CPCU 551
Principal will comply with the laws that apply to the activity for which the principal is licensed and pay damages to any third party that suffers a loss because of the principal's failure to comply
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Principal will properly account for an remit taxes or fees collected
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Principal: Government entities
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Principal: Owner of the lost securities
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Principal: Owner or operator of hazardous waste facility
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Proactive avoidance-Deciding not to assume a loss exposure in the first place. (Risk control technique)
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Profit-Net income that results when revenues exceed expenses
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Six additional coverages to the BPP-* Debris removal * Preservation of Property * Fire Department Service Charge * Pollutant Cleanup and Removal * Increased Cost of Construction * Electronic Data
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Smoke (cause of loss)-Limited to smoke causing sudden and accidental loss or damage.
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Surety-The party (usually an insurer) to a surety bond that guarantees to the oblige that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or law.
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The Functional Building Valuation endorsement defines "market value" as:-The price which the property might be expected to realize if offered for sale in a fair market.
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The Harter Act-The U.S. Law that domestic shipments over either inland waterways or the coastwise sea lanes by common carrier are subject to.
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The Main Street segment-Relatively small insureds, often thinly financed and therefore vulnerable to business income or extra expense losses; tend to have uncomplicated breakdown exposures, primarily heating and air conditioning
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The SPP is designed for insuring "distressed risks," properties with unfavorable attributes that have made them unacceptable in the standard insurance market. Thus, the SPP could be used by FAIR plans.
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The agreement describes the land, the building, and the common elements and identifies each individual unit. It establishes a method of collecting and paying for such common expenses as maintenance, upkeep of common areas, and insurance.
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The amount of insurance is automatically reduced each month during the life of the lease.
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The usual combination of percentages is 40%-80%-100%. With this combination, and a policy with a $100,000 limit of insurance, loss payments would be limited in these ways:
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Theft (definition as part of Employee Theft coverage)-The unlawful taking of money, securities, or other property to the deprivation of the insured.
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Trade fixtures-Fixtures and equipment that may be attached to a building during a tenant's occupancy, with the intention that they be removed when the tenant leaves.
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Trading exclusion (Bond Form 24)-Losses related to unauthorized securities trading, often referred to as "rogue trading", are excluded.
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Transfer of Rights and Duties Under This Policy condition of the Common Policy Conditions form-States that the insured cannot transfer any rights or duties under the policy to any other person or organization without the insurer's written consent.
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Valuable papers and records insurance-Insurance that covers direct physical loss to valuable papers and records, such as architects' blueprints and plans
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Basic attributes needed for HPR insurance:-* An insured whose managers are determined to control property losses * An insurer that is able to provide the loss prevention engineering needed to implement a complete protection plan for the insured's property
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(However, for coverage that was not previously written with a reporting form by the insurer, the insured has 60 days from the end of the reporting period to file the first report on all except the quarterly report basis.)
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(Many firms retain this exposure believing it is better handled by loss control techniques)
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(The BPP excludes all electronic data, subject to two exceptions: stock of prepackaged software and data covered under Electronic Data additional coverage.)
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(The primary characteristic of personal property is that it is not permanently attached to real property.)
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(Thus, a building and property permanently attached to it are real property.)
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(context: equipment breakdown; overlaps extra expense coverage to some degree, but is not as broad)
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(context: inland marine)
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(since the initiating causes of losses are often operator error, faulty maintenance, etc.)
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Applies only to the extent of the insured's own costs; it does not cover any other part of the customers' property. Category 5 also does not cover the insured's anticipated profit on the work performed.
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Appraisal condition-If the insurer and the insured disagree about the value of covered property or the amount of a covered loss, the appraisal condition allows either party to demand an appraisal.
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Artificially Generated Electrical Energy-Artificially generated electrical, magnetic, or electromagnetic energy that damages, disturbs, disrupts or otherwise interferes with any:
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Because employee dishonesty accounts for the vast majority of financial institution losses, fidelity, the historical name for employee dishonesty coverage, is the most important element of the bond
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Because sprinkler systems are susceptible to earthquake damage, insureds that do not want or cannot obtain full earthquake coverage might elect this less expensive coverage.
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Because the Legal Liability Coverage Form covers losses only if the insured is legally liable, the rate charged for that form is lower than the usual commercial property contents or building rate.
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Because the actual cash value and the replacement cost of a building under construction are typically the same, the Builders Risk Coverage Form does not contain optional replacement cost coverage provisions.
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Beginning in the 1950s, the Nationwide Marine Definition was no longer used as a definition of what types of loss exposures an insurer could underwrite. However, the Definition remained useful in determining which types of insurance were exempt from the filing requirements.
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Bill of lading-A document acknowledging receipt of goods from the shipper, given by the carrier which includes the terms of the contract of carriage for the goods.
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Blanket Business Income Insurance-With blanket coverage, one limit of insurance applies to all of the insured's locations, and a blanket rate can be used. (A blanket business income rate can be computed on a weighted average based on floor areas at the various locations.)
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Blanket insurance-Insurance that covers either of the following with one limit of insurance: (1) one type of property in one or more separately rated buildings or (2) two or more types of property in one or more separately rated buildings.
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Block policy-A dealers policy, particularly one written for a jeweler or furrier
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Boiler-A fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water
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Bond Form 24 - Insuring Agreement A - Fidelity-Covers losses resulting directly from dishonest or fraudulent acts committed by an employee acting alone or in collusion with others.
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Coinsurance condition (business income) requires the insured to carry an amount of insurance equal to this:-The chosen coinsurance percentage times a dollar amount called the coinsurance basis.
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Coinsurance condition-The insured agrees to carry insurance at least equal to a specified percentage of the covered property's value. The coinsurance percentage most commonly used is 80 percent
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Condominium association agreement-A document that describes what each condominium unit owner has purchased and clarifies the rights and responsibilities of the unit owners and the association.
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Condominium unit-The portion of a condominium owned solely by a unit owner.
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Employee Theft coverge-Insures an employer against theft of its property by its own employees.
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Employee Theft insuring agreement of commercial crime insurance coverage applies here:-U.S. (& territories & possessions), Puerto Rico, & Canada. Also for employees temporarily outside the covered territory for <= 90 days.
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Employee Theft insuring agreement of commercial crime insurance covers what 'cause of loss'-"Theft" committed by any "employee"
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Employee theft-(also called employee dishonesty or embezzlement)
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Fire stop-Solid pieces of materials that are inserted between wall studs or other supporting members to delay the flow of heat through spaces that would otherwise be open
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Firetube Scotch marine boiler-One of the oldest boiler designs in current use.
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Firetube boiler-Boiler in which the combustion process adn the resulting gases are contained inside the tubes; water (and steam) are outside the tubes
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For example: payment under a policy with a $100,000 limit and a $1,000 deductible:
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For farm-related insurance: When the insured is an agribusiness corporation, how is the insurance structured?-The form covering residential property exposures is omitted.
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Four categories of loss exposure:-1. Property loss exposure 2. Liability loss exposure 3. Personnel loss exposure 4. Net income loss exposure
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Guests' Evacuation Expense-ISO Market Segments Program endorsement
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Governmental Action exclusion (basic and broad causes of loss forms)-Excludes any "seizure or destruction of property by order of governmental authority".
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Guests' Property - additional insuring agreement of commercial crime insurance-Property covered: Guests' property for which the insured is legally liable
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Guests' Relocation Expense-ISO Market Segments Program endorsement
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It covers all waterborne shipments (and, often, international air shipments) in which the insured has an insurable interest.
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Mortgage impairment insurance - Coverage D - Real Estate Tax Liability-Covers damages for which the insured becomes liable because it failed to pay a mortgagor's real estate taxes
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"Did over should times loss, minus deductible" = Amount of loss payable
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"Disappearance and destruction" for commercial crime insurance-The addition of the words 'disappearance and distruction' increases the scope of the coverage to include losses even when they do not result from an unlawful act. For example, coverage is provided for money and securities that are destroyed in a fire. Disappearance is covered regardless of whether it is mysterious or whether theft appears to be the cause of the disappearance.
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"Employee" as defined for employee theft coverage-A natural person (as opposed to a corporation engaged by the insured) who is:
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"Employee" here includes (1) attorneys and their employees retained by the insured while performing legal services for the insured and (2) corporations or partnerships and their employees performing data processing of checks or other records for the insured.
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"Forgery" definition-The signing of the name of another person or organization with intent to deceive; it does not mean a signature which consists in whole or in part of one's own name signed with or without authority, in any capacity, for any purpose.
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"Household personal property" = "property usual to a living quarters" "Other than household personal property" = furniture, fixtures, machinery, equipment, stock, other owned personal property used in the insured's business
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"Layer" in layered property coverage-Each separate policy, providing $1 million or more of coverage
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"Occurrence" in the context of employee theft-(1) An individual act (2) The combined total of all separate acts whether or not related; or (3) A series of acts whether or not related;
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"Or order"-In addition to a clause that names the parties insured, open cargo policies contain a loss payable clause stating that losses will be paid to the assured "or order". The phrase "or order" means that the assured can direct payment to the consignee, a bank, or some other party that has an insurable interest in the shipment.
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"Other property" definition for employee theft coverage-All tangible property, other than money and securities, which has intrinsic value.
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"Securities" definition for employee theft coverage-Negoitiable adn nonegotiable instruments or contracts representing eithe rmoney or other property. (Stocks, bonds, tokens, tickets, stamps in current use, etc.)
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"Within 100 feet of the described premises" is ordinarily interpreted to mean:-It is ordinarily interpreted to mean within 100 feet of the nearest boundary of the land considered to be part of the insured premises, as opposed to meaning within 100 feet of the building.
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$10,000 for building damage + $2,000 for debris removal = $12,000 - $1,000 deductible
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$150,00 is available for buildings in Alaska, Hawaii, Guam and the U.S. Virgin Islands. Maximum limits apply per building.
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$3,370,000 / $5,000,000 = 0.67, which is rounded up to 70 percent coinsurance.
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$36,000 for building damage - $1,000 deductible = $35,000 that the insurer pays for direct physical loss +$19,000 for debris removal
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(Blanket rates are calculated as a weighted average using the rates and amounts of insurance at each location.)
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(Cleaners and shoe repairers are obvious examples of commercial bailees.)
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(Compared with discovery form, re: commercial crime. Loss sustained is the most commonly used of these two.)
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(For example, perishables such as eggs and lettuce will spoil quickly if they are shipped without refrigeration.)
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(However, if the policy describes the location as 1234 Main Street, Suite 1403, it is generally held that the coverage applies only within suite 1403 and that the 100-foot extension is calculated from the exterior of suite 1403, not the entire premises at 1234 Main Street.
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(However, the exclusion does not apply if the fungus, wet rot, dry rot, or bacteria results from fire or lightning.)
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(If business is interrupted for only a short time, payroll of key employees, debt repayments, taxes, insurance, and many other expenses will continue during the interruption. If a longer interruption of business occurs, many expenses can be reduced or eliminated. Workers can be laid off, taxes are reduced (because of reduced income), and insurance premiums are smaller.)
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(Proof of unlawful taking does not have to meet the standards needed to obtain a criminal conviction.)
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(Replacement cost is determined at the time and location of the loss, so depreciation is subtracted from the current replacement cost, not the original cost.)
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(Risk control technique)
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(See 2.26 if context is needed)
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(See example page 2.17)
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* $100,000 limit on the building * $1,000 deductible * $10,000 damage to building * $2,000 debris removal-Insured collects:
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* $100,000 limit on the building * $1,000 deductible * $36,000 damage to building * $22,000 debris removal-Insured collects:
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* $500 loss: No payment (loss is less than the deductible) * $100,000 loss: $99,000 payment ($100,000 - $1,000 deductible) * $110,000 loss: $100,000 payment ($110,000 - $1,000 deductible exceeds the limit of insurance)
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* Buildings * Land * Water * Bridges * Roadways, walks, patios, and other paved surfaces * Retaining walls that are not a part of a building * Bulkheads, pilings, piers, wharves, and docks * The cost of excavations, grading, back filling, or filling * Foundations below the lowest basement floor or, if there is no basement, the surface of the ground * Underground pipes, flues, and drains
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* Business personal property at any newly acquired location other than fairs, trade shows, or exhibitions * Business personal property located at newly constructed or acquired buildings at the location described in the declaration * Newly acquired business personal property at the described premises
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* Can provide coverage for a greater variety of property * Can be attached to a commercial property coverage part providing the full range of commercial property coverages * Can be written subject to the replacement cost or functional valuation options available under commercial property forms
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* Currently employed by the insured or an ex-employee who employment ended in the past 30 days * Compensated by the insured by salary,w ages, or commissions * Subject to the control and direction of the insured
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* Fire, lightning, and explosion (all are mandatory) * Windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, sinkhole collapse, and volcanic action can be added by making an appropriate entry in the declarations (and windstorm and hail can be omitted from this combination) * Vandalism and sprinkler leakage can also be triggered by marking the declarations page accordingly
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* If the period of restoration is 30 days or less, extra expenses up to $40,000 would be covered. * If the period of restoration is between 30 and 60 days, extra expenses up to $80,000 would be covered. * If the period of restoration is longer than 60 days, extra expenses up to $100,000 would be covered.
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* May include automatic coverage for new construction during the policy period with no limit other than policy expiration and no required premium adjustment (values adjusted at renewal)
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* Money, securities, and similar property * Electronic data and valuable papers * Vehicles, watercraft, and aircraft * Animals * Property More Specifically Defined in Another Form (e.g., stock, electronic data processing equipment) * Airborne or waterborne personal property
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* Ordinance or law * Governmental action * Nuclear hazard * Utility services * War and military action
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* Outdoor grain, hay, straw, and other crops * Outdoor trees, shrubs, and plants (unless they are the insured's merchandise) * Outdoor radio or television antennas, including satellite dishes, their lead-in wiring, masts, and towers * Outdoor fences
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* Rating is more flexible than commercial property forms * Forms can be tailored to create specialized contracts for large or complex projects * Usually provide coverage for flood, earthquake, transit, and theft for property not attached to the building
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* Stamp "salvage" on the merchandise or its containers, if the stamp will not physically damage the merchandise; or * Remove the brands or labels, if doing so will not physically damage the merchandise. The insured must relabel the merchandise or its containers to comply with the law.
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* The Power Failure exclusion does not apply to loss or damage to computers and electronic data * The Electrical Apparatus exclusion states that the insurer will pay for loss or damage to computers resulting from artificially generated electrical current if the loss or damage is caused by or results from (1) an occurrence taking place within 100 feet of the described premises or (2) interruption of electricity, power surge, blackout, or brownout if the cause of the occurrence takes place within 100 feet of the premises. * The exclusion of mechanical breakdown does not apply to the breakdown of computers
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* The condominium property pertains to the named insured's condominium unit only * The named insured has a duty to insure the condominium property according to the condominium association agreement.
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* Typically written for blanket limits of insurance with no coinsurance. If coverage is on a blanket basis and if the total values exposed to any one loss do not exceed the limit of insurance, no increase in limit and no additional premium are required.
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*Because shareholders in a co-op do not directly own corporate property.
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*The phrase "Not Covered" is inserted on the dec page for those coverages that are not included.
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- A - Fidelity* - B - On Premises* - C - In Transit* - D - Forgery or Alteration - E - Securities - F - Counterfeit Money* - G - Fraudulent Mortgages
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- A - Mortgageholders Interest - B - Property Owned or Held in Trust - C - Mortgageholders Liability - D - Real Estate Tax Liability
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- A principal's qualifications (in surety) are sometimes summed up as these 3 Cs-Capital (does the principal have sufficient funds and credit to finance the project and all other ongoing work?) - Capacity (does the principal have the skill, experience, staff, and equipment to execute the work successfully?) Character (does the principal have a reputation for honoring agreements even when there are adverse developments?)
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- Computer Systems Fraud - Data Processing Service Operations - Voice Initiated Transfer Fraud - Telefacsimile Transfer Fraud - Destruction of Data or Programs by Hacker - Destruction of Data or Programs by Virus - Voice Computer System Fraud
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- Concealment, Misrepresentation, or Fraud - Control of Property - Insurance under Two or More Coverages - Legal Action Against Us - Liberalization - No Benefit to Bailee - Other Insurance - Policy Period and Coverage Territory Transfer of Rights of Recovery Against Others to Us (the Subrogation Condition)
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- Exclusions similar to exclusions contained in commercial property policies - Exclusions that eliminate coverage for perils usually insured in other policies - Other exclusions
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- Four qualities that distinguish a surety bond from most property and liability policies-There are three parties to the contract - The principal is liable to the surety for losses paid by the surety - In theory, the surety should not sustain any losses on any surety contracts The coverage period is indefinite
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- In addition to coverage parts, a CPP also contains these:-A common declarations form for the entire policy A Common Policy Conditions form
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- Insure these items as business personal property in a commercial property policy. (Excludes many perils; coverage is very limited)
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- Liability of Depository - Loss of Customers' Property; Premises Damage
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- Policy provision categories-Declarations - Definitions - Insuring agreements - Exclusions - Miscellaneous provisions Conditions
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- Two primary reasons why licenses are required by the federal government, states, counties, cities, and political subdivisions:-They are a source of revenue They help regulate license holders through statutes, regulations, or ordinances that exist for the safety and general welfare of the community
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- Use a combination of equipment breakdown coverage and commercial property coverage (may not provide adequate limits for loss of data from perils other than breakdown of covered equipment)
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- Use an inland marine electronic data processing (EDP) equipment floater. (Premium can be higher than it is when using a commercial property policy.)
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0.70 x $5,000,000 = $3,500,000. Comparing that result with the EML of $3,370,000, you choose the higher amount of $3.5 million and THAT is the limit of insurance you should purchase.
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1. $30,000 / 6 = $5,000 2. 3 x $5,000 = $15,000
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1. Fire requires three elements-An initial source of heat 2. Oxygen 3. Fuel (contents and construction materials)
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1. Two approaches to risk control measures-Engineering approach Human behavior approach
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3 categories of extra expenses-* Extra expenses incurred to avoid or minimize the suspension of business and to continue operations * Extra expenses incurred to minimize the suspension of business if the insured cannot continue operations * Extra expenses incurred to repair or replace any property (but only to the extent that it reduces the amount of loss that would otherwise have been payable)
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3 differences b/w RCBAP and the General Property Form:-- A higher limit of insurance may be purchased. - The NFIP offers replacement cost coverage on building property insured under a RCBAP (REBAP) - The REBAP includes an 80 percent coinsurance requirement on building property coverage.
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4 additional coverages and a coverage extension that apply to the Business Income (and Extra Expense) Coverage Form:-* Civil Authority * Alterations and New Buildings * Extended Business Income * Interruption of Computer Operations
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4 coverages for the NFIP General Property Form-A: Building Property B: Personal Property C: Other Coverages D: Increased Cost of Compliance
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4 factors taken into account in determining the amount of business income loss:-* The insured's net income before the loss occurred * The likely net income if no loss had occurred * Operating expenses, including payroll, necessary to resume operations at the same level of service that existed just before the loss occurred * Other relevant sources of information, including (but not limited to) the insured's financial records, bills, and invoices
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4 types of terms of sale used in international commerce-* Ex Point of Origin * FOB (Free on Board) Vessel * FAS (Free Along Side) Vessel * CIF (Cost, Insurance, Freight)
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4. Inside the Premises - Robbery or Safe Burglary of Other Property 8. Money Orders and Counterfeit Money
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5 exceptions to common carrier liability-* Acts of God * Acts of a public enemy * Exercise of public authority * Shipper's fault or neglect * Inherent vice
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7 specific categories of Business Personal Property-1. Furniture and fixtures 2. Machinery and equipment 3. "Stock" 4. All other personal property owned by you and used in your business 5. Labor, materials, or services furnished or arranged by you on personal property of others 6. Your use interest as a tenant in improvements or betterments 7. Leased personal property that you have a contractual responsibility to insure, unless otherwise provided for under Personal Property of Others
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8 insuring agreements of commercial crime insurance:-Employee Theft Forgery or Alteration Inside the Premises - Theft of Money & Securities Inside the Premises - Robbery or Safe Burglary of Other Property Outside the Premises Computer Fraud Funds Transfer Fraud Money Orders and Counterfeit Money
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= $11,000 that the insured collects
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= $54,000 total that the insured collects
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A business already operating at a net loss can sustain a business income loss if a partial or total shutdown increases the net loss beyond what was expected.
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A clause that excludes coverage for loss caused by delay, such as loss of market, spoilage, and business interruption.
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A condominium unit owner generally has no need for full building insurance in its own name, so the form includes coverage only for Your Business Personal Property and Personal Property of Others
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A contract bond guaranteeing that the project will be free of liens
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A contractors equipment floater normally contains a schedule that lists each piece of equipment and its corresponding limit of insurance. Coverage may be on an open perils basis or for named perils. These floaters frequently include rental reimbursement coverage, which pays the cost of renting substitute equipment when covered property has been put out of service by a covered cause of loss.
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A coverage extension provides up to $250,000 (can be increased by endorsement) for new buildings under construction at the described premises for up to 30 days after the start of construction.
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A firm that estimates (for its EML), for example, only a six-month period of restoration must consider the six months beginning on this date:-The last day of the policy period.
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A fourth element, an uninterrupted chain reaction, causes the fire to flame up and spread, rather than just to smolder.
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A frequent shipper would want to purchase this type of inland/ocean marine policy-Annual transit insurance (aka transportation insurance)
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A major advantage of the Legal Liability Coverage Form (as compared with the Commercial General Liability (CGL) Coverage Form)-The broader range of perils that can be insured when the property is rented for longer than seven consecutive days.
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A real estate development in which each occupant has exclusive ownership of its own unit and the land that the structure occupies and a homeowners' association composed of all the unit owners jointly owns the surrounding land and structures.
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A shipment made before the date of attachment is not covered even if it is still in transit after the date of attachment. Open cargo policies are so named because they do not specify an expiration date. The policy remains in force continuously until canceled by either the assured or the insurer.
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A simple, rule-of-thumb method can be used to select the fraction and the amount of insurance. In this method, the fraction is selected by using the estimated number of months needed for restoration in a worst-case scenario as the denominator, with 1 as the numerator.
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A typical installation floater covers the property during the course of transit and while being installed and tested at the work site. The point at which coverage ends is usually the earliest of these times: * when the insured's financial interest ceases, when the purchaser accepts the property as complete, or when the policy expires or is canceled
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A unique type of explosion involving boilers which is actually covered by commercial property policies. It occurs when unburned fuel or gases that have accumulated in a steam boiler or another type of fired vessel are ignited.
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A value of the smoke peril: it extends coverage to smoke resulting from friendly fires, such as smoke from a fireplace or furnace
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A warranty that excludes loss caused by strikes, labor disturbances, riots, vandalism, sabotage, or malicious acts
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A warranty that excludes loss caused by war, piracy, virtually any lawful or unlawful taking of the vessel, a nuclear weapon, a mine, or a torpedo.
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A watchperson or janitor can be a messenger, but not a custodian. An employee taking cash and checks to the bank for deposit in the insured's account is an example of a messenger.
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Abandonment-Eliminating a loss exposure that already exists. (Risk control technique)
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Accounts receivable insurance-Insurance that covers the sums the insured is unable to collect when records of accounts receivable are destroyed by a covered cause of loss.
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Accumulation clause-A clause in open cargo policies that doubles the policy limit when, for reasons beyond the control of the assured, shipments accumulate at some point in transit.
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Act of God-A natural and unavoidable catastrophe that interrupts the expected course of events
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Actions a licensed inspector (for equipment breakdown insurance purposes) might take:-- Comment on suitability of equipment for the job - Request the testing of controls and safety devices - Check equipment maintenance - Review operators' logs - Review the insured's training programs - Provide underwriters with information they need to keep rates and coverages in line with the exposures
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Actual Cash Value-Cost to replace property with new property of like kind and quality less depreciation.
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Additional Coverage - Collapse (broad form cause of loss)-The insurer agrees to pay for loss or damage caused by the abrupt collapse of a building or any part of a building, or the abrupt collapse of personal property inside a building.
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Additional Covered Property endorsement-Provides a blank space for inserting the additional property to be covered.
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Additional Exclusions and Limitations Contained in the Special Form * Dishonest or Criminal Acts * Voluntary Parting * Unauthorized Instructions * Inventory Shortages * Unexplained Disappearance * Theft of Building Materials * Special Theft Limits * Exclusions to Match Broad Form Condtions * "Maintenance" Perils * Pollution * Concurrent Causation * Production Errors
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Additional Exclusions and Limitations Contained in the Special Form-* Dishonest or Criminal Acts * Voluntary Parting * Unauthorized Instructions * Inventory Shortages * Unexplained Disappearance * Theft of Building Materials * Special Theft Limits * Exclusions to Match Broad Form Condtions * "Maintenance" Perils * Pollution * Concurrent Causation * Production Errors
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Additional Insuring Agreements of commercial crime insurance-Lessees of Safe Deposit Boxes Securities Deposited with Others Guests' Property Destruction of Electronic Data or Computer Programs Unauthorized Reproduction of Computer Software by Employees
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Additional coverages to the Basic and Broad Form causes of loss-The Basic and Broad Form both contain an additional coverage for loss resulting from fungus, wet rot, dry rot, or bacteria, and the Broad Form also contains an additional coverage for loss resulting from the abrupt collapse of a building or personal property inside a building.
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Additional output policy coverage options that are not ordinarily included in standard commercial property policies are these (3):-* Auto Physical Damage Coverage - A good option for those insureds with large fleets of automobiles who are at risk of a loss involving several vehicles at one time. * Equipment breakdown coverage * Flood and earthquake coverage
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Advantage of Special Form over Basic and Broad Form - Fire-Damage caused by friendly fire is covered.
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Advantage of Special Form over Basic and Broad Form - General-Open perils coverage (coverage is provided unless it is excluded and coverage may be limited)
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Advantage of Special Form over Basic and Broad Form - Theft-Most theft loss is covered, except for some excluded thefts, such as theft committed by the insured's employees
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Advantage of Special Form over Basic and Broad Form - Water damage-Water damage that occurs when melting snow penetrates the building because of "ice damming" on the roof is covered.
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Advantages of a DIC policy-* Cost-effective method of obtaining flood and earthquake coverage. * Usually do not require coinsurance * Are often easier to modify to meet the insured's particular needs (because they're nonfiled) * May offer broader coverage for some perils
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After a loss has occurred, the insured can waive its recovery rights against someone else covered by the policy form (for example, a landlord when named as an additional insured), a business firm that either owns or is owned by the insured, or a tenant of the insured (subrogation against a tenant is prohibited by law in some states)
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Aggregate flood limit-The most the insurer will pay for all floods within a 12-month period starting with the beginning of the policy's present annual period.
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Agreed Value (business income option for modifying coinsurance)-Suspends the coinsurance condition, and the insured and the insurer agree to a set of values reported in a written statement, so it is not necessary to include any increased percentage buffer amount after doing a maximum loss of business income calculation.
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Agreed Value optional coverage-Optional coverage that suspends the Coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and insured.
