Chapter 1 Flashcards
3 types of buildings referred to as commercial risks
Non-mercantile
Mercantile
Manufacturing/industrial
Name 3 institutional risks
Hospitals, nursing homes, municipal buildings
3 classes of commercial property
Building
Equipment
Stock
two options for what coverage can be provided on
Scheduled
All Property
What does it mean when coverage is provided on an All property basis
Covered by a single limit of insurance
Define Building
Fixed structures pertaining to the building(s) and located on the “premises”
Define premises
The entire area within the property lines and area under adjoining sidewalks and driveways at the locations described on the declaration page an in or on vehicles within 100 meters (328 feet) of such locations
5 aspects of building location
fixed structures pertaining to the building(s) and located on the “premises”
Additions and extensions communicating and in contact with the building(s)
Permanent fittings and fixtures attached to and forming part of the building(s)
Materials, equipment 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”
Define stock
merchandise of every description usual to the Insured’s business
packing, wrapping and advertising materials; and
similar property belonging to others which the Insured is under obligation to keep insured or for which he is legally liable
The value of property belonging to others is insured within the values selected on stock subject to what conditions
The property lost or damaged must be similar to that insured by the policy
The Insured must have had an obligation to keep the property insured
The Insured must have been legally liable for it
Define Equipment
Generally all contents usual to the Insured’s business, including furniture, furnishings, fittings, fixtures, machinery, tools, utensils and appliances other than “building” or “stock”
Similar property belonging to others which the Insured is under obligation to keep insured or for which he is legally liable
Tenants improvements
3 ways property can be valued
Actual Cash Value
Replacement Value
Book Value
Define Actual Cash Value
repair or replace lost or damaged property, less the application of any depreciation
5 methods used to determine the ACV of the lost or damaged property
Formula/Cost Approach Method
Market Value/Direct Sales Approach
Income Approach
True Value to the Owner
Broad Evidence Rule
Define Book Value
Price which was expended at the time of purchase and which has been reduced by depreciation or other write-offs
Explain the difference between package and manuscript policies
Package policies combine under one form a variety of coverages, while manuscript policies are designed for risks having a specialized exposure for which no standard coverage form exists
Why do subscription policies and policies for reinsurance operate in different ways?
Reinsurance involves ceding part of the risk it has assumed to one or more “other Insurers” while on a subscription policy, a group of Insurers agree to share in providing insurance coverage
3 factors considered by the adjuster when determining the amount of indemnity to be provided by the policy
The value of the lost or damaged property as determined in Clause 15
The interest of the Insured in the property
The amount of insurance specified on the “Declaration Page” for the lost or damaged property
Waiver of Co-insurance clause
Recognizes that many insured losses are small ones. For smaller valued losses, it makes sense for the Insurer to remove the obligation from the insured so that resources are not wasted trying to do an inventory of remaining values to prove co-insurance has been met
What are the two types of exclusions
Property excluded
Perils excluded
Why do exclusions exist
Exclude losses which are generally considered by Insurers to be commercially uninsurable
To exclude losses which have within them the potential to be catastrophic
To exclude losses for which more specialized policy forms have been developed
To exclude losses that are wholly or partially in the control of the Insured, or which can be expected
Losses not common to a large number of Insureds, but represent increased potential for loss which is deserving of an additional premium charged
To exclude losses where there the activity is illegal
What constitutes a building in regards to insurance
Fixed structures
Additions and extensions in contact with the building
Permanent fittings and fixtures
Materials, equipment and supplies on the premises for maintenance of, and normal repairs and minor alterations to the building
Growing plants, trees, shrubs or flowers inside the building used for decorative purposes
Explain reinstatement and reinstatement clause
“Loss under any item of this form shall not reduce the applicable amount of insurance
Provides that Insureds shall have as much insurance after a loss as they did before it
Parts
In the case of loss of or damage to any part of the insured property whether scheduled or unscheduled, consisting, when complete for use, of several parts, the Insurer is not liable for more than the insured value of the parts lost or damaged, including the cost of installation
