Bảo hiểm - Chapter 25: Commercial property insurance

Chapter 25Commercial Property InsuranceAgendaISO Commercial Property ProgramBuilding and Personal Property Coverage FormCauses-of-Loss FormsReporting FormsBusiness Income InsuranceOther Commercial Property CoveragesTransportation InsuranceBusinessowners Policy ISO Commercial Property ProgramBusiness firms can purchase a commercial package policy (CPP) The package policy is tailored to meet the specific needs of the business The policy combines two or more coverages into a single policyAdvantages include: fewer gaps in coverage, lower premiums, and convenienceThe policy contains:Common policy declarationsCommon policy conditions, e.g., cancellation termsCoverage parts, e.g., commercial property, crimeExhibit 25.1 Components of a Sample Commercial Package Policy (CPP) (Endorsements omitted)Building and Personal Property Coverage FormThe building and personal property coverage form is a commercial property coverage part that is widely used to cover a direct physical damage loss to commercial buildings and personal propertyThe form covers the buildings described in the declarations, including fixtures and permanently installed machinery and equipmentBusiness personal property, such as furniture and computers, is coveredIncludes the insured’s interest in improvements and betterments as a tenantPersonal property of others in the care, custody, or control of the named insured is also covered Building and Personal Property Coverage FormAdditional coverages include debris removal, the cost of preserving property, fire department charges, and the cost to replace data destroyed by a covered lossUnder certain conditions, the insurance can be extended to cover other property, such as the personal effects of employees, newly acquired property, and property off the premisesThe declarations page must show a coinsurance requirement of 80% or greater or a value-reporting period symbolA standard deductible of $250 applies to each occurrenceIf applicable, the coinsurance requirement must be met to avoid a penaltyThe policy can be endorsed to cover losses on an agreed value or replacement cost basis, or to add an inflation guardCauses-of-Loss FormsA causes-of-loss form must be added to the policy to have a complete contractThe form specifies the covered perils for the business and personal property coverageThe causes-of-loss basic form provides coverage for 11 basic causes of loss:FireLightningExplosionWindstorm or hailSmokeAircraft or vehiclesRiot or civil commotionVandalism Sprinkler leakageSinkhole collapseVolcanic actionCauses-of-Loss FormsThe causes-of-loss broad form includes all causes of loss covered by the basic form plus:Falling objectsWeight of snow, ice, or sleetWater damageAlso, collapse is covered for certain causes, such as hidden decayThe causes-of-loss special form insures against “risks of direct physical loss” unless specifically excludedAlso, personal property in transit is covered for certain causes of lossCoverage also includes glass damageReporting Forms The reporting form is used to insure fluctuations in business personal property Premiums are based on the actual value of the covered propertyThe insured can report inventory on a daily, weekly, monthly, quarterly or annual basisIf the insured underreports the property values at a location, and a loss occurs at that location, recovery is limited to the proportion that the last value reported bears to the correct value that should have been reportedBusiness Income InsuranceBusiness income insurance is designed to cover the loss of business income, expenses that continue during the shutdown period, and extra expenses because of loss from a covered perilOne form is the business income (and extra expense) coverage formThis form covers the loss of business income due to suspension of operations during a period of restorationSuspension must result from a covered direct physical lossExtra expenses, such as relocation costs, are also coveredAn extended business income provision covers the reduction in earnings for a limited period after the business reopensBusiness income is defined as the net profit or loss before income taxes that would have been earned, and continuing normal operating expenses, including payrollBusiness Income InsuranceThe business income coverage form can be purchased with coinsurance of 50, 60, 70, 80, 90, 100, or 125%The coinsurance percentage selected depends on the length of time it takes to complete repairs and resume operationsA higher percentage should be selected if the business expects to be shut down for a longer period of timeSome optional coverages include:A maximum period of indemnity of 120 daysAlso eliminates the coinsurance requirementA monthly limit of indemnityEliminates the coinsurance requirement and limits the maximum monthly amount that will be paid for each consecutive 30-day periodBusiness income agreed valueThis option suspends the coinsurance clause and places no limit on the monthly amount paid, provided that the agreed amount of insurance is carriedBusiness Income InsuranceThe extra expense coverage form is a separate form that can be used to cover the extra expenses incurred by the firm in continuing operations during a period of restorationCan be used by firms that must continue to operate after a loss occurs, such as a newspaperThe form does not cover loss of business incomeExpenses to continue operations are covered, subject to certain limitsAn endorsement can be added to a business income policy to cover the loss of business income from dependent propertiesUsed when a business depends on a single supplier for raw materials, or relies on a single customer to purchase its productsThe loss of income must result from direct damage to property of the dependent propertyTypes of dependent properties include:Contributing locationRecipient locationManufacturing locationLeader locationOther Commercial Property CoveragesSome firms have certain needs that require more specialized property coverageA builders risk coverage form can be used to insure buildings under constructionCovers the insurable interest of a general contractor, subcontractor, or building ownerA builders risk reporting form can be attached as an endorsementRequires the builder to report monthly on the value of the building under constructionAs the building progresses, the amount of insurance on the building is increased, and premiums are adjusted based on the values reported by the builderOther Commercial Property CoveragesA condominium association coverage form is used to cover a condominium buildingCoverage includes the association’s personal property, such as exercise room equipmentCoverage also includes personal property in the association’s care, such as leased lawn mowers Businesses that own units in a condominium building can purchase a condominium commercial unit-owners coverage formNot used for residential condominium unitsThe form covers the business property of the unit owner, such as furniture, fixtures and improvements, machinery and