Chapter 3 Flashcards
Vacant
“empty”; or when the normal occupant is absent and the contents have been removed
Unoccupied
Lack of habitual presence of human beings temporarily
Loading
An additional rate charged over and above the fire rate
Centrifugal Force
The inertia of a body that tends to move it away from the center around which it revolves
Mechanical Breakdown
a failure in the working mechanism of the machinery… a functional defect in the moving parts of the equipment which causes the latter to cease functioning or to function improperly
Electrical Breakdown
A failure in the electrical mechanism of machinery, appliance or device
Trade Loss
The types of losses which might be expected as a part of the every day operation of a business
Wear & tear
“… deterioration or depreciation (i.e. value by ordinary and reasonable use of the subject matter)
Gradual Deterioration
The deterioration of an object which arises naturally over time
Latent Defect
A hidden or concealed defect. One which could not be discovered by reasonable and customary inspection; one not apparent in face of goods, product, document, etc.
Mysterious Disappearance
Disappearance under circumstances which cannot be explained
Three leading causes of fire losses
Failure or malfunction of mechanical or electrical equipment
Arson, suspected arson and other set fires
Misuse of source of ignition
Explain how the defining of policy period in this way can cause potential problems for Insurers
The problem with the wording is that it is 12:01 on that day. so if someone wanted to obtain the insurance halfway through that day, they could technically work around the fact that the insurance is retroactive for 12:01 a.m. Some brokers will amended the insurance to indicate the time of day in which the application for insurance was made, and coverage bound
After a total fire loss to Insured property, the Insurer paid the full amount of the claim directly to the Insured. The Insured immediately left town and was never heard from again. Does the mortgagee named on the policy have any rights of action against the insurer? Explain
The Insurer is obligated to pay the mortgagee so long as they are listed in the policy.
Insurers often do not provide a breakdown of the individual rates charged for coverages provided by the policy. What reason might the Insurer have for adopting this practice?
The reason they do this is to hide the costs of specific items from the competition
What is the policy period start applicable to most policies of commercial property insurance?
Policy period takes effect at 12:01 a.m. local time at the address of the Named Insured as stated on the policy.
Six pieces of information shown on the declaration page
Names of parties to the contract
Policy period
Loss payable or payee
Summary of insurance coverage(s) and amounts for which Insurer may be liable
Rate and premium charged
Subject matter of insurance
Does the practice of hiding individual rates charged for coverage comply with the legislated requirements for disclosure of costs of insurance?
It does not conform exactly to the legislated requirements. To soften potential litigation, must Insurers will willingly provide rating details to Insureds and their brokers when requested.
The Insurance Acts of the Common Law provinces require that all policies insuring against the peril of fire also insure direct losses caused by
Lightning
Explosion of natural, coal or manufactured gas
Will increased cost of construction due to compliance with local building bylaws be covered by commercial policies
No
What conditions increase the physical hazard for which coverage is excluded by the fire policy
Vacancy, unoccupany and when premises are shut down
Summarize the coverage provided by the Debris Removal clause
Insurer will indemnify the Insured for expenses incurred in the removal of debris from the premises of the property insurance, occasioned by loss or damage to such property, for which loss or damage insurance is afforded under this policy
What is the importance of the Fire Policy, even though it is rarely used?
Because any policy insuring the peril of fire must comply with fire insurance legislation. This policy serves as the model for other broader commercial property coverage forms
Outline the provisions of the Removal clause
Coverage is provided for property which is at a location(s) not indicated on the policy, provided the Insured is able to show that such property was “necessarily” removed to prevent loss
In the event of loss to property at an unnamed location, the amount to be paid by the Insurer is limited to the amount of insurance remaining after the payment of any losses at the location Insured by the policy
Summarize the by-laws exclusion contained in commercial property insurance policies
By-law requirements which make it impossible to repair/reinstate the property as it was prior to the loss. Cost to build in compliance with the by-laws must be paid by the insured
Named perils insured on a Fire and Extended Coverage forms
Fire or Lightning
Explosion
Impact by Aircraft, Spaceship or Land Vehicle
Riot, Vandalism or Malicious Acts
Smoke
Leakage from Fire Protective Equipment
Windstorm or Hail
True or False: Coverage is excluded for damage caused to electrical devices and appliances by lightning
False. It has now been extended to include this.
True or False: There is no coverage under this policy for explosion of a boiler which is owned, operated or controlled by the insured
True, not covered
True or False: A tenant never needs to purchase a Boiler and Machinery policy
False, if tenants are the ones operating or controlling boilers, they may need to purchase coverage and or be concerned about coverage
True or False: Coverage is provided for the explosion of certain owned pressure vessels so long as their internal operating pressure does not exceed 25 pounds per square inch
False
True or False: Impact losses include damage caused to building glass by rocks thrown up by the tires of a customer’s automobile
False, this would not qualify as impact
True or False: Damage caused to insured property by a land vehicle driven by the insured or their employee is not covered by the policy
False, it is covered
True or False: Under Impact by Aircraft, Spacecraft, or Land Vehicle, coverage is provided for cumulative damage only
False, this is provided on an occurrence basis only
True or False: Riot includes coverage for freezing of waterpipes resulting from the disruption of power to the insured building by employees who have been locked out
False
True or False: Under Riot, Vandalism or Malicious Acts, there is no coverage for theft under this peril
True
True or False: Damage from smoke is covered only if it results from the sudden, unusual and faulty operation of any stationary furnace
True
True or False: Leakage From Fire Protective Equipment covers damage caused to Insured’s stock by accidental discharge of sprinkler system installed in the building
True
True or False: Before the Insurer will agree to pay for loss caused to the interior of the building or its contents, the Insured must provide evidence to show that the loss being claimed occurred concurrently with and is directly attributable to the entrance of wind or hail through an opening caused to the building by such windstorm or hail
True
Three examples of local building bylaws which may effect building re-construction
1) Improved building materials
2) Installation of sprinkler systems
3) Handicapped accessibility
What parts of the building are not insured by Building Damage by Theft extension?
Glass
Six advantages of the Broad Form policy
Theft or attempted theft
Water damage due to rupture and freezing of waterlines
Impact by land vehicles driven by insureds or employees
All sources of smoke damage, excluding agricultural smudging or industrial operations
Expansion and rupture of hot water heaters less than 24 inches in internal diameter and used for domestic purposes only
Roof collapse from various causes e.g. snow-load
Four types of explosion excluded by Fire and Extended Coverage forms?
1) All boilers
2) Piping connected to boilers under pressure
3) Steam generating boilers
4) Smelt dissolving tanks