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Agreed value method-A method of valuing property in which the insurer and the insured agree, at the time the policy is written, on the maximum amount that will be paid in the event of a total loss.
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All of the other exclusions of the causes of loss forms apply to the Legal Liability Coverage Form except:
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All-in concept (additional installations coverage)-A concept of condominium ownership that is similar to the single-entity concept except that the all-in concept includes improvements made by the unit owner, not just the original installations or replacements of like kind and quality.
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Also applies to business income losses resulting from damage to machinery, equipment, supplies, or building materials located on or within 100 feet of the described premises and used in the construction or incidental to the occupancy of new buildings.
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Also known simply as "transportation insurance"; purchased by frequent shippers to cover all shipments made or received during the annual policy period.
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Also referred to as "wrap-ups," they provide coverage for contractors and subcontractors in addition to the owner (contractors usually reduce their prices in exchange for the insurance coverage).
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Also, fire legal liability coverage (the CGL's version) applies only to real property, whereas the Legal Liability Coverage Form can apply to both real and personal property.
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Alterations and New Buildings additional coverage (Business Income)-Insures loss of business income sustained because of physical damage to (1) new buildings or structures at the described premises or (2) alterations or additions to existing buildings or structures at the described premises.
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Alternatives to the Builders Risk Coverage Form (4):-* The BPP * Inland marine builders risk policies * Highly protected risk (HPR) policies * Owner Controlled Insurance Program (OCIP)
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Amount payable = ((Limit of insurance / Completed value) x Loss) - Deductible
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An additional benefit to insurers of classifying their DIC policies as inland marine is the avoidance of increased residual market participation in states that have residual property or windstorm plans based on property, but not inland marine, premiums written.
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An annual transit policy does not contain as many exclusions as the Special Form and thus covers a broader scope of perils. For example, flood and earthquake are usually covered.
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An infrequent shipper would want to purchase this type of marine policy-Trip transit insurance. It covers the particular shipment of goods specified in the policy.
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An installation floater usually covers property installed at a work site by a particular contractor or subcontractor. The coverage normally applies while the property is in transit or in temporary storage and during the installation and testing process. The entity insured is usually the contractor or subcontractor installing the property.
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An insured that needs a DIC policy only to cover an unusual or a catastrophic loss exposure can obtain a DIC policy that covers on a named peril(s) basis.
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An organization can also suffer a business income loss because of physical damage to property at locations not owned or controlled by the organization. This type of loss can result from any of these exposures (5):-* Loss or damage to the organization's own property off premises * Dependent property exposures * Interruption of utility services * Acts of civil authorities * Adverse weather
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An organization can depend on other firms in this way. This exposure is sometimes referred to as a "contingent business income" exposure.
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Animal mortality insurance-Insurance that covers loss of valuable animals by (1) death resulting from accident, injury, sickness, or disease, or (2) theft, subject to exclusions. Can be written for whatever limit is appropriate
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Annual transit policy-Policy that covers all shipments made or received by the insured throughout a one-year policy period.
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Another advantage of valuation at invoice is that it covers whatever profit the seller has in that price.
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Anti-concurrent causation wording-The lead-in paragraph to the first group of cause-of-loss exclusions states that these exclusions apply to loss or damage caused directly or indirectly by any of the excluded causes, "regardless of any other cause or event that contributes concurrently or in any sequence to the loss."
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Any loss payment made to the loss payee will satisfy the insured's claims against the insurer for the owner's property.
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Apparent causes of equipment breakdown losses-- Heat - Pressure - Electrical energy - Centrifugal force - Reciprocating motion
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Appeal bond-A judicial bond guaranteeing that a plaintiff who appeals an adverse decision to a higher court will pay all court costs of the appeal
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As compared to COGSA, the Harter Act does not include a package limitation.
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As long as the insured contracts for repair or replacement of covered property within 180 days of loss by a covered peril, the Functional Personal Property Valuation (Other Than Stock) endorsement will pay the smallest of these amounts:-* The applicable limit of insurance * The cost to replace, on the same site, the damaged item with the most closely equivalent property available * The amount necessarily spent to repair or replace the property
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Assailing thieves-Theft of cargo by force (does not include clandestine theft, pilferage, or theft by the passengers or crew)
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Assured-In ocean marine policies, the party named as the insured.
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Attach (in the context of property)-Take (the property) by legal authority
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Attachment bond-A judicial bond guaranteeing that, if the court decides against a plaintiff who has requested attachment of the defendant's property, the defendant will be paid any damages that result from the property attachment
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Attachment clause - open cargo insurance-States that the insurance will "attach and cover all shipments made on and after" the date and time shown in the policy.
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Attachment point-The dollar amount above which the reinsurer responds to losses
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Automatic coverage is also provided for newly acquired buildings at other locations, provided the purpose of the newly acquired building is similar to the use of the building described in the declarations or the newly acquired building will be used as a warehouse. The maximum amount of coverage is $250,000 at each building.
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Available for administrative officials, officials who handle public funds, and officials with direct public involvement
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Average (in maritime law)-In maritime law, "average" refers to a partial loss to a vessel or its cargo. General average is either an expenditure or a sacrifice of part of the vessel or cargo, made in a time of danger to save the voyage.
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Avoidance-Risk control technique that eliminates any possibility of loss
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BFE-Base flood elevation; the BFE is the regulatory requirement for the elevation or floodproofing of structures, and the relationship between the BFE and a structure's elevation determines the flood insurance premium. The zone in which a property is located flood insurance rates.
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BMC 32 - Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability-An endorsement that insurers must attach to motor truck cargo liability policies of interstate carriers stating that the insurer will pay cargo claims for which the insured is liable, up to the limits required by the U.S. Department of Transportation, even if such claims are not covered under the policy.
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BOP has an insurance-to-value requirement that resembles that found in many homeowner's policies. Although less stringent than coinsurance, it encourages insureds to insure to at least 80 percent of the covered property's value. It differs from the BPP's coinsurance condition in several ways, including: - It applies only to replacement cost (not to ACV) - It does not apply if the insured elects an ACV settlement For full replacement cost coverage to apply under the BOP, the amount of insurance at the time of loss must equal at least 80 percent of the full replacement cost of the covered property immediately before the loss. If the amount of insurance is less than 80 percent of the full replacement cost, the insurer will pay the greater of two amounts, not to exceed the limit of insurance: - The ACV of the lost or damaged property - A proportion of the cost to repair or replace, after applying the deductible but without a deduction for depreciation. The proportion is the applicable limit of insurance divided by 80 percent of the property's replacement cost.
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BOP, however, does contain its own exclusions for computer coverage, eliminating coverages for these losses: * E&O in programming, processing, or storing data or processing or copying valuable papers and records * Errors or deficiencies in design, installation, testing, or repair of computer systems * Electrical or magnetic injury, disturbance, or erasure of electronic data, except as provided for under the additional coverages
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BOP-A package policy that includes most of the property and liability coverages needed by small and midsize businesses. Businessowners policies typically provide building and business personal property coverage, business income and extra expense coverage, and the equivalent of commercial general liability coverage.
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BOP: Additional Coverages: Business Income and Extra Expense - three ways they differ from the separate ISO business income and extra expense forms:-- BOP coverages are subject to a one-year limit instead of the dollar limits in other forms The BOP coverages are not subject to coinsurance; therefore, coverage is simplified and any possibility of a coinsurance penalty is eliminated. The BOP coverages limit ordinary payroll coverage to 60 days following the date of the physical loss unless a greater number of days is shown in the declarations
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BPP (and other) Causes of Loss - Basic Form-Form that covers fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action
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BPP (and other) Causes of Loss - Broad Form-Form that covers basic form perils plus falling objects; weight of snow, ice, or sleet; water damage; and (as additional coverage) collapse caused by certain perils
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BPP conditions-* Limits of insurance * Deductible * Valuation
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BPP is the most commonly used commercial property coverage form in ISO's CPP program
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BPP's Personal Property of Others agreement-Insures personal property of others only while it is (1) in the named insured's care, custody, or control and (2) located in or on the building described in the declarations or in the open (or in a vehicle) within 100 feet of the described premises.
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Bailee-The party temporarily possessing the personal property in a bailment
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Bailees' customers policy-A policy that covers damage to customers' good while in the possession of the insured, regardless of whether the insrued is legally liable for the damage.
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Bare-walls concept-A concept of condominium ownership in which the association has no ownership interest within the bare walls of each unit.
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Barratry of the masters and mariners-Any wrongful act willfully committed by the master or crew with criminal intent, to the detriment of the shipowner or charterer. Mutiny and malicious destruction of cargo are examples of barratry.
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Basic & Broad Causes of Loss (farm property)-- Fire or lightning - Windstorm or hail - Explosion - Riot or civil commotion - Aircraft - Vehicles - Smoke - Vandalism - Theft - Sinkhole collapse - Volcanic action - Collision (Coverages E & F only) - Earthquake loss to covered livestock - Flood loss to covered livestock
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Basic and Broad Form Exclusions (all - 12)-Exclusions subject to anti-concurrent causation language: * Ordinance or law * Earth movement * Governmental action * Nuclear hazard * Utility services * War and military action * Water * Fungus, wet rot, dry rot and bacteria
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Basic and Broad Form Exclusions - Exclusion NOT subject to anti-concurrent causation language (4):-* Artificially generated electrical energy * Explosion of steam boilers * Mechanical breakdown * Neglect
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Basic and Broad Form Exclusions - Exclusions subject to anti-concurrent causation language (8):-* Ordinance or law * Earth movement * Governmental action * Nuclear hazard * Utility services * War and military action * Water * Fungus, wet rot, dry rot and bacteria
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Basic and Broad Form Exclusions Contained in the Special Form-* Ordinance or Law * Earth Movement * Governmental Action * Nuclear Hazard * Utility Services * War and Military Action * Water * "Fungus", Wet Rot, Dry Rot and Bacteria * Artificially Generated Electrical Energy * Steam Boiler Explosion * Mechanical Breakdown * Neglect
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Because DIC policies are often written by nonadmitted insurers or as nonfiled inland marine policies, policy provisions and rates are open to negotiation between the insurer and the insured.
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Bid bond-A contract bond guaranteeing that a contractor bidding on a construction or supply contract will enter into the contract and will provide a performance bond if the bid is accepted.
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Bond Form 24 - Insuring Agreement B - On Premises-Covers "property" located at any office or premises anywhere in the world against a broad range of named perils.
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Bond Form 24 - Insuring Agreement C - In Transit-Insures property in transit anywhere in the custody of certain types of individuals or organizations.
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Bond Form 24 - Insuring Agreement D - Forgery or Alteration-Covers loss resulting from forgery of a signature or alteration involving most types of negotiable instruments and certain other listed instruments.
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Bond Form 24 - Insuring Agreement E - Securities-Covers loss sustained by the insured because of the insured's reliance on certain listed instruments that bear a forged signature, that are altered, or that are counterfeit or stolen.
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Bond Form 24 - Insuring Agreement F - Counterfeit Money-Covers loss when the bank, acting in good faith, receives any counterfeit or altered paper securities, money, or coins of the U.S., Canada, or another country in which the insured maintains a branch office
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Bond Form 24 - Insuring Agreement G - Fraudulent Mortgages-Covers loss resulting from the insured's good-faith acceptance of a mortgage or deed of trust that proves to be defective because the signature on the mortgage or deed was obtained through fraud or false pretenses
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Bond Form 24 Deductible-SFAA manual requires a minimum $1000 deductible, but actual deductibles are typically much larger than that
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Bond Limit-A bond is written for a set limit, sometimes called the "penalty". If the principal's obligation exceeds the limit, the surety will be liable only for the amount of the limit.
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Bottleneck-Often applied to situations in which work from several assembly lines or processes must flow through (or depend on continued operation at) a single job site or position.
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Bottlenecks in a business operation can cause the business process to slow down or stop. Physical damage confined to the bottleneck position could shut down several undamaged assembly lines. Production bottlenecks are easiest to imagine, but bottlenecks can also exist in purchasing and selling.
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Brands and Labels endorsement-To help protect the reputation of the insured's goods when the insurer takes any part of the property as salvage, the Brands and Labels endorsement permits the insured to take these actions:
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Breakdown coverage-Coverage, in an EDP equipment floater, for perils such as mechanical failure, electrical disturbance, and damage to electronic data when covered equipment breaks down.
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Broad (aggregate definition) of Commercial Property Insurance-All types of commercial property insurance covering property loss and related net income loss.
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Broad Causes of Loss (farm property) also include-- Electrocution of covered livestock - Attacks on covered livestock by dogs or wild animals - Accidental shooting of covered livestock - Drowning of covered livestock - Loading/unloading accidents (livestock only) - Breakage of glass or safety glazing materials - Falling objects - Weight of ice, snow, or sleet - Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system,an air conditioning or automatic fire protective system, or an appliance for heating water - Accidental discharge or leakage of water or steam from within a plumbing, heating, air conditioning, or other system or appliance - Freezing of a plumbing, heating, air conditioning, or automatic fire protective system or a household appliance - Sudden and accidental damage from artifically generated electrical current
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Builders Risk Coverage Form contains these four of the six BPP additional coverages-* Debris removal * Preservation of property * Fire department service charges * Pollutant cleanup and removal
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Builders Risk Coverage Form valuation-Contains a standard valuation condition that provides coverage on the basis of actual cash value.
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Builders Risk Coverage Form-A form that covers buildings in the course of construction, including additions or alterations to existing buildings.
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Builders Risk Reporting Form-Another method, less commonly used, is to write builders' risk coverage on a value reporting basis. By adding the Builders Risk Reporting Form endorsement, the Builders Risk Coverage Form can be changed to a value reporting basis.
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Building (as defined in the BPP)-The building or structure described in the Declarations, including: * Completed additions; * Fixtures, including outdoor fixtures; * Permanently installed machinery & equipment * Personal property owned by you that is used to maintain or service the building or structure or its premises (e.g., fire-extinguisher, outdoor furniture, floor coverages, appliances) * Additions under construction, alterations and repairs to the building or structure (if not covered by other insurance) * Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the building or structure
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Building Glass - Tenant's Policy endorsement-Covers the building glass described in the endorsement's schedule against the causes of loss (Basic, Broad, or Special, as well as any related endorsements) indicated in the schedule, up to the limit of insurance stated in the schedule.
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Building Limit - Automatic Increase-Increases the stated limit for buildings by an annual percentage shown in the declarations. (The annual percentage is applied on a pro rata basis throughout the policy year.)
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Building Materials and Supplies of Others coverage extension (Builders Risk Coverage Form)-Provides up to $5,000 to cover building materials and supplies owned by others, such as building materials brought by a subcontractor onto the work site.
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Building Owner Loss Payable Clause (Loss Payable Provisions endorsement)-Provides that the owner of a building in which the insured is a tenant can be covered as a loss payee. The insurer further agrees to adjust losses to the described building with the building owner who is shown as loss payee.
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Building and Personal Property Coverage Form (BPP)-Can be used to cover any combination of three broad categories of property: - Building - Your Business Personal Property - Personal Property of Others
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Burglary-Theft by someone who forcibly enters the place where the property is kept
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Business Income Changes - Educational Institutions endorsement-An endorsement that modifies business income coverage forms to make them more appropriate for covering the business income loss exposures of schools.
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Business Income From Dependent Properties (BOP)-Insures the actual loss of business income resulting from damage at the premises of a dependent property caused by any covered cause of loss up to $5,000, or a higher limit shown in the declarations.
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Business Income From Dependent Properties - Broad Form endorsement-This endorsement is used when the insured wants the same limit that applies to business income loss resulting form damage at its own premises to apply to business income loss resulting from damage to other properties as well
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Business Income From Dependent Properties - Limited Form endorsement-This endorsement is used when separate limits are preferred or when the insured wishes to insure only business income from dependent properties
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Business Income Premium Adjustment endorsement-An endorsement that bases the final policy premium earned by the insurer on the actual exposure as reported by the insured at 12-month intervals.
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Business Personal Property - Limited International Coverage endorsement-Provides a partial solution to the problem that, once an insured's property is outside the coverage territory, the commercial property policy will not cover it.
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Business iNcome Changes - Beginning of the Period of Restoration endorsement-Eliminates or reduces to 24 hours the 72-hour waiting period for business income coverage
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Business income insurance covers the reduction in a firm's net income caused by accidental property damage.
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Business income insurance-Insurance that covers the reduction in an organization's income when operations are interrupted by damage to property caused by a covered peril.
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Business income worksheet-A worksheet for calculating the amount of insurance necessary to comply with the Coinsurance condition of business income insurance forms, for reporting business income values to the insurer, or for providing underwriters with information they need to evaluate an organization's business income loss exposure.
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Businessowners Coverage Form-Three main sections of policy provisions: - Section I - Property - Section II - Liability - Section III - Common Policy Conditions
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Businessowners policies typically provide building and business personal property coverage, business income and extra expense coverage, and the equivalent of commercial general liability coverage. Other coverages are either included automatically or available as options.
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Businessowners policy (BOP)-A package policy that combines most of the property and liability coverages needed by small and medium-size businesses.
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By endorsement, other valuation methods can be applied to property covered by the BPP or other commercial property coverage forms. These include (3):-* Manufacturer's Selling Price * Functional Building Valuation * Functional Personal Property Valuation
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CIF (Cost, Insurance, Freight)-(Inland marine - terms of sale)
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COGSA also provides that the carrier will not be held liable for cargo loss arising from unseaworthiness of the vessel unless the loss is caused by "want of due diligence on the part of the carrier" to make the vessel seaworthy. (The Harter Act imposes a similar standard.)
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COGSA is far less strict than the rules that apply to common carriers of goods in surface transit. It contains a much longer list of exceptions that relieve the carrier of liability.
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COGSA provides for a package limitation, which limits the carrier's liability to $500 for loss to a single package or customary freight unit (such as a metric ton of grain.)
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Carpeting, tile, windows, elevators, and machinery are examples of property that can be covered.
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Carrier responsibility for loss does not eliminate the owner's loss exposure; it merely provides a possible source of recovery.
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Categories of equipment that can be covered under equipment breakdown policies-- Boilers and pressure vessels - Electrical equipment - Mechanical equipment - Air conditioning and refrigeration equipment - Office equipment and systems
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Categories of items excluded from the BPP-* Buildings and other real property * Plants and outdoor property * Other personal property
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Causes of Loss Form - Farm Property-Basic, Broad, or Special
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Changes condition of the Common Policy Conditions form-States that policy constitutes the entire contract between the insurer and the named insured, and that the policy can be changed only by a written endorsement issued by the insurer
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Characteristics of Equipment Breakdown Insurance-- Small, specialized field (an insufficient volume for some carriers) - Role of reinsurance - Importance of risk control
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Charter-A travel contract in which transportation is temporarily hired for a specific trip.
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Civil Authority additional coverage (Business income)-Provides payment for loss of business income and extra expense if access to the insured's premises is prohibited by civil authority because of damage to property at another premises. Damage must be caused by a covered peril.
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Civil Authority additional coverage-An additional coverage in a business income form, covering loss of business income and/or extra expenses that result when access to the insured's premises is prohibited by a civil authority because of damage by a covered cause of loss to property other than the insured's.
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Classes of Commercial Inland Marine Insurance Filed by ISO and AAIS-* Accounts receivable * Camera and musical instrument dealers * Film * Floor plan merchandise * Equipment dealers (implement dealers) * Jewelers block (jewelry dealers) * Mail (ISO only) * Music instruments * Photographic equipment * Physicians, surgeons, and dentists equipment * Signs * Theatrical property * Valuable papers and records
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Coinsurance basis (business income)-The sum of the insured's estimated net income and operating expenses for the 12 months following policy inception, minus only those expenses listed in the business income worksheet
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Coinsurance formula-((Limit of insurance) / (Value of covered property x Coinsurance percentage)) x Amount of covered loss - Deductible
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Coinsurance requirement for blanket insurance-The insured with blanket insurance must insure to 90 percent of value to avoid a coinsurance penalty, but does not receive the 5 percent discount that applies to specific insurance with a 90 percent coinsurance requirement.
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Coinsurance-An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced.
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Collapse coverage (an additional coverage on the cause of loss broad form) applies only if the collapse is caused by one of these perils (6):-* Any cause of loss covered by the Broad Form * Hidden building decay (unless known to the insured before the collapse) * Hidden insect or vermin damage (unless known to the insured before the collapse) * Weight of people or personal property * Weight of rain that collects on a roof * Use of defective materials or methods in construction, remodeling, or renovation
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Combination Safe Depository Policy-A policy that enables a financial institution to cover loss of or damage to its customers' property in the insured's safe-depository facilities and damage to the insured's premises
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Combination Safe Depository Policy-Two insuring agreements
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Combined with the marine extension, these clauses provide an extremely broad scope of coverage for deviations, delays, forced discharges, and trans-shipments (cargo moved from one ship or other conveyance to another)
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Combustion explosion-a.k.a., furnace explosion
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Commercial Crime Conditions (commercial crime insurance)-* Conditions Affecting Employee Theft * Conditions Affecting Interests Insured * Conditions Affecting Claim Handling
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Commercial Property Conditions-A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms.
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Commercial bailment-The temporary possession by one party (the bailee) of personal property of another party (the bailor) for a specific purpose beneficial to both parties.
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Commercial crime insurance is designed for:-Insuring any type of nongovernment commercial or not-for-profit entity other than financial institutions.
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Commercial package policy (CPP)-Policy that covers two or more lines of business by combining ISO's commercial coverage parts.
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Common carriers-Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services.
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Common elements-Areas of a condominium that are jointly owned by all unit owners, including the land on which the buildings are located.
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Common perils affecting equipment which are NOT covered by the Equipment Breakdown policy (and are instead covered by Commercial Property Policy)-- Explosion of unfired pressure vessels - Furnace explosion - Fire
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Common perils affecting equipment which are covered by the Equipment Breakdown policy-- Boiler explosion - Electrical breakdown - Mechanical breakdown - Rupture or bursting from centrifugal force
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Common types of breakdown losses to fired pressure vessels:-- Explosion caused by excessive internal pressure of steam - Overheating (referred to as 'dry-firing') caused by continued firing when there is insufficient water in the vessel, usually because of the failure of the low-water cutoff. - Cracking of cast iron sections because of expansion and contraction stresses, rust growth between sections, porous castings, and tie rods that are too tight - Bulging or "bagging" (swelling), usually caused by improper heat transfer because of buildup of scale or sediment
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Common types of inland and ocean marine policies used for covering transportation loss exposures:-* Annual transit insurance * Open cargo insurance * Trip transit insurance * Mail insurance * Motor truck cargo insurance
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Comparison of Condominiums, Cooperatives, and Planned Unit Developments: Have "fee simple" title to their unit?-Condominium Unit Owners: NO Cooperative Shareholders: NO Planned Unit Development Homeowners: YES
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Comparison of Condominiums, Cooperatives, and Planned Unit Developments: Insurance requirements are usually spelled out in the governing agreements or bylaws?-Condominium Unit Owners: YES Cooperative Shareholders: YES Planned Unit Development Homeowners: YES
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Comparison of Condominiums, Cooperatives, and Planned Unit Developments: Own an identifiable portion of the property?-Condominium Unit Owners: YES Cooperative Shareholders: NO Planned Unit Development Homeowners: YES
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Comparison of Condominiums, Cooperatives, and Planned Unit Developments: Own common elements jointly with others?-Condominium Unit Owners: YES Cooperative Shareholders: NO* Planned Unit Development Homeowners: YES
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Comparison of Condominiums, Cooperatives, and Planned Unit Developments: Own stock in the corporation that owns the property?-Condominium Unit Owners: NO Cooperative Shareholders: YES Planned Unit Development Homeowners: NO
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Completed Value Approach-The Builders Risk Coverage Form is designed to be issued, at policy inception, for an amount of insurance equal to the building's full completed value. This method of providing builders risk coverage is referred to as the completed value approach.
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Compliance bonds with third-party liability-Classification of license and permit bond
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Compliance-only bond-Classification of license and permit bond
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Computer Crime - Insuring Agreement - Computer Systems Fraud-Covers loss caused by someone who has managed to enter or change electronic data or computer programs in the insured's computer system
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Computer Crime - Insuring Agreement - Data Processing Service Operations-Designed for insureds that perform data processing services for others under contract. It covers loss sustained by the insured's clients caused by fraudulent entries or changes in the insured's computer system if the insured is legally liable to its client.
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Computer Crime - Insuring Agreement - Destruction of Data or Programs by Hacker-Covers destruction of, or damage to, electronic data or computer programs by a hacker
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Computer Crime - Insuring Agreement - Destruction of Data or Programs by Virus-Covers destruction of, or damage to, electronic data or computer programs resulting from a computer virus
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Computer Crime - Insuring Agreement - Telefacsimile Transfer Fraud-Covers the fraudulent transfer of funds based on faxed instructions given by someone pretending to be either a customer or an employee in another office
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Computer Crime - Insuring Agreement - Voice Computer System Fraud-Covers loss resulting from unauthorized telephone long-distance toll charges. The charges can be caused by fraudulent use of codes or passwords to obtain access to parts of the insured's voice communications network.
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Computer Crime - Insuring Agreement - Voice Initiated Transfer Fraud-Covers the fraudulent transfer of funds based on telephone instructions given by someone pretending to be either a customer or an employee in another office. Security measures are required, and - when the transfer exceeds the amount specified in the policy - the transaction must be confirmed by a call-back to verify the instructions.
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Computer Crime Policy-Seven insuring agreements
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Computer Fraud insuring agreement of commercial crime insurance-Property covered: Money, securities, and other property Causes of loss: Use of a computer to fraudulently cause a transfer of covered property Where coverage applies: The property must be transferred from inside the "premises" or a "banking premises" to a person or place anywhere else in the world.
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Computer fraud coverage-Coverage for loss of covered property due to use of a computer to fraudulently transfer covered property to the wrongdoer
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Concealment, Misrepresentation or Fraud condition (Commercial Property Conditions)-Says the policy or coverage part is void if any insured commits fraud related to the insurance, or if there is intentional concealment or misrepresentation by any insured of a material fact with respect to the coverage part/property.
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Concurrent Causation Doctrine-Holds that a loss is covered when caused by two or more independent, concurrent perils only if one of the perils is covered - even if the other peril or perils are clearly excluded.
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Condition: "Defense": Gives the insurer the right, but not the duty, to defend the insured against suits arising from claims of property owners (such as the owner of property in the insured's care, custody, or control). If the insurer chooses to defend against a claim or suit, it will pay the resulting expenses.
