chapter 7 - Commercial Property
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State the basic difference between the Named Perils and Broad Form policies ?
- - Named Perils Form has eight named perils: fire, lighting, explosion, impact by aircraft, spacecraft or land vehicle, riot vandalism or malicious acts, smoke due to sudden unusual faulty operation, leakage from fire protective equipment, windstorm or hail
- - Board Form insures against "all risks of direct physical loss or damage" subject to policy conditions and exclusions.
Identify five insurance coverages provided by the Board Form policy that are not provided by the Named Perils Form ?
- 1. Vehicle impact damage to insured's buildings even when caused by insureds or their employees
- 2. All sources of smoke damage, excluding agricultural smudging or industrial operations
- 3. Water damage due to freezing or rupture of water lines: excludes flooding, overflow of any body water, sewer backup, seepage through basement walls and floors
- 4. Theft
- 5. Collapse: excludes earthquake, cost of making good faulty or improper material, workmanship or degisn.
Identify five factors used by insurers in establishing the base rate to be charged for insuring commercial property ?
- 1. Construction: mansory construction will have a lower fire rate than wood's one
- 2. Protection: public protection (proximity to fire hall and hydrants, sufficient water supply) and private protection (fire extinguishers, detection systems, automatic sprinkler)
- 3. Occupancy: for example garages, restaurants night clubs have higher rate than retail stores.
- 4. Location: Distance from other building, construction and occupancy of nearby buildings, character of neighbourhood
- 5. Claim history: of similar businesses over 5 years.
What is the definition of "building" in a business ?
- - Fixed structure pertaining to the buildings(s) and located on the premises (pole signs, yard lights)
- - Additions and extensions communicating and in contact with the buildings
- - Permanent fitting and fixtures attached to and forming part of the buildings (heating, plumbing, air condition systems, lighting fixtures etc)
- - Materials, equipments and supplies on the premises for maintenance of and normal repairs and minor alterations to the building or for building services.
- - Growing plants, trees, shrubs or flowers inside the building used for decorative purposes when the insured is the owner of the building .
What does "Stock" means ?
- i) Merchandise of every description usual to the insured's business
- ii) Packing, wrapping, and advertising materials
- iii) Similar property belonging to others which the insured is under obligation to keep insured or for which he is legally liable
What is "Equipments" ?
- i) Generally all contents usual to the insured's business including furniture, furnishings, fittings, fixtures, machinery, tools, utensils and appliances other than building or stock as herein defined
- ii) Similar property belonging to others which the insureds are under an obligation to keep insureds or for which they are liable. (Leased equipement)
- iii) Tenants's improvements which are defined as building improvements
Identify the types of losses to which the Co-Insurance Clause applies
A partial loss is on in which all property has not been destroyed.
Summarize the solution devised by insurers to discourage people from deliberately under-insuring ?
- - The co-insurance clause was desgined to apply a penalty for all partial losses when insureds purchased less insurance than specified by the insured.
- - The min limit required usually set at no less than 80% of the ACV of the property insured. If the property coverage is purchased on a replacement cost basis, then the replacement cost calculation will apply accordingly.
State the formula for the calculation of the settlement amount on policies containing a Co-insurance Clause.
(Amount of Insurance Purchased/Percentage of Insurance Required ) x (Amount of Loss) = Settlement
Explain the coverage provided for Debris Removal ?
If the limits of insurance have not been fully used to pay for damage insured by the policy, the remaining amounts can be paid for debris removal.
Summarize the provisions of the "Reinstatement Clause"
Loss under any items of this form shall not be reduce the applicable amount of insurance.
Limits of insurance remains regardless of the claim amount.
Explain the "Subrogation Clause"
The insurer is entitled to seek recovery from the responsible party after paying claim. Unless the responsible party has financial interested, they can not be surrogated.
Identify three obligations placed upon insureds by the Property Protection Systems clause.
