was discovered
– covered loss of or damage to other property is paid on a replacement cost basis

(basics of crime insurance)

Government Crime Forms
These forms are similar to commercial crime forms/policies in most of the provisions.
– Coverage territory does NOT include Canada.
– per loss coverage limit is available
– per employee coverage limit is available
– termination as to any employee condition

(basics of crime insurance)

Equipment Breakdown Insurance
This insurance covers losses resulting from accident breakdown of covered equipment (operated under pressure or that controls, transmits, transforms, or uses mechanical or electrical power)

(Equipment Breakdown Insurance)

1. Boilers and pressure vessels
2. electrical equipment
3. mechanical equipment
4. AC of Refrigeration equipment
5. office equipment/systems
Major Categories of Equipment Covered (5):

(Equipment Breakdown Insurance)

fired pressure vessels
these are closed containers headed by direct fire of burning fuel and can withstand internal pressure

NOT COVERED IN CP FORM

(Equipment Breakdown Insurance)

boilder
this is the most common type of fired pressure vessel – made of cast iron or steel which water is used to produce steam or hot water

NOT COVERED IN CP FORM

(Equipment Breakdown Insurance)

explosion, overheating, cracking due to expansion/contraction or swelling
common types of breakdown for fire pressure vessels

(Equipment Breakdown Insurance)

unfired pressure vessels
these are closed containers and can withstand internal pressure/vacuum but are not headed by direct fire or burning fuel.
ex: compressed air tanks etc.

COVERED IN CP FORM – explosion
NOT COVERED IN EQUIPMENT BREAKDOWN

(Equipment Breakdown Insurance)

Electrical equipment
common types of _____________ include power transformers, switch boards, circuit breakers, cables, generators, etc.

NOT COVERED IN CP FORM – however, the resulting fire damage is covered under CP

(Equipment Breakdown Insurance)

Mechanical Equipment
examples of this _____________ equipment include compressors, pumps, blowers, fans, engines, turbines, etc.
Breakdowns = breaking of rotator elements or gears/couplings or failure of bearings.

NOT COVERED IN CP FORM for mechanical breakdown

(Equipment Breakdown Insurance)

AC or Refrigeration Equipment
this equipment components include motors, compressors, fans, coins, pipes, etc. and failure of these components can result in a variety of losses.

NOT COVERED IN CP FORM

(Equipment Breakdown Insurance)

Office Equipment and Systems
This equipment includes computer systems, automated telephone systems, copiers, fax machines, etc.

suffers losses due to: circuit board failure, breaking of parts, bearing/gear failure, electrical surges.

COVERED IN EB – better coverage than manufacturers warranty policies.

(Equipment Breakdown Insurance)

covered by EB
Boiler Explosion
covered by EB
exectrical breakdown
covered by EB
mechanical breakdown
covered by EB
rupture/busting
Covered by CP
Explosion of Unfired vessel
Covered by CP
Furnace Explosion
covered by CP
Fire
Small Business Market
also known as the Main Street Market, the largest portion of the market.
ex. retain stores, offices, churches, etc.
– usually have uncomplicated exposures
– exposures include heating/AC, refrigeration equipment, scanning/checkout/inventory equipment

(Equipment Breakdown Insurance)

Midsize Market
the size of the market includes food processors, printers, manufacturers, etc.
– more complex exposures including production machinery and processing equipment

(Equipment Breakdown Insurance)

Large Industrial Market
the market with the most complex exposures with high values exposed to losses.
ex: utilities, chemical companies, oil and natural gas companies , heavy manufacturers, etc.

(Equipment Breakdown Insurance)

breakdown to covered equipment
______________________ is the event that triggers coverage, once triggered, all types of losses described in insuring agreement are covered.

(Equipment Breakdown Insurance)

Property Damage
Equipment Breakdown insuring agreement that states the insurer agrees to pay for “covered property” at location described in decs
– will pay for property in named insured’s care custody and control NOT neighboring property.

(Equipment Breakdown Insurance)

Expediting Expenses
Equipment Breakdown insuring agreement that states the insurer agrees to pay expenses to speed up the repair/replacement of covered property.
ex: overtime wages to speed up repairs or overnight shipping fees to replace destroyed parts.