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Conditions Affecting Claim Handling (commercial crime insurance)-* Concealment, Misrepresentation, or Fraud (void the insurance) * Cooperation * Deductible (no loss is payable unless it exceeds the deductible; on a loss of $50500 or more with a $50000 limit and $500 deductible, the insurer would pay the full $50000. The deductible is taken off the amount of the loss, not off the limit) * Duties in the event of the loss * Other insurance * Records (required to keep them) * Recoveries (any recovery is distributed first to cover any costs used in obtaining recovery, then to the insured, then to the insurer) * Transfer of Your Rights of Recovery Against Others to Us * Valuation - Settlement (Money is paid at face value, securities at market value at close of business on day of discovery, other property at replacement cost
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Conditions Affecting Employee Theft (commercial crime insurance)-* Territory * Termination as to Any Employee * Employee Benefit Plans
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Conditions Affecting Interests Insured (commercial crime insurance)-* Ownership of Property; Interests Covered (applies to property owned, leased, or held for others by the named insured regardless of liability) * Joint Insured (addresses situations in which more than one insured is named on a policy; first named insured acts not only for itself but also for all other insureds) * Consolidation - Merger or Acquisition (extends coverage to newly acquired co. for 90 days) * Additional Premises or Employees (automatically covers any of these additions throughout the policy period)
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Conditions applying to the Employee Theft insuring agreement of the commercial crime insurance-- Termination as to any employee - Territory - Employee benefit plans
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Condominium Additional Provisions Endorsement - Act or Omission-States that no act or omission by any unit owner will void the policy or bar recovery unless the unit owner acts on behalf of the association
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Condominium Additional Provisions Endorsement - Additional Protection for Mortgageholders-States that the insurer will give 30 days' advance notice of cancellation or nonrenewal to each of the mortgageholders. If the condominium is terminated, the insurer will pay covered loss to buildings or structures to each mortgageholder shown in the declarations in their order of precedence.
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Condominium Additional Provisions Endorsement - Expanded Waiver of Right of Recovery-States that rights of recovery are waived, beyond the condition in the coverage form, to include members of unit owners' households and members of the board of directors when acting within the scope of their duties.
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Condominium Additional Provisions Endorsement - Notice of Cancellation or Nonrenewal-States that the insurer will provide at least 30 days' written notice to the first named insured of policy cancellation or nonrenewal
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Condominium Additional Provisions Endorsement - four parts-* Act or Omission * Expanded Waiver of Right of Recovery * Notice of Cancellation or Nonrenewal * Additional Protection for Mortgageholders
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Condominium Association Coverage Form-Designed to insure the building and business personal property loss exposures of condominium associations.
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Condominium Commercial Unit-Owners Coverage Form-Designed for insuring business personal property and building improvements and betterments of unit owners in commercial condominiums.
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Condominium association-An entity composed of the unit owners in a condominium to manage the condominium and to own the common elements
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Condominium-A real estate development consisting of a group of units, in which the air space within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners.
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Consent-to-rate rules-State laws/regulations that allow insurers to charge higher rates for riskier exposures as long as the insured's written consent is filed with the appropriate insurance department.
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Consignee-The person or organization that receives property being transported by a carrier.
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Contents of an ISO BOP-*Businessowners Policy Declarations *Businessowners Coverage Form *applicable endorsements
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Continuing expenses-Expenses that continue to be incurred during a business interruption.
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Contraband is also excluded but is not insurable.
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Contract bond-A surety bond guaranteeing the fulfillment of obligations under construction contracts or other types of contracts
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Contract carriers-Carriers that furnish transportation services to shippers with whom they have contracts
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Contract of Sale Clause (Loss Payable Provisions endorsement)-Provides that a purchaser or seller has the right to have payment of any loss made jointly to the loss payee and the named insured as their interests may appear.
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Contractors equipment floater-A policy that covers mobile equipment or tools while located anywhere in the coverage territory.
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Contractors equipment is the largest class of commercial inland marine insurance.
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Contrasted to "blanket insurance"
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Contributing locations-A type of dependent property; refers to locations that deliver materials or services to the insured or to others for the account of the insured. (These do not include water, power, or communication supply services, which can be covered by another endorsement.)
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Control of Property condition (Commercial Property Conditions)-States that, if the insured does not have control of the property (for example, when an entire building is rented to another firm or when the insured is a tenant in a building where the protective systems are controlled by the building owner), any act of neglect by others will not affect coverage.
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Cooperative corporation-A form of real property ownership in which the real property is owned by a corporation whose shareholders are the tenants of the property.
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Cost to replace or restore information on valuable papers and record-An excluded item under the BPP: Other Personal Property exclusions. In essence, the BPP excludes the cost to replace or restore information on valuable papers and records, including those that exist as electronic data.
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Court bonds-A classification of surety bonds guaranteeing that a person or an organization will faithfully perform certain duties prescribed by law or by a court or will demonstrate financial responsibility for the benefit of another until the final outcome of a court's decision
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Coverage Trigger for Bond Form 24-Apply on a discovery basis, covering loss sustained by the insured at any time but discovered during the bond period
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Coverage also applies to personal property (for example, uninstalled windows, doors, sinks, and furnaces) if they are intended to be permanently located in or on the building or structure described in the declarations or within 100 feet of its premises.
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Coverage applies only when the fungus is the result of one or more covered causes of loss that occur during the policy period. The additional coverage does not apply to losses resulting from fire and lightning, because the fungus exclusion does not exclude fungus resulting from fire and lightning.
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Coverage can apply to all of these categories or can be restricted to one or more of them by specifying the extent of coverage in the declarations or by endorsement
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Coverage ceases immediately when any of these events occur: * The named insured's interest in the property ceases * The property is accepted by the purchaser * The named insured abandons the project with no intention to complete it The policy expires or is canceled
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Coverage continues while those goods are temporarily stored awaiting transport at any location in the foreign coverage territory other than a location owned, operated, or leased by the insured.
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Coverage is provided to the insured when the insured is the bailee if there is coverage in the policy on property of others in the care, custody, or control of the insured.
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Coverage on property subject to the Value Reporting Form is excess over the total of (1) the amount due from specific insurance plus (2) the amount of any deductible applying to the specific insurance.
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Covered Property under the Builders Risk Coverage Form-Building or structure being built, building materials, and supplies intended to become a permanent part of the building, and temporary structures such as scaffolding and forms.
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Covered cause of loss for all of the insuring agreements-"Breakdown" to "covered equipment"
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Covered equipment types-- Boilers and pressure vessels - Electrical equipment - Mechanical equipment - Air conditioning and refrigeration equipment - Office equipment and systems
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Covered losses include robbery, burglary, misplacement, and mysterious unexplained disappearance, as well as damage to or destruction of the property, while the property is "lodged or deposited within offices or premises located anywhere". The act that causes the loss must be committed on the insured's premises.
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Covered perils are "robbery, common-law or statutory larceny, theft, misplacement, mysterious unexplainable disappearance, and damage thereto or destruction thereof".
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Covered property includes money, securities, gems, jewelry, precious metals, and all other tangible personal property.
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Covers direct physical loss caused by flood at the described premises.
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Covers expenses associated with the recall or withdrawal of items sold or held for sale because of a known or suspected defect or a known or suspected tampering with the items, which has caused or is reasonably expected to cause bodily injury or damage to tangible property.
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Covers the failure to deliver, or the misdelivery of, customers' goods. The annual aggregate limit is $5,000, subject a $250 deductible per loss.
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Covers the increased cost required by law to repair or replace covered equipment lost or damaged by a covered peril
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Covers the insured's legal liability for damages caused by a home improvement design error or omission by the insured. Annual aggregate limit of $10000 applies, subject to a $250 deductible per loss
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Covers the insured's liability for acts or omissions arising out of the lock-out, sale, removal or disposal of tenants' property when the tenant is evicted for failure to pay rent.
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Covers the insured's liability for property damage to a customer's property while at the insured's self-storage facility. The annual aggregate limit is $100,000 subject to a $250 deductible per loss
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Credit Enhancement Financial Guaranty Bonds-Guarantee that the Principal will pay interest to investors as promised and will return the principal at maturity of a debt instrument.
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Crop hail insurance-Insurance offered by private insurers that covers crops against loss caused by hail and often other perils (fire, windstorm, damage caused by livestock, and vehicles)
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Custodian-A person who has care and custody of property inside the premises, excluding any person while acting as a "watchperson" or janitor.
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DIC-type endorsements provide two advantages as compared to separate DIC policies:-* The convenience of one policy * The avoidance of minimum premiums for the DIC coverage
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DR (Value Reporting Form)-Code letters for "daily values reported monthly"
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Damage to the land on which the building is situated is NOT covered.
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Dealers policy-A policy that covers the inventory and other property of any of the types of dealers that qualify for inland marine coverage (such as jewelers, equipment dealers, fine arts dealers, and furriers).
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Debris Removal (additional coverage to the BPP)-Covers the cost of removing debris of covered property resulting from a covered cause of loss during the policy period.
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Debris removal is greater than 25 percent of the sum of loss payment plus deductible. How much does the insured collect?
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Debris removal is less than 25 percent of the sum of loss payment plus deductible. How much does the insured collect?
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Deductibles-Deductibles apply separately for each applicable coverage (and so insuring agreements can have different deductibles); only the highest applicable deductible will apply if multiple are involved in one breakdown
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Defendant bond-Guarantees that, if the court decides in the plaintiff's favor, the defendant will refrain from the action, return the property, and/or pay damages sustained by the plaintiff
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Defendant's appeal bond (supersedeas bond)-A judicial bond guaranteeing that a defendant who appeals an adverse decision to a higher court will pay the entire judgment, plus court costs and interest, should the higher court sustain the initial judgment for the plaintiff.
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Definition of "business income" in the context of equipment breakdown - business income insuring agreement-Net income that would have been earned + continuing normal operating expenses incurred (including employee payroll)
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Definition of "earth movement"-(1) Earthquake, including any earth sinking, rising or shifting related to such event (2) Landslide, including any earth sinking, rising, or shifting related to such event (3) Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity has ceased (4) Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.
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Definition of "equipment" for EDP floater-Defined broadly. Is "your electronic data processing equipment, word processing equipment, and telecommunications equipment, including their component parts".
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Definition of "one breakdown"-Includes all additional breakdowns that result from an initial breakdown at the same premises
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Delay clause-Warranty/exclusion in an open cargo policy
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Delivery Errors and Omissions coverage-ISO Market Segments Program endorsement
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Dependent property exposure-The possibility of incurring business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales.
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Destruction of Electronic Data or Computer Programs - additional insuring agreement of commercial crime insurance-Covers the costs to restore or replace electronic data or computer programs stored in the insured's computer system if such property is damaged or destroyed by a computer virus or by vandalism committed by a person who has gained unauthorized access to the insured's computer system. Does not exclude acts of employees, mangers, directors, etc.
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Difference b/w "employee theft" and "employee dishonesty"-Employee dishonesty forms cover loss resulting from an employee's dishonest act, and that phrase encompasses a broader range of offenses than "theft".
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Difference b/w "temp" and "leased" employee-Temps are persons furnished to the insured either to substitute for permanent employees who are on leave or to meet seasonal or short-term work load conditions. Leased employees are regular workers who are nominally employed by a labor-leasing firm but subject to day-to-day control by the organization that leases them.
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Difference between CP 10 40 and CP 10 45 (the two earthquake / volcanic eruption endorsements)-CP 10 45, by contrast to CP 10 40, is not subject to coinsurance and thus permits earthquake and volcanic eruption coverage to be written subject to a sublimit that is lower than the policy limit that applies to other covered perils.
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Difference between Extra Expense Coverage Form and extra expense coverage in the Business Income (and Extra Expense) Coverage Form:-Limits on Loss Payment condition is found only in the Extra Expense Coverage Form. This condition encourages insurance to value by limiting recovery for certain time periods to stipulated percentages of the overall limit of insurance.
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Difference between custodians and messengers-Custodian has care & custody of property INSIDE the premises; a messenger has care and custody fo property OUTSIDE the premises
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Difference in building coverage between the Condominium Association Coverage Form and the building coverage of the BPP-Treatment of fixtures, improvements and alterations, and of appliances including (but not limited to) those used for refrigerating, ventilating, cooking, dishwashing, laundering, and housekeeping contained within the individual units.
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Difference in conditions (DIC) policy, or DIC insurance-Policy that covers on an "all-risks" basis to fill gaps in the insured's commercial property coverage, especially gaps in flood and earthquake coverage.
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Disadvantages of a DIC policy-* The market is limited, and the terms that insurers are willing to provide can vary over time * Insured and the insurer cannot be as certain of how the provisions will be interpreted by courts as when standard provisions are used (because DIC provisions are not standardized) * Policy language not evaluated by regulators * Minimum premium requirements may make the coverage disproportionately expensive for smaller insureds * May take more time negotiate and prepare
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Discovery-The time when the named insured first becomes aware of facts taht would cause a reasonable person to assume that a covered loss has been incurred; the amount of the loss or its details need not be known for a loss to have been discovered.
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Discretionary Payroll Expense endorsement (business income)-An endorsement that extends business income forms to cover payroll expenses for specified job classifications or employees regardless of whether such expenses are necessary to resume operations.
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Distinction between fixtures and trade fixtures-Fixtures are part of the realty and are the building owner's property. Trade fixtures, however, are characterized by the tenant's right (or obligation) to remove them when the tenant vacates the premises. Trade fixtures may include counters, machinery, and appliances.
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Diversification-Involves providing a range of products and services used by a variety of customers
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Does not include computer programs, electronic data, or any other specifically excluded property. Also does not include intangibles such as copyrights, patents, intellectual property, etc.
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Dollar deductible-Simply the dollar amount shown as such in the declarations
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Duplication-Involves relying on backups - spares or duplicates - used only if primary assets or activities suffer loss
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Duties in the event of loss (commercial crime insurance)-* Notify the insurer as soon as possible * Submit to examination under oath at the insurer's request and give the insurer a signed statement of the insured's answers * Produce all pertinent records for the insurer to examine * Give the insurer a detailed, sworn proof of loss within 120 days * Cooperate with the insurer in the investigation and settlement of any claim
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EDP ends immediately on the effective date of any other insurance that the insured obtains to replace, in whole or in part, the coverage provided by the cancelled. Policy.
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ERISA-Employee Retirement Income Security Act of 1974 - requires each fiduciary of a qualifying employee benefit plan and each person who handles plan assets to be bonded. ERISA bonding can be provided by naming the particular plan or plans as insureds for the employee theft insuring agreement.
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Each category is covered only if a limit of insurance for that category is shown in the declarations.
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Earthquake Sprinkler Leakage Coverage Option - Earthquake and Volcanic Eruption Forms-Under both of the earthquake endorsements, the insured can elect to restrict coverage to loss due to sprinkler leakage resulting from earthquake or volcanic eruption.
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Economizer-(Another type of fired pressure vessel)
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Efforts to prevent equipment breakdown losses tend to focus on:-operator training, regular maintenance of the equipment, and inspections to help detect and correct hazards before accidents occur
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Electronic Data Processing (EDP) equipment floater-Typically covers equipment, data, and media owned by the insured, as well as similar property of others in the insured's care, custody, or control. Extra expense coverage is also usually included. (BIC can be added.)
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Electronic data as defined by BPP-(note: an excluded item)
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Eligibility rule changes with the 2010 ISO BOP revision-- Maximum gross sales at each of the insured's locations raised from $3 million to $6 million - Maximum size of an eligible building has been increased from 25,000 to 35,000 square feet Stores selling gasoline are eligible as long as they have at least 3,000 square feet and do not repair vehicles or fill propane or kerosene tanks - More types of restaurants are eligible
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Elimination period-Just another name for the 72-hour waiting period before the 'period of restoration' begins; also known as the "time deductible"
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Employee Benefit Plans condition (employee theft)-Eliminates the need to attach the Employee Retirement Income Security Act of 1974 (ERISA) compliance endorsement to the policy to satisfy the fidelity bonding requirement of ERISA.
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Employee Theft insuring agreement of Commercial Crime Insurance covers what property?-"Money", "securities" and "other property"
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Endorsements available for covering losses that would otherwise be excluded under the commercial property causes of loss forms:-* Ordinance or Law Coverage * Utility Services - Direct Damage * Spoilage Coverage * Radioactive Contamination
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Engineering approach to risk control-Attacks hazards by reviewing and improving the design and location of properties and equipment, to reduce the number of hazards
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Ensuing Loss - Earthquake and Volcanic Eruption Forms-On the sublimit form (CP 10 45) only - states that in the event of ensuing loss caused by another peril that is covered by the policy (such as fire), the most that the policy will pay for the entire loss (for example, all loss caused by earthquake and fire) is the limit for the other covered peril (fire, in this case)
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Ensuing loss - ISO Flood Coverage Endorsement-The endorsement states that, in the event of an ensuing covered loss, the most that the insurer will pay is the limit applicable to fire.
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Equipment breakdown insurance is also known as-Boiler and machinery insurance
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Equipment floaters-A category of inland marine policies covering various types of equipment, wherever it may be located in the policy period.
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Estimated Maximum Loss (EML)-Assumes a worst-case scenario - that is, a shutdown at the worst possible time of the year, lasting for the maximum amount of time it would take to replace a destroyed building and equipment, restore inventory and personnel to their pre-loss status, and regain lost customers.
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Even if the building is not occupied or put to use - for example, if the building remains vacant whle the owner tries to sell it - coverage ceases 90 days after the construction is completed.
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Ex Point of Origin-(Inland marine - terms of sale)
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Examination Under Oath (Insured duty in the event of loss)-Any insured may be required to submit to questioning under oath concerning the claim. Usually any refusal will void coverage.
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Examination of Books and Records condition of the Common Policy Conditions form-States that the insurer reserves the right to examine and audit the insured's books and records related to the policy at any time during the policy period and for up to three years after the policy's termination.
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Example:
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Example: ABR Company has an EML of $3,370,000 and a coinsurance basis of $5,000,000.
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Examples of floaters are the contractors equipment floater, the commercial articles floater, and the fine arts floater.
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Examples of the types of property covered include bonds, stock certificates, certificates of deposit, money orders, checks, bills of lading, and other commercial papers.
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Examples of types of property that can be covered under this endorsement include the cost of excavation, grading, backfilling or filling; foundations of buildings; underground pipes, flues, and drains; bridges; fences; roadawys; animals; vehicles or self-propelled machines
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Examples of what does NOT constitute 'breakdown' of equipment:-- Malfunction including but not limited to adjustment, alignment, calibration, cleaning or modification - Defects, erasures, errors, limitations or viruses in computer equipment and programs including the inability to recognize and process any date or time or provide instructions to "Covered Equipment" - Leakage at any valve, fitting, shaft seal, gland packing, joint or connection - Damage to any vacuum tube, gas tube, or brush - Damage to any structure or foundation supporting the 'Covered Equipment' or any of its parts - The functioning of any safety or protective device - The cracking of any part on an internal combustion gas turbine exposed to the products of combustion
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Examples: - Lost Securities Bonds - Hazardous Waste Removal Bonds Credit Enhancement Financial Guaranty Bonds
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Examples: air tanks, liquefied gas tanks, and steam-jacketed vessels
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Excess Bank Employee Dishonesty Bond (Form 28)-A method of covering severe employee dishonesty exposures of banks. Applies only to the Fidelity coverage agreement and is usually written for amounts of $1 million or more, applying in excess of other applicable bonds and insurance.
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Excluded types of property under the Builders Risk Coverage Form (4)-* Land or water * Lawns, trees, shrubs, or plants * Antennas * Signs not attached to the building
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Exclusion Applicable to Funds Transfer Fraud insuring agreement (commercial crime insurance)-The Computer Fraud exclusion applies only to funds transfer fraud coverage, to avoid overlaps between the two coverages. This exclusion eliminates coverage under Funds Transfer Fraud for loss resulting from the use of a computer to fraudulently cause a transfer of money, securities, or other property.
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Exclusion of property contained in customers' safe deposit boxes (Bond Form 24)-Form 24 does not cover loss resulting from a burglary or robbery of customers' property from a safe deposit box unless the loss is caused by dishonesty on the part of a bank employee
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Exclusions - BPP - Buildings and other real property-Excluded items under this exclusion include:
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Exclusions - BPP - Other Personal Property-Several additional types of personal property are not covered by the BPP (though they are for the most part insurable under other insurance forms). These include:
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Exclusions - BPP - Plants and outdoor property exclusions-Excluded items under this exclusion include:
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Exclusions - Commercial crime insurance-* General exclusions * Exclusion applicable only to employee theft * Exclusions applicable to inside the premises and outside the premises * Exclusions applicable to computer fraud * Exclusion applicable to funds transfer fraud
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Exclusions NOT subject to anti- concurrent causation language: * Artificially generated electrical energy * Explosion of steam boilers * Mechanical breakdown * Neglect
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Exclusions and exceptions to common exclusions - ISO Flood Coverage Endorsement-* Covers tsunami loss * Does not cover damage to property in the open unless specified in the decs * Does not cover flood damage unless the flood begins more than 72 hours after the inception of the endorsement * Does not cover loss caused by sewer backup or overflow unless it meets the flood damage requirement above * Covers foundations below the lowest basement floor * Covers underground pipes, flues, and drains
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Exclusions applicable only to employee theft insuring agreement (commercial crime insurance)-* Inventory shortages * Trading (i.e., loss resulting from an employee's unauthorized trading in stocks, bonds, futures, commodities, etc.) * Warehouse receipts (i.e., loss resulting from the fraudulent signing, issuing, canceling or failing to cancel, a warehouse receipt)
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Exclusions applicable to Business Income and Extra Expense forms-* Finished stock * Labor strikes * Loss of license, lease, or contract * Antennas * Consequential loss
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Exclusions applicable to Computer Fraud insuring agreement (commercial crime insurance)-* Credit Card Transactions * Funds Transfer Fraud * Inventory Shortages
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Exclusions applicable to Inside the Premises and Outside the Premises insuring agreement (commercial crime insurance)-* Accounting or Arithmetical Errors or Omissions * Exchanges or Purchases (i.e., losses resulting from giving or surrendering property in an exchange/purchase) * Fire * Money Operated Devices (i.e. losses or property from vending machines, amusement devises, or change machines) * Motor Vehicles or Equipment and Accessories * Transfer or Surrender of Property * Vandalism * Voluntary Parting of Title To or Possession of Property (i.e., when the insured/agent of the insured is tricked into voluntarily handing over property to a thief)
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Exclusions from the Falling Objects cause of loss-Damage to personal property in the open. Also, damage to the interior of a building or structure, or property inside a building or structure, unless the falling object first damages the roof or an outside wall.
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Exclusions in Special Form that match Broad Form Conditions (6)-* Windstorm or Hail * Smoke, Vapor, or Gas * Rain, Snow, Ice or Sleet * Continuous Seepage or Leakage * Leakage Resulting from Freezing * Collapse
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Exclusions to Bond Form 24-- Loan exclusion - Exclusion of property contained in customers' safe deposit boxes - Trading exclusion - Uncollected funds exclusion - Extortion exclusion
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Exclusions-In addition to the exclusions within the policy definitions, equipment breakdown policies contain these exclusions:
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Exclusions: Computer-related theft committed by the insured's own employees (because it's covered under Employee Theft); Loss resulting from credit or debit card transactions or the information contained on such cards, and for loss due to funds transfer fraud
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Exclusions: Loss resulting from the use of a computer to fraudulently transfer money, securities, or other property.
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Executor-Fiduciary named in a will to administer an estate
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Expediting expenses-Expenses incurred to speed up the repair or replacement of covered property
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Expenses excluded from the coinsurance calculation-* Prepaid freight - outgoing * Returns and allowances * Discounts * Bad debts * Collection expenses * Cost of raw stock and factory supplies consumed (including transportation charges) * Cost of merchandise sold (including transportation charges) * Cost of other supplies consumed (including transportation charges) * Cost of services purchased from outsiders (not employees) to resell that do not continue under contract * Power, heat, and refrigeration expenses that do not continue under contract (if they have been excluded by endorsement) * Ordinary payroll expenses excluded by endorsement * Special deductions for mining properties
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Explosion of Steam Boilers exclusion (basic and broad causes of loss)-Excludes damage caused by or resulting from explosion of "steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control.
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Explosion-A large-scale, rapid, or spectacular expansion or bursting out or forth. (Excludes bursting resulting from water.)
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Extended Business Income (EB)-An additional coverage to business income insurance. It insures income loss for up to 30 days after the damaged property is restored to use. (The 30 day period can be extended.) The EML, for purposes of estimating exposure and arranging business income insurance, should include the EBI exposure only to the extent that it is insured.
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Extended Business Income (EBI) additional coverage-Coverage for business income losses that continue after the period of restoration ends; the coverage begins when the damaged property has been restored and ends when the insured's business returns to normal, subject to a maximum of 30 days.
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Extended Period of Indemnity-An optional coverage that lengthens the duration of the extended business income (EBI) additional coverage for up to two years
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Extended Period to Discover Loss condition (commercial crime insurance)-Applies only if the policy is cancelled. The insurer agrees to pay for loss sustained before the effective date of cancellation, but only if the insured discovers the loss within a specified period following the cancellation date.
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Extended discovery period-A specified period following the cancellation of a commercial crime policy; if discovered by the insured during this period, a loss that occurred before the cancellation date will be covered under the canceled policy.
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Extension for containers Property covered: Locked safe or vault Causes of loss: Actual or attempted "robbery" or "safe burglary" Where coverage applies: Inside the premises
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Extension for containers Property covered: Locked safe, vault, cash register, cash box, or cash drawer Causes of loss: Actual or attempted "theft" or "unlawful entry" Where coverage applies: inside the premises
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Extension for damage to premises Property covered: The "premises" or their exterior Causes of loss: Actual or attempted "theft" of "money or securities" Where coverage applies: at the premises
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Extension for damage to premises Property covered: The premises or their exterior Causes of loss: Actual or attempted "robbery" or "safe burglary" of "other property" Where coverage applies: At the premises
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Extortion exclusion (Bond Form 24)-Excludes loss by extortion. SFAA riders can be added to the bond to cover, for an additional premium, threats against persons or property
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Extra Expense Coverage Form-Covers extra expense only; is intended for organizations that must continue their operations "at any cost" and do not want to cover loss of business income.
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Extra Expense From Dependent Properties endorsement-This endorsement, combined with the Extra Expense Coverage Form, covers extra expenses because of direct loss or damage at other properties.
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Extra expenses-Expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.
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F.L.A.R.E.-Fire, lightning, explosion, riot or civil commotion, and aircraft - the losses covered by the Outdoor Property coverage extension (BPP)
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FAS (Free Along Side) Vessel-(Inland marine - terms of sale)
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FIRM-Flood Insurance Rate Maps (FIRMs) show boundaries of special flood hazard areas (SFHA), the various flood zones, and base flood elevations (BFEs)
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FOB (Free on Board) Vessel-(Inland marine - terms of sale)
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FPA/AC (free of particular average/American conditions) warranty-An exceptive warranty that excludes particular average unless the loss is actually caused by the stranding, sinking, or burning of the vessel or its collision with another vessel
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Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form covers:-Residential building and personal property exposures, as well as additional living expenses and loss of fair rental value resulting from damage to such property.
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Farm Liability Coverage Form-Covers both personal and farm business liability exposures. Combines elements of homeowners liability coverage and commercial general liability coverage and contains special provisions that address liability loss exposures unique to farms
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Farm Umbrella Liability Policy / Farm Excess Liability Policy-Can be used to provide limits of liability in excess of underlying policies for farm liability, auto liability, farm employers liability, recreational motor vehicle liability, and watercraft liability.
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Farmowner's policy-A package policy used for covering traditional farms. Covers both residential loss exposures and farming business loss exposures.
