CAIB 2 Summary Notes

CAIB II

Chapter 1: Introduction to Commercial Property Insurance

1.      Commercial Property Defined

Residential = Personal Lines

Non-Mercantile, Mercantile, Manufacturing & Industrial = Commercial Property

Property Insured

·         Building    - Fixed Structures, pertaining to the building & located on premises

- Premises = entire area within property lines

- Fixed Structure = permanently erected structures

* Must be linked to the business

* Additions and extensions must be in contact with & communicate with building

* Permanent fittings/fixtures are covered

* Flora and Fauna used for decorations are covered

·         Stock         - Merchandise of every description usual to insured’s business

* The key is “usual’ insured must declare what is stock and what isn’t

- Packing and shipping material is covered

- Similar property belonging to others which insured is responsible

*Conditions 1) Lost/Damaged stock must be similar to insured’s stock

                                2) Insured must have had an obligation to hold the stock

                                3) Must have been legally liable for the stock

·         Equipment  - Generally all contents usual to the business                                                                            (furniture/furnishings/fittings/fixtures/machinery/tools/utensils)

  - Similar property belonging to others, but held by insured (like stock)

*Most leases require proof of insurance – broker must check

Determining Insurance Values

1)      Actual Cash Value (ACV) = Replacement cost – Depreciation

A) Straight Line Depreciation, or Accelerated Depreciation

B) Market Value/Direct Sales: An appraiser will come in to determine value before loss, value after loss, and the land values

* hard to find fair market value after a loss

C) Income Approach, what was the $ generating potential (need an accountant)

D) True Value to Owner, need to have the same utility as before loss (usually more $)

- Broad Evidence Rule, use all 4 ways and come to a conclusion

2) Replacement Value = No depreciation charged when repairing/replacing

3) Book Value = Original sticker price – depreciation (good for older equipment)

2.      Policies (General Information)

- Composite (package) Policies- combo. Packs, all-in-one policy for commercial small business

- Manuscript- Specialized risks need tailored policies

- Reinsurance- ceding part of risk/premium to other insurers, primary takes the lead

- Subscription- no primary, insurers each take a piece that they like, biggest acts as leader

* For a broker, subscription is a pain in the ass, must go to all the companies

- Minimum Premium- so kiss-me-ass policies don’t clutter the office

- Minimum Retained Premium- an amount kept to cover costs of business if cancelled

Common Clauses 

1)      Indemnity Agreement- not exceeding the least of:

A)    ACV of property at time of loss

B)    The interest of the insured in the property suffering loss

C)    Amount of insurance specified on the Declarations Page

* Where insurance applies to property of more than 1 individual, the aggregate  liability insurer will pay is total on the Declaration Page         

2)      Deductible- portion of a loss insured must pay before insured covers (a deterent)

     - one per claim

3)      Co-Insurance- makes sure insured carries enough coverage (usually 80% of ACV)

            Since most claims are small, they can’t take advantage of companies

* Waiver of Co-Insurance: insurer realizes this and makes 2 conditions to waive, 1) loss is not greater than 2% of amount of insurance

            2) not greater than $5,000

4)      Exclusions- Property Excluded/Perils Excluded

    Reasons – to exclude loses resultant from uninsurable acts

·         Deliberate act of violence (war/rebellion/revolution, etc)

·         Nuclear energy related hazard

·         Earthquake/flood/landslide (except by separate policy)

·         Car/plane/pressure vessels (except by extra policy)

5)      Permission – is granted for:

·         For other insurance concurrent with this form (try to manage all insurance need as a broker..easier)

·         To make additions, alterations, or repairs (they tell broker, broker deals with it)

·         To do such work & to keep & use such articles, materials, and supplies in such quantities as to do business (no permission need to do work, but needed to go beyond stated activities)

6)      Breach of Conditions- condition is placed upon insured, making then do/not do an act. 

·         Insurer can refuse to pay if condition breached, unless loss was not caused by breached condition, or breach occurred out of the insured’s control.

