Chapter 3 Commercial Property Insurance - Policy Forms

Question 1

The insurance act requires the following information (6) be provided in insurance policies:

Answer 1

1. Names of parties to contract
2. Policy period (12:01am at the address of the insured)
3. Loss payable or payee
4. Types of Insurance coverage and amounts of insurance
5. Rate and Premium charged
6. Subject Matter of insurance (Description and location of property_)

Question 2

Under the Fire Policy, what are Perils insured?

Answer 2

Fire, Lightning & Explosion of Natural Gas, coal or Manufactured Gas

Question 3

Under the Fire Policy, what are Perils Excluded?

Answer 3

Perils Excluded (Resultant fire damage is covered in first 2 cases)
- Damage caused by lightning & artificially generated electrical currents.
- Damage from direct application of heat
- Riot, civil commotion, war
- Contamination of radioactive material or nuclear energy

Question 4

Under the Fire Policy, what are Property Excluded

Answer 4

Property excluded include:
- evidences of title or debt (promissory note or deed to business)
- securities for money (stocks and bonds, preprinted lottery tickets)
- automobiles (excludes motorized vehicles used exclusive to insured premises - tractor, forklift)
- watercraft (excludes watercraft held for sale)
- bylaw (local bylaw to install sprinkler, or rebuild with better materials)
- Money
- Vacant property for more than 30 days (vacant means no contents, no person where as unoccupied means contents, no person present)

Question 5

Under the Fire Policy, what is the removal clause?

Answer 5

Property is provided for property that has been moved to another location provided:
1) Insured moved it to prevent a loss
2) Whatever remaining after the loss has been paid at the Named Location
3) Coverage is limited to 7days or the unexpired term of policy

Question 6

Under the Fire Policy, what is the debris removal cost?

Answer 6

The insurer agrees to provide debris removal as long as the debris is from the insured’s property and coverage only if there is any insurance left over after the loss to property has been paid

Question 7

Name the 7 coverages of Fire and Extended Coverage

Answer 7

F. SWILLER
1. Fire & or Lightning
2. Explosion
3. Impact: aircraft, spacecraft & or land vehicle
4. Riot, Vandalism and Malicious Acts
5. Smoke
6. Leakage from fire protective equipment
7. Windstorm or Hail

Question 8

List the extensions and exclusions of the Fire and Extended Coverage policy

Answer 8

1. Extended to cover lightning damage to electrical appliances
2. Explosion Exclusions:
   - Piping & apparatus normally containing steam/water under pressure
   - Combustion chambers/fire boxes in boilers
   - Smelt dissolving tanks
   - Vessels/apparatus/pipes over 15lb/sq inch (this exclusion does not include propane tanks)
   - Moving/rotating machinery or parts when loss/damage caused by centrifugal force, mechanical breakdown
   - Any vessel/apparatus/pipes damaged during pressure tests
   - Gas turbines
3. Impacts (direct impacts only) by Aircraft (includes debris dropped from aircraft) or Land Vehicle with the following exclusions:
   - No coverage if impact cause by insured or employee
   - No coverage to damage to the aircraft, spacecraft or land vehicle
   - No coverage for cumulative damage, damage from multiple impacts over time
4. Riot Vandalism (3+ people that cause damage to property) with the following exclusions
   - No coverage for damage by striking or locked out employees
   - No coverage for damage caused by flood or release of water impounded dam
   - No coverage for theft or attempted theft
5. Smoke
   - Must originate from building furnace
   - Must be due to sudden, unusual and faulty operation of furnace
6. Leakage from fire protective equipment
   - insures damage caused by sprinkler and fire extinguishing systems
   - insures damage caused by falling breaking or freezing of such equipment
7. Windstorm of hail
   - insures only damage to interior of building and contents only when storm has created an opening in the building
   - No coverage caused by snowload, iceload, tidal wave, overflow, flood, land subsidence, even if caused by wind.

