BPP ITV Flashcards
Inadequate stock estimates: A food manufacturer that makes popsicles had a fire loss and they had just moved lots of popsicles outside of their freezer to ship. At the time of the loss, the company reported that it had …
4M in popsicles that were lost. Their insurance application stated that they had 1.5M in stock. They knew right away that they had 4M in stock so why did they only report 1.5M on their application?
A food manufacturing plant with 16 locations had a large fire loss at 1 of its locations. Their blanket BPP limit was …
18M. At the time of loss, it was learned that their actual BPP exposure was 26M! Their entire blanket limit was only 18M!
Instead of paying ACV and then having the insured have to send in all kinds of paperwork to recover additional amounts spent to replace equipment, we did a …
“white paper” settlement and paid them 16M.
Were they happy? Yes, in the sense that …
they didn’t have to worry about any further interactions, paperwork, etc., but no, in the sense that they were going to have to file an E&O claim against their broker for the remaining 8M! And we weren’t happy either - we want our insureds to be happy.
How often do you think about BPP ITV as being a risk to financial stability during business disruptions?
How well aware are you of the adequacy of your insureds’ machinery and equipment valuations?
There might be a valuation issue IF the real property value is …
higher than the personal property value
There might be a valuation issue IF
one line or piece of equipment is a significant % of the total
There might be a valuation issue IF
they buy a significant amount of used equipment
There might be a valuation issue IF
they have leased/rental equipment, they might not be including it
There might be a valuation issue IF
they send in forklifts valued at 5,000, when the minimum is usually 30-35K, there could be a problem
The valuation for an office, in dollars per sq. ft., ranges between …
25-50 and warehouses with racks, not including stock, 20/SF. If a manufacturer is less than that, there might be a valuation issue.
The better way to handle this is to be proactive. Ask the insured …
how they developed their ITV. If they say they got it from a depreciated asset list, there’s a problem.
If they are using a market value appraisal, it’s a problem because …
that’s not the same as replacement cost. If they say that they don’t know or that they guessed, it’s a problem.
If you counsel your insureds on how to come up with proper valuation, such as by using an ASA, AMEA, etc. accredited replacement cost appraiser, or they do a thorough self-valuation …
you could be saving their business.
Also, when you send in a submission, Travelers evaluates the BPP ITV. We ask that you submit the stock and M&E/furniture & fixtures limits separately.
We can still blanket them, but it’s easier for us to help you evaluate the adequacy of the limits. Armed with that information, you can counsel the insured on the importance of ITV.