7)      Reinstatement – Loss under an item of policy will not affect amount of available   insurance.  Automatic Reinstatement Clause = insureds will have as much insurance after a loss as before for the life of the policy.

8)  Subrogation – Insurer has power to go after 3^rd parties to recoup losses

                          - Insured can sign away rights, insurer hates this

                          - Can’t subrogate one insured against his/her partner, wife, etc., makes 

                                  insurance redundant.

9)       Property Protection Systems

- Insured will notify insurer if interruption/cancellation of alarm/fire system   

- Insured will notify a change in any monitored system

- Insured will notify if ‘suspension of police services’ is in effect 

10)  Premium Adjustment – if insured buys too much stock insurance, insurer aggress to

                           return a portion if:

·         claims for a return made no later than 6 months after expiry

·         claims presented on Premium Adjustment Form showing ACV of stock on the last day of each month, verified by insured’s accountant

11)   Verifications of Values

- Insurer (or rep) can have full access to insured assets at all reasonable times

- The right to inspection extends to a year after expiry

12)  Valuations

- Unsold stock restricted to ACV at time of loss (repaired if cheaper)

- If sold, but not delivered, then sold price stands

13)  Special Basis of Settlement

- Tenants Improvements, and Records are book value only

14)  Property of Others – others property damages under insured’s policy, the insurer

                                               chooses whom to pay

14)  Locked Vehicle Warranty – doors/windows locked & forced entry is proven,

Statutory Conditions

    - Misrepresentation- any false description of property to the prejudice of insurer.  A lie is a misrepresentation of a Material Fact, or twisting/leaving out any facts is fraud.

Additional Conditions

• Notice to Authorities (must tell cops/fire department ASAP)
• Sue & Labour: protect form damage, and pursue lost stuff
• No benefit to bailee: can subrogate bailee of insured’s property
• Pair & Set: lose 1 earring, get 50% value
• Parts; just get the part and installation

Chapter 2.  Underwriting Commercial Property Insurance

1. Role of the Broker in Underwriting

A) Submission is a proposal for insurance and can include: application, verbal information, additional written information (history/financials/claims)

Steps:  1) Completion of Survey – assists in identification of loss exposure

                                                     - eliminates redundant coverage

                        * Commercial property checklist often used by brokers (alerts on exposures)

           

            2) Seek Interested Insurer – market the risk (take to companies for lowest rates)

            3) Arrange Meeting with Prospect – must try to get clients business by offering good

                                                                        fit, or low premium (something)

           

            4) Submit Application – usually not required, insurers can get own info. if needed.

Example: Building Construction

5 classes: 1) fire resistive- passed minimum standards of heat

                2) Non-combustible- can’t burn

                3) Heavy Timber – rare, old buildings

                4) Ordinary – brick/joist and or block/wood (exterior can’t burn)

                5) Frame – supporting walls are wood

Additional information (older than 25 years) – roof/wiring/over-current protection/plumping

B. Common Hazards

• Heat – type of heating appliance/fuel source/chimney important
• Electrical Service – copper is best (superior risks have enclose wiring in conduits)
• Detachment – how close to other commercial rated buildings.
• Protection – private (sprinkler/alarm/extinguishers)

                                    public (distance to hydrant/fire service/police

• Occupancy – who’s in it? Nightclub vs. restaurant vs. retail

C..Special Hazard

                        - Church (candles)

   - Garage (compressor/sprays/paint)

   - Bakery/hotel/restaurant (deep frying/baking)

   - Butcher shops & Locker plants (smoking/rendering)

D..Brokers Statement/Supplementary Information

Broker may be asked to comment on physical condition of premises quality and maintenance, housekeeping, photos, financials, claims history

2. Role of Underwriter in the Underwriting Process

1)      Risk Selection – must take profitable risks (avoid adverse selection)

2)      Risk Classification – grouping risks by classification, based on profitability