(Equipment Breakdown Insurance)

Spoilage Damage
Equipment breakdown insuring agreement that states the insurer agrees to cover spoilage damage to raw materials, property in process, or finished products
ex: heat or AC breaks = covered
ex: spoilage must result from lack of power, light, heat, steam, or refrigeration.

(Equipment Breakdown Insurance)

Business Income
Equipment breakdown insuring agreement that states the insurer agrees to provide BI and Extra Expense coverage or only Extra Expense coverage – decs indicated if one or both coverages apply.

(Equipment Breakdown Insurance)

Utility Interruption
equipment breakdown insuring agreement that states the insurer agrees to cover BI, Extra Expense, or spoilage losses resulting from breakdown of public/private utility providers equipment
e.g. utility company’s transformer breaks down causing the insured to incur spoilage damage due to lack of electricity

(Equipment Breakdown Insurance)

Contingent Business Income
equipment breakdown insuring agreement that covers BI and extra expense arising from breakdown to covered equipment at dependent property’s location
ex: cookie place in the mall & belks AC goes out, no customers for the cookie place = covered loss

(Equipment Breakdown Insurance)

newly acquired premises
equipment breakdown insuring agreement that states the insurer agrees to extend the breakdown coverages to newly acquired locations, coverage continues for the number of days shown in the decs page

(Equipment Breakdown Insurance)

Ordinance or Law Coverage
equipment breakdown insuring agreement that states the insurer agrees to cover losses arising out of ordinance/laws regulating buildings
e.g. covers cost of demolition or increased cost of construction

(Equipment Breakdown Insurance)

Brands & Labels
equipment breakdown insuring agreement that states the insurer agrees to either stamp “salvage” or remove brands/labels from damages merchandise

(Equipment Breakdown Insurance)

1. Earth Movement, war/military action, nuclear hazard, etc.
2. losses commonly covered by other policies: fire/combustion, water damage from fire, breakdown caused by windstorm/hair
3. damage due to electrical/pressure tests – failure
Equipment Breakdown Insurance EXCLUSIONS (3):

(Equipment Breakdown Insurance)

Limits of Equipment Breakdown Insurance
these are the limits per break down, e.g. the most that the insurer will pay for any ONE breakdown.
– $25K limit for spoilage dur to ammonia contamination
– $25K limit for damaged caused by hazardous materials
– $15K limit for fungus, wet rot, and dry rot damage

** Limit would cover full for explosion, but has a max amount with hazardous materials

(Equipment Breakdown Insurance)

Equipment Breakdown Insurance Deductibles (4):
1. Dollar Deductible
2. Time deductible – use in BI & Exp. Coverages
3. Percentage Deductible – larger the loss the higher the deductible – specified percentage is multiplied by gross amount of loss, usually applied to spoilage damage coverage
4. Multiple of Day Value Deductible – alternative to time deductible ex: how much money you lost on an average, per day $60,000 total on 6 days = $10,000 a day

(Equipment Breakdown Insurance)

Replacement Cost
Valuation condition coverage usually applies on a ________________ basis
i.e. cost to repair/replace property with like kind and quality materials.

(Equipment Breakdown Insurance)

Selling Price
If the valuation condition is manufactured by insured, property held for sale is valued at ___________ ( providing more complete coverage for the manufacturer).

(Equipment Breakdown Insurance)

Valuation Methods
Raw materials: Valued at RC
Property in process: Valued at RC + labor + overhead
finished products: valued at selling price

** policy will also pay additional cost to replace covered equipment with equipment that is better for the environment, safer, or more efficient. most insurers will pay is Additional 25% of property damage

(Equipment Breakdown Insurance)

Coinsurance for Equipment Breakdown Insurance generally only applied to ______________.