equipmentThe form also covers the personal property of others in the care, custody, or control of the unit ownerOther Commercial Property CoveragesThe equipment breakdown coverage form can be used to cover losses due to the accidental breakdown of covered equipment, such as steam boilers, refrigeration equipment, and computer equipmentThese losses are not covered under the causes-of-loss formsA breakdown is a direct physical loss that causes damage to covered equipmentThe current ISO form contains numerous coverages that can be included or omitted depending on the needs of the business firm, such as:Property damageSpoilage damageUtility interruptionOrdinance or law coverageErrors and omissionsBrands and labelsOther Commercial Property CoveragesDifference in Conditions (DIC) insurance is an “all-risks” policy that covers other perils not insured by basic property insurance contractsThe coverage fills gaps in commercial property coverageThe coverage can be used to insure unusual and catastrophic exposures that are not covered by the underlying contractsA substantial deductible must be satisfied for losses not covered by the underlying contractsMany multinational corporations use a DIC policy to insurer their overseas propertyTransportation InsuranceOcean marine insurance provides protection for goods transported over waterIt is one of the oldest forms of transportation insuranceOcean marine insurance comes in several different forms:Hull insurance covers physical damage to the ship or vesselA collision liability clause (running down clause) covers the owner’s legal liability if the ship collides with another vessel or damages its cargoCargo insurance covers the shipper of the goods if the goods are damaged or lostRegular shipments can be covered with an open-cargo policyThis coverage requires the shipper to report periodically the shipments that are madeTransportation InsuranceProtection and indemnity (P&I) insurance is usually written as a separate contract that provides comprehensive liability insurance for property damage or bodily injury to third partiesCoverage includes liability for damages caused by the ship to piers and docks, and for illness or injury to passengers and crewFreight insurance indemnifies the ship owner for the loss of earnings if the goods are damaged or lost and are not deliveredTransportation InsuranceOcean marine insurance is based on certain fundamental concepts, or implied warranties:The owner implicitly warrants that the vessel is seaworthyThe ship cannot deviate from its original courseThe ship can only deviate to avoid an accident, or to save the life of an individual on board, or rescue persons from another vesselThe purpose of the voyage is legalThe ocean marine policy provides broad coverage for perils of the sea, such as bad weather, high waves, collision, sinking, and strandingIncludes losses from fire, pirates, and jettison (to save the ship)The policy can be written on an “all-risks” basisCommon exclusions are losses due to delay and warTransportation InsuranceA particular average is a loss that falls entirely on a particular interestUnder the free-of-particular average (FPA) clause, partial losses are not covered unless the loss is caused by certain perils, such as stranding or sinkingThe insurer pays the full amount of a loss only if it exceeds a certain percentage specified in the FPA A general average is a loss that falls on all parties to the voyage, incurred for the common goodEach party must pay its share of the loss based on the proportion that its interest bears to the total value in the ventureConditions for a general average loss include imminent peril, voluntary sacrifice, preservation of at least part of the valueAll parties claiming contributions must be free of fault Transportation InsuranceInland marine insurance provides protection for goods shipped on landThe coverage grew out of ocean marine insuranceConflicts between fire and marine insurers were resolved with a nationwide marine definition in 1933, to define the types of property that marine insurers could writeThe current definition includes imports, exports, domestic shipments, means of transportation and communication, personal property floater risks, and commercial property floater risksSome examples of property that can be insured include:Losses to domestic goods in transitProperty held by a bailee, such as dry cleanerMobile equipments, such as a tractorProperty of certain dealers, such as jewelry and fine art Means of transportation and communication, which is property at a fixed location that is used in transportation or communications, such as a bridge or television towerTransportation InsuranceInland marine contracts are classified as either filed or nonfiled formsFiled forms are filed with the state insurance department, and are typically used in situations where there are a large number of potential insuredsForms under the ISO simplified commercial inland marine program include, for example:Accounts receivable coverageCamera and musical instrument dealers coverageFilm coverage formMail coverage formSigns coverage formTheatrical property coverage formTransportation InsuranceNonfiled inland marine forms are used to meet specialized needsAn annual transit policy can be used to cover the shipment of goods on public trucks, railroads, and coastal vesselsBoth incoming and outgoing shipments can be insured on a named perils or “all-risks” basisA trip transit policy is used by firms to cover a single shipmentA business floater covers property that frequently moves from one location to another, such as contractors equipment and garments in the process of manufacturingBusinessowners Policy A businessowners policy (BOP) is a package policy specifically designed for small- to medium-sized retail stores, office buildings, apartment buildings, and similar firmsThe ISO BOP provides both property and liability coverage in one policyBusinesses are ineligible if their loss exposures are outside those contemplated for the average small- to medium-sized firme.g., auto repair shops and bowling alleysProperty losses are covered on an “all-risks” basisCoverage includes buildings described in the declarations, fixtures, permanently installed machinery and equipmentBusiness personal property, including property in the insured’s care, is also coveredA peak season provision provides for a temporary increase of 25% of the amount of insurance when inventory values are at their peakSome addition coverages include debris removal, collapse, and interruption of computer operationsBusinessowners PolicyFor an additional cost, businessowners can also cover:Outdoor signsMoney and securitiesEmployee dishonestyMechanical breakdownA standard deductible of $500 per occurrence applies to all property coveragesThe BOP also includes business liability coverage similar to the commercial general liability policy (CGL) The businessowner is insured for bodily injury and property damage liability, and advertising and personal injury liabilityMedical expense insurance is also provided