Chapter 7: Commercial Property Insurance Flashcards
Commercial Property is…
property for business use while on premises (3 types: building, stock, equipment)
Broad Form covers…
- vehicle impact caused by insureds or employees
- all sources of smoke damage (excluding industrial operations and agricultural smudging)
- water damage due to freezing or rupturing except: flooding, overflow, seepage or sewer backup
- theft: including damage by theft or attempted theft
- collapse of building: except due to earthquake, faulty or improper materials/workmanship/design
Factors that affect fire rate
- building construction: concrete is cheaper to insure than wood frame
- protection:
- public protection: from outside sources (ie. distance to fire hydrant, fire hall, accessibility)
- private protection: get a discount if you have sprinklers or alarms - occupancy: type of business done by insured and others in the building
- location: area, distance from other buildings and their characteristics
- claims history: review type of business and history of applicant (usually 5 years)
The building described on the declarations page includes…
- fixed structures (ie. metal fence, sign, bike stands)
- additions and extensions (ie. walkways, canopies)
- permanent fixtures (ie. A/C units, carpet, light fixtures, bathroom fixtures)
- materials & equipment on premises: for maintenance and normal repairs
- growing plants: if inside the building and for decoration only
Stock includes…
stock = merchandise usual to the business
- packaging & advertising materials (ie. catalogues, boxes, grocery bags)
- similar property of others: in the care of insured where insured is legally liable or required to insure by contract
Equipment includes…
all contents usual to the business + similar property of others + tenant improvements
What is Co-insurance Clause
When insureds purchase less insurance than specified by the insurer
must purchase a minimum limit of insurance based on percentage
applies to partial losses only
Calculation of the amount of settlement for a partial loss
Settlement = (Did/Should) x Loss amount
did= amount of insurance purchased should= percentage of insurance required (usually 80% of ACV) x ACV
What is Debris Removal
allows insureds to use remainder of limit to pay for removal of debris
Summarize the provisions of the Reinstatement clause
loss under any items of this form shall not reduce the applicable amount of insurance
limits of insurance remain unchanged for the entire policy period, regardless of the number/amounts of claims paid
While the “Subrogation Clause” recognizes the right of the insurer to collect the amount of any loss paid by it from the party responsible for the loss, the insurer agrees not to exercise that right in all cases. Explain.
will not subrogate fellow insured(s) or those held harmless by contract (ie. payees, business partners and subsidiary firms)
if the net amount recovered (after costs) is not enough to fully cover the loss, amount is divided between the insurer & insured based on percentage of loss borne
3 obligations placed upon insureds by the “Property Protection Systems” clause
must notify insurer immediately…
- any known interruption/defect of protection system
- any cancellation of monitoring/maintenance services
- notification of suspension of police services
Locked Vehicle Warranty
fully enclosed body/compartment, locked doors/windows and visible signs of forceful entry
Glass insurance
covers accidental damage by anyone, earth movement or thieves
excludes: fire, war, nuclear hazard
What evidence are required for a claim to be successful under Burglary insurance
- unlawfully taken from within the premises
- unlawfully entered or exited
- visible signs of the use of force
- force used to gain access into the safe or remove from premises
What evidence are required for a claim to be successful under Robbery insurance
- taken by actual or threatened force
- taken from a custodian killed or rendered unconscious
- custodian witnessed property being taken
What evidence are required to for a claim to be successful under Theft insurance
show that property was taken without owners consent
2 key coverages provided by a Boiler and Machinery policy
- damage to buildings from explosion of boilers & pressure vessels operating > 15 PSI
- electrical or mechanical breakdown
3 different types of property items insured by the Builders Risk - Broad Form (Contractor’s Insurance)
- materials forming part of the finished part
- landscaping & temporary buildings (ie. scaffolding, trailers, forms)
- coverage can be added for materials in transit or at any other location
4 characteristics common to Business Interruption policies
- a contract of indemnity
- insures same perils as property policy
- coverage not limited to policy period
- pay expenses when they reduce amount of loss
What is Business Interruption Insurance
restores lost income if caused by insured perils up to the level the business would have earned if the loss hadn’t occurred (insured perils = same as property insurance)
Types of Business Interruption Insurance and state the basic difference
- earnings form: coverage ceases when property is rebuilt/repaired/replaced
- profits form: coverage ceases when income restored to expected level
State the purpose of Extra Expense insurance and provide 3 examples of extra costs insured by this policy
pay extra expenses needed to maintain normal business
examples: rent temporary premises, rent temporary equipment, pay overtime salaries
Building, Stock, or Equipment:
Mops, laundry detergent when insured is owner of the building and no other coverages have been purchased
Building
Building, Stock, or Equipment:
Wrapping paper, tape and packing materials
Stock
Building, Stock, or Equipment:
Photocopier and furnishings leased from office supply company
Equipment
Building, Stock, or Equipment:
Bathroom sinks, air conditioning system and wall to wall carpeting
Building
Building, Stock, or Equipment:
Growing plants contained in building owned by insured and held for re-sale
Building
Building, Stock, or Equipment:
Additions and improvements made to rented premises by tenant
Equipment
A form of crime coverage requiring visible signs of forcible entry or exit from premises
Burglary
Provides coverage for special classes of property when the loss results from actual destruction, disappearance or wrongful abstraction
Money and Securities (Broad Form) Policy
Insures property while in transit, at the job site awaiting installation, during and after installation until such time job is accepted by purchaser
Installation Floater
Designed to cover the cost of reproducing lost or damaged documents
Valuable Papers and Records Insurance
Coverage commences at time of the loss and continues until the property is rebuilt, repaired or replaced
Earnings Form
The taking of property by inflicting violence upon the custodian, or putting such custodian in fear of violence
Robbery
Insures owned, rented or leased mobile equipment, including miscellaneous tools
Contractor’s Equipment Floater
Coverage commences at the time of the loss and ceases when the income is restored to the level it would have been had the loss not occurred
Profits Form
Broadest form of crime coverage insuring against the taking of property without the owner’s consent
Theft
Includes coverage for actual removal of receptacle from premises
Safe Burglary Policy