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Feedlot insurance-A specialized type of livestock coverage that covers animals while in the custody of a commercial feedlot operator; this coverage is purchased by the feedlot operator. Limit to named perils such as fire, explosion, windstorm, electrocution, drowning, and attack by dogs or wild animals. Loss by smothering (commonly occurs during blizzards) may or may not be covered. Exposure to the elements is also often not covered.
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Fidelity bond-Synonymous with employee theft or employee dishonesty insurance
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Fiduciary bond-A court bond guaranteeing that a person appointed by a court to administer the property or interests of others will faithfully perform his or her duties
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Fiduciary-Practically anyone whose role in employee benefits involves discretionary control or judgment in the design, administration, funding, or management of a benefit plan.
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Filed classes (controlled classes)-The classes of inland marine business for which policy forms and/or rates must be filed with the state insurance department.
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Financial Institution Bond Form 24-Insuring agreements:
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Financial Institution Bond Form 24-Used to insure commercial banks and savings and loan associations; one of the most widely used SFAA financial institution bonds. Used to be called the "Bankers Blanket Bond".
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Financial institution bond-A policy that covers the crime loss exposures of financial institutions such as banks, savings and loan institutions, and insurance companies.
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Fire Department Service Charge (additional coverage to the BPP)-Pays fire department charges up to $1,000 if they are required by local ordinance or are assumed by contract before the loss occurs.
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Fire Extinguisher Systems Recharge Expense-Additional coverage unique to BOP - pays up to $5,000 per occurrence to cover the cost of recharging or replacing (whichever is less) the insured's fire extinguishers and fire extinguisher systems if they are discharged on or within 100 feet of the insured premises. The coverage includes hydrostatic testing, if necessary
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Fire wall-A self-supporting solid wall that prevents a fire from passing through or around it
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Fired pressure vessel-A closed container that is heated by the direct fire of burning fuel and can withstand internal pressure
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Fixture-Any personal property affixed to real property in such a way as to become part of the real property
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Floater-A policy designed to cover property that floats, or moves, from location to location.
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Flood-A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which your property), from overflow of inland or tidal waters or unusual and rapid accumulation or runoff of surface waters from any source.
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For a total loss, the endorsement covers the cost to repair or replace the building with a less costly building that is functionally equivalent to the original one.
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For benefit plans claims, both provide a 1-year EDP.
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For coverage under the BPP - Limited International Coverage endorsement to apply, the property must meet these three criteria:-* Temporarily in the foreign coverage territory specified in the schedule * Used in the insured's business in the foreign coverage territory * Located at a business location the insured owns, operates, or leases; or in the care, custody, or control of the insured or its authorized representatives
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For example, a manufacturer that depends heavily on one supplier may be able to obtain needed materials from other suppliers while the regular supplier's business is interrupted. However, the new suppliers may charge a higher price, which would be an extra expense loss for the manufacturer.
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For example, if a bookkeeper fo a small insruance agency embezzled $190K by stealing cash receipts or inserting her name as payee on customers' checks during 100 separate incidents, each for less than $10,000, and the limit of insurance was $10,000, the court would likely side with the interpretation that the theft constituted a single series of acts and that the $10,000 limit was the most the insured was liable to pay.
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For example, if theft is a covered cause of loss, theft losses must be reported to the police.
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For example, the insurer would make no payment for fire damage of $800 to a building and $400 to business personal property under a policy with a $1,000 deductible that had separate building and business personal property limits.
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For example, virtually all HPR policies cover foundations; excavations; and underground pipes, flues, and drains. Many HPR policies also cover items such as bridges, roadways, walks, fences, retaining walls, signs, and radio or television antennas and towers. Another common feature of HPR policies is that they extend coverage to property located within 1,000 feet, rather than 100 feet, of the described locations.
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For farm-related insurance: When a farm engages in additional business activities, how is the insurance structured?-The farm coverage forms can be combined with other commercial property and liability forms in a commercial package policy.
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For farm-related insurance: When the insured is a traditional farm family that lives on its own farm, how is the insurance structured?-A form covering residential property exposures is included in the policy along with other forms that cover the farm business exposures.
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For most claims, the loss sustained forms provide a 1-year extended discovery period; discovery forms provide only a 60-day extended discovery period.
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For most insureds, the Special Form's most significant difference from the Broad Form is:-It covers theft losses unless they are excluded or limited.
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For smaller renovation or addition projects, which Builders Risk alternative is often the most effective?-The BPP. It provides coverage for additions or renovations to an insured building, provided no other insurance is in effect. The amount of insurance must be increased to reflect the added value. The limit can be increased at the start of the project based on estimated completed value or periodically as work progresses.
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For the purposes of employee theft coverage, theft includes forgery.
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Foreign Master Policy-A type of policy issued in the U.S., that provides nonadmitted property coverage for the insured's foreign exposures. It can be written on an excess basis ("difference in limits") over the limits of any foreign-issued local policies. It can also be written covering exposures not written in the foreign-issued local policies ("difference in conditions")
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Forfeiture basis-Some surety bonds are issued on a forfeiture basis, meaning that the entire amount of the bond is paid if the principal defaults
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Forfeiture bonds-Classification of license and permit bond
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Forgery or Alteration insuring agreement of commercial crime insurance covers this cause of loss:-Forgery or alteration of the insured's checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum. (Not acceptance by the insured of forged checks, etc.)
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Forgery, in the context of Bond Form 24-The signing of the name of another with the intent to deceive. (It does NOT include the genuine but unauthorized signature of the signer.)
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Fortuitous loss-One that occurs by chance (from the insured's perspective) and that the insured neither expects nor intends.
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Four Additional Basic and Broad Form Exclusions-- Artificially generated electrical energy - Explosion of steam boilers - Mechanical breakdown - Neglect
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Four criteria that must be met in order for the Civil Authority additional coverage to apply to a Business Income policy-* A covered cause of loss must have caused damage to property other than property at the described premises. * Access to the area immediately surrounding the damaged property must be prohibited by action of civil authority as a result of the damage. * The described premises must be within the area just described and not more than one mile from the damaged property. * The action of civil authority must have been taken either in response to dangerous physical conditions resulting from the damage or continuation of the covered cause of loss that caused the damage; or to enable a civil authority to have unimpeded access to the damaged property
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Four disadvantages of layered property insurance-* Conflicts in wording and interpretation among layers can result in coverage disputes * Insurers may not want to participate * The market for layered property coverage can shrink rapidly, making it difficult and expensive to find coverage * Minimum premium requirements for each layer can be costly
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Four main advantages of layered property insurance-* Obtaining adequate and flexible limits * Pricing considerations * Availability of broader coverages * Accessing additional markets
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Four types of contract bonds: - Performance bonds - Payment bonds - Bid bonds Maintenance bonds
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Four types of deductibles that can be used with equipment breakdown insurance-- Dollar - Time - Multiple of Daily Value - Percentage of Loss
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Free of capture and seizure (FC&S warranty)-Warranty/exclusion in an open cargo policy
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Friendly fire-One that remains inside its intended receptacle
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Functional Building Valuation endorsement-A commercial property endorsement that provides modified replacement cost coverage on buildings; may be appropriate when insuring a building with a replacement cost far in excess of its market value.
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Functional Personal Property Valuation (Other Than Stock) endorsement-Provides functional valuation on personal property other than stock.
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Fundamental differences b/w a builders risk policy and an installation floater-A builders risk policy covers an entire building or other structure during the course of construction, including the building supplies and material that will become part of the covered structure. The entity insured is usually the owner, the builder, or perhaps both.
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Funds Transfer Fraud insuring agreement of commercial crime insurance-Property covered: "Funds" defined to mean money and securities Causes of loss: "Fraudulent instruction" directing a financial institution to transfer, pay, or deliver funds Where coverage applies: The financial institution must be located within the policy territory
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Fungus, Wet Rot, Dry Rot, and Bacteria exclusion (basic and broad causes of loss forms)-Exclude loss or damage resulting from fungus, wet rot, dry rot, or bacteria. Fungus is defined to include mold, mildew, and any by-products produced or released by fungi.
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General Property Form-The version of the NFIP Standard Flood Insurance Policy that is used for insuring commercial buildings and contents.
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General average-Partial loss that must, according to maritime law, be shared by all parties to a voyage (cargo owners and vessel owner)
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General exclusions for Commercial Crime-* Acts Committed by You, Your Partners, or Your Members * Acts of Employees Learned of by You Prior to the Policy Period * Acts of Employees, Managers, Directors, Trustees, or Representatives * (Unauthorized disclosure of ) Confidential Information * Governmental Action (i.e., seizure or destruction by order of governmental authority) * Indirect Loss (i.e., business income losses, legally liable damage payment, or expenses incurred in establishing the existence/amount of loss) * Legal Fees, Costs, and Expenses * Nuclear Hazard (i.e., loss or damage resulting from) * Pollution * War and Military Action
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General purpose definition of "civil commotion"-A public uprising by a large number of people who, acting together, cause harm to people or property
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General purpose definition of "riot"-An assemblage of three or more persons in a public place for the purpose of accomplishing concerted action - and in a turbulent and disorderly manner - a common purpose.
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Generally, this party bears the loss for property loss while in transit.-Generally, the part that owns the goods at the time they are damaged bears the loss.
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Glass Expenses-Additional coverage unique to BOP - pays the cost to install temporary plates or to board up openings if repair or replacement is delayed.
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Government Crime Form: Additional Exclusions (commercial crime insurance)-Eliminate coverage for loss caused by (1) any employee required by law to be individually bonded or (2) any treasurer or tax collector
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Government Crime Form: Indemnification and Faithful Performance (commercial crime insurance)-States that the insurer will indemnify any of the insured's officials who are required by law to provide faithful performance bonds against loss resulting from theft committed by employees who serve under these officials.
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Government Crime Form: Insuring agreement (commercial crime insurance)-Each contains two Employee Theft insuring agreements instead of a single one; one provides "per loss coverage" and the other provides "per employee coverage" (for all loss caused by a single employee)
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Government Crime Form: Termination as to Any Employee Condition (commercial crime insurance)-Encompasses a broader group of employees whose knowledge is imputed to the insured: terminates coverage when any dishonest act/theft is discovered by the named insured or any official or employee authorized to manage, govern, or control the insured's employees (for example, a supervisor)
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Government Crime Form: Territory condition (commercial crime insurance)-Does not include Canada (is limited instead to just U.S., its territories or possessions, and Puerto Rico); however, Forgery/Alteration and Computer Fraud are still worldwide
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Gross Earnings Form - an alternate approach (to the actual-loss-sustained approach) in the Business Income form-Covers business interruption as measured by gross earnings less noncontinuing expense, rather than by net income plus continuing expenses
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HPR policies - characteristics-Highly protected risk policies (an alternative to the Builders Risk coverage form)
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Hazard-Refers to a condition that increases the frequency and/or severity of loss
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Hazardous Waste Removal Bonds-Guarantee that the Principal will comply with the Environmental Protection Agency (EPA) and state laws for closure and post-closure care of hazardous waste facilities
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Highly protected risk (HPR)-A large property whose construction meets high standards of risk mitigation and control characteristics and whose management maintains best practices loss control and risk mitigation techniques for the specific occupancy.
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Home Improvement Design Errors & Omissions-ISO Market Segments Program endorsement
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How many times do hot gases pass through firetubes before exiting from the top of a firetube Scotch marine boiler?-3 x
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How to best insure computers and electronic data?-One of three approaches:
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However, all other additional insureds may be added without charge, except for general lessees, managers, or operators of the premises, and employees other than executive officers and partners. An additional premium charge of 25 percent applies when anyone in those classifications is named as an additional insured.
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However, if loss or damage by fire results from the excluded events, the insurer agrees to pay for the resulting loss or damage.
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However, the cost of removing deposits of earth or mud from the grounds is not covered. By implication, the cost of removing mud from within the building is covered.
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However, the insurer agrees to pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority at the time of a fire to prevent its spread.
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Human behavior approach to risk control-Attacks hazards by modifying people's behavior to reduce the frequency of unsafe acts.
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IN a CPP, each of these coverages would have to be provided by a separate coverage part or coverage form. Thus, an output policy uses a more seamless approach in providing commercial property insurance.
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ISO BOP - Additional Coverages that are the same/similar to BPP-* Debris Removal * Preservation of Property * Fire Department Service Charge * Pollutant Clean-up and Removal * Increased Cost of Construction
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ISO BOP - Additional Coverages that are the same/similar to Causes of Loss - Special Form-* Collapse (similar, but without the clarifications) * Water Damage, Other Liquids, Powder, or Molten Materials Damage * Limited Coverage for Fungi, Wet Rot, Dry Rot and Bacteria * Interruption of Computer Operations (similar, but has an aggregate limit of $10,000 rather than $2500 in the business income forms)
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ISO BOP - Additional Coverages that are the same/similar to ISO business income form-* Business Income (including Extended Business Income) (similar, except that a one-year limit applies instead of a specific dollar limit) * Extra Expense (similar) * Civil Authority (similar, but here only applies for 3 weeks, as compared with 4 weeks in ISO biz income form, and does not contain the one-mile radius limitation) * Business Income From Dependent Properties (similar)
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ISO BOP - Additional coverages unique to BOP-* Glass Expenses * Fire Extinguisher Recharge Expenses
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ISO BOP - Coverage Extension: Accounts Receivable-* Coverage for loss or damage at the described premises is limited to $10,000 unless a higher amount is shown in the declarations, and off-premises coverage is limited to $5,000
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ISO BOP - Coverage Extension: Newly Acquired or Constructed Property-* Essentially the same as in BPP
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ISO BOP - Coverage Extension: Outdoor Property-* Same as BPP except the limit for outdoor property in BOP is $2500, subject to a sublimit of $500 for any one tree, shrub or plant (compared to $1000/$250 in BPP)
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ISO BOP - Coverage Extension: Personal Effects-* Combines personal effects and property of others in a single extension, and the $2500 limit applies to the combination of both types of loss in a single occurrence * BOP has no extension for property of others because it includes personal property of others under its definition of covered business personal property
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ISO BOP - Coverage Extension: Personal Property Off Premises-* Same $10,000 limit as BPP extension; BOP is broader however because it includes coverage for property while it is in the course of transit or temporarily at premises not owned, leased, or operated by the named insured
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ISO BOP - Coverage Extension: Valuable Papers and Records-* BOP is broader here in two ways. First, it specifies that only seven of the property exclusions apply to valuable papers and records. * Second, the BOP extension has limits of $10,000 on premises and $5,000 off premises, whereas the BPP has a $2,500 limit.
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ISO BOP - Coverage Extensions-* Newly Acquired or Constructed Property * Personal Property Off Premises * Outdoor Property * Personal Effects * Valuable Papers and Records * Accounts Receivable
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ISO BOP - Hired and Nonowned Auto Liability Coverage-* Available via endorsement to BOP
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ISO BOP - Limits-Differ from BPP in 2 ways: * BOP automatically includes a provision titled Building Limit - Automatic Increase. The BPP just includes an optional Inflation Guard provision * BOP includes a provision titled Business Personal Property Limit - Seasonal Increase, which has no BPP counterpart
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ISO BOP - Optional Coverages-* Outdoor Signs ($1000 per attached-to-building sign any one occurrence) * Employee Dishonesty * Mechanical Breakdown * Money and Securities
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ISO BOP - Other additional coverages-* Money Orders and Counterfeit Money (similar to coverage in ISO commercial crime program, but subject to a $1,000 limit) * Forgery or Alteration (similar to coverage in ISO commercial crime program, but subject to a $2,500 limit) * Electronic Data (similar to additional coverage in BPP except broader perils and higher limit apply to BOP version - not restricted to specified causes of loss, and has an aggregate limit of $10,000 as opposed to the BPP's $2,500)
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ISO BOP - Section I - Property: Additional Coverages-* Same as in BPP * Same/similar to Causes of Loss - Special Form * Same/similar to ISO business income form * Unique to BOP * Other
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ISO BOP - Section I - Property: Covered Causes of Loss-Uses the same approach as the Causes of Loss - Special Form, with some variations in exclusions and limitations. Named perils coverage (equivalent to Basic Form) can be substituted by endorsement.
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ISO BOP - Section I - Property: Covered Property - how it differs from the BPP-Differs from the BPP in two ways: *Named insured's personal property in apartments or rooms furnished by the named insured as landlord (not included in the BPP) *Covers personal property of others in the insured's care, custody, or control under the same limit that applies to personal property owned by the named insured. (BPP divides this coverage into two sections.)
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ISO BOP - Section I - Property: Property Not Covered-Excavations, foundations, and underground pipes and flues are covered by the BOP but excluded by the BPP (unless endorsed)
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ISO BOP - Section II - Liability - Insuring Agreements-* Business Liability (the equivalent of Coverage A - Bodily Injury and Property Damage Liability and Coverage B - Personal and Advertising Injury Liability of CGL coverage form) * Medical Expenses (provides the equivalent of Coverage C - Medical Payments of the CGL coverage form)
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ISO BOP - Section II - Liability - Limits-* The Products-Completed Operations Aggregate Limit in the BOP may be increased to three times the Liability and Medical Expenses Limit by endorsement. In contrast, the CGL's aggregate limits can be set at various multiples of the each occurrence limit. * The BOP's Liability and Medical Expense Limit is the most the insurer will pay for the sum of all damages because of all bodily injury, property damage, and medical expenses arising out of any one occurrence; and all personal or advertising injury sustained by any one person or organization.
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ISO BOP - Section II - Liability - Professional Services Exclusion-* Subject to an exclusion eliminating coverage for bodily injury, property damage, or personal and advertising injury resulting form the rendering of, or failure to render, any professional service.
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ISO BOP Deductible-A basic deductible of $500 applies to all BOP property coverages other than Business Income, Extra Expense, Civil Authority, Fire Extinguisher Systems Recharge Expense, and Fire Department Service Charge.
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ISO BOP Property Endorsements-* Spoilage Coverage * Food Contamination * Water Back-up and Sump Overflow * Utility Services - Direct Damage * Utility Services - Time Element * Computer Fraud and Funds Transfer Fraud * Electronic Commerce (E-Commerce) * Contractors' Installation, Tools and Equipment Coverage * Earthquake * Condominium Association Coverage * Condominium Commercial Unit-Owners Coverage
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ISO BOP Property Loss Conditions-BOP covers buildings and personal property on a replacement cost basis, except for used or secondhand merchandise and most types of household contents.
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ISO Flood Coverage Endorsement - Debris Removal-The flood endorsement covers the insured's expense to remove debris of covered property and other debris resulting from a flood.
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ISO Flood Coverage Endorsement - Newly Acquired or Constructed Property-Limits the coverage extension in two respects: * It does not apply to any building or structure that is not fully enclosed by walls or roof * The limit is changed to 10 percent of the total of all limits of insurance for flood coverage provided by the endorsement, but this additional coverage does not increase the total limit for flood insurance.
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ISO Flood Coverage Endorsement-Part of the commercial property policy to which it is attached. It differs from NFIP coverage in 3 ways:
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ISO general eligibility rules for BOP-*May not exceed 25,000 square feet in total floor area *May not exceed $3 million in annual gross sales at each location *Generally ineligible businesses include automobile-related businesses, bars, buildings occupied in whole or in part for manufacturing, financial institutions, and general contractors (not every insurer uses these same eligibility rules)
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ISO's Market Segments Program-A series of endorsements to expand commercial property and general liability coverages to meet the insurance needs of specific types of businesses.
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If a maximum deductible is specified int he declarations, it will apply to a loss if:-It will apply if the dollar amount calculated for the multiple of daily value deductible or the percentage of loss deductible is more than the maximum deductible.
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If a minimum deductible is specified in the declarations, it will apply to a loss if:-It will apply if the dollar amount calculated for the multiple of daily value deductible or the percentage of loss deductible is less than the minimum deductible.
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If a shipment is damaged in transit after title (ownership) has passed to the buyer, the buyer will suffer the loss.
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If at the time a loss occurs the insured has failed to submit any required Report of Values (for an insured using Value Reporting) after the first required report has been made, the insurer will pay no more than this amount:-the values last reported for the location at which the loss occurred.
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If at the time of loss the first required Report of Values is due, but has not been received, the insurer will pay no more than this amount:-75% of the amount that would otherwise have been paid.
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If rental value coverage is included in a Business Income policy, "suspension of operations" means this:-That either a part of all of the described premises is rendered untenantable
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If the agreement requires the association to insure such property but the association fails to do so, the unit owner's form still does not apply.
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If the assessment is a result of a deductible in the insurance purchased by the condominium association, the insurer's payment is limited to $1,000.
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If the carrier and shipper agree to be subject to COGSA instead, they can be.
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If the insured fails to contract for repairs within 180 days after the loss occurs or otherwise choose not to make a claim based on the cost to repair or replace, the Functional Building Valuation endorsement sets the maximum that the insured can collect at the lowest of these amounts:-* The limit of insurance shown in the endorsement * The market value of the damaged building, exclusive of the land value, at the time of the loss * The cost to repair or replace the building on the same site with less costly material in the same architectural style, less an allowance for physical deterioration and depreciation
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If the limit of insurance is less than the agreed value, the amount of loss payment is calculated by this equation:
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If the named insured waived its right of recovery in writing before a loss occurs.
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If the policy covers business personal property, the extension also provides automatic coverage for:
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If the specific insurance is written with no coinsurance, the specific coverage pays the loss up to its policy limit, and the reporting insurance pays the balance, less any applicable deductible.
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Important difference: coverage for computers. The BOP provides broader coverage than the BPP and the Causes of Loss - Special Form for computers and electronic data & media. (It does this via exceptions to policy exclusions:
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Improvements and betterments-Alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them.
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In contrast to the BPP, there is coverage for underground pipes, flues, and drains if they are intended to be part of the described building or structure.
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In contrast, most HPR policies cover such collapse even if it occurs after construction, remodeling, or renovation is completed.
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In its 2008 revision of commercial property forms, ISO added this to the Special Form-A "Loss or Damage to Products" exclusion, which eliminates coverage for damage to merchandise, goods, or other products resulting form production errors, such as adding wrong ingredients or measuring ingredients incorrectly.
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In many cases, the main exposure covered by such policies is equipment normally used away from the insured's premises, such as a building contractor's tools and mechanized equipment.
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In order for business income insurance to apply, the following 4 things MUST occur:-* An interruption of operations... * caused by property damage from a covered peril... * to property at locations or situations described in the policy... * resulting in a loss of business income and/or extra expense
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In the CACF, building coverage applies to these items only if the condominium association agreement requires the association to insure them. Otherwise, such property items are not included in the association's building coverage.
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In the U.S., marine insurance has a broader definition and consists of two distinct lines: ocean marine and inland marine. Ocean marine corresponds to the international meaning of marine insurance.
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In the context of commercial property insurance, business income loss refers to loss of net income resulting NOT from poor business management, market conditions, competitive forces, or other general business risks, but instead from:-Accidental loss of or damage to property
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Inchmaree clause-A clause that adds coverage to an ocean marine cargo policy for loss resulting from bursting of boilers, breakage of shafts, latent defects in the vessel, or faults or errors in the navigation or management of the vessel
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Includes information, facts, or computer programs used with electronically controlled equipment.
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Increase Cost of Compliance (ICC)-National Flood Insurance coverage that pays for compliance costs related to floodplain management for qualifying structures.
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Increased Cost of Construction (additional coverage on BPP)-Provides a small amount of insurance to cover the increased cost to comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings. The amount of insurance is equal to 5 percent of the amount of insurance or $10,000, whichever is less.
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Increased Cost of Loss and Related Expenses for Green Upgrades endorsement-Allows the insured to replace damaged property with more environmentally friendly materials following a covered loss.
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Indemnifies the insured for up to $15000 for expenses it incurs to move tenants back to the insured premises when the tenants must temporarily vacate because of untenantability from loss or damage by a covered cause of loss.
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Inflation Guard optional coverage-Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.
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Ingress/egress coverage-To cover losses in situations where civil authorities ban access to the insured's premises because of a loss by a covered cause at another location. (Ingress means "entrance", and egress means "exit").
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Inherent vice-A quality of or condition within a particular type of property that tends to make the property destroy itself.
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Inland marine builders risk policies typically cover the structure under construction, temporary structures at the building site, and building materials that have not yet become part of the building. Building materials are covered while on the insured location, in transit, or in storage at another location. BIC may be provided as part of the policy.
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Inland marine builders risk policy - characteristics-(Alternative to Builders Risk coverage form)
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Inland marine insurance-Covers a wide range of usually land-based risks that have some link to transportation or communication
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Inside the Premises - Robbery or Safe Burglary of Other Property insuring agreement of commercial crime insurance-Property covered: "Other property" Causes of loss: Actual or attempted "robbery" of a "custodian" or "safe burglary" Where coverage applies: Inside the premises
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Inside the Premises - Theft of Money and Securities insuring agreement of commercial crime insurance-Property covered: Money and securities Causes of loss: Theft, disappearance, & destruction Where coverage applies: Inside the "premises" or "banking premises" (The thief must be present inside the premises.)
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Inspections and Surveys condition of the Common Policy Conditions form-The insurer has the right, but not the obligation, to inspect the insured's premises and operations at any reasonable time during the policy period.
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Installation floater-Policy that covers a contractor's interest in building supplies or fixtures that the contractor has been hired to install.
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Insurance Under Two or More Coverages condition (Commercial Property Conditions)-When two or more of the policy's coverages apply to a property loss, the insurer will pay no more than the actual loss amount.
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Insurance to value-The goal of obtaining premiums based on an amount of insurance that is 80 to 100 percent of the property's full value.
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Insured's Duties in the Event of Loss condition-The insured must comply with the conditions precedent (the prescribed duties in the event of loss) before the insurer is obligated to make any payment.
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Insuring agreement: Brands and Labels-Pays reasonable costs the insured incurs in stamping merchandise with the word "Salvage" or removing brands and labels
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Insuring agreement: Business Income-Can provide business income and extra expense coverage or only extra expense coverage
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Insuring agreement: Contingent Business Income-Covers business income and extra expense (or only extra expense) arising from breakdown to covered equipment at the location, shown in the declarations, that is NOT owned or operated by the insured.
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Insuring agreement: Errors and Omissions-Commits the insurer to pay for loss or damage not otherwise covered under this form solely because of any of these reasons: • Any error or unintentional omission in the description or location of insured property • Any failure through error to include any premises owned or occupied by the insured on the policy's inception date Any error or unintentional omission by the insured that results in cancellation of any premises insured under the policy
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Insuring agreement: Expediting Expenses-The insurer agrees to pay such expenses that the insured necessarily incurs.
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Insuring agreement: Newly Acquired Premises-Extends the other coverages provided by the policy to apply at newly acquired premises the insured buys or leases. Continues for the number of days (starting with the acquisition date) shown in the declarations.
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Insuring agreement: Ordinance or Law Coverage-Covers losses brought about by ordinances or laws that regulate the repair or construction of buildings resulting after a breakdown loss.
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Insuring agreement: Property Damage-Pays for direct damage to these types of "Covered Property": • Property that the named insured owns • Property that is in the named insured's care, custody, or control and for which the named insured is legally liable. In either case, the property must be situated at a location described in the declarations.