Insured must notify the insurer immediately when
- - Sprinkler or other fire extinguishing system; or
- - Fire detection system; or
- - Intrusion detection system
- - They know there is an interruption to or flaw/defect in such system
- - any contract providing monitoring/maintenance services to such services has been cancelled or not renewed
- - they have been provided with notification of the suspension of police service in response to any such system.
Summarize the provisions of the "Locked Vehicle Warranty"
When insurer agree to provide transit coverage the Locked Vehicle Warranty applies
Warranted by the insured that any vehicle in which the property insured is carried is equipped with a fully enclosed body or compartment and the insurer shall be liable in case of loss by theft from an unattended vehicle only as a direct result of forcible entry into body/compartment the doors of which are securely locked and the windows closed.
Identify the evidence required before the insured will agree to make payment under the Burglary insurance
- a) Mercantile Stock Burglary: successful if
- - the insured property was unlawfully taken from within the premises
- - the Premise were unlawfully entered or exited
- - there were visible signs of the use of force at the point of entry or exit.
- b) Safe Burglary:
- - must provide the insurer with evidence that force was used to gain access into the safe. Coverage will also be provided when the entire safe is removed from the premises.
Identify evidence require for Robbery insurance
- Will pay when
- - Actual or threatened force is used to take insured property from a person having control over it.
- - Insured property is taken from a custodian who is killed or rendered unconscious
- - The custodian witnessed the taking of insured property by a person not authorized to have it.
Identify evidence require for Theft insurance
need only show that the insured property was taken without their consent
- Board Form : Stock and equipment are insured whenever they are taken unlawfully by outsiders.
- - Money and Securities:
- *Actual Destruction: improper use of cutting resulting of destruction of money and fire
- *Disappearance: when money and securities are not in the location they were left, no sign of theft.
- *Wrongful abstraction: includes safe burglary, robbery and theft
Identify two key coverages provided by a Boiler and Machinery Policy
- i) Loss or damage to building resulting from the explosion of the following objects owned, operated or controlled by in the insured:
- - boilers
- - pressure vessel operating in excess of 15pounds/sqinch
ii) Electrical or mechanical breakdown
Identify three different types of property items insured by the Builder Risk - Broad Form IBC 4042
this policy is to insure risk of building in construction
- i) Property insured/excluded
- - Policy insures all value of all materials owned by the insured or others which are part of the completed projects
- - There is no coverage for: contractor's tools and equipment, cost of making good faulty or improper resulting in damage to other completed work.
- - cover can be added for material in transit or any any location
- ii) Policy period
- - Coverage ceases when the project has been left unaltered or no activity for more than 30 consecutive days or when building is occupied
- iii) Limit of insurance
- - insured are required to purchase an amount of insurance which is equivalent to its completed value.
Identify four characteristic commons to Business Interruption policies
- 1. A contract of Indemnity:
- - pays for (i) expenses which continue after a loss and (ii) loss profit
- 2. Insures Same Perils as Property Policy:
- - There is no coverage when business interrupted by peril not insured by property policy.
- - Except where loss profit when there is no physical damage.
- 3. Coverage Not Limited to Policy Period:- Coverage starts on the day of the loss and can continue for specified period, usually 12 months
- - payment will be made even if the policy expires during the period of interruption.
- 4. Pay Expenses when they reduce amount of loss - Expense to speed up resume of business will be paid.
State the basic difference between the Earnings Form and Profits Form
- Earning Forms:
- - Coverage commences at the time of the loss and continues until the property is rebuilt, repaired or replaced.
- Profit Forms:- Coverage commences at the time of the loss and ceases when the income is restored to the level it would have been had the loss not occurred.
State the purpose of the Extra Expense Insurance
- Insures all necessary extra expenses incurred by insureds in continuing normal business operation after a loss.
ex: to rent temp premises, rent temp equipment, install phones, pay overtime salaries, pay bonuses for quick services.
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