                                     - helps find proper premium

3) Rating & Rate Making – determining premium

                                          -  rates change because economic and claims numbers

                                          - Soft Market = intense competition, lower rates

                                          - Hard Market = low profit margins force some out

4) Policyholder Service – changing policies, renewing, and billing quickly

A)    Hazards

i)  Physical Hazards – type of building construction

                                - occupancy

                                - housekeeping (upkeep)

                                - external exposures (location, neighbors)

                                - geography

                                - protection (public/private services)

ii) Moral Hazards    - financial condition

                                 - associates

                                 - moral character

                                 - indifference to loss

                                 - poor management

B)    Developing Additional Underwriting Information

i)                    External Sources: - broker

                                   - government records (look at clients finances)

                                   - financial rating service (credit check)

                                   - consumer investigation reports

ii)   Internal Sources:  - loss experience data

                                    - inspection reports

                                    - field reps.

                                    - claims history (if available)

                                    - production records

                                    - guides and manuals

                                    - other underwriters

Making the Decision

Accept – Reject – Accept at higher rate – Accept at higher deductible –

Ch 3. Commercial Property Insurance – Policy Forms

Issuing the Policy – The Declarations Page (IBC 4000) includes:

• Names of parties to the contract
• Policy period
• Loss payable or payee, if any: list of people loses are payable to
• Types of Insurance coverage(s) and amounts insurer is liable
• Rate and Premium charged (sometimes broken down in parts, or not)
• Subject matter of insurance

The Fire Policy (IFC 10010) – 70,000/year/ 1Bil$

Main causes: mech. Failure/electrical, arson, misuse of ignition fuel

 

Basic Coverage Legislated – must cover lightning, and gas/coal explosion

            Exclusions –    To devices from power surge cause from lightning

-          Damage/loss of goods from application of heat

-          Loss/damage from war/riot/invasion/etc.

-          Any damage from nuclear device/incident

-          Money, bullion, stamps, securities

-          Automobiles/watercraft/amphibious/spacecraft/trailers

-          Property at locations which insured knows are vacant/shut down (30 days)

-          Loss due to enforcement of law or change in by-law

Extensions of Coverage 1) Removal: if moved to protect, then covered for 7 days

                                       2) Debris Removal: is covered.

Fire and Extended Coverage (no standard form)

Perils Insured:

1) Fire & Lightning: extended to cover devices that suffered form surge

2) Explosion Exclusion: Portions containing steam/water under pressure

                                     : Piping & apparatus normally containing steam/water under pressure

                                     : The combustion chambers/fire Boxes in boilers

                                     : Smelt dissolving tanks

                                     : Other vessels/apparatus/pipes operating over 103Kpa (15/lb sq.inch)

                                     : Moving/rotating machinery or parts when loss/damage caused by                            

                                       centrifugal force, mechanical breakdown

                                     : Any vessel/apparatus/pipes damaged during pressure tests

                                     : Gas turbines

3) Impact by Aircraft, Spacecraft, Land Vehicle

                                     : if impact cause by insured, or employee, or own car = no coverage

                                     : impact losses covered only

                                     : includes damage caused by shit dropped by aircraft/spacecraft

4) Riot, Vandalism, or Malicious Acts

            : riot includes striking workers inside and outside premises

exclusions              -    due to cessation of work, or interruption to process or business operations

-          due to flood, or release of water impounded by dam, or due to explosion

-          due to theft, or attempt theft

5) Smoke: only sudden, unusual, and faulty operation of any stationary furnace

6) Leakage from Fire Protective Equipment: when water leaks from system

7) Windstorm or Hail: no $ for a) interior contents, unless happened concurrent to hole

                                                  b) snow-load, ice-load, tidal wave, flood, landslip

Named Perils Form (IBC 4036): mostly same as Fire & EC

Commercial Building, Equipment, and Stock: Broad Form (IBC 4037): all risks basis

Property Excluded: Loss or damage to/from;