(Equipment Breakdown Insurance)

Time element coverages
Suspension Condition
this condition for Equipment Breakdown Insurance allows for insurers/representatives to immediately suspend insurance against loss of equipment in dangerous situations/circumstances.
Joint or Disrupted loss Agreement
this condition of Equipment Breakdown Insurance addressed situation in which two different insurers disagree on what the CP should pay and what the equipment breakdown should pay.
ex: insurance companies will not delay claims, they will settle them and fight each other later.
Jurisdictional inspection condition
this condition of Equipment Breakdown Insurance provides that the insurer will provide any federally/state/locally mandated inspections of boilers/machines on insured behalf.
e.g. insurer will pay for inspections on equipment
Business Owners Policies – BOP
this policy is designed for smaller, relatively uncomplicated insureds.
i.e. small to midsize businesses
– provides an economical alternative to a regular commercial package policy

(Business Owners Policies – BOP)

Business Owners Policies – BOP
This policy is a package policy that typically provides coverage for:
– building and personal property
– business income and extra expense
– general liability coverage

(Business Owners Policies – BOP)

BOP advantances to insurer (2):
1. reduction of adverse selection due to packaging of coverages
2. reduction of insurer costs due to simplified rating and underwriting systems
– leads to lower premiums and better ability for insurer to compete in market place

(Business Owners Policies – BOP)

BOP advantages for producer:
quicker quotes from simplified underwriting procedures

(Business Owners Policies – BOP)

BOP advantages for insured (2):
1. convenience of one policy that meets property and liability needs
2. premium savings due to economics of scale

(Business Owners Policies – BOP)

BOP Eligibility Rules
______________ limiting its program to certain applicants, based on criteria related to size and complexity of business.
– under ISO rules, risks may nor exceed 25K square feet or $3M in annual sales at a given location
– ineligible business types include auto- related businesses, bars, manufacturers and financial institutions.

(Business Owners Policies – BOP)

1. Property
2. Liability
BOP Coverages: coverage is very similar or identical to commercial package programs (2):

(Business Owners Policies – BOP)

Property Coverage
This coverage differs in BPP in two majors ways:
1. BOP covers named insured’s property in apartment/rooms furnished by names insured
– also included coverage for landlords property in common areas
2. Covers personal property of others under the same limit that applies toward personal property owned by named insured
3. Covers damage to foundations/underground pipes

(Business Owners Policies – BOP)

Property Coverage to ISO BI and Extra Expense Form
1. BOP BI coverage is subject to a 1 year limit instead of a dollar limit
2. BOP BI coverage is NOT subject to coinsurance – helps to simplify coverage and eliminate coinsurance penalty
3. BOP limits ordinary payroll coverage in 60 days
4. insurers charge and additional premium to eliminate 72 hour waiting period.

(Business Owners Policies – BOP)

3 weeks after a 72 hour waiting period
Property coverage for acts of civil authority applies for ___ weeks after a __________ waiting period.

(Business Owners Policies – BOP)

$5k
BI losses from dependent properties id covered for up to $_____k or a higher limit in decs and pays up to that per occurrence to cover cost of recharging/replacing fire extinguishers/systems after they have been discharged.

(Business Owners Policies – BOP)

$10K
According to Property Coverages, electronic data losses are covered for up to $_____

(Business Owners Policies – BOP)

Property Coverage extensions
Newly acquired/constructed property =
– covered for 30 days up to $250K for buildings
– covered for 30 days up to $100K for personal property

Personal Property off premises is covered for up to $10K.

Outdoor property is covered for up to $2,500

BOP provides broader coverage for valuable papers and records, also has a $10K on premises limit

AR losses are covered for up to $10K

(Business Owners Policies – BOP)

inflation Guard
BOP automatically increases limits of building by a percentage shown in the decs and this serves as an ________________.

(Business Owners Policies – BOP)

$500 deductible
a deductible of $______ applies to most losses, sometimes windstorm/hair percentage deductibles are used

(Business Owners Policies – BOP)

1. outdoor sign
2. employee dishonesty
3. mechanical breakdown
4. money and securities
Optional Property Coverages (4):

(Business Owners Policies – BOP)

other available property endorsements
1. spoilage coverage
2. utility services
3. computer/fund transfer fraud coverage
4. contractors installation/equipment coverage
5. earthquake coverage
6. condominium coverage

(Business Owners Policies – BOP)

Liability Coverage
this coverage provides coverage for business liability (bodily injury and property damage liability coverage & personal and advertising injury liability coverage)
and Medical Expense liability.

EXCLUDES: Personal Services

(Business Owners Policies – BOP)