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Insuring agreement: Spoilage Damage-Covers spoilage damage to raw materials, property in process, or finished products while in storage or in the course of being manufactured.
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Insuring agreement: Utility Interruption-Extends any business income, extra expense, or spoilage damage coverage provided by the policy to include loss resulting from breakdown of covered equipment owned, operated, or controlled by the local private or public utility or distributor from whom the insured receives utilities.
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Insuring agreements in Barns, Outbuildings, and Other Farm Structures Coverage Form (industry-specific policies)-Coverage G (designed to insure all types of farm buildings and structures (other than dwellings and private garages) on either a scheduled or a blanket basis)
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Insuring agreements in Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form (industry-specific policies)-Coverage A - Dwellings Coverage B - Other Private Structures Appurtenant to Dwellings Coverage C - Household Personal Property Coverage D - Loss of Use
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Insuring agreements in Farm Personal Property Coverage Form (industry-specific policies)-Coverage E - Scheduled Farm Personal Property Coverage F - Unscheduled Farm Personal Property
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Interruption of Computer Operations additional coverage-Coverage for loss of business income or extra expense due to a suspension of operations resulting from an interruption of computer operations caused by destruction or corruption of electronic data as a result of a covered cause of loss.
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Inventory Shortages exclusion (Special Form)-Excludes loss of property if the only evidence of the loss or damage is a shortage discovered on taking inventory.
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Inventory and Inspection (Insured duty in the event of loss)-A complete inventory of damaged and undamaged goods, including quantities, costs, values, and amount of loss claimed, may be required. The insured must allow the insurer to inspect the property and examine the records documenting the loss.
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Invoice value is frequently used in policies covering property in transit between buyers and sellers. An advantage of valuation at invoice is that the amount of loss can be determined quickly and without dispute.
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Invoice value-A valuation basis that values covered property at its invoice value, including freight. (Inland marine concept)
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Is attached to every commercial property coverage part in a CPP or monoline policy. Conditions include:
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Issues one should consider when analyzing transportation loss exposures (3):-* Parties involved in transportation * Ownership of goods * Carrier responsibility for loss
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It covers only loss by fire, lightning, explosion, riot or civil commotion, and aircraft (F.L.A.R.E.)
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Items typically covered by an annual transit policy (but which can be insured for an additional premium)-Precious metals, furs, jewelry, money, and securities.
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Jettison-The voluntary throwing overboard of cargo (or other property) in an emergency, usually to lighten the vessel's load or to eliminate a hazard.
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Joint control-When both the surety and the fiduciary control a ward's assets
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Joint or Disputed Loss Agreement-Condition that addresses claim situations in which the insured's equipment breakdown insurer and the insured's commercial property insurer disagree on which insurer covers a loss; each insurer pays half the loss to quickly indemnify the insured; insurers then resolve their differences
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Joisted masonry is more combustible than noncombustible construction
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Judicial bond-Usually arise out of litigation. They are posted by a plaintiff or a defendant (the principal) in a court case to protect the opposing party in the event that the principal does not prevail in the court action.
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Jurisdictional Inspections-A condition in equipment breakdown policies that provides that the insurer will perform required inspections of boilers and other equipment on the insured's behalf
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Jurisdictional inspections condition-A condition in equipment breakdown policies that provides that the insurer will perform required inspections of boilers and other equipment on the insured's behalf
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Key requirements in the Business Income (and Extra Expense) Coverage Form:-* Actual loss of business income you sustain * Due to the necessary suspension of your operations * During the period of restoration * Caused by direct physical loss of or damage to property at the described premises * Loss or damage caused by a covered cause of loss
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Kidnap, Ransom, and Extortion coverage (additional option for commercial crime insurance)-Typically contain a confidentiality condition requiring every insured not to divulge the existence of the insurance. Territory for this coverage is usually worldwide. Often this coverage pays for a variety of expenses beyond the ransom, including expenses associated with a kidnapped person's release.
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LLC-Limited liability corporation, a form of corporate organization that offers the limited liability of a corporation but avoids the double taxation to which regular corporations are subject.
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Labor, Materials, or Services Furnished on Property of Others (Category 5 of Business Personal Property)-Coverage that includes the insured's work on personal property of others. (This clarifies that the BPP will cover labor and materials the insured has put into customers' property, if the property is destroyed by an insured peril while still on the insured's premises.)
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Large industrial insureds commercial segment (equipment breakdown)-Complex equipment breakdown exposures.
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Largest classes of commercial inland marine business (6)-* Contractors' equipment * Builders' Risk * Motor Truck Cargo * Electronic Data Processing Equipment * Property in Domestic Transit * "Difference in Conditions"
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Layered property coverage-Two or more property policies arranged in levels of coverage; the policies in the second or higher levels provide coverage only when the loss exceeds the coverage afforded by the lower-level policies.
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Leader locations-A type of dependent property; refers to locations that attract customers to the insured's business.
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Leader property/magnet store-A major department or discount store on which other (nearby) businesses depend to drawn customers to the mall
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Leasehold Interest Coverage Form-A commercial property coverage form for insuring a tenant's financial losses resulting from the cancellation of the tenant's lease because of damage to the premises by a covered cause of loss.
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Legal Action Against Us condition (Commercial property Conditions)-Before an insured can sue or bring legal action against the insurer under the terms of the insurance policy, the insured must comply with all the policy's terms.
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Legal Liability Coverage Form - Exclusions-Eliminates coverage for damages that the insured is legally liable to pay solely by reason of the insured's assumption of liability in a contract or agreement.
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Legal Liability Coverage Form-A commercial property coverage form that provides legal liability coverage on buildings or personal property of others in the insured's care, custody, or control.
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Lender's Payable Clause (Loss Payable Provisions endorsement)-Provides that a loss payee whose interest in the insured property is established by written agreements, such as bills of lading or financing statements, receives protection similar to that provided by the Mortgageholders condition
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Lessees of Safe Deposit Boxes - additional insuring agreement of commercial crime insurance-Property covered: Securities Causes of loss: Theft, disappearance, or destruction Where coverage applies: in a safe deposit box on the premises of a bank or other depository
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Levels of combustion-Wood frame construction is more combustible than joisted masonry,
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Liability loss exposure-A condition that presents the possibility that a person or an organization will sustain a loss resulting from a claim made against that person or organization by someone seeking money damages or some other legal remedy.
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Liberalization condition (Commercial Property Conditions)-If the insurer, during the policy period or up to 45 days before policy inception, adopts any revision that would broaden coverage without requiring additional premium, the insured automatically benefits from the broadened coverage.
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License and permit bonds-Surety bonds that provide payment to the oblige (the state, city, or other public entity) for loss or damage resulting from violations of the duties and obligations imposed on the licensee or permit holder
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Like the BPP, the Condominium Association Coverage Form can cover property in 3 categories: * Building * Your Business Personal Property * Personal Property of Others
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Limit for Newly Acquired or Constructed Property coverage extension-$100,000 at each building
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Limit of $100,000 at each location. Applies in addition to the overall limit of insurance for the coverage form.
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Limit of Insurance - Commercial crime insurance-A separate limit can be shown for each insuring agreement. If a loss is covered under more than one insuring agreement, the insurer will pay no more than the highest limit of the insurance agreements that apply.
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Limitation on Loss of Animals (basic and broad causes of loss)-A limitation provision in both the Basic and Broad Forms states that the insurer will pay for loss of animals only if they are killed or their destruction is made necessary. This limited coverage applies only to animals that the BPP includes as covered property - that is, animals boarded or held as stock for sale.
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Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria additional coverage (business income)-Includes 30 days of coverage for business income and extra expense due to fungus, wet rot, dry rot, and bacteria damage. The 30 days need not be consecutive.
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Limits of Liability for Bond Form 24-An aggregate limit of liability applies to the entire bond. A single-loss limit applies to each of the basic insuring agreements.
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Limits of Loss Payment Condition (Extra Expense Coverage Form)-Limits recovery for certain time periods to stipulated percentages of the overall limit of insurance.
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Loan exclusion (Bond Form 24)-If the insured advances funds to a borrower with the expectation of repayment in the normal course of business, but such repayment is not made, the bond excludes coverage for the resulting loss
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Loss Payable Clause (Loss Payable Provisions endorsement)-Provides the loss payee with the right to have payment of any loss made jointly to the loss payee and the insured
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Loss Payees condition-Loss payees other than mortgageholders, such as the owner of equipment leased to the insured or the insured's landlord, can be named on the policy declarations page.
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Loss Payment condition - how it differs for the Condominium Association Coverage Form-If the association has designated an insurance trustee, the insurer may pay covered claims to the designated insurance trustee. (The condo's board of trustees generally serves in this capacity.)
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Loss Payment condition-The insurer usually has the option of either paying the value of the lost or damaged property or paying for repair or replacement.
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Loss Sustained During Prior Insurance Issued by Us or Any Affiliate (commercial crime insurance)-Provides coverage under an in-force crime policy for a loss that would have been covered under a prior crime policy issued by the same insurer (or an affiliate) if the loss had been discovered during the term of the prior policy.
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Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate (commercial crime insurance)-A loss sustained during the prior insurance but discovered during the current policy period is covered under the current policy if (1) there is no ap between the current and preceding policies, and (2) the loss would have been covered under the current insurance if it had been in effect at the time of the occurrence.
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Loss payment = ((Limit of insurance / Agreed value) x Loss) - Deductible
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Loss prevention-Involves reducing the frequency of a particular loss
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Loss reduction-Involves reducing the severity of a particular loss
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Loss sustained form-Form that covers losses actually sustained during the policy period and discovered no later than one year after policy expiration.
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Losses resulting from written instructions directed towards the insured that have been altered or that bear a forged signature are also covered.
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Lost Securities Bonds-Guarantee that the Principal will indemnify the obligee for any financial loss it suffers because of the duplicate securities it issues to the principal.
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MR (Value Reporting Form)-Code letters for "values as of the last day of the week reported monthly" - is the most commonly used of the reporting requirement options
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Mail Coverage Form-Form that covers a financial institution against loss of securities and other negotiable instruments while in transit through specified types of mail.
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Mail insurance is also available through commercial insurers (instead of just the USPS). Many organizations find it useful because the cost is frequently lower than that of government insurance, the amount of insurance available from the USPS is limited, and commercial insurance may provide faster claim settlements.
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Mail insurance-Insures property being transported by the United States Postal Service or another country's postal service.
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Maintenance bond-A contract bond guaranteeing that the work will be free from defects in materials and workmanship for a specified period after the project is completed
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Maintenance exclusion (Special Form)-Eliminates coverage for loss or damage from these causes: * Wear and tear * Rust, corrosion, decay, deterioration, and hidn or latent defect * Smog * Settling, cracking, shrinking, or expansion * Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents, or other animals * Mechanical breakdown * Dampness or dryness of atmosphere, changes in or extremes of temperature, and marring or scratching (applicable to personal property only)
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Major features of the Value Reporting Form (5):-* Reporting requirement * Limit of insurance * Penalties * Provisional premium * Treatment of specific (nonreporting) insurance
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Manufacturer's Selling Price (Finished "Stock" Only) endorsement-A commercial property endorsement that values finished stock manufactured by the insured at selling price, less any discounts and expenses that the insured otherwise would have had.
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Manufacturers' Consequential Loss Assumption endorsement-If a front, or any other part of an unassembled garment, is destroyed or damaged, the remaining parts will have little more than scrap value unless the missing part can be replaced. This endorsement provides coverage for this type of situation.
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Manufacturing locations-A type of dependent property; refers to locations that manufacture products for delivery to the insured's customers under contract of sale.
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Many EDP floaters cover special perils such as mechanical or electrical breakdown to computer equipment, which otherwise can only be covered in an equipment breakdown policy. They also typically insure covered property while in transit.
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Many cases are determined by trade customs. As an example: Walk-in freezers and refrigerators in a restaurant and the stage machinery in a theater may be completely built in and firmly attached to the structure. However, by custom they are trade fixtures subject to removal by the tenant and not building improvements that become the property of the building owner.
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Many leases of premises allow the lessor (landlord) to terminate the lease if (1) the building or premises are damaged by fire or other perils to a stipulated percentage of the value of the building or premises (for example, 25 percent) or (2) the amount of time required to repair or replace the damaged property exceeds a stipulated period.
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Many states adhere to the broad evidence rule in determining ACV in that every indicator of value must be considered.
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Margin clause (blanket insurance)-A margin clause provides that the insured's recovery is limited, in any event, to not more than a specified percentage above the values filed with the insurer. The percentage is typically between 15 and 50 percent.
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Marine insurance-Insurance on vessels and their cargoes. (The international meaning of marine insurance.)
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Marks of forcible entry into the premises are not required.
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Maximum Period of Indemnity (business income optional coverage)-Optional coverage that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration, or (2) the policy limit.
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Maximum amount of insurance available for nonresidential properties in the NFIP Emergency Program-$100,000 on buildings and $100,000 on contents.
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Maximum amount of insurance available for nonresidential properties in the NFIP Regular Program-$500,000 for building coverage and $500,000 for personal property
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May be used to insure the interests of several parties, including the building owner, contractor, or the owner and the contractor jointly.
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Mechanic's lien-A right granted by statute and is available to those who seek to secure the value of their work or services that have gone into the form of additions on real estate. When a lien is placed on such property, the owner does not have clear title to the property until all debts are settled.
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Mechanical breakdown exclusion (basic and broad causes of loss)-Excludes loss or damage caused by or resulting from mechanical breakdown, including rupture or bursting caused by centrifugal force.
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Merchandise Withdrawal Expenses-ISO Market Segments Program endorsement
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Merchandising and dealer bonds-Classification of license and permit bond
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Mere suspicion of a loss is not sufficient to constitute discovery.
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Midsize commercial segment (equipment breakdown)-In this group, the equipment breakdown exposures become more complex, including production machinery and processing equipment in addition to heating and air conditioning
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Miller Act-A federal statute that governs contracts for the construction, alteration, or repair of any public buildings or public work for the federal government. Requires that, when construction contracts exceed $100,000, a contractor must furnish a performance bond for the protection of the government and a payment bond for the protection of suppliers of labor and materials.
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Miscellaneous bond-Any bond that does not fit well under the other primary categories of surety bonds formulated by the Surety and Fidelity Association of America
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Money Orders and Counterfeit Money insuring agreement of commercial crime insurance-Property covered: Money orders issued by any post office, express company, or bank; and "counterfeit money" paper currency acquired during the regular course of business. Causes of loss: Good-faith acceptance of (1) money orders that are not paid upon presentation or (2) counterfeit money Where coverage applies: U.S. & et al.
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Monoline policy-A policy covering only one line of business
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Monthly Limit of Indemnity (business income optional coverage)-Optional coverage that deletes the coinsurance clause while limiting the amount recoverable during any month of business interruption to a stipulated fraction (1/6, 1/4, or 1/3) of the insurance amount.
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More specifically, "covered equipment" includes:
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More specifically, these are necessary expenses the insured incurs during the period of restoration that would not have been incurred if there had been no physical loss caused by a covered peril.
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Mortgage Impairment Insurance-Four insuring agreements
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Mortgage guarantee insurance-Insurance that protects a mortgageholder from loss if the borrower fails to repay the mortgage loan
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Mortgage impairment insurance - Coverage A - Mortgageholders Interest-Covers loss to the insured's interest as mortgageholder in covered property resulting from the insured's (or its representative's) error or accidental omission when following its customary procedure to require, procure, and maintain insurance on the mortgaged property.
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Mortgage impairment insurance - Coverage B - Property Owned or Held in Trust-Covers loss to property owned (such as a house on which a bank has foreclosed) or held in trust by the insured.
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Mortgage impairment insurance - Coverage C - Mortgageholders Liability-Covers the insured's liability for damages arising form the insured's duties as a mortgage fiduciary or servicing agent
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Mortgage impairment insurance-Insurance that protects a lending institution or mortgage servicing agency against losses arising out of the insured's failure to maintain insurance protecting mortgaged property, as well as other exposures connected with servicing mortgages
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Mortgageholders condition-Applies to covered loss to buildings or structures only. The insurer agrees to pay mortgageholders to the extent of their financial interests in the property and agrees to pay them "in their order of precedence, as interests may appear".
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Most HPR define covered property as, essentially, this:-All property except that which is excluded.
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Most insureds select the Business Income (and Extra Expense) Coverage Form as opposed to the Business Income (Without Extra Expense) Coverage Form because:-Because proving that an extra expense has reduced a business income loss can be difficult.
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Most organizations do not buy all 8 of the coverages included in the Commercial Crime Form. A typical firm might select the following-1. Employee Theft 2. Forgery or Alteration 3. Inside the Premises: Theft of Money and Securities 5. Outside the Premises 6. Computer Fraud 7. Funds Transfer Fraud
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Most the insurer will pay for fungus damage to property, including the costs of necessary tearing out and replacement of property and of testing for the presence of fungus after damaged property has been repaired or replaced-$15,000 per annual policy period.
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Most the insurer will pay is the highest limit of insurance applicable during the course of the loss. Deductible comes from the current policy.
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Most the insurer will pay is the lowest of the limits of insurance applicable during the course of the loss. Deductible comes from the current policy.
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Motor truck cargo insurance-Contains two basic variations. The "carrier's form" covers the insured's legal liability as a motor carrier for loss to customers' property. The "owner's form" provides transit coverage for organizations that use their own trucks to transport their own goods.
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Motor truck cargo liability insurance (a type of inland marine liability insurance)-Covers a trucking company's liability for damage to property of others being transported by the trucking company
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Motor truck cargo liability policy-Policy that covers a trucker's liability for damage to cargo of others being transported by the trucker.
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Multiline policy-A policy covering two or more lines of business; also referred to as a "package policy"
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Multiple of Daily Value-Alternative deductible for time element coverages. It is shown in the declarations as a number (such as 3) times the insured's daily value, calculated as the amount of business income that the insured would have earned during the period of restoration if no breakdown had occurred, and divided by the number of working days in that period.
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Multiple peril crop insurance (MPCI)-Insurance offered by the federal government that covers unexpected crop production losses due to natural causes such as drought, excessive moisture, hail, windstorm, and flood. Does NOT cover losses resulting from neglect, poor farming practices, or theft
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NFIP Emergency Program-Initial phase of a community's participation in the National Flood Insurance Program in which property owners in flood areas can purchase limited amounts of insurance at subsidized rates.
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NFIP General Property Form - Coverage A - Building-Covers the described building; additions and extensions; listed fixtures, machinery, and equipment; materials and supplies to be used for construction at the described location; and a building under construction
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NFIP General Property Form - Coverage B - Personal Property-Covers either household personal property or other than household personal property, but not both.
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NFIP General Property Form - Coverage C - Other Coverages-* Debris removal * Loss avoidance measures (pays for measures to protect property from imminent flood damage up to $1,000) * Pollution damage (up to $1,000)
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NFIP General Property Form - Coverage D - Increased Cost of Compliance-Pays up to $30,000 for activities necessary to comply with state or local floodplain management laws or ordinances that meet NFIP minimum standards. Such activities might include elevation, floodproofing, relocation, or demolition.
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NFIP Regular Program-Second phase of the National Flood Insurance Program in which the community agrees to adopt flood-control and land-use restrictions and in which property owners purchase higher amounts of flood insurance than under the emergency program
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NFIP eligibility-To participate, communities are required to regulate new construction and substantial alterations and improvements of existing structures by adopting and enforcing community floodplain management ordinances.
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Narrow (singular definition) of Commercial Property Insurance-One particular type of commercial property insurance that covers loss of or damage to buildings and business personal property at specified locations.
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Narrow definition denotes one of the specific types of commercial property insurance, such as commercial property, crime insurance, or inland marine insurance.
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Nationwide Marine Definition-Statement of the types of property that may be insured on inland marine and ocean marine insurance forms.
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Need for Adequate Insurance conditon (Builders Risk Coverage Form)-Is, in effect, a 100 percent coinsurance clause in which the amount of insurance that should be carried is based ont eh value of the building on the date it will be completed. The formula is:
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Neglect exclusion (basic and broad causes of loss)-Excludes loss or damage caused by or resulting from an insured's neglect to use all reasonable means to save and preserve the property from further damage at and after the time of loss.
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Net income = revenues - expenses
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Net income-(In the context of business income insurance)
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Net loss-Net income that results when expenses exceed revenues
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Newly Acquired Locations coverage extension (business income)-Applies only when 50 percent or greater coinsurance is shown in the declarations.
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Newly Acquired or Constructed Property coverage extension (BPP)-If the policy covers a building, the Newly Acquired or Constructed Property extension provides automatic coverage for a new building being constructed at the premises described in the declarations.
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Newly Acquired or Constructed Property coverage extension terminates automatically at the earliest of three dates:-* The expiration date of the policy * Thirty days after the acquisition of the new location or the start of construction of the new building * The date the insured notifies the insurer of the new location or new building
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Newly Acquired or Constructed Property extension (BPP)-Provides coverage for property at locations within the policy territory that the insured acquires after the policy's inception. The policy territory consists of the USA (+ territories + possessions), Puerto Rico & Canada
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No Benefit to Bailee condition (Commercial Property Conditions)-The insurer will pay the insured(s) for any covered loss while the insured's property is in the temporary custody of a commercial bailee, but will not treat the bailee as an insured.
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No Coinsurance option (business income option for modifying coinsurance)-Eliminates the coinsurance condition. Costs an increased rate (in some cases, up to 2.5x the rate for 50 percent coinsurance!). Does not require business income worksheets. Does not impose a 120-day restriction on the length of the period of restoration; does not impose a fractional limit of recovery in any one month.
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No coverage applies to these items: * Loss to any undamaged portion of the building that an ordinance or law does not permit to remain in use * The cost to demolish the undamaged portion of the structure and remove its debris
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No standard insurance requirements exist for PUDs. In some cases, each unit owner is required to insure his or her own unit, and the association is responsible only for the insurance on the commonly owned property. In other cases, the homeowner's association has the duty to insure all real property, whether owned by the association or by an individual unit owner. As with condominiums and cooperatives, only examination of the pertinent documents can indicate how the insurance should be arranged.
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Non-Owned Detached Trailers coverage extension (BPP)-Trailer leases usually require that the lessee provide insurance for the trailer while it is leased. The Non-Owned Detached Trailers extension permits the insured to extend "your business personal property" to include such trailers. The limit of liability is $5,000 unless a higher limit is shown in the decs.
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Noncontinuing expenses-Expenses that will not continue during a business interruption.
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Nonfiled classes (uncontrolled classes)-The classes of inland marine business for which neither policy forms nor rates must be filed with the state insurance department.
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Notice of Loss (Insured duty in the event of loss)-Requires prompt notice of loss. Written notice is not required.
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Notice of Loss for Bond Form 24-Report must be made within a period not to exceed 30 days after discovery of loss
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Nuclear Hazard exclusion (basic and broad causes of loss forms)-Excludes loss or damage caused by "nuclear reaction or radiation, or radioactive contamination, however caused."
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Obligee-The party to a surety bond that receives the surety's guarantee that the principal will fulfill an obligation or perform as promised.
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Ocean Cargo Perils Clause - common perils (6)-Perils of the seas Fire Jettison Assailing thieves Barratry of the masters and mariners All other like perils
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One of the perils included in the Ocean Cargo Perils Clause
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Open cargo policy-Policy that covers all goods shipped or received by the insured during the policy's term; comparable to an inland marine annual trip transit policy, but without a set policy expiration date.
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Optional Loss Assessment Coverage (available by endorsement to the Condominium Commercial Unit-Owner's Coverage Form)-The insurer agrees to pay the unit owner's share of any assessment charged to all unit owners by the condominium association when the assessment is made as a result of direct physical loss or damage caused by an insured peril to property in which each unit owner has an undivided interest.
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Optional Miscellaneous Real Property Coverage (available by endorsement to the Condominium Commercial Unit-Owner's Coverage Form)-Extends the form to include condominium property not included under Your Business Personal Property under either of these situations:
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Optional coverages of the BPP-* Agreed Value * Inflation Guard * Replacement Cost * Extension of Replacement Cost to Personal Property of Others
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Optional for the insured to purchase.
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Ordinance or Law - Equipment-ISO Market Segments Program endorsement
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Ordinance or Law - Increased Period of Restoration endorsement-Endorsement that covers business income loss during the additional time required to comply with building ordinances or laws.
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Ordinance or Law Coverage endorsement-Endorsement that covers three types of losses resulting from the enforcement of building ordinances or laws: (1) the value of the undamaged portion of a building that must be demolished, (2) the cost to demolish the building's undamaged portion and remove its debris, and (3) the increased cost to rebuild the property
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Ordinance or Law exclusion (basic and broad causes of loss)-Excludes loss resulting from:
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Ordinary Payroll Limitation or Exclusion endorsement (business income)-Endorsement that limits coverage for ordinary payroll expenses to a specified number of days or excludes such expenses altogether, allowing the insured to satisfy the coinsurance requirement with a lower amount of insurance.
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Ordinary payroll-The entire payroll expense (including employee benefits, FICA payments, union dues paid by the employer, and workers compensation premiums) for all employees of the insured except officers, executives, department managers, and employees under contract.
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Other Common Conditions (beyond those in the Commercial Property Conditions)-* Valuation * Coinsurance * Insured's Duties in the Event of a Loss * Appraisal * Loss Payment * Recovered Property * Vacancy * Mortgageholders * Loss Payees
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Other Exclusions in the Basic Form-The Basic Form contains two additional exclusions, which reinforce the fact that the Basic Form does not cover the types of damage covered by the Broad Form's water damage peril.
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Other Insurance - ISO Flood Coverage Endorsement-States the insurer will pay that proportion of the loss that the insurer's limit bears to the total limits of all applicable flood insurance. Also states that the endorsement's coverage is excess over the maximum limit that could have been insured under an NFIP policy.
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Other Insurance condition (Commercial Property Conditions)-When another applicable policy is subject to the same terms, conditions, and provisions as the coverage part, the insurer agrees to pay its share on a pro rata basis (calculated by dividing the applicable policy limit of the coverage part by the total of all policy limits covering on the same basis, and multiplying the result by the amount of the loss).
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Other exclusions-Certain types of testing that place above-normal stresses on equipment, such as a pressure or electrical test
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Other than the coinsurance basis, what factors should also be considered in estimating an Estimated Maximum Loss (EML)?-* Business income worksheet * Noncontinuing expenses * Time required to restore property * Peak periods * Extended business income loss * Anticipated changes in expenses and profits during restoration period * Extra expense * Compensating for possible errors * Coinsurance percentage
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Other than this coverage enhancement and a few additional items, output building coverage is not much different from that provided by standard commercial property policies.
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Outdoor Property coverage extension (BPP)-Covers loss to outdoor fences; radio and television antennas (including satellite dishes); signs not attached to buildings; and trees, shrubs, and plants.
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Output Policy-Combines all or most of the property coverages a commercial organization needs.
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Output policies provide broader property coverage than standard commercial property forms but do not provide liability coverage. Coverage is typically written to cover risks of direct physical loss other than those specifically excluded, These policies are generally judgment rated rather than manual rated, which provides flexibility in pricing. Almost all output policies either omit or suspend coinsurance.