1. Sewers/drains/watermains outside bearing walls/foundations.  Communications towers, antenna, and equipment.  Street clocks, exterior signs, exterior glass and lettering.  But damage is covered if caused directly by named perils
2. Property at locations, which to the knowledge of insured, are vacant for 30 straight days.
3. Electrical devices/appliances/wiring damaged from surge.
4. Plants/trees/shrubs/flowers (except if provided in Extensions of Coverage Clause 7e)
5. Animals, fish, birds – must schedule if rare &/or valuable
6. Money, bullion, platinum and other precious shit
7. Automobiles, watercraft, amphibious, air cushion, trailers, planes, helicopter, except if held for sale or for business
8. Furs, jewels, pearls, watches..etc. but not to first 1,000$ of loss or directly lost from named perils.
9. Property while waterborne, except on regular ferry/railroad
10. Property on loan, rented, sold on credit – if insured lends it, no coverage
11. Property in custody of sale agent outside premises (can get at extra premium)
12. Property illegally acquired (nice necklace Shari)
13. Vessels over 15 lbs per square inch (exception; domestic hot water tank under 24” diameter)

Perils Excluded: Not insured against loss by;

1. Earthquake, except for enuing loss/damage which resulted by fire/explosion/smoke/leakage (separate quake from rest is really hard)
2. Flood, including waves/tides/tsunami/overflow of body of water, but loss/damage which results from fire, explosion, smoke, leakage from system is covered.
3. Seepage, Leakage, influx of water from natural sources, and entrance of rain, sleet, snow through windows and roof openings
4. Centrifugal force, mechanical force, or electrical breakdown.
5. Dampness/dryness of atmospheric changes of temperature.
6. By smoke from agricultural smudging or industrial operations.
7. War, invasion, foreign enemy, civil war, rebellion
8. Any nuclear/radioactive incident
9. Any dishonest/criminal act by insured or interested party
10. By enforcing a by law or law enforcement
11. Wear/tear, gradual deterioration, latent defect
12. Mysterious disappearance or shortage of equipment – must prove no peril caused loss
13. Loss/damage sustained to equipment/stock while being worked upon – trade hazard
14. Disturbance/erasure of electronic recordings by electric/magnetic injury (except lightning)

Extensions of Coverage – provides coverage that would otherwise be denied.

• Removal – if u took it away to protect
• Debris removal – clean your shit and others shit that blew on you premises
• Personal Property of officers and employees – 250$/per, and at 1 location
• Building damaged by theft – 2,500$ max. not glass/lettering (must be owner)
• Plants, trees, shrubbery, flowers in the open – 500$ a piece

Commercial insurance Package Policies

Named perils and broad form are popular but now-a-days losing out to package policies.  Package policies are multi-peril, multi-line, and if done right will not require additional coverage.  They usually have property insurance, business interruption, liability insurance, and crime insurance.

Credits:

- Buildings after 1945                 - Sprinklers

- Sole Occupant                          - Increased deductibles

- Claims free with same insurer  - Ground floor under 279m2 (3000sqf.)

Brokers like package policies because it’s a simple application form, costs are determined on the spot, extensive expertise is not required, and it eliminates many claims problems of limited forms.

Ch. 4  Commercial Property Insurance – Additional Coverage

1. Dealing with policy Exclusions

Extended by endorsement, rider, or separate policy

2. Broadening on Premises Coverages

Direct Damage Forms

·         Sign Form: limited to loses caused by named perils only, exterior signs are more expensive than interior signs

·         Glass Rider: Scheduled coverage needs type/size of glass, location of glass (exterior is more$), description of lettering, ornamentation, tape and foil. But no coverage for fire, war, during construction, and if vacant for more than 30 days.

·         Accounts Receivables: All risks covering; Amounts which can’t be collected as a direct result of loss/damage to accounts receivables.  Interest charges on any loan to offset impaired collections pending repayment of such sums made uncollectible by loss/damage.  Collection expense in excess of normal collection costs and made necessary because of such loss/damage.  Other expenses reasonably incurred. Exclusions: caused by electrical and/or magnetism (lightning is covered), and only at specified locations.