Question 9

List all Perils Excluded from Broad Form Policy Coverage

Answer 9

Perils Excluded include:
*resultant damage smoke, explosion, leakage from fire protection system, fire = SELF
1. Earthquake (except SELF)
2. Flood from any body of water (except SELF)
3. Excludes damage caused by water entering at or below ground level, excludes sewer backup, excludes water coming in from skylights unless opening caused by windstorm/hail
4. Excludes Centrifugal force, mechanical breakdown, electrical breakdown (motor in freezer stops working (except when destroyed in resultant fire)
5. Excludes Freezing of stock items, shrinkage and evaporation due to loss of humidity control, excludes spoilage to vegetables and damage of merchandise from direct sunlight, excludes insect infestation due to power failure
6. Excludes smoke from agricultural smudging or Industrial Operations
7. Excludes Rodents Insects or Vermin infestations
8. Excludes Loss of Use
9. Excludes War/Invasion
10. Excludes Nuclear Liability
11. Excludes Dishonest &/or Criminal Acts (Exception when physical damage -not theft is caused by an employee
12. Excludes losses to building
(this exclusion applies to building only, not stock and equipment)owned by insured due to snow slide, landslide or earth movement, explosion (except for hot water heater <15 sq inch used for domestic purposes). Excludes settling, expansion moving or cracking in building
13. Bylaws Exclusion
14. Exclusion for wear & tear, latent defect, inherent vice, faulty or improper workmanship
15. Excludes mysterious disappearance, or shortage in inventory
16. While being worked upon exclusion
17. Loss to automated records by electrical current (except in lightning is insured)

Question 10

List all Property Excluded from Broad Form Policy Coverage

Answer 10

Properties excluded include:
1. Sewers, drains and Watermains outside bearing walls and foundations, outside communication towers, street clocks, exterior signs and building glass (there is coverage for Named Perils F.Swiller for exterior sign and building glass caused by vandalism)
2. Vacancy Exclusion - Vacant/Unoccupied/Shut down to knowledge of insured for 30 days+
3. Electrical appliances and equipment damaged by artificially generated electrical surges (damaged caused by subsequent fire or explosion IS COVERED)
4. Growing plants, trees, shrubs or Flowers in the open
5. Animals Fish or Birds, exotic/valuable animals must be scheduled
6. Property having high Values (Money, Bullion, Precious Metals)
7. Motorized Vehicles (Automobiles, Watercraft, Aircraft, Spacecraft, Trailers) - coverage only if they are held for sale or are unlicensed vehicles (forklifts, loader) used in business premises
8. Furs, Jewelry, watches and pre-recorded video tapes (With Exception for any loss under $1000 or caused by Named Perils)
9. Ocean Going Property (no coverage for property already insured under a marine policy or property that is waterborne). With Exception for Property being transported as part of a land voyage
10. Loaned Property, rented Property, Property sold under Conditional Sale, Installment Payment, Deferred Payment Plan. With Exception for property being delivered by a delivery service (not insured’s vehicle)
11. Property in custody of Sales rep while outside premises
12. Property illegally acquired stored transported or seized by authorities
13. Boilers and Pressure Vessels exclusions (similar to Fire and Extended Coverages)

Question 11

Name 7 advantages of broad form policy

Answer 11

WEST CIA
1. Water Damage due to rupture of water lines
2. Explosion of hot water heaters less than 24” internal diameter used for domestic purposes
3. All Sources of Smoke damage except agricultural smudging or industrial operations
4. Theft or attempted theft

5. Collapse from a variety of causes
6. Impact of land vehicles driven by insureds or their employees
7. All other losses not specifically excluded

Question 12

Name 5 extensions of broad form policy

Answer 12

1. Removal
2. Debris Removal
   - enhancement over fire policy, insures removal of debris insured by policy and removal of property blown in by windstorm
3. Personal Prop of Officers & Employees
   - must be at insured premises, max $250 per employee
4. Building damage by theft
   - Not available on Named Perils form, insured must own building or be responsible for building (applies to tenant as well), this extension is used when building not covered by broad form, max $2500 per loss, includes vandalism, no coverage for building glass
5. Growing Plants Trees Shrubs/Flowers in Open
   - Coverage limited to named perils (excludes windstorm and hail) and theft or attempted theft, up to $500 per item

*Important note, extensions do not increase limit of insurance and there is no coverage once these limits are exhausted and are subject to conditions of the policy form

Question 13

Credits for commercial policy can be earned by:

Answer 13

1. newer building
2. sprinklers
3. alarms
4. selecting higher deductible
5. claims free
6. concrete floor/no basement
7. automatic circuit breaker

Question 14

Four advantages of the package polices

Answer 14

1. application is easy to complete
2. on the spot pricing
3. extensive insurance knowledge not required
4. broad package coverage eliminates many claims problems

Question 15

Define Latent Defect

Answer 15

A hidden or concealed defect which cannot be discovered by reasonable inspection

Question 16

Define Loading

Answer 16

The rate over and above the fire rate charged by insurer to provide additional policy coverages

Question 17

Vacant vs Unoccupied Premises

Answer 17

Vacant = empty or have no contents and person is absent
Unoccupied Premises = contents are still on premises and person is temporarily away

Question 18

Define Inherit Vice

Answer 18

Something in the commodity or property that destroys itself over time (e.g. vegetables)