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Output policy-A policy that combines, in one form and associated endorsements, all or most of the commercial property coverages that the insured organization needs, and uses a flexible rating plan.
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Outside the Premises insuring agreement of commercial crime insurance-Property covered: Money & securities Causes of loss: Theft, disappearance, or destruction Where coverage applies: Outside the premises while in the care or custody of a "messenger" or an armored car company and inside the U.S. & et al.
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Owner Controlled Insurance Program (OCIP)-(alternative to Builders Risk)
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Owners' goods on owners' trucks policy-A type of motor truck cargo policy that covers any type of organization (not just a trucking company) for damage to its own cargo while being transported on its own trucks.
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PR (Value Reporting Form)-Code letters for "values as of the last day of the month reported at the end of the policy year"
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Packaging several coverages (as in a BOP) has the following benefits:-- Reduces adverse selection - (Due to simplified rating) reduces insurers' handling costs - Can often use automated rating instead of an underwriter, leading to more favorable premiums
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Parcel post policy-Inland marine policy that provides broad coverage on parcel post shipments. A parcel post policy provides coverage against loss due to nondelivery (failure of the package to arrive at its destination).
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Particular average-Partial loss that is borne by only one party to a voyage (such as a cargo owner)
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Parties protected: Federal or State Government
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Parties protected: Investor
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Parties protected: entity that issues replacement securities
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Pattern and die floater-A policy that covers the insured's patterns and dies while located at the premises of others and also while in transit to and from those premises.
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Payment bond-a.k.a. labor and materials bond
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Payment of Personal Property of Others is made to the owner of the property, not to the insured. The coverage pays regardless of whether the insured is legally liable for the loss.
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Payment of tax or fee bonds-Classification of license and permit bond
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Pays actual loss of business income during the period of restoration resulting from breakdown to covered equipment.
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Pays up to $2500 per policy year. (Aggregate limit.) Causes of loss are also very limited, but include: virus, harmful code, or similar instruction designed to damage or destroy any part of a computer system.
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Pays up to $25000 limit to reimburse expenses the insured incurs to evacuate the premises because of imminent danger to the life or safety of the guests
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Peak Season Limit of Insurance endorsement-Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.
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Percentage of loss deductible-Most frequently used with spoilage damage coverage. The dollar amount of the deductible for a particular claim is calculated by multiplying the specified percentage by the gross amount of the loss (before application of any deductible or coinsurance penalty)
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Performance bond-A contract bond guaranteeing that a contractor's work will be completed according to plans and specifications
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Perils Covered by a DIC policy-Mostly equivalent to the Causes of Loss - Special Form but with certain basic perils excluded. Still often called "all-risks".
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Perils covered by the BPP (and other) Causes of Loss - Basic Form-* Fire * Lightning * Explosion * Windstorm * Hail * Smoke * Aircraft * Vehicles * Riot * Civil Commotion * Vandalism * Sprinkler leakage * Sinkhole collapse * Volcanic action * (as additional coverage) Fungus
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Perils covered by the BPP (and other) Causes of Loss - Broad Form-* All basic form coverages * Falling objects * Weight of snow, ice, or sleet * Water damage * (as additional coverage) Collapse caused by certain perils
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Perils of the seas-Fortuitous causes of loss peculiar to the sea and other bodies of water such as rivers, lakes, and seaports. Abnormally high winds or waves. Accidents in navigation.
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Period of restoration (in the context of equipment breakdown)-Continues for five consecutive days after the damaged property is repaired or replaced with reasonable speed. (Can be extended.)
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Period of restoration-The period during which business income loss is covered under the BIC forms; it begins 72 hours after the physical loss occurs and ends when the property is (or should have been) restored to use with reasonable speed. (With regard to extra expense coverage, it begins immediately after the physical loss occurs.)
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Personal Effects and Property of Others coverage extension (BPP)-Provides a limited amount of coverage for personal effects (such a coat or jewelry) owned by an individual insured or a partner, a member, an officer, a manager, or an employee of the insured while on the premises described in the declarations. Personal effects are not covered for loss by theft.
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Personal property-All tangible property (property with physical form and characteristics) other than real property.
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Personnel loss exposure-A condition that presents the possibility of loss caused by a key person's death, disability, retirement, or resignation that deprives an organization of that person's special skill or knowledge that the organization cannot readily replace.
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Plaintiff bond-Guarantees that, if the court determines the plaintiff's action was wrongfully taken, the plaintiff will pay any damages sustained by the defendant because of the action
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Police Report (Insured duty in the event of loss)-If a law might have been broken, the police must be notified.
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Policy Bridge condition (commercial crime insurance)-Only discover forms contain this condition. It addresses coverage overlaps that might occur when a discovery policy replaces a loss sustained policy. If such a coverage overlap occurs, the Policy Bridge condition suspends the Other Insurance condition; it also provides that the replacement policy does not cover any loss discovered during the discovery period of the prior policy unless the loss exceeds the limit of insurance and deductible amount of the prior policy.
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Policy Conditions (commercial crime insurance)-* Extended Period to Discover Loss * Loss Sustained During Prior Insurance Issued by Us or Any Affiliate * Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate * Policy Bridge
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Policy Period and Coverage Territory condition (Commercial Property Conditions)-The policy period is determined by the date(s) or time period shown on the policy Declarations sheet, generally beginning at 12:01 AM standard time for the address listed.
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Policy condition-Any insurance policy provision that qualifies an otherwise enforceable promise of the insurer
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Policy definition of "breakdown"-Failure of pressure or vacuum equipment, mechanical failure (including rupture or bursting caused by centrifugal force), and electrical failure (including arcing), subject to exclusions
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Pollutant (as defined by the BPP)-Any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
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Pollutant Cleanup and Removal (additional coverage on the BPP)-Provides limited coverage for the cleanup and removal of pollutants from land or water at the described premises.
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Pollution exclusion (Special Form)-Excludes coverage for loss resulting from "discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge...is itself caused by any of the 'specified causes of loss'."
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Power, Heat and Refrigeration Deduction endorsement (business income)-Endorsement that eliminates power, heat, and refrigeration expenses from coverage and from the coinsurance calculation, allowing the insured to satisfy the coinsurance requirement with a lower limit of insurance. (Available only for manufacturing and mining firms.)
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Preheats water being fed into or returned to a boiler
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Premium and Adjustments-Requires the insured to report to the insurer annually the total insurable property values at each insured location as of the policy's anniversary date (if the insured has business income and extra expense coverage)
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Premiums condition of the Common Policy Conditions form-The first named insured is responsible for paying the policy premium. If the insurer owes a return premium, it will make payment only to the first named insured.
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Preservation of Property (additional coverage to the BPP)-Extends the policy to protect covered property while it is being moved and for up to thirty days at the new location.
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Principal will comply with the laws that apply to the activity for which the principal is licensed
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Principal will conduct merchandising activities according to the law and, on many bonds, properly account for any funds held in trust and transfer them to the appropriate party
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Principal will restore land to its original state after its operations are completed and clean up spills or runoff that pollute the land or water in the area of operation
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Principal-The party to a surety bond whose obligation or performance the surety guarantees.
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Processing floater-A policy that covers the insured's goods while being worked on at a subcontractor's or processor's premises and while in transit to and from those premises.
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Proof of Loss (Insured duty in the event of loss)-The insurer may require insureds to sign a sworn proof of loss containing information requested by the insurer
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Properties insured under HPR insurance generally have these characteristics:-* Fire-resistive, masonry noncombustible, or heavy timber (mill) construction * Automatic sprinkler systems and other loss prevention equipment * Adequate water supply and water pressure * Adequate public or private fire protection
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Property Covered Only for Specified Causes of Loss - Special Form (3)-* Animals * Fragile Articles * Contractors' Tools & Equipment
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Property Covered by a DIC policy-Generally the same as the insured's other policies: buildings and business personal property. Most of the exclusions are the same, too. However, the list of property not covered in DIC policies is generally shorter than in standard commercial property policies. (For example, DIC policies often do not exclude foundations and underground piping.)
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Property Off-Premises extension (BPP)-Provides $10,000 of coverage for property away from the described premises - specifically, at other locations within the policy territory, which consists of the USA (+ territories + possessions), Puerto Rico, & Canada
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Property covered: Other property Causes of loss: Actual or attempted robbery Where coverage applies: Outside the premises while in the care or custody of a "messenger" or an armored car company and inside the U.S. & et al.
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Property covered: Property other than money and securities Causes of loss: Burglary, robbery, and vandalism Where coverage applies: in a safe deposit box on the premises of a bank or other depository
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Property in Process of Manufacture by Others - Limited International Coverage endorsement-Extends the insured's business personal property coverage to include raw materials and in-process goods while being manufactured in a foreign coverage territory at a location not owned, operated, or leased to the insured.
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Property in Transit (Special Form extension) is covered only against these named perils:-* Fire, lightning, explosion, windstorm or hail, riot or civil commotion, and vandalism * Theft, but only when an entire bale, case, or package is stolen from a securely locked body or compartment of the vehicle by a thief who leaves visible marks of the forced entry * Collision and upset
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Property in Transit extension (Special Form)-Provides up to $5,000 of additional insurance for damage to the insured's personal property in or on a motor vehicle that is more than 100 feet from the described premises.
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Property in transit must be (1) in the custody of a "messenger" or (2) in the custody of a transportation company and being transported in an armored vehicle.
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Property loss exposure-A condition that presents the possibility that a person or an organization will sustain a loss resulting from damage (including destruction, taking, or loss of use) to property in which that person or organization has a financial interest.
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Property-off-Premises coverage extension (BPP)-Provides up to $10,000 coverage for covered property while it is away from the described premises. Also covers property in storage at a location leased after the inception of the current policy and property at any fair, trade show, or exhibition.
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Protection of Property Against Further Loss (Insured duty in the event of loss)-All reasonable steps must be taken to protect the property from further loss, such as temporary covering over a damaged roof or removal of contents from the building to a safe location.
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Protective Safeguards endrosement-States that fire coverage is automatically suspended if the insured knows that the sprinkler system is not operational and fails to notify the insurer.
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Provides up to $500 per guest / $50,000 per occurrence for reimbursement of expenses incurred when guests are lodged at another facility when the insured location is rendered uninhabitable because of loss or damage by a covered cause of loss.
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Provides up to 30 days' temporary coverage at a new location, which gives the insured time to report the added exposure to the insurer.
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Provisional premium-The initial premium in a Value Reporting program. It is not based on the full limit of insurance, but instead is typically 75 percent of the annual premium that would be required to purchase nonreporting coverage with the same limit. Ordinarily, the provisional premium must be paid at the beginning of the policy period.
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Public official bond-A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully and honestly.
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QR (Value Reporting Form)-Code letters for "values as of the last day of the month reported quarterly"
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Radioactive Contamination endorsement-A commercial property endorsement for organizations that have a radioactive contamination exposure on their premises, othe rthan a nuclear reactor or fuel for a nuclear reactor; covers physical loss to covered property caused by sudden and accidental radioactive contamination.
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Real property-Consists of land, all structures permanently attached to the land, and whatever is growing on the land.
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Recipient locations-A type of dependent property; refers to locations that receive products or services from the insured.
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Reclamation and environmental protection bonds-Classification of license and permit bond
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Recovered Property condition-If either the insured or the insurer recovers any insured property after the loss settlement, the other party must be notified.
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Release of attachment bond-A bond that guarantees that the insured will pay any damages and court costs if the court should decide in the claimant's favor
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Repetitive Loss Structure-A building that meets specific damage that lowers its market value; is the only type of building for which Coverage D - Increased Cost of Compliance coverage is available under the NFIP General Property Form
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Replacement Cost optional coverage-Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis.
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Replacement Cost-The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation
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Report of Values form (Value Reporting Form)-Used to report property values to the insurer.
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Reporting requirement options and code letters (for Value Reporting Form)-DR = daily values reported monthly WR = values as of the last day of the week reported monthly MR = values as of the last day of the week reported monthly (most commonly used option) QR = values as of the last day of the month reported quarterly PR = values as of the last day of the month reported at the end of the policy year
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Requires the employee's acts to have been committed with "the active and conscious purpose to cause the Insured to sustain such loss."
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Residential Building (as defined for the purposes of the RCBAP)-Has at least 75 percent of its floor area occupied for residential purposes. Non-residential condominiums can be insured under the General Property Form (as opposed to the RCBAP)
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Residential Condominium Building Association Policy (RCBAP)-A version of the National Flood Insurance Program Standard Insurance Policy that is used for insuring residential condominium buildings, as well as contents that are owned either by the unit owners in common or by the condominium association solely.
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Retention-Involves generating funds from within the organization to pay for losses. (Risk financing technique.)
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Rider-Essentially the same thing as an endorsement
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Risk control-Avoiding or minimizing loss
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Risk financing-Methods of paying for loss
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Risk management process-1. Identify loss exposures 2. Analyze loss exposures 3. Examine feasibility of risk management techniques 4. Select the appropriate risk management technique 5. Implement selected risk management techniques Monitor results and revise the risk management program
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Robbery-Involves the use (or threat) of force against the person from whom the property is taken
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Robbery-The unlawful taking of property from the care and custody of a person by one who has caused or threatened to cause that person bodily harm; includes situations in which the thief commits an obviously unlawful act that is witnessed by the custodian of the stolen property (such as an observed "smash and grab" theft from a shop window)
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Rules of the International Warsaw Convention-Govern the liability of air carriers engaged in international service. Under these rules, an air carrier is not liable for loss to property (for example, baggage, or cargo) if it can prove that it took all of the necessary steps to avoid the loss or that the loss was caused by pilot error.
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SFHA-Special flood hazard area
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SPP Covered perils-All the perils covered by the Basic Form are available in the SPP, but the insurer can restrict the covered perils to these combinations:
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SPP contains 3 conditions that result in more restrictive coverage than under the BPP:-- Vacancy and occupancy (the insurer will not pay for loss or damage by an peril if the building has been vacant or unoccupied for more than 60 days; coverage for vandalism ceases after 30 days) - Increase in hazard (coverage is suspended during any period in which the hazard has been increased by means within the named insured's knowledge and control) - Cancellation (the insurer may cancel the policy by providing only 5 days' advance notice)
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Safe Burglary-The unlawful taking of property from within a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by marks of forcible entry upon its exterior;
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Sale and Disposal Liability-ISO Market Segments Program endorsement
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Sample insureds include utilities, chemical companies, oil and natural gas companies, heavy manufacturers, and mining companies
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Seasonal increase provision-A provision commonly included in BOPs that addresses fluctuating personal property values by automatically increasing the amount of insurance for certain time periods. Limit for business personal property is automatically increased by 25 percent, but only if the limit for personal property in the declarations is 100 percent or more of the insured's average monthly personal property value for the twelve months preceding the date of the loss.
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Securities Deposited with Others - additional insuring agreement of commercial crime insurance-Property covered: Securities Causes of loss: Theft, disappearance, destruction Where coverage applies: while in the custodian's possession or on deposit by the custodian for safekeeping in a depository
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Separately fired superheater-(Another type of fired pressure vessel)
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Separation involves the routine, daily reliance on each of the separated assets or activities, all of which regularly form a portion of the organization's working resources.
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Separation-Involves dispersing a particular activity or asset over several locations. (Risk control technique.)
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Shipper-The person or organization shipping goods, often the seller of the goods.
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Signs Coverage Form-Form that covers neon, florescent, automatic, or mechanical signs
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Single-entity concept (original specifications coverage)-A concept of condominium ownership in which the association is considered to be the owner of all property contained in the unit as sold to the original purchaser or replacements of such property if the replacements are of like kind and quality.
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Sinkhole collapse (cause of loss)-Loss or damage caused by the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite.
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Six BPP coverage extensions-* Newly Acquired or Constructed Property * Personal Effects and Property of Others * Valuable Papers and records (Other Than Electronic Data) * Property Off-Premises * Outdoor Property * Non-Owned Detached Trailers
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Six conditions contained in the Common Policy Conditions form-* Cancellation * Changes * Examination of Books and Records * Inspections and Surveys * Premiums * Transfer of Rights and Duties Under This Policy
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Sod, Trees, Shrubs, and Plants coverage extension (Builders Risk Coverage Form)-Covers landscaping outside of buildings on the described premises. This extension, similar to the coverage extension of the BPP, is offered for only five causes of loss (fire, lightning, aircraft, riot/civil, and explosion). Coverage is limited to $1,000 in any one loss and to $250 for any one tree, shrub, or plant.
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Special Causes of Loss - Farm Property-Correspond to those of the homeowners special form and the commercial property Causes of Loss - Special Form
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Special Form and Exclusions-Basic and Broad Form Exclusions Contained in the Special Form * Ordinance or Law * Earth Movement * Governmental Action * Nuclear Hazard * Utility Services * War and Military Action * Water * "Fungus", Wet Rot, Dry Rot and Bacteria * Artificially Generated Electrical Energy * Steam Boiler Explosion * Mechanical Breakdown * Neglect
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Special Form exclusion - Dishonest or Criminal Acts by Certain Individuals-Excludes the dishonest or criminal acts of the named insured; any of the named insured's partners, members, managers, ("members" and "managers" refer to members and managers of limited liability companies), officers, employees (including leased employees), directors, trustees, or authorized representatives; or anyone else (such as a bailee) to whom he named insured entrusts covered property for any purpose.
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Special Theft Limit for furs, fur garments, and garments trimmed with fur-$2,500.00
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Special Theft Limit for jewelry, watches, watch movements, precious and semi-precious stones, bullion, gold, silver, platinum and other precious alloys or metals.-$2,500.00
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Special Theft Limit for patterns, dies, molds, and forms-$2,500.00
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Special Theft Limit for stamps; tickets, including lottery tickets held for sale; and letters of credit.-$250.00
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Special Theft Limits-* $2,500 for furs, fur garments, and garments trimmed with fur * $2,500 on patterns, dies, molds, and forms * $2,500 on jewelry, watches, watch movements, precious and semi-precious stones, bullion, gold, silver, platinum and other precious alloys or metals. Jewelry and watches with a value of less than $100 are not subject to this $2,500 limit. * $250 for stamps; tickets, including lottery tickets held for sale; and letters of credit.
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Special limit: $5000 per occurrence for these types of property: precious metals, precious or semiprecious stones, pearls, furs, or completed or partially completed articles made of or contained such materials that constitute the principal value of such articles.
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Specialty Farm Coverages-- Crop hail insurance - Multiple peril crop insurance - Animal mortality insurance - Feedlot insurance - Federal livestock insurance
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Specific Insurance (in this context, separate of the opposite of blanket insurance)-The Value Reporting Form defines specific insurance as "other insurance that covers the same Covered Property to which the Value Reporting Form endorsement applies, and is not subject to the same plan, terms, conditions and provisions as this insurance."
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Specific insurance-Insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance.
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Spoilage Coverage endorsement-Endorsement that covers damage to perishable stock due to power outages; on-premises breakdown; or contamination of the insured's refrigerating, cooling, or humidity control equipment
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Spoilage must result from the lack or excess of power, light, heat, steam, or refrigeration, and the insured must own or be legally liable for the property.
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Sprinkler leakage (cause of loss)-Leakage or discharge of any substance from an automatic sprinkler system. (Also includes the collapse of automatic sprinkler system tanks.)
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Standard BPP deductible-$500. Rate credits are available for deductibles higher than $500.
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Standard ISO endorsements are available to match some of the coverages provided by typical HPR policies. Examples of such endorsements include:-* Ordinance or Law Coverage endorsement * Debris Removal Increased Limit of Insurance endorsement * Additional Covered Property endorsement
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Standard Property Policy (SPP)-A commercial property policy form for covering buildings and business personal property on restricted items.
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Statutory Nature of Bonds-Many bonds are required by municipal ordinance or federal or state regulations or statutes
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Stock-Merchandise held in storage or for sale; raw materials; and in-process or finished goods.
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Strikes, riots, and civil commotion (SR&CC warranty)-Warranty/exclusion in an open cargo policy
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Subdivision bond-A contract bond guaranteeing a local governmental authority that a subdivision developer will complete the subdivision in accordance with approved proposals and at the developer's expense
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Subject to explosion, bulging, cracking, and implosion (collapse)
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Sublimit: $5000 per occurrence for loss of or damage to manuscripts, drawings, or records of any kind, including the cost of reconstructing them.
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Such time element losses include loss of income or extra expenses incurred for rental of replacement property. Coverage for loss of use is an important advantage of the Legal Liability Coverage Form. The BPP does not cover this.
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Sue and labor clause-Clause that covers the cost of reasonable measures that the insured is required to take to protect property from damage at the time of loss.
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Summary: imports; exports; domestic shipments; instrumentalities of transportation and communication (bridges, tunnels, power & telephone lines, etc.), various types of property owned or used by individuals (jewelry, furs, etc.); and various types of property pertaining to a business, profession, or occupation (live animals, builders' risks, property at exhibitions, etc.)
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Supply contract bond-A contract bond guaranteeing that a supplier will perform the designated supply contract according to specifications. Specifically, it is an agreement for furnishing and delivering materials/supplies at an agreed price.
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Surety Bond Guarantee Program-Program provided by the Small Business Administration (SBA) to give small, less-experienced contracting firms the opportunity to be bonded so they can compete for bonded jobs and prove themselves by profitably performing work to specifications.
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Surety bond-A written contract that expresses one party's promise to answer for another party's failure to do something as promised.
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Surety will pay (forfeit) the entire bond penalty if the principal fails to complete the bonded obligation
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Suretyship-The obligation of one entity to answer for the debt, default, or miscarriage of performance of duties by another entity
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Suspension condition-Allows the insurer or any of its representatives to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be in a dangerous condition
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Suspension-Allows the insurer or any of its representatives to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be in a dangerous condition
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T of F: If Earth Movement results in fire or explosion, insurers pay for the loss or damage caused by that fire or explosion.-TRUE. If Earth Movement results in fire or explosion, insurers DO pay for the loss or damage caused by that fire or explosion.
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T or F: A DIC policy can be classified as an inland marine policy.-TRUE. Doing so can, in those states that treat DIC policies as a nonfiled class of business, exempt them from rate- and form-filing requirements, allowing greater flexibility.
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T or F: A DIC policy that provides flood coverage in excess of a commercial property endorsement or an NFIP policy will "drop down" to cover water damage losses encompassed by the DIC policy's definition of flood but not by the definition of flood in the underlying coverage.-FALSE. A DIC policy that provides flood coverage in excess of a commercial property endorsement or an NFIP policy will NOT "drop down" to cover water damage losses encompassed by the DIC policy's definition of flood but not by the definition of flood in the underlying coverage.
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T or F: A business income loss can result when there has been no physical damage to buildings or personal property.-TRUE. A business income loss can result when there has been no physical damage to buildings or personal property. For example, the closing of a road or a labor strike can cause a business income loss. (However such risks are GENERALLY NOT INSURABLE.)
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T or F: A common carrier ordinarily has a lower degree of responsibility for customers' property than a contract carrier.-FALSE. A common carrier ordinarily has a higher degree of responsibility for customers' property than a contract carrier. Common carriers, regardless of whether they have acted negligently, are usually liable to the shipper for any cargo losses except those that occur in narrowly defined circumstances.
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T or F: A commonly ideal condominium arrangement is for the association to agree with insurer on the extent of coverage provided under the association's policy and to communicate that information to the unit owners so that they can tailor their insurance accordingly.-TRUE. That is a recommended arrangement.
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T or F: A contract carrier's liability depends on the contract terms agreed to by the carrier and the shipper-TRUE. A contract carrier's liability DOES depend on the contract terms agreed to by the carrier and the shipper.
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T or F: A coverage extension for Business Personal Property provides up to $2,500 per location for property of others in the insured's care, custody, or control.-TRUE. A coverage extension for Business Personal Property DOES provide up to $2,500 per location for property of others in the insured's care, custody, or control.
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T or F: A tenant, lessee, concessionaire, exhibitor, contractor, or subcontractor can be added as an additional insured to the Legal Liability Coverage Form-FALSE. A tenant, lessee, concessionaire, exhibitor, contractor, or subcontractor CANNOT be added as an additional insured to the Legal Liability Coverage Form
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T or F: AAIS forms call for subtracting the deductible before applying the coinsurance penalty.-TRUE. AAIS forms DO call for subtracting the deductible before applying the coinsurance penalty.
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T or F: Adverse weather may also impede a business's operations even when no damage occurs to property.-TRUE. For example, heavy rain can cause cancellation or poor attendance at outdoor events that were expected to attract large crowds and generate substantial income.
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T or F: All earthquake shocks or volcanic eruptions occurring within a 168-hour (7-day) period are considered a single earthquake or volcanic eruption.-TRUE. All earthquake shocks or volcanic eruptions occurring within a 168-hour (7-day) period are considered a single earthquake or volcanic eruption.
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T or F: Although completed value builders risk policies are issued for a minimum term of one year, the insured receives a half refund of the unearned premium if the project is completed in less than a year.-FALSE. Although completed value builders risk policies are issued for a minimum term of one year, the insured receives a FULL refund of the unearned premium if the project is completed in less than a year.
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T or F: An unmodified business income policy provides no coverage for dependent property exposures.-TRUE. This is because it covers only business income loss that results from physical loss to property at the insured's premises.
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T or F: As in transit policies, certain types of valuable property likely to be targeted by thieves are commonly excluded in motor truck cargo liability policies, such as precious metals, jewelry, and fine arts.-TRUE. As in transit policies, certain types of valuable property likely to be targeted by thieves are commonly excluded in motor truck cargo liability policies, such as precious metals, jewelry, and fine arts.
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T or F: At the time of a flood loss, any unused coverage from one insured building can be used to increase limits available to another building.-FALSE. Not blanket coverage. At the time of a flood loss, any unused coverage from one insured building CANNOT be used to increase limits available to another building.
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T or F: Builders Risk coverage ceases 30 days after an insured building is occupied, in whole or in part, or is put to its intended use.-FALSE. Builders Risk coverage ceases 60 days after an insured building is occupied, in whole or in part, or is put to its intended use.
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T or F: Business income coverage ends when the property has been repaired, rebuilt, or replaced with reasonable speed.-FALSE. Business income coverage ends when the property SHOULD have been repaired, rebuilt, or replaced with reasonable speed. Thus, there can be a gap between it and EBI, which does not begin until the property is actually restored and operations are resumed.
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T or F: Cargo policy limits apply on a per-shipment basis.-FALSE. Cargo policy limits apply on a per-conveyance basis. Because several shipments could be stowed on the same vessel, the assured must exercise care to select adequate limits. The accumulation clause contained in most open cargo policies provides some relief to the assured in this matter.
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T or F: Collapse of a building insured under the Builders Risk Coverage Form can only be covered by endorsement.-TRUE. Collapse of a building insured under the Builders Risk Coverage Form can only be covered by adding the Builders Risk - Collapse During Construction endorsement. (True even of Special Form.)
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T or F: Courts have held that time consumed by delays resulting from acts of persons other than the insured, or even by reasonable disputes between the insured and others, is includable in the period of restoration.-TRUE. Courts HAVE held that time consumed by delays resulting from acts of persons other than the insured, or even by reasonable disputes between the insured and others, is includable in the period of restoration. Moreover, delays resulting from conditions beyond the insured's control are also includable in the period of restoration.