·         Valuable Papers and Records Insurance: Not money or Securities, its an ‘all risks’ basis, a blanket policy.  It covers transported papers and those away from specific location.  Exclusion is electrical/magnetism (lightning is covered)

·         Electronic Data Processing Policy: Most insured have this coverage, no standard form, 3 components A) Loss to Data Processing and Equipment: blanket is easier than scheduled.  Coverage is beyond all risks, covers almost anything but only on premises  B) Active Data Processing and Media Programs: Media=disk/tape/cards, Data=software, and coverage is the same as under part A in the above section                 C) Extra Expenses that occur in continuing business, maximum for 2 weeks.

·         Boiler and Machinery Policy:

Named Perils and Broad Form do not cover –boilers/vessels owned by insured over 15lb/inch sq, mechanical/electrical breakdown (can get a special policy)

Coverage for loses arising out of accidents to objects while in use or connected at a covered location, property of insured, or property of others in care of the insured

A)    Limited – explosion only

B)    Comprehensive – explosion, electrical, mechanical breakdown

           

            Basis of Settlement: lesser of repair/replace, and no payment for obsolete crap.

Losses Excluded: Fire, nuclear, war, costs of toxic contamination, earthquake, flood, delay/interruption of business.

Expediting Expenses: insurer pays for necessary temporary repairs to property, amount payable is least of $5,000 or property damage as result of incident.

Unique Features: inspection before and after policy issued, all claims investigated by tech. guys.  And can suspend insurance if deemed to be in serious condition.

·         Earthquake Endorsement: Occurrence basis (all quakes in 72hrs. are covered)

Coverage period restricted, no coverage before endorsement or after expiry, deductible is usually 10% and fire/explosion/flood/theft caused by quake is not covered by this endorsement.

·         Water Escape Endorsement: loss/damage caused by the sudden back-up or escape of water from a sewer, sump, septic tank, eavestrough or downspout.  ACV usually

·         Flood: $1,000 - $10,000 deductible, covers flood, waves, tidal water, rising/overflowing lakes, rivers, reservoirs by wind or not.

Indirect Damage

·         Consequential Loss Assumption Clause – Cold Storage

Loss due to change in temperature.  Only kicks in when direct damage occurs to refrigeration system owned by insured and on the premises.  But not if loss of power causes loss.

·         By-Laws Coverages: Costs to comply with by-laws is insurable.  Increased cost of construction, loss of value to portion of building, and cost of demolition are covered.  Broker must have deep knowledge of local by-laws.

3.      Insuring Off Premises Exposures

·         Temporary Locations: Equipment and stock but only at location not owned by insured.  Usually for property being repaired, being held for pick-up, or being examined.

·         Newly Acquired Location: Equipment/stock at any location owned or controlled by insured.  Opposite of temporary locations coverage.  Covers vehicles within 100m of location.

·         Parcel Post: Any stock/equipment in any 1 package in case of transit by Canada Post.  This is cheaper than insuring each package individually with Canada Post.

·         Other Transit: Equipment/stock in non-post transit.  Things shipped direct from manufacturer, virtually all firms need this.

·         Sales Representative: Equipment/stock in transit or not, but controlled by salesman (custody) is covered.

4.      Miscellaneous Endorsement Forms

·         Installment Sales Contract Floater: coverage for single interest of seller, or dual interest of vendor/vendee.  Coverage done when payments are made.

·         Peak Season Endorsement: an increase in stock values for set periods, like Xmas.  Save in premium because only a few big weeks/months, not all year.

·         Replacement Cost Endorsement: for building/stock/equipment, hard to get, must qualify.  Must be on same site, only paid after items actually get replaced.

·         Inflation Protection Endoresement: building value on policy is adjusted for inflation. At no charge, but renewals have increase too.

