Commercial Property Insurance

Chapter 10

Business Property Insurance

Appendix C

Building and Personal Property Coverage Form

Property Risk Management

Property loss - any loss that a person or organization sustains as a result of the damaging, destruction, taking or loss of use of property in which that person or organization has a financial interest

Risk Management Process1 - Identify and analyze loss exposures2 - Examine the feasibility of alternative risk management techniques3 - Select the best risk management technique4 - Implement the technique5 - Monitor the program

Identify and Analyze Loss ExposuresProperty Loss Exposures

1 - The item exposed to lossReal propertyPersonal propertyValuable information

2 - The cause of loss – anything that couldcause a loss to property

3 - The effects of lossReduction in valueIncreased cost to repair or replaceLoss of revenueExtra expenseDirect loss and indirect loss

Overview of Commercial Property Insurance

Insurance Advisory Organizations

Insurance Services Office (ISO)

American Association of Insurance Services (AAIS)

Develop and file with state insurance departments:

Policy forms

Manual rules

Loss costs

ISO Commercial Lines Program (1986)

“Commercial property”

Building and contents (on or within 100’ of insured location)

Boiler and machinery

Commercial crime

Employee dishonesty, forgery, theft, burglary, robbery, extortion

Commercial inland marine

Elements of transportation or communication

Property in transit, mobile equipment, property being installed by a contractor, bridges, radio towers

Farm

Commercial auto and liability

Building and Personal Property Coverage Covered Property

Building - Table 10-1Your business personal property – Table 10-2

Property owned by the insuredFurniture and fixturesMachinery and equipment“Stock”All other personal property owned by you and used in your businessProperty owned by othersLabor, materials or services furnished on property of othersImprovements and bettermentsLeased personal property

Personal property of others$2500 for property in the care, custody or control of insured

Property Not Covered under BPPTable 10-3Buildings and other real property

Land Roadways

Water Retaining walls

Bridges Piers

Plants and outdoor propertyGrowing crops and lawns

Outdoor crops

Outdoor trees, shrubs and plants

Outdoor fences

Outdoor signs, unless attached to buildings

Property Not Covered - continuedOther personal property

DeedsEvidence of debtMoneyCurrencyAccounts BillsSecurities and notesAlso, food stamps

Vehicles, Watercraft, AircraftAnimalsValuable papers and recordsProperty otherwise covered (BPP is excess)Contraband

Building and Personal Property Coverage

Covered locations

Described locations and off premises

Additional coverages – Table 10-4

Debris removal

Pollutant cleanup and removal

Preservation of property

Fire department service charge

Building and Personal Property Coverage

Coverage Extensions – Table 10-4Newly acquired or constructed propertyPersonal effects and property of othersValuable papers and recordsProperty off premisesOutdoor property

Covered only for fire, lightning,explosion, riot or civil commotion or aircraft

Covered Causes of Loss

Evolution

Fire

Fire and lightning (Standard Fire Policy)

Extended coverage (EC)

Vandalism and malicious mischief (VMM)

Extended Coverage(W.C.SHAVER)

Wind

Civil commotion

Smoke

Hail

Aircraft

Vehicles

Explosion

Riot

BPP Cause of Loss OptionsBasic Form – Table 10-5

Fire, lightning and extended coveragesSprinkler leakageSinkhole collapseVolcanic action

Broad Form – Table 10-5Basic form perils plusWeight of snow, ice or sleetWater damageFalling objectsBreakage of glass

Special Form – All RiskIncludes limited coverage for theft

Concurrent Causation

California court rulings of the 1980sIf a loss to property can be attributed to two or more causes, as long as one of the causes is not excluded the loss is covered.

ExamplesFlood and negligent construction of flood control structures (Palm Desert)Landslide and faulty installation of drain

Other Exclusions - MaintenanceWear and tearRust, corrosion, fungus, decay, deterioration, hidden or

latent defectSmogSettling, cracking, shrinking or expansionInsects, birds, rodents, or other animalsMechanical breakdown (except elevator collision)Dampness, dryness, changes or extremes of temperature,

and marring or scratching

Other Exclusions - Theft RelatedEmployee dishonestyVoluntary partingUnauthorized instructionsInventory shortageUnexplained disappearance Theft of building materialsDollar Limitations

$2500 for furs$2500 for patterns, dies, molds and forms$2500 for jewelry,….gold, silver,..$250 for stamps, tickets (including lottery tickets held for sale, and letters of credit

Consequential Property CoverageBusiness Income Coverage

Business interruption

Net income

Continuing normal operating expenses incurred

Extra expense

Monthly limit of indemnity

Maximum period of indemnity

Payroll endorsements

Other Property Coverage

Commercial Crime Coverage

Inland Marine

Boiler and Machinery

Businessowners Policy

Inland Marine Insurance

Development

Regulatory restrictions on other coverages

Could offer all-risk coverage

Less restrictive regulations

Nationwide Marine DefinitionImportsExportsDomestic shipmentsInstrumentalities of transportation and communication

(bridges, tunnels, piers, power lines, television towers)

Various types of individual personal property (jewelry, furs, instruments)

Various types of business property (mobile equipment, animals, computers)

General Characteristics of Inland Marine Policies

Coverage for property in transit

Loss exposures covered

Physical loss

Business income and extra expense

Broad coverage of perils

Valuation provisions

Actual cash value, replacement cost, selling price, invoice value or agreed value