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T or F: Coverage B of Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form covers farm structures such as barns and silos-FALSE. Barns and silos can be covered under the Barns, Outbuildings, and Other Farm Structures Coverage Form.
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T or F: Coverage for mechanical breakdown utility services failure is readily provided in most inland marine electronic data processing equipment policies (subject to an additional premium charge).-TRUE. Coverage for mechanical breakdown utility services failure IS readily provided in most inland marine electronic data processing equipment policies (subject to an additional premium charge).
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T or F: DIC is excess over any other insurance.-TRUE. A DIC policy IS excess over any other insurance.
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T or F: DIC policies commonly exclude loss caused by steam boiler explosion or mechanical or electrical breakdown.-TRUE. DIC policies commonly exclude loss caused by steam boiler explosion or mechanical or electrical breakdown.
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T or F: Damage caused by rain that a windstorm blows through an open window, roof vents, or cracks is covered as part of the Windstorm or Hail cause of loss.-FALSE. Damage caused by rain that a windstorm blows through an open window, roof vents, or cracks is NOT covered. But if the windstorm breaks a window and wind-blown rain enters the structure through the broken window, the policy will ocver the resulting water damage.
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T or F: Dependent property coverage does not apply when the only loss to the dependent property is loss or damage to electronic data (including corruption or destruction).-TRUE. Dependent property coverage does NOT apply when the only loss to the dependent property is loss or damage to electronic data (including corruption or destruction).
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T or F: EDP policies typically do not cover computer virus losses.-FALSE. EDP policies typically cover computer virus losses if they can be attributed to a covered cause of loss. If, for example, the virus was planted in the system by an outsider with malicious intent, the loss will be covered if the policy covers vandalism (and does not exclude computer virus losses).
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T or F: Earthquake coverage may be provided under an "all-risks" DIC policy simply by omitting any exclusion of earthquake or other earth movement, subject perhaps to an exclusion of earth movement loss to masonry veneer.-TRUE. Earthquake coverage may be provided under an "all-risks" DIC policy simply by omitting any exclusion of earthquake or other earth movement, subject perhaps to an exclusion of earth movement loss to masonry veneer.
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T or F: Equipment breakdown insurance covers only loss to the covered equipment.-FALSE. In reality, breakdown to covered equipment during the policy period is the event that triggers coverage. Once equipment breakdown coverage is triggered, it covers any of the types of loss describe din any of the insuring agreements that apply to the policy.
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T or F: Even losses that insurance will not cover should be included in the EML.-FALSE. Only losses that insurance will cover should be included in the EML for insurance purposes.
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T or F: Even when it includes the Special Form, the Builders Risk Coverage Form does not cover theft of uninstalled building materials.-TRUE. Even when it includes the Special Form, the Builders Risk Coverage Form does not cover theft of uninstalled building materials.
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T or F: Exposure analysis for setting insurance limits for business income insurance is done on a post-tax basis.-FALSE. Exposure analysis for setting insurance limits for business income insurance is done on a pre-tax basis because business income loss payments will be subject to income tax.
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T or F: Fixtures, improvements, alterations, and appliances (such as those used for refrigerating, cooking, and so on) are covered by the unit owner's policy even if the condo association agreement requires the association to insure such property.-FALSE. Fixtures, improvements, alterations, and appliances (such as those used for refrigerating, cooking, and so on) are NOT covered by the unit owner's policy if the condo association agreement requires the association to insure such property.
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T or F: For a loss to be covered, a covered cause of loss need not be the proximate cause of the loss.-FALSE. For a loss to be covered, a covered cause of loss MUST be the proximate cause of loss.
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T or F: For some insureds, a principal reason for choosing a DIC policy is to cover small theft exposures.-FALSE. For some insureds, a principal reason for choosing a DIC policy is to cover significant theft exposures that are not covered under the insured's commercial property policy. To fill the gap, the insured can obtain a DIC policy that specifically covers theft or provides open perils coverage without a theft exclusion.
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T or F: Furniture and other household personal property owned by a landlord and provided in a furnished apartment or room are covered under the BPP.-FALSE. Furniture and other household personal property owned by a landlord and provided in a furnished apartment or room are NOT covered under the BPP.
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T or F: ISO business income forms require that the suspension of operations must be caused by loss of or damage to property at premises which are described in the declarations.-TRUE. ISO business income forms require that the suspension of operations must be caused by loss of or damage to property at premises which are described in the declarations.
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T or F: If 80 percent or higher coinsurance is in effect for the Condominium Association Coverage Form, the form automatically includes a coverage extension for property of others.-TRUE. The coverage extension covers property of others up to $2,500 at each described location. If this extension is not adequate, the insured can buy an additional amount of insurance under the Personal Property of Others coverage agreement.
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T or F: If the condo association has other insurance covering the same property, the unit owner's insurance is excess coverage.-T RUE. If the condo association has other insurance covering the same property, the unit owner's insurance IS excess coverage.
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T or F: If the insured does not resume operations as quickly as possible, the insurer will calculate the business income loss based on the length of time it would have taken to resume operations as quickly as possible.-TRUE. If the insured does not resume operations as quickly as possible, the insurer will calculate the business income loss based on the length of time it would have taken to resume operations as quickly as possible.
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T or F: If two or more insureds are listed in the declarations, any of them can request cancellation.-FALSE. If two or more insureds are listed in the declarations, only the one listed first (called the first named insured) can request cancellation
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T or F: In addition to covering loss of property actually burned by a fire, the fire peril covers heat and smoke damage resulting from a fire, as well as water damage resulting from attempts to put out the fire.-TRUE. In addition to covering loss of property actually burned by a fire, the fire peril DOES cover heat and smoke damage resulting from a fire, as well as water damage resulting from attempts to put out the fire.
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T or F: In addition to covering property transported by carriers, many transit policies also cover property shipped by any land vehicle owned or operated by the insured.-TRUE. In addition to covering property transported by carriers, many transit policies DO also cover property shipped by any land vehicle owned or operated by the insured.
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T or F: In policies that contain a coinsurance condition, coinsurance can often be suspended by the agreed value method.-TRUE. In policies that contain a coinsurance condition, coinsurance CAN often be suspended by the agreed value method.
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T or F: In practice, many dealers are insured under BOPs rather than under inland marine Dealers policies-TRUE. In practice, many dealers ARE insured under BOPs rather than under inland marine Dealers policies
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T or F: In the BPP, when an occurrence involves loss to two or more items of covered property that are insured for separate limits, the losses cannot be combined in determining the application of the deductible.-TRUE. The BPP states that, when an occurrence involves loss to two or more items of covered property that are insured for separate limits, the losses cannot be combined in determining the application of the deductible.
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T or F: Inland marine builders risk policies typically cover losses that are usually excluded under standard commercial property forms, such as flood, earthquake, theft of building materials that have not been installed, and boiler explosion.-TRUE. Inland marine builders risk policies typically cover losses that are usually excluded under standard commercial property forms, such as flood, earthquake, theft of building materials that have not been installed, and boiler explosion.
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T or F: Inland marine builders risk policies usually provide weaker coverage than the commercial property version of builders risk coverage and allow for rating flexibility.-FALSE. Inland marine builders risk policies usually provide broader coverage than the commercial property version of builders risk coverage and allow for rating flexibility.
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T or F: Inland marine offers open perils coverage.-TRUE. Open perils is also known as 'all-risks' coverage (though that title is not quite accurate in most situations)
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T or F: Insurance adjusters have generally interpreted the phrase "suspension of your operations" to encompass business income coverage for either partial or total interruption of operations.-TRUE. Insurance adjusters HAVE generally interpreted the phrase "suspension of your operations" to encompass business income coverage for either partial or total interruption of operations.
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T or F: Insurers typically charge a 10 percent premium surcharge for the business income Agreed Value option.-TRUE. By contrast, the surcharge for the BPP Agreed Value option is typically 5 percent.
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T or F: It makes sense to increase the EML by a selected percentage (such as a 10 percent buffer) to allow for possible underestimates.-TRUE. It DOES make sense to increase the EML by a selected percentage (such as a 10 percent buffer) to allow for possible underestimates.
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T or F: Jewelry and watches with a value of less than $150 are not subject to the standard $2,500 limit.-FALSE. Jewelry and watches with a value of less than $100 are not subject to the standard $2,500 limit.
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T or F: Leased personal property that the insured is required by contract to insure is covered as part of Your Business Personal Property unless otherwise covered under Personal Property of Others.-TRUE. Leased personal property that the insured is required by contract to insure IS covered as part of Your Business Personal Property unless otherwise covered under Personal Property of Others.
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T or F: Leasehold Interest Coverage Form coverage is provided even if the lease is canceled because a local ordinance prevents the owner from rebuilding.-TRUE. Leasehold Interest Coverage Form coverage is provided even if the lease is canceled because a local ordinance prevents the owner from rebuilding.
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T or F: Leasehold Interest insurance is commonly purchased.-FALSE. Such insurance is seldom bought, perhaps because many risk managers and producers are unaware it exists. For some organizations, it fills a valuable need. However, lesees find it difficult to conceptualize the exposure even when it is brought to their attention.
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T or F: Lightning is naturally, not artificially, generated.-TRUE, of course.
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T or F: Many inland marine policies exclude (and therefore do not cover) flood and earthquake.-FALSE. Many inland marine policies do NOT exclude (and therefore cover) flood and earthquake.
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T or F: Many output policies cover property for which the insured is responsible under an installation agreement, until the buyer accepts the installation.-TRUE. Many output policies DO cover property for which the insured is responsible under an installation agreement, until the buyer accepts the installation.
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T or F: Most HPR policies limit coverage for collapse to the same named-perils approach used in the ISO Broad and Special causes of loss forms-FALSE. HPR policies usually do NOT limit coverage for collapse to the named-perils approach used in the ISO Broad and Special causes of loss forms.
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T or F: Most animal mortality policies cover the intentional destruction of an insured animal that is suffering from an irreversible or incurable condition, as long as the condition results from a cause that is not excluded and the intentional destruction is necessary for humane reasons.-TRUE, but, before destroying the animal, the insured must have either the insurer's consent or a veterinarian's certification that destruction was immediately required
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T or F: Most annual transit policies cover on a named perils basis.-FALSE. Most annual transit policies cover on an open perils basis.
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T or F: Most annual transit policies cover the U.S. and its territories + Puerto Rico.-FALSE. Many annual transit policies cover only within the continental U.S. And Canada, including airborne shipments between those places. This means they do not cover Hawaii, Puerto Rico, or any overseas possessions.
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T or F: Most risk management professional recommend against combining the Agreed Value option with blanket insurance.-FALSE. Most risk management professionals regard the combination of the Agreed Value option with blanket insurance as the preferred method to provide property insurance.
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T or F: NFIP definition of a covered building says it must include two or more outside rigid walls and a secured roof-TRUE. NFIP definition of a covered building says it must include two or more outside rigid walls and a secured roof
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T or F: Noncontinuing expenses are deducted from the EML estimate.-TRUE. Noncontinuing expenses ARE deducted from the EML estimate.
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T or F: Once a covered peril has occurred, all subsequent damage is also covered, even when an excluded peril has meanwhile intervened, unless the policy clearly states otherwise.-TRUE. Once a covered peril has occurred, all subsequent damage is also covered, even when an excluded peril has meanwhile intervened, unless the policy clearly states otherwise. This rule has been modified by the anti-concurrent cause language incorporate into many forms; consequently, proximate cause is an area in which the advice of coverage counsel may be needed in complex cases.
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T or F: One important feature of an output policy is that personal property can be covered anywhere within the policy territory without listing the location in the policy.-TRUE. One important feature of an output policy is that personal property CAN be covered anywhere within the policy territory without listing the location in the policy.
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T or F: Open cargo policies typically require the insured to report the full value of all shipments to the insurer.-TRUE. Open cargo policies typically DO require the insured to report the full value of all shipments to the insurer.
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T or F: Property covered by a motor truck cargo liability policy is covered only while in or on a land vehicle operated by the insured (including connecting carriers) or while located at the insured's terminal.-TRUE. Property covered by a motor truck cargo liability policy is covered only while in or on a land vehicle operated by the insured (including connecting carriers) or while located at the insured's terminal.
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T or F: RCBAP is commonly referred to as REBAP-True dat.
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T or F: SPP coverage extensions apply only to property located in the same state at the described premises.-TRUE. SPP coverage extensions DO apply only to property located in the same state at the described premises.
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T or F: Shareholders in a co-op do not directly own corporate property.-TRUE. Shareholders in a co-op do not directly own corporate property.
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T or F: Stock that has been sold but not delivered is valued at replacement cost.-FALSE. Stock that has been sold but not delivered is valued at selling price less any unincurred discounts or expenses.
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T or F: The 72-hour waiting period of BIC coverage does not apply to extra expense coverage.-TRUE. Extra expense coverage begins immediately after the physical loss occurs.
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T or F: The BPP animal exclusion applies to animals owned by the named insured and held for sale or owned by others and boarded by the insured.-FALSE. The BPP animal exclusion does NOT apply to animals owned by the named insured and held for sale or owned by others and boarded by the insured.
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T or F: The BPP coverage extensions apply only if at least 80 percent coinsurance or a value reporting period symbol is shown in the declarations.-TRUE. The BPP coverage extensions DO apply only if at least 80 percent coinsurance or a value reporting period symbol is shown in the declarations.
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T or F: The BPP includes improvements and alterations only to the extent of a tenant's use interest in them.-TRUE. By contrast, the Condominium Commercial Unit-Owner's Coverage Form includes fixtures, improvements, and alterations that are part of the building and owned by the unit owner.
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T or F: The BPP provides limited coverage for 'ordinance or law' under the Increased Cost of Construction additional coverage.-TRUE. The BPP DOES provide limited coverage for 'ordinance or law' under the Increased Cost of Construction additional coverage. Additionally, higher limits and broader coverage can be provided by the Ordinance or Law Coverage endorsement.
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T or F: The Builders Risk Coverage Form may also be used for insuring additions or alterations to existing buildings.-TRUE. The Builders Risk Coverage Form MAY also be used for insuring additions or alterations to existing buildings. The Builders Risk Renovations endorsement excludes the value of the existing property, covering only the renovations under construction.
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T or F: The EML should be adjusted to correspond to the maximum period of restoration anticipated.-TRUE. The EML SHOULD be adjusted to correspond to the maximum period of restoration anticipated.
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T or F: The Functional Building Valuation endorsement automatically includes ordinance or law coverage, subject to the regular limit of insurance on the building.-TRUE. The Functional Building Valuation endorsement DOES automatically include ordinance or law coverage, subject to the regular limit of insurance on the building.
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T or F: The ISO Flood Coverage Endorsement, when attached, is often subject to a separate limit of insurance that may be substantially lower than the regular policy limit(s).-TRUE. The ISO Flood Coverage Endorsement, when attached, is often subject to a separate limit of insurance that may be substantially lower than the regular policy limit(s).
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T or F: The Legal Liability Coverage Form will pay for time element losses that the owner of the property incurs as a result of the physical damage.-TRUE. The Legal Liability Coverage Form WILL pay for time element losses that the owner of the property incurs as a result of the physical damage.
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T or F: The NFIP General Property Form covers building and contents on an ACV basis with no option for Replacement Cost.-TRUE. The NFIP General Property Form covers building and contents on an ACV basis with no option for Replacement Cost.
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T or F: The NFIP General Property Form excludes loss of use and loss of income.-TRUE. The NFIP General Property Form excludes loss of use and loss of income.
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T or F: The NFIP General Property Form includes a coinsurance provision.-FALSE. The NFIP General Property Form does NOT include a coinsurance provision
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T or F: The NFIP General Property Form offers coverage for property owned by others.-FALSE. There is no coverage in this policy for property owned by others.
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T or F: The Special Form contains an additional concurrent causation exclusion not found in the Basic or Broad Form.-TRUE. The Special Form DOES contain an additional concurrent causation exclusion not found in the Basic or Broad Form. It provides that the insurer will not pay for loss or damage cause by or resulting from weather conditions, acts or decisions, or other third-party negligence with respect to planning, maintenance, quality of construction materials.
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T or F: The actual-loss-sustained approach of business income insurance requires the insured to have been earning a net profit before the loss occurred in order to receive any benefit.-FALSE. The actual-loss-sustained approach of business income insurance does NOT require the insured to have been earning a net profit before the loss occurred in order to receive any benefit.
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T or F: The aggregate limit of coverage for Electronic Data (an additional coverage in the BPP) is $5,000 per policy year regardless of the number of occurrences or locations covered.-FALSE. The aggregate limit of coverage for Electronic Data (an additional coverage in the BPP) is only $2,500 per policy year regardless of the number of occurrences or locations covered.
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T or F: The agreed value option provides that if the limit of insurance equals or exceeds the agreed value stated in the declarations, losses will be paid in full up to the limit of insurance.-TRUE: The agreed value option provides that if the limit of insurance equals or exceeds the agreed value stated in the declarations, losses will be paid in full up to the limit of insurance.
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T or F: The building definition in the BPP is restricted to a structure with four walls and a roof.-FALSE. It can be any structure, such as a three-story parking garage with no walls, if it is described in the declarations.
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T or F: The business income insured is limited to 80 percent, 90 percent, and 100 percent as its only coinsurance percentage options.-FALSE. The insured may choose business income coinsurance percentages of 50, 60, 70, 80, 90, 100 or 125 percent.
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T or F: The business income limit of insurance should equal the EML or the amount necessary to satisfy the coinsurance requirement, whichever is higher.-TRUE. The business income limit of insurance SHOULD equal the EML or the amount necessary to satisfy the coinsurance requirement, whichever is higher.
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T or F: The coinsurance basis (business income) is just about always a reasonable approximation of EML.-FALSE. The coinsurance basis, referred as the "business income exposure for 12 months" in the worksheet, is NOT necessarily a reasonable approximation of EML. The maximum interruption period is almost never precisely 12 months.
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T or F: The coinsurance condition applies to both business income and extra expense coverages.-FALSE. The Coinsurance condition applies only to business income coverage, not to extra expense.
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T or F: The deductible comes off the loss, not the limit of insurance.-TRUE. The deductible DOES come off the loss, not the limit of insurance.
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T or F: The dependent properties endorsements (business income) require that operations at the specified location be shut down.-FALSE. The dependent properties endorsements (business income) do NOT require that operations at the specified location be shut down.
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T or F: The earthquake deductible is calculated for, and applied separately to, each item insured.-TRUE. The earthquake deductible IS calculated for, and applied separately to, each item insured.
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T or F: The earthquake endorsements exclude coverage for loss to masonry veneer unless the veneer is limited to 50 percent or less of the exterior wall area.-FALSE. The earthquake endorsements exclude coverage for loss to masonry veneer unless the veneer is limited to a mere 10 percent or less of the exterior wall area.
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T or F: The elimination deductible applies to Civil Authority additional coverage (Business Income)-TRUE. The 72-hour waiting period also applies to this additional coverage.
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T or F: The extra cost of complying with building/zoning laws/codes is considered part of the business income and extra expense loss exposure.-FALSE. The extra cost of complying with these laws is not considered part of the business income and extra expense loss exposure; however, the delay caused by having to meet these requirements must be taken into account when estimating maximum business income and extra expense losses.
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T or F: The flood endorsement does not cover all of the causes of loss excluded by the Water exclusion found in the commercial property causes of loss forms.-TRUE. The flood endorsement does not cover all of the causes of loss excluded by the Water exclusion found in the commercial property causes of loss forms. The Water exclusion is often referred to as a flood exclusion, but it excludes more than flood, surface water, and mudslide.
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T or F: The inception date of a builders risk policy is required to be no later than the date construction starts above the level of the lowest basement floor, or, if there is no basement, the date construction starts.-TRUE. The inception date of a builders risk policy is required to be no later than the date construction starts above the level of the lowest basement floor, or, if there is no basement, the date construction starts. This rule helps the insurer earn an adequate premium for the risk assumed. In the absence of this rule, insureds who are willing to retain the risk themselves for the first few weeks or months of a building project (when covered property's value is low) could select a later inception date to reduce the earned policy's premium. To earn an adequate premium, the insurer must earn premium over the project's duration.
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T or F: The insurance needs of a condominium association are opposite of those of the building insurance needs of a building owner/landlord.-FALSE. The insurance needs of a condominium association are similar to the building insurance needs of a building owner/landlord. Similarly, the needs of a condominium unit owner are similar to the personal property insurance needs of a tenant.
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T or F: The insurer reserves the right to reduce its payment for business income loss to the extent that the insured can resume operations in whole or in part using damaged or undamaged property at the described premises or elsewhere.-TRUE. The insurer reserves the right to reduce its payment for business income loss to the extent that the insured can resume operations in whole or in part using damaged or undamaged property at the described premises or elsewhere.
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T or F: The most common arrangement is for the landlord to carry insurance on the building, including the landlord's interest in the improvements and betterments, while the tenant insures its use interest in the same property.-TRUE. The most common arrangement IS for the landlord to carry insurance on the building, including the landlord's interest in the improvements and betterments, while the tenant insures its use interest in the same property.
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T or F: The period of restoration for Alterations and New Buildings additional coverage is subject to the same elimination deductible (72-hour waiting period) as regular Business Income coverage.-FALSE. The period of restoration for Alterations and New Buildings additional coverage is NOT subject to the same elimination deductible (72-hour waiting period) as regular Business Income coverage.
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T or F: The rate for the Legal Liability Coverage Form is lower than the rate for direct property insurance.-TRUE. The rate for the Legal Liability Coverage Form IS lower than the rate for direct property insurance, because the insurer is obligated to pay only when the insured is liable for the damage.
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T or F: The standard valuation provision for most property covered by the BPP is replacement cost.-FALSE. The standard valuation provision for most property covered by the BPP is ACV.
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T or F: The steam boiler explosion exclusion in commercial property policies does not extend to explosion of unfired pressure vessels, which is therefore covered under commercial property forms and usually excluded under equipment breakdown policies-TRUE. T or F: The steam boiler explosion exclusion in commercial property policies does not extend to explosion of unfired pressure vessels, which is therefore covered under commercial property forms and usually excluded under equipment breakdown policies
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T or F: The volcanic action peril covers costs to remove volcanic debris unless the debris has caused physical loss or damage-FALSE. The volcanic action peril does NOT cover costs to remove volcanic debris unless the debris has caused physical loss or damage
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T or F: There are multiple types of 'Free on Board' terms of sale designations available.-TRUE. Could be FOB Point of Origin, FOB Destination, FOB Vessel, etc.
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T or F: Today, very few classes of inland marine insurance remain exempt from filing requirements.-FALSE. Today, many classes of inland marine insurance remain exempt from filing requirements.
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T or F: Under condominium statutes or agreements, the condominium association is usually obligated to maintain insurance for the unit owners' benefit.-TRUE. Under condominium statutes or agreements, the condominium association IS usually obligated to maintain insurance for the unit owners' benefit.
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T or F: Under output policies, building coverage often extends to materials and equipment within 1,000 feet of the described premises rather than 100 feet.-TRUE. Under output policies, building coverage often extends to materials and equipment within 1,000 feet of the described premises rather than 100 feet.
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T or F: Underground foundations, underground pipes, flues, drains, and similar types of property excluded by the BPP are automatically included in Earthquake & Volcanic Eruption Coverage Endorsement-FALSE. These must be added using the Additional Covered Property endorsement.
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T or F: Volcanic action is distinct from volcanic eruption.-TRUE. Earth Movement exclusion excludes coverage for "volcanic eruption, explosion or effusion" but by exception allows coverage for resulting damage caused by volcanic action, as defined, or by fire,
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T or F: When a carrier transports goods, the carrier may be held responsible for any damage or loss that occurs to the goods.-TRUE. When a carrier transports goods, the carrier MAY be held responsible for any damage or loss that occurs to the goods, thus providing a source of recovery for the owner.
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T or F: When higher than 80 percent coinsurance applies, the rate is reduced.-TRUE. With 90 percent coinsurance on building or contents insurance, the 80 percent coinsurance rate is typically reduced by 5 percent. With 100 percent coinsurance, the 80 percent coinsurance rate is typically reduced by 10 percent. Therefore, an insured who agrees to 100 percent coinsurance pays a premium rate that is 10 percent lower than what the rate would have been for 80 percent coinsurance.
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T or F: With blanket insurance, a single limit of insurance applies to two or more items of covered property.-TRUE. With blanket insurance, a single limit of insurance DOES apply to two or more items of covered property.
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T or F: some types of surety bonds may be cancelable-TRUE. Some types of surety bonds are cancelable.
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Techniques: - Avoidance - Loss Prevention - Loss Reduction - Separation - Duplication Diversification
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Techniques: - Retention Transfer
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Tenant Move Back Expenses-ISO Market Segments Program endorsement
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Terminal coverage is usually limited to a certain time period, such as 72 hours.
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Termination as to Any Employee condition (employee theft)-Provides automatic termination of employee theft coverage with respect to any employee who has committed a dishonest act as soon as the act is known to the insured or any partner, officer, director, etc. not in collusion with the employee. Also, the condition gives the insurer the right to cancel coverage with respect to any employee by providing 30 days' advance notice to the insured.
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The Builders Risk Coverage Form may be used to insure any building in the course of construction, including buildings such as farm buildings and dwellings that will not be eligible for coverage under the BPP when construction is completed.
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The Condominium Association Form clarifies the distinction between personal property insured by the association and that insured by individual unit owners:-* The CACF covers business personal property that is owned by the association or that is indivisibly owned by all unit owners. * The CACF does NOT cover business personal property that is individually owned by a unit owner.
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The Debris Removal additional coverage includes the cost to clean up pollution at the insured's premises caused by an insured peril.
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The Nationwide Marine Definition states that a DIC policy, to be considered inland marine, must exclude these perils:-Fire, windstorm, hail, smoke, explosion, riot, riot attending a strike or civil commotion, aircraft, and vehicles.
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The SPP is a self-contained monoline policy containing all necessary policy provisions in a single document. Only a completed dec page is needed to complete the contract. As a result, the SPP cannot be part of a package policy. Any additional coverages, such as general liability coverage, must be obtained separately.
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The Special Form is generally regarded as covering only fortuitous loss.
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The Value Reporting Form replaces the Coinsurance condition of the BPP with a Full Reporting provision, which stipulates that if the last report showed less than the full value of covered property at the affected location on the report date, then the insurer would pay claims according to this formula:-Insurer's payment (not to exceed limit) = ((Value reported / actual value) x Loss) - Deductible
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The ___________ of a business interruption is directly related to the time required to replace damaged property plus the time required to restore the normal level of operations.-Duration
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The agreed value option avoids any coinsurance penalty, and if separate locations are involved that are not subject to the same loss, the damage of underinsurance is greatly reduced.
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The answer to the question "How much could a business interruption cost?" depends on:-* Anticipated revenue and expense figures * How long business income is reduced (or extra expenses are incurred) * Seasonal fluctuations in business income
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The broad definition encompasses all types of commercial property insurance, such as commercial property, crime, and inland marine insurance
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The buyer assumes responsibility for loss as soon as the goods are placed aboard the vessel at the port named in the terms, sucha s "FOB Vessel, Port of San Diego."