·         Fire Department Charges: insurer will pay costs of the department.

·         Vacancy Permit: can cover empty buildings/property. Permit No. 1: if building occupied, but wants to empty for short time.  No. 2: 3/5 value if already empty.

Ch. 5 Commercial Property Insurance – Miscellaneous Property Forms

1. Bailee’s Insurance

Bailee has temporary custody of property of another for purposes other than sale.  Bailee is responsible for ‘ordinary care’, which is the same as a prudent/competent person would give.  Bailee is liable when ‘ordinary care’ is breached, and a bailee can assume even greater liability under contract (having extra coverage makes customers comfortable)

Two Types:    - legal liability ensuring bailee’s liability

- property policy insuring direct loss/damage to customers property      regardless  of fault.

Inland Transportation Insurance

Insurance other than marine, against loss/damage while in transit, or delay incidental to transit.  Insurable interest lies with property owner and carrier of property. 3 Types:

1. Liability of Common Carriers: airlines/rail/trucking (not acts of God, public enemies, inherent vice, etc.) A “Bill of Landing” shows extent of liability. A standard bill shows mount per kg/parcel.  Valued bill reflects the value of goods.  And a Released bill releases the carrier of liability.
2. Liability of Contract Carriers: carries goods for only certain customers rather than for the public at large.
3. Liability of Private Carriers: those who carry their own goods, or goods entrusted to them as bailee, are responsible for losses.

Insurance for Owners of Property in Transit

1. Transportation Floater (Broad Form): Can be ‘all risk’ or ‘named’ perils.  Property must be owned by insured, insured must be responsible for it, and/or it must be sold but not delivered.
• Transit of Property not restricted to insureds vehicles (rail/freight)
• Selecting amounts insured – insured selects amounts for each trip
• Description of Coverages – from start – to delivery
• Property Excluded – jewels/furs/manuscripts/paintings/livestock
• Perils Excluded – gradual deterioration/inherent vice, moths/rodents/vermin, atmospheric/temperature changes
2. Transportation Floater Rider (limited Form)

Named perils basis, one notable exclusion is collision of trucks/cars/railcars during coupling/uncoupling.

3. Motor Cargo Rider: owners own vehicles, can be broad form or named.
4. Trip Transit Policy: Transit exposure for a single trip, either ‘all risks’ or named perils.

* Insurance For Carriers: (Truckman’s Liability Cargo Rider) – either all risks or named perils, from loaded-to-destination.  Liability per vehicle, and since it may not be enough, property owner can get their own, over and above.           

2. Contractor’s Insurance

·         Tool Floater Rider: Off premises coverage for tools, mostly ‘all risks’.  Exclusions are loss/damage to electrical apparatus caused by artificial currents, and, any mysterious disappearance.  Paid ACV on scheduled or blanket coverage.

·         Contractors Equipment Floater: All movable equipment owned, rented or leased by the contractor.  Limited or all risks basis and scheduled or blanket coverage.  90% co-insurance is needed, and a catastrophic loss limit will apply.  Automatic coverage for newly acquired equipment, but must be scheduled after 30 days.  Exclusions: weight at time of loss isn’t over manufactures recommended load.  Waterborne/airborne equipment.  Mechanical/electrical breakdown.  While underground or in muskeg.  Loss by dynamite/blasting.  Extreme temperatures, rust, and corrosion.  Loss/damage to crane/derrick while operated.

·         Builders Risk Insurance: Insure building, equipment, and stock of owners and proprietors of on-going business.  Both Named and Broad form peril coverage. COC=Course of Construction.  Contractor/owner has insurable interest, and bigger developers get blanket coverage.

* Broad Form – Property Insured: all materials owned by the insured or that will enter.

                        - All landscaping, flowers, trees

                        - Temporary building, scaffolding, and shit necessary, but not included

                           in final outcome. 

