chapter 3 Flashcards
The three leading causes of fire losses in Canada.
1) Malfunction of electrical or mechanical equipment
2) Arson
3) Misuse of ignition source
6 items required to be shown on a policy declaration page
1) Names of parties to the insurance policy
2) policy period
3) loss payable or payee
4) type of insurance and amount of coverage
5) rate and premium
6) subject matter of insurance
The policy-period start that’s applicable to most commercial property policies.
Policy period takes effect at 12:01 a.m. standard time at the address of the Named Insured as stated on the policy.
What changes can be made to application forms to address concerns relating to coverage commencement?
some insurers have inserts a questions on the application form indicating when the coverage was bound by the broker and when the application was completed
What may happen when losses are paid in full to the insured when loss payables are shown on the policy?
insurer will have to pay loss amount to the loss payable for their amount of interest in the risk
what may happen when losses are paid in full to insured and there is no loss payable shown on the policy but it should have been shown
insurer will not be obligated to pay interest of loss payable
The reason why insurers don’t provide breakdowns of coverage rates.
They don’t want to divulge their rates to competitors.
Will increased costs of construction due to compliance with local building bylaws be covered by commercial policies
NO
Provincial legislation requires that policies insuring against the peril of fire must include all of these coverages
Direct loss or damage from fire, lightning and explosion of natural, coal or manufactured gas.
These conditions increase the physical hazard for which coverage is excluded by the Fire Policy
Vacancy, unoccupancy and when premises are shut down.
Summary of the by-laws exclusion
Any increase in the costs to rebuild, repair or replace the insured’s building after a loss that are incurred to comply with a law or by-law are not insured.
Provisions of the removal clause.
Coverage is provided for property at location(s) not shown on the policy, as long as the insured can show that the property was “necessarily” removed to prevent loss.
The coverage amount is limited to the insurance amount remaining after payment of any losses at the insured location. Coverage at an unnamed location is limited to the least of 7 days or the remaining policy term
Coverage provided by the Debris Removal clause.
Removal of debris from insured premises after loss or damage to the insured property from an insured peril.
“Vacant.”
Empty, or when the normal occupant is absent and the contents have been removed
“Unoccupied.”
Lack of habitual presence of human beings, or when premises are complete with contents but the person who normally occupies the premises is temporarily away.
What are three examples of local building bylaws which may effect building re-construction
1) improved building material
2) installation of sprinkler systems
3) handicapped accessibility
3 components of the Removal Clause
1) policy will insure property which was removed to unnamed location to protect it from, loss or further loss 2) amount of coverage at the new unnamed location is the remainder of coverage which was not used during loss at the named location
3) duration of coverage at the new unnamed location is the least of seven days or policy expiry
Perils included in the Named Perils Form
A) Fire or lightning
B) Explosion
C) Impact by Aircraft, Spacecraft or Land Vehicle
D) Riot, Vandalism or Malicious Acts
E) Smoke
F) Leakage from fire protective equipment
G) Windstorm or Hail
“Loading.”
An additional rate charged over and above the fire rate.
What are four types of explosion excluded by Fire and Extended Coverage forms?
An additional rate charged over and above the fire rate.
1) All boilers
2) piping connected to boilers under pressure
3) steam generating boilers
4) smelt dissolving tanks
1 Type of pressure vessel that is included
manually portable gas cylinders
Will tenants of buildings have to be concerned about exclusions relating to explosions of pressure vessels? Why?
Yes. Tenants may operate or control boilers
3 exclusions found in the Riot, Vandalism & Malicious Acts in the Named Peril & provide an example in
1) Due to cessation of work; employees walk off job and product at factory spills
2) water damage due to escape of water impounded by dam; vandals damaged face of dam allowing water to be released
3) theft; thieves steal stock
What source of smoke is insured by Fire & EC policies?
Smoke due to sudden, unusual and faulty operation of any stationary furnace
What is insured by Leakage from Fire Protective Equipment peril
damage caused when product within fire protective equipment leaks (water or foam)
What is the Insuring agreement in the Broad Form Policy
All risks of direct physical loss or damage subject to policy conditions and exclusions
6 advantages of the Broad Form policy
1) theft losses to stock and equipment is insured
2) water damage from rupture of overhead water lines is insured
3) impact of vehicles operated by insured or employees is covered
4) many types of collapse are insured
5) all types of smoke damage except smoke from industrial operations
6) all other losses not specifically excluded
3 provisions of coverage found in the extension for Personal Property of Officers and Employees
1) only applicable when the employee (owner) does not have the property insured or when client is obligated or liable for loss
2) $250 max per employee or director
3) coverage applies at described location or any newly acquired location
2 crime coverages provided by Building Damage by Theft exclusion
1) theft or attempted theft
2) vandalism or malicious acts happening during the same occurrence
What parts of the building are not insured by Building Damage by Theft extension?
Glass
What is the limit of coverage found in Building Damage by Theft extension?
$2500
2 perils not insured by Growing, Trees, Shrubs or flowers in the Open extension? What is the limit of coverage
1) Hail
2) Windstorm. $500 ea including debris removal cost
“Centrifugal force.”
Inertia of a body that tends to move it away from the centre that it revolves around.
“Mechanical breakdown.”
Failure in the working mechanism of the machinery; a functional defect in the moving parts of the equipment that causes the equipment to stop functioning or to function improperly.
“Electrical breakdown.”
A failure in the electrical mechanism of the machinery, appliance or device.
“Trade losses.”
Types of losses that might be expected as a part of the everyday operation of a business.
“Wear and tear.”
Deterioration or depreciation, by ordinary and reasonable use of the object.
“Gradual deterioration.”
Deterioration of an object that arises naturally over time.
Latent defect.”
A hidden defect, which could not be discovered by reasonable and customary inspection.
“Inherent vice.”
Something within a commodity or other kind of property that causes its demise over time
“Mysterious disappearance.”
Disappearance under circumstances that can’t be explained.
The purpose of policy extensions
To broaden coverages and make policies more competitive.
Do the limits of coverage extensions increase the amount of insurance under the form?
No. When the policy limits are fully paid out to cover other losses insured by the policy, there’s no coverage available to the extensions.
The deductible that applies to the policy extensions.
The policy deductible.
The common extensions provided on a commercial property form
- Removal;
- Debris removal;
- Personal property of officers and employees;
- Building damage by theft;
- Growing Plants, Trees, Shrubs or Flowers in the open.
Four coverages usually provided in commercial package policies.
1) Property insurance;
2) Business interruption;
3) Liability insurance;
4) Crime insurance.
Qualities of a risk that influence the amount of rate credit provided under a commercial package policy.
1) Building constructed after 1945;
2) Alarmed (local or central);
3) Sole occupant;
4) Grade floor entirely of concrete with no basement;
5) Neighbourhood;
6) Maintenance and safety;
7) Management;
8) Judgment of broker;
9) Building insured in addition to contents;
10) Detachment;
11) Enclosed shopping mall;
12) Circuit breakers.
Advantages of the Package Policy Approach to commercial insurance
1) Simplicity of application form;
2) Cost of insurance determined on the spot;
3) Coverages provide adequte protection for most small businesses;
4) Broad coverages eliminate many common claims problems.
Disadvantages of the Commercial Package Policy Approch
1) One size doesn’t fit all;
2) No standard package policy forms.