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The buyer assumes responsibility for loss as soon as the goods are placed alongside the vessel at the port named in the terms, such as "FAS Vessel, Port of Los Angeles."
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The buyer takes delivery of the goods at the point of origin specified in the terms, such as "Ex Warehouse, Philadelphia." The buyer is responsible for any loss that occurs after taking delivery of the goods.
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The carrier transporting the property from one place to another may be held legally liable for loss of or damage to the property in its custody. Motor truck carriers can insure this liability loss exposure by purchasing a motor truck cargo liability policy.
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The categories of supply properties that can be checked off are water supply, communication supply, and power supply.
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The chief advantage of this optional coverage is that it is uncomplicated. It is a reasonable alternative for organizations that are unlikely to sustain a business interruption of more than four months.
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The coinsurance basis is the sum of the insured's estimated net income and operating expenses for the 12 months following policy inception, minus only those expenses listed in the form as deductions.
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The coverage extends to the cost of removing debris from the premises (including both the building and the grounds), not just from covered property as is the case with NFIP policies
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The coverage territory is the United States, Puerto Rico, and Canada. Property located in other parts of the world is not insured unless the coverage territory is modified.
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The difference between revenues (such as money received for goods and services) and expenses (such as money paid for merchandise, rent, and insurance)
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The endorsement excludes property exported to or held for sale in the foreign coverage territory.
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The endorsement extends business income and/or extra expense coverage to encompass the increased period of suspension of operations brought about by the enforcement of building laws. Moreover, the period of restoration is redefined to include the added time necessary to replace damaged property with replacement property that complies with the minimum standards of the law.
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The endorsement includes an Extended Business Income (EBI) provision that replaces the regular EBI provision of the business income coverage forms. The modified EBI provision states that if damaged property is actually repaired, rebuilt, or replaced within 60 days or less before the scheduled opening of the next school term, the policy will cover the actual loss of business income sustained during that entire school term.
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The enforcement of any ordinance or law (1) regulating the construction, use or repair of any property; or (2) Requiring the tearing down of any property, including the cost of removing its debris.
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The exclusion does not apply to combustion explosion or resulting loss by fire. An important nuance of this exclusion is that it does not apply to steam boiler explosions when the boiler or other steam equipment is not owned or leased by the insured or operated under the insured's control.
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The extension applies only to "your personal property" that is in or on a motor vehicle that the named insured owns, leases, or operates, while between points in the coverage territory.
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The flame or glow requirement may not be met when a substance merely smokes because of a buildup of heat but does not actually flame or glow.
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The flame or glow requirement-Courts have generally held that a fire must involve a flame or glow and rapid oxidation.
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The form notes that "The values you report do not change your limits of insurance. If values exceed or come close to your limits of insurance, contact your agent or broker. You may need additional insurance."
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The insured may be required to insure materials and supplies owned by others. When the value of such property exceeds the limit of the extension, a higher limit can be specified in the declarations if the insured is required to provide coverage.
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The insured using a Value Reporting Form must file the required report within how many days after the end of each reporting period?-30 days
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The insurer also agrees to pay expenses the insured incurs to reduce the amount of spoilage loss, not to exceed the amount that would otherwise have been payable.
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The insurer may exercise its right to take action against the bailee to recover the amount paid to the insured.
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The insurer will not pay more under each overage than the limit of insurance applicable to that coverage.
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The interruption of service must be caused by direct physical loss or damage by a covered cause of loss to a type of supply property that has been checked off in the endorsement's schedule.
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The legal liability rate that an insurer charges for real property is generally 25 percent of the 8 percent coinsurance building rate that would otherwise apply, and the legal liability rate for personal property is generally 50 percent of the 80 percent coinsurance contents rate.
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The limit on all property covered by this extension (personal effects and property of others) is $2,500 at each described location.
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The most the insurer will pay for each period of 30 consecutive days is the actual business income loss sustained, not to exceed the limit of insurance times the fraction shown in the declarations.
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The objective of calculating the EML is to estimate the largest loss that could occur in the future.
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The period of restoration (business income) ends on the earlier of these dates:-(1) When the property should, with "reasonable speed and similar quality" be repaired or replaced, or (2) When business is resumed at a new permanent location
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The principle exclusions of a cargo policy are called warranties, but they are equivalent to exclusions in a non marine policy. The 3 principal warranties are:-Free of capture and seizure (FC&S) warranty Strikes, riots, and civil commotion (SR&CC warranty Delay clause
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The reason a liability form is included in the commercial property division is that fire is the major cause of property loss for which the insured could be held liable.
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The removal expenses will be paid only if they are reported in writing within 180 days after the loss. The most that the insurer will pay for such debris removal is 25 percent of the sum of the direct loss payment plus the deductible amount. Because this amount may not be sufficient in some cases, an additional $10,000 limit per location is provided if the direct loss plus debris removal expense exceeds the limits of insurance or the debris removal expense exceeds the 25 percent limitation of direct losses.
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The safest approach to estimating the potential severity fo business income losses-Assume a worst-case scenario - that is, a shutdown at the worst possible time of the year, lasting for the maximum amount of time it would take to replace a destroyed building and equipment, restore inventory and personnel to their pre-loss status, and regain lost customers. (This is referred to as the Estimated Maximum Loss.)
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The seller quotes a price that includes the cost of insurance and all transportation charges (freight) incurred to the named destination. The buyer assumes responsibility for loss or damage as soon as the goods are placed into the custody of the ocean carrier or delivered on board the vessel.
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The standard ISO commercial property wording encompasses only the property that meets the policy definitions of "building" and "business personal property"
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The word "included" shown beside a coverage in the declarations of an equipment breakdown policy means that-The limit shown for that coverage is part of, not in addition to, the limit per breakdown.
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Theft of Building Materials limitation (Special Form)-The BPP's description of covered building property includes building materials and supplies on or within 100 feet of the described premises, to be used for making additions, alterations, or repairs to the insured building or structure. A Special Form limitation excludes theft of such materials and supplies until they are attached to the building or structure.
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Theft that an employee commits against his or her own employer
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Then, determine the limit of insurance by multiplying the coinsurance percent by the coinsurance basis:
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There are 3 basic endorsements available for insuring dependent property exposures: * Business Income from Dependent Properties - Broad Form * Business Income from Dependent Properties - Limited Form * Extra Expense from Dependent Properties
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There are 3 coverages available under this endorsement: 1) Provides an additional limit of insurance to cover the increased cost of replacing damaged property with more environmentally sound materials or methods 2) Provides an additional amount for expenses related to green updates 3) (If Business Income or Extra Expense is included) Extends the period of restoration by up to thirty days for any increased construction time due to the use of green upgrades
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There are 5 exceptions to common carrier liability: * Acts of God * Acts of a public enemy * Exercise of public authority * Shipper's fault or neglect * Inherent vice
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These expenses must be reported in writing within 180 days after the loss. An aggregate limit of $10,000 per location applies to all such expenses that occur during each separate twelve-month period.
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These programs usually include general liability workers compensation, and other coverages, such as umbrella, in addition to property coverage. They are used on large construction projects.
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This also includes temps and leased employees (except outside the insured's premises), plus the insured's corporate directors, managers (if an LLC), officers, or trustees while performing duties.
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This difference is important because subtracting the deductible from the loss before multiplying results in a slightly higher recovery.
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This endorsement also states that the insurer will cover, within the limit of insurance, the costs incurred by the insured in taking the measures just described.
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This endorsement extends the insured's business personal property coverage to include certain property in, or en route to or from, a foreign coverage territory. The endorsement schedule provides a blank space to list a specific foreign territory or a box to select all foreign territories.
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This endorsement might be useful when insuring older machinery or equipment that is no longer available, such as a machine that has been superseded by a newer, more efficient, less-expensive model.
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This exclusion also applies when an employee designs unauthorized instructions to defraud the employer.
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This exclusion does NOT apply under insurance agreement 5 (Outside the Premises) to the types of threats that might be made against a messenger in a typical robbery.
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This feature can eliminate the need for purchasing a separate installation floater.
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This feature is important for insureds that have multiple locations that frequently change during the policy year. With a few exceptions, standard commercial property policies cover only personal property at listed locations.
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This is a type of bailee liability policy, which covers loss by an insured peril to property in the bailee's care, custody, or control only if the bailee is legally liable for the loss.
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This limit is the most the insurer will pay even if the fungus resulting form a particular loss continues or recurs in a later policy period.
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This may yield a significantly different EML if the firm's operations are rapidly changing.
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Three general approaches appearing in condominium statutes and agreements are these:-* The bare-walls concept * The single-entity concept * The all-in concept
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Thus, both intent and motive must be established for a loss to be considered vandalism. (Vandalism, in contrast to riot and civil commotion, may involve only one person.)
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Thus, if the sum of the building and contents listed in the statement of values is $2 million and the policies specifies a margin of 20 percent, the most that the insured could collect for any one loss at that location is $2.4 million. Without a margin clause, an insured could theoretically collect the entire blanket limit for a los at one location.
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Thus, the DIC exclusion of these exposures should be coordinated with any equipment breakdown (boiler and machinery) coverage the insured has.
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Thus, to meet coinsurance requirements, the insured with blanket insurance must buy more insurance than otherwise would be required.
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Time deductible-Used for time element coverages. Referes to the insurer not being liable for any loss occurring during the specified number of hours or days immediately following the breakdown
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Title insurance-Insurance that protects against loss resulting from defects in a title to real property
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To be eligible for blanket business income insurance, all premises must be substantially owned, managed, or controlled by the insured.
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To determine whether one or more of the Basic, Broad, and Special causes of loss forms would cover a particular loss, insurance professionals need to do four things:-* Understand the coverage provided under each insuring agreement * Determine whether any exclusions apply that would preclude coverage * Ascertain whether other policy provisions eliminate or limit the coverage provided * Determine whether any optional coverages (endorsements) affect coverage
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Transfer of Rights of Recovery Against Others to Us (the Subrogation Condition)-After an insurer has paid its insured for damage to covered property, the insurer has the right to seek recovery from any responsible third party to the extent of the payment made to its insured. The insured is not permitted to take any action that will hinder the insurer's ability to recover from the third party; except:
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Transfer or Surrender of Property exclusion (to INside the Premises commercial crime coverage)-Excludes transfer or surrender of property to someone outside the premises because of unauthorized instructions or any of several different types of threats against the insured. Many unauthorized instructions losses involve computer fraud, which is excluded because it can be insured under the Computer Fraud insuring agreement.
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Transfer-Involves generating funds from outside the organization to pay for losses and includes insurance and noninsurance transfer. (Risk financing technique.)
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Transportation loss exposures (inland marine)-The possibility of loss to property being transported (does not refer to the conveyances on which that property is carried.)
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Trip transit insurance-Purchased by infrequent shippers, trip transit insurance covers the particular shipment of goods specified in the policy.
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Trip transit policy-Policy that covers a particular shipment of goods specified in the policy. Depending on where the shipment is going, the policy may be inland marine or ocean marine. A trip transit policy is commonly used to cover property such as a valuable piece of machinery being moved from its place of manufacture to its place of use.
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Two ISO endorsements available for addition earthquake and volcanic eruption as covered perils under a commercial property coverage part:-* CP 10 40, Earthquake and Volcanic Eruption Endorsement * CP 10 45, Earthquake and Volcanic Eruption Endorsement (Sub-Limit Form)
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Two coverage extensions for Builders Risk Coverage Form:-* Building Materials and Supplies of Others * Sod, Trees, Shrubs, and Plants
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Two general categories: judicial bonds and fiduciary bonds.
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Two of the most important types of equipment floaters cover these types of property: - Contractors equipment - Electronic data processing equipment
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Two retroactive date endorsements that limit a discovery form (commercial crime insurance)-* Provide Limited Coverage for Loss Occurring Before Retroactive Date * Include Retroactive Date
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Two versions of the crime coverage forms/policies-Loss sustained and discovery
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Types of dealers eligible for inland marine dealers policies-Jewelers Equipment (farm or construction) dealers Fine arts dealers Furriers Camera dealers Musical instrument dealers Stamp and coin dealers Dealers of any other property that, when sold to the ultimate purchaser, mayb e covered, by the owner, under an inland marine policy
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Types of provisions added by ISO's Market Segments Program endorsements-- Provisions that add higher limits for coverage extensions or additional coverages - Provisions that add coverages available in other ISO forms - Provisions that add coverages not found in any other ISO forms
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Typically for one year after completion
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Typically, bonds allowing cancellation require the surety to give notice of cancellation to the obligee. Cancellation becomes effective a certain number of days thereafter as stipulated in the bond itself or provided by law or regulation.
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U.S. Carriage of Goods by Sea Act (COGSA)-Specifies a common carrier's liability for goods shipped in foreign trade to or from the U.S. By sea. COGSA excuses the carrier from liability for loss caused by any "act, neglect, or default" of the master or crew in navigation or management of the vessel; perils of the seas; and several other occurrences.
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Unauthorized Instructions exclusion (Special Form)-Eliminates coverage for property transferred to a person or place outside the described premises on the basis of unauthorized instructions.
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Unauthorized Reproduction of Computer Software by Employees - additional insuring agreement of commercial crime insurance-Can protect insureds against the cost of fines and penalties for the unauthorized reproduction of computer software by an employee in violation of a licensing agreement with a third-party vendor. (Must be without the knowledge of the insured, any of the insured's partners, LLC members, etc.)
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Uncollected funds exclusion (Bond Form 24)-Eliminates coverage for loss involving items of deposit that "are not finally paid for any reason"
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Under ISO Commercial Lines Manual (CLM) policywriting rules, widely used by insurers, one of the coverage parts of a CPP must cover buildings and/or business personal property, and another must cover commercial general liability.
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Under this program, the SBA does not issue surety bonds. It merely guarantees to reimburse a participating surety for a stipulated portion - such as 70, 80, or 90 percent - of any loss sustained.
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Unexplained Disappearance exclusion (Special Form)-Excludes loss of property if no physical evidence is available to explain the loss.
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Unfired pressure vessel-A closed vessel that can withstand internal pressure or vacuum but is not heated by the direct fire of burning fuel
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Unintentional errors clause - HPR policies-Provides coverage for properties that have been unintentionally omitted or erroneously described in the listing of covered locations.
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Unit owners are also permitted to purchase insurance at their own expense for their own benefit. Such insurance is usually excess over the association's insurance.
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Unit-Owner's Insurance condition - how it differs for the Condominium Association Coverage Form-If a unit owner has coverage applying to the same property covered by the association's policy, the association's policy is primary.
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Unlawful taking (definition as part of Employee Theft coverage)-An act that is not authorized by law or is a violation of a civil or criminal law.
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Unlike blanket building and contents insurance, which requires at least 90 percent coinsurance, blanket business income coverage may be written with any coinsurance percentage. Insureds do not pay a surcharge for blanket coverage.
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Upgraded value-The cost to replace covered equipment with the latest comparable state-of-the-art equipment available; can be used as a valuation basis in an EDP floater.
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Utility Services - Direct Damage endorsement-A commercial property endorsement that covers damage to covered property caused by the interruption of utility services (water, communications, or power) to the insured premises
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Utility Services - Time Element endorsement-An endorsement that covers loss of business income or extra expense at the insured premises caused by the interruption of utility services (water, communications, or power) to the insured premises.
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Utility Services exclusion (basic and broad causes of loss forms)-Eliminates coverage for loss caused by the failure of power, communication, water, or other utility service supplied to the described location, in either of these circumstances: * The failure originates away from the described location * The failure originates at the described location, but only if the failure involves equipment used to supply the utility service to the described location from a source off the described location.
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Vacancy condition-IF the building in which the loss occurs has been vacant for sixty consecutive days before the loss, the insurer is not obligated to pay for loss caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft.
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Valuable Papers and Records (Other Than Electronic Data) coverage extension (BPP)-This extension provides $2,500 of coverage for the cost of researching or reconstructing the lost information, but it does not apply to electronic data.
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Valuable papers and records-Include, but are not limited to, proprietary information, books of account, deeds, manuscripts, abstracts, drawings, and card index systems. (Excluded in the BPP)
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Value Reporting Form-A commercial property form that bases the insured's premium for business personal property on the values that the insured reports to the insurer periodically during the policy period.
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Value of the smoke peril-It extends coverage to smoke resulting from friendly fires, such as smoke from a fireplace or furnace
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Valued Business Income Form - an alternate approach (to the acutal-loss-sustained approach) in the Business Income form-The insurer pays an agreed amount for each day, week, or month that the insured business is shut down (instead of the actual loss sustained)
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Vandalism (cause of loss)-Willful and malicious damage to, or destruction of, the described property.
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Volcanic action (cause of loss)-Direct loss or damage resulting from the eruption of a volcano when the loss or damage is caused by: a) Airborne volcanic blast or airborne shock waves b) Ash, dust or particulate matter; or c) Lava flow
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Voluntary Parting exclusion (Special Form)-Eliminates coverage if the insured or anyone else to whom the insured has entrusted covered property (such as an employee or a bailee) voluntarily hands the property over to another as the result of "any fraudulent scheme, trick, device or false pretense".
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WR (Value Reporting Form)-Code letters for "values as of the last day of the week reported monthly"
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Waiver of Rights of Recover condition - how it differs for the Condominium Association Coverage Form-In the Waiver of Rights of Recovery condition, the insurer agrees not to subrogate against any unit owner.
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Warehouse legal liability insurance (a type of inland marine liability insurance)-Covers a warehouse operator's legal liability for damage to property of others being stored in the warehouse
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Warehouse operators legal liability policy-Policy that covers warehouse operators against liability for damage to the property of others being stored in operators' warehouses.
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Warehouse to warehouse coverage-Clause in open cargo policies that covers the insured cargo during the ordinary course of transit (including land transit) from the time the cargo laves the point of shipment until it is delivered to its final destination.
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Water Damage peril (cause of loss)-Covers damage caused by accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of a plumbing, heating, air conditioning, or other system or appliance located on the described premises.
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Water Damage, Other Liquids, Powder or Molten Material Damage (Special Form extension)-Clarifies that the Special Form will pay the cost of tearing out and replacing any part of the building to repair damage ot a system or an appliance from which water or other liquid, powder, or molten material has escaped and caused damage.
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Water exclusion (basic and broad causes of loss forms)-Precludes coverage for flood-type losses and is therefore commonly referred to as the flood exclusion. The exclusion also applies to mudslide or mudflow; underground water that seeps into a basement; and water that backs up from sewers, drains, or sumps.
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What constitutes a "single occurrence" as far as volcanic action is concerned?-All volcanic eruptions that occur within any 168-hour period (7 consecutive days) will be considered a single occurrence.
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What happens to the insured's rights and duties under a policy if an individual named insured dies?-The insured's rights and duties under the policy are automatically transferred to the insured's legal representatives, or, if the insured's legal representatives have not yet been appointed, to any person having proper temporary custody of the insured property.
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What is its coinsurance percentage, and what limit of insurance should be purchased?-To determine the coinsurance percentage, divide the EML by the coinsurance basis:
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What is the main purpose of several inland marine forms?-To cover property in the course of transit. Inland marine policies almost always provide an element of coverage for property in transit or at locations other than the insured's premises.
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What qualifies as "employee dishonesty"?-To reduce this broad scope of coverage, employee dishonesty forms typically require that the employee must have acted with "manifest intent" (that is, evident intent) to (1) cause a loss to the insured and (2) obtain financial benefit for the employee or for another person or entitty that employee wants to receive the benefit. Furthermore, the financial benefit must be something other than wages, commisssions, or other employee benefits. Sometimes referred to as a "dual trigger" or a "triple trigger", all elements of manifest intent must be present in order for employee dishonesty coverage to apply.
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When a carrier wants to limit its amount of cargo liability, such limitations are usually expressed in the bill of lading, which is the contract of carriage between the carrier and the shipper. (In a so-called 'released bill of lading', the carrier charges a lower freight rate if, in return, the shipper agrees to accept a limitation on how much the shipper can recover from the carrier if the carrier becomes liable for cargo loss.
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When the Causes of Loss - Special Form is attached to the Builders Risk Coverage Form, what additional coverage results?-The insured receives $5,000 coverage for property in transit on the insured's own vehicles. (This is otherwise excluded)
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When the covered peril that causes fungus, wet rot, dry rot, or bacteria damage results in a suspension of operations, the 30 day limit applies to the time that the period of restoration is increased by the fungus, wet rot, dry rot, or bacteria damage.
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When the endorsement becomes effective, the insured must submit a business income worksheet to the insurer showing business income values for the insured's latest available 12 months' operating experience.
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Where employee theft coverage applies-United States (including its territories and possessions), Puerto Rico, and Canada. Coverage also applies to loss caused by an employee who is temporarily outside the covered territory for not more than ninety consecutive days.
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Why is business income coverage considered a "time element" coverage?-Because the severity of a business income loss is directly related to the length of time required to restore the property.
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With the NFIP, residential condominium associations can purchase building coverage up to how much?-$250,000.00
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With the exception of mail insurance, all of these are nonfiled classes of business in most states.
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Within 120 days following each successive period of 12 months, the insured must submit a report of actual business income values for that period. Based on the reports, the premium is adjusted to reflect actual business income values. The endorsement does not suspend the Coinsurance condition.
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Write Your Own (WYO)-A program allowing private insurers to write flood insurance under the National Flood Insurance Program (NFIP)
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a.k.a.
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committed by an "employee" acting alone or in collusion with other persons.
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coverage extension: *Newly Acquired Locations coverage extension
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e.g.: The insured's business was interrupted for six days because of a breakdown to covered equipment. If the breakdown had not occurred, the business income for those six days would have been $30,000. If the business income and extra expense deductible is three times the daily value, the amount of the deductible would be calculated in these two steps:
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leaving out:
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or the unlawful taking of a safe or vault from inside the premises.
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• Coinsurance-Generally applies only to time element coverages • Must complete an annual report of values if you have equipment breakdown business income/extra expense coverage Operates as a 100% coinsurance clause
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• Conditions-Valuation • Coinsurance • Policy Period, Coverage Territory • Premium and Adjustments • Suspension • Joint or Disputed Loss Agreement Jurisdictional Inspections
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• Each coverage part of the CPP consists of these 4 components:-One or more declarations forms • One or more coverage forms • For some lines of insurance, a general conditions form Any applicable endorsements
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• Equipment built to operate under internal pressure or vacuum other than weight of contents • Electrical or mechanical equipment that is used in the generation, transmission, or utilization of energy • Communication equipment, and "Computer Equipment", and Equipment in the above categories that is owned by a public or private utility and used solely to supply utility services to your premises
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• Excluded types of equipment-"Media" • Part of pressure or vacuum equipment that is not under internal pressure of its contents or internal vacuum • Insulating or refractory materials, but not excluding the glass lining of any "Covered Equipment" • Non-metallic pressure or vacuum equipment • Catalyst • Vessels, piping, and other equipment that is buried below ground • Structure, foundation, cabinet or compartment support covered equipment • Vehicle, aircraft, self-propelled equipment or floating vessel including any covered equipment • Dragline, excavation, or construction equipment including any covered equipment • Felt, wire, screen, die, extrusion plate, swing hammer, grinding disc, cutting blade, non-electrical cable, chain, belt, rope, clutch plate, brake pad, non-metal part or any part or tool subject to periodic replacement
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• Exclusions for perils usually insured in other policies-Fire or combustion explosion that results in a breakdown, that occurs at the same time as a breakdown, or that ensues from a breakdown • Water or other means of extinguishing a fire • Breakdown caused by any of the following perils if coverage for that peril is provided by another policy of the insured's, whether collectible or not: aircraft or vehicles; freezing caused by cold weather; lightning; sinkhole collapse; smoke; riot; civil commotion; or vandalism; or weight of snow, ice, or sleet • Breakdown caused by windstorm or hail • Business income, extra expense, or utility interruption coverage for: ◦ Business that would not or could not have been conducted if the breakdown had not occurred ◦ The insured's failure to use due diligence and dispatch in operating the business The suspension, lapse, or cancellation of a contract
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• Exclusions similar to commercial property exclusions-Ordinance or law • Earth movement • Water • Nuclear hazard • War or military action • Wear and tear or gradual deterioration (unless a breakdown occurs) • Neglect to use all reasonable means to save covered property from further damage at and after the time of a loss Fungus, wet rot, and dry rot
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• Insuring agreements-Property Damage • Expediting Expense • Business Income and Extra Expense - Or Extra Expense Only • Spoilage Damage • Utility Interruption • Newly Acquired Premises • Ordinance or Law Coverage • Errors and Omissions • Brands and Labels Contingent Business Income and Extra Expense - Or Extra Expense Only
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• Limits-One overall limit, which is the most that the insurer will pay for loss or damage from any one breakdown ("limit per breakdown") - typically equal to the covered property's value (if one location) or maximum possible loss at highest valued location • Additionally, separate limits may be shown for some of the insuring agreements, such as equipment breakdown business income coverage. • Sublimits of $25,000 are common for the following: ◦ Spoilage damage to covered property resulting from ammonia contamination ◦ Reduction in value of undamaged parts of a product that becomes unmarketable ◦ Cost to research, replace, or restore, damaged computer data or media, including the cost to reprogram instructions used in any computer equipment ◦ Additional expenses the insure dincurs to clean up, repair, replace, or dispose of covered property that is damaged or contaminated by a hazardous substance ◦ Damage to covered property by water (no coverage applies when it results from leakage of a sprinkler system or domestic water piping) Fungus, Wet Rot, Dry Rot: $15,000 aggregate limit (unless shown otherwise in decs)
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• Policy Period, Coverage Territory-Policy period shown in decs Loss or damage must occur w/in coverage territory of U.S. Et al.
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• Valuation-Replacement Cost basis • If not repaired or replaced w/in 24 months after the time of loss, the insurer will pay no more than (1) what it would have cost to repair the property at the time of loss, or (2) the property's ACV at th etime of loss, whichever amount is less • Property held for sale is valued at selling price, less discounts & expenses • The policy provides that the insurer will pay the additional cost to replace covered equipment with equipment that is better for the environment, safer, or more efficient than the equipment being replaced (the most the insurer will pay is an additional 25 percent) Spoilage = replacement cost
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(Compared with loss sustained form, re: commercial crime. Loss sustained is the most commonly used of these two.)
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Discovery form-Form that covers losses discovered during the policy period even though they may have occurred before the policy period.
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Bailor-The owner of the personal property in a bailment
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Fire division-A space in a building that is separated from other spaces in the building by a fire wall
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Fire prevention efforts focus on removing one or more of the four elements.
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Net income loss exposure-A condition that presents the possibility of loss caused by a reduction in net income.
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(1) Electrical or electronic wire, device, appliance, system or network; or (2) Device, appliance, system or network utilizing cellular or satellite technology
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* Required
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Customers' Property Legal Liability-ISO Market Segments Program endorsement
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Planned unit development (homeowners association)-A.k.a., a homeowner's association
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Raises the temperature of steam after it leaves the boiler.
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