Study 10 - Commercial Property Solutions Flashcards
What techniques are used in loss control?
Avoidance Loss prevention Loss reduction Separation or diversification Non insurance risk transfer
What are the two methods used to finance losses?
Retention and transfer
What types of losses are best served by retention?
Low in severity, high in frequency
What is passive retention?
Exposures retained but never identified
What are the two methods of transfer?
- Loss to other entities by business contract
- Loss to an insurer through insurance policy
What are some examples of avoidance?
- Permanently close a building
- Stop using high risk products and/or processes
What are some examples of loss prevention and loss reduction?
- Build a fence around a property lot
- Install locks on doors
- More valuable papers off site or away from ignition sources
- Hire an appraiser to evaluate a building’s value
- Have an insurer conduct a property preinspection
- Screen employees driving history
- Create an attrition plan
For hazard materials, what loss prevention and loss control techniques could you use?
LP:
- Remove substances from premises; store at off site location
- Hang signs to alert others of dangerous chemicals
LC:
- Place in a ULC container
- Fire extinguishers on hand
For poor housekeeping, what loss prevention and loss control techniques could you use?
LP:
- Contract maintenance duties to a third party
- Have insurer inspect premises
- Remove all clutter on and around ignition sources
For smoking, what loss prevention and loss control techniques could you use?
LP:
- Install signs prohibiting smoking
- Place fire resisitive waste receptacles in smoking areas
LC:
- Install a centrally monitored fire alarm system
For exposed wiring, what loss prevention and loss control techniques could you use?
LP:
- Hire a company to conduct an infrared thermography inspection to check for hot spots
LC:
- Install centrally monitored fire alarm
For property away from the premises, what loss prevention and loss control techniques could you use?
LP:
- Lock property in vehicle overnight or in a hotel room
For adjacent exposures, what loss prevention and loss control techniques could you use?
LP:
- Install a fire resistive barrier between buildings
LC:
- Reduce extent of wall openings facing the exposure
- Clean up debris between buildings
For spray painting, what loss prevention and loss control techniques could you use?
LP:
- Install proper equipment such as a downdraft spray booth
- Use only approved materials
LC:
- Install a sprinkler system
For commercial cooking, what loss prevention and loss control techniques could you use?
LP:
- Contract with a cleaning company to service and clean cooking equipment on regular basis
LC:
- Install a fire suppression system
- Install fire extinguishers
For welding, what loss prevention and loss control techniques could you use?
LP:
- Appoint a security guard to stay on the work site for two hours after work has been completed to ensure no fires
- Provide fire safety and training programs to staff
For cutting, what loss prevention and loss control techniques could you use?
LP:
- Install effective dust control systems
- Clean the main dust control system on a regular basis
LC:
- Install a sprinkler system
- Install fire extinguishers
- Install a centrally monitored fire alarm system
What are the typical property exclusions?
- Vacant property
- Electrical devices
- Money, bullion, platinum, and other precious metals
- Automobiles
- Watercraft
- Fur or fur garments
- Property illegally acquired
What are the typical peril exclusions?
- Flood
- Earthquake
- Sewer backup
- By laws
- Inventory shortage
- Pollution
- Mould, fungus, biological or environment perils
- Terrorism
- Equipment breakdown
What is typically covered?
Building, stock, equipment & floaters
What is covered under building?
Fixed structures that pertain to the building and located on premises
Also includes signs, plants, trees & shrubs
Many insurers include equipment used for maintenance and normal repairs part of the building
What is covered under stock?
Merchandise usual to the insureds business
Includes packaging, wrapping, advertising materials
Many companies also consider similar property belonging to others
What is covered under equipment?
All contents usual to the business
Includes furniture, furnishings, fittings, fixtures, machinery, tools, utensils and appliances other than building or stock
What are the two types of endorsements?
Standardized
Manuscript or free-form
What elements should be considered in commercial property forms?
- The valuation basis (typically RC or ACV)
- Policy coinsurance clause
- Choice between blanket or separate limits
- Do values at risk fluctuate over the year
What does the coinsurance clause encourage insureds to do?
Insure their property to value
What is the formula for coinsurance?
Amount of insurance carried / minimum amount required
x Amount of loss
= Amount covered by the insurance company
How does a stated amount coinsurance clause differ from a standard one?
Stated is a dollar amount as opposed to a percentage
What is POED or COED?
Property of every description
Contents of every description
Common for blanket policies
What two options are available for businesses with fluctuating values?
Stock reporting policy
Peak season endorsements
Explain a stock reporting policy
Policy limit reflects highest anticipated value of stock
Reports of stock value monthly, quarterly or annually
Premium is adjusted at year end
What is the difference between named perils and all perils?
- A named-perils policy provides coverage against loss or damage caused by only the listed perils.
- Property must be directly damaged by a peril that is explicitly named in the policy.
- Named-perils policies are cheaper than all-risks policies.
- All-risks policies cover against direct physical loss or damage caused by any peril provided that the peril is not excluded.
- Some excluded perils can be purchased on top of an all-perils policy.
- Since all-risks forms limit coverage by exclusions, they insure against more perils than named perils forms.