Exclusions: Contractors tools/equipment (covered elsewhere)

                    Cost of making good faulty materials/designs/workmanship

                    Flood/earthquake

Extensions: In transit in Can./USA

                    Any other location except building site

Limit of Insurance is based on completed value of project.

      * Named Perils – same as above, except no in-transit, and any other location

·         Installation Floater Rider: for contractors who specialize in installation of machinery and equipment.  Property listed on coverage form can be Limited or Broad.  Coverage while in transit, and while awaiting installation on site.  Basis of settlement is used annually not for instances.  Exclusions: while on premises owned by insured.  Tools/equipment owned by insured.  By faulty materials/workmanship.

Specialized Dealers Policies 

1.      Jewelers Block – all-risks basis, very detailed application

2.      Furriers Block, fine arts, Stamps/Coin, Automobile, Camera/Music/Instrument.

            All these policies are very detailed, as the high value and relatively easy of transfer.

Ch. 6 Crime Insurance

1. Crime, A Major Source of Loss

Property susceptible to loss: real property, personal property

Target items have: convertibility, value, portability

Methods; forced or unforced entry/opening into building/protected enclosure

                Vandalism, malicious acts, espionage, shoplifting, employee theft

Safeguarding against loss:

Physical, electronic protection (electric traps, barriers)

Rate Credits: 1) Perimeter Protection – partial protection (windows/doors)

                                                               complete Protection (even floors/walls/ceiling)

                                                               physical protection – locks/bars/screening

                                                               electric protection – magnetic contact switch

                     2) Area Protection

Electric protection, interior trapping devices, motion/heat       detectors, panic buttons, and cameras.

                     3) Point Protection – security for individual items (safe, vault, chest)

Alarm Control & Signaling: Locally Supervised = owner operated, Central = company

1)      Central Station (24/hr service, guard)

2)      Monitored Station (24/hr service)

3)      Emergency Station (not 24/hr, but connected to company)

4)      Local Alarms (just a sound alarm, no company)

2. Commercial Crime Insurance Policy:

limited crime coverage provided by standard commercial property forms

3 Components: 1) Declarations (options listed & details)

                         2) General conditions (rules of policy)

                         3)general definitions

Format for analyzing crime riders:

1)      Property covered (jewelry, money securities have strict definitions)

2)      Perils insured (some perils not clearly defined)

3)      Location of Property Covered (location specific)

4)      Persons Causing the Loss (exclusion for most employees, insured and wife)

Common Riders:

Basic coverage = burglary (only if forced entry), robbery (needs witness), theft

1) Stock Burglary: actual and/or attempted burglary

                              robbery of watchman

                              vandalism/malicious acts if concurrent to loss/damage

                              * coverage only when premises closed.

2) Safe Burglary:  safe & vaults are security and fire protection for valuables.

                              Can cover money and securities, securities only, stock only.

                              5 different classes of safes/vaults, visible forced entry rec’q for indemnity

3) Damage to Building by Burglary or Robbery

            Coverage for: damage from actual/attempted burglary or robbery

                                   Vandalism/malicious mischief at same occasion

            Exclusions: damage to glass and lettering.

4) Inside/Outside Robbery

            Defining robbery – caused/threatened custodian bodily harm

-          committed unlawful act witness by custodian

-          taken from custodian who was killed or unconscious

* can insure money, securities, property/securities only/ specific property

Insuring Agreements: Inside robbery; robbery of custodian on premises & damage

                                    Outside Robbery:  robbery of custodian off premises

                                    Theft within custodian’s home/night depository/bank all covered

General Conditions – Commercial Crime Insurance Policy

1)      Canadian Currency Clause – same as premium

2)      Cancellation – insurer must give 30 days (15 is no premium paid)

3)      Change of Interest – not extended to new owner

4)      Changes – endorsements

5)      Discovery Period of Loss – up to 1 year after policy expiry.

6)      Duties in Event of Loss - proof of loss, contact police quick, etc.

7)      Inspection – insurer can inspect at nay reasonable time (even after expiry)

8)      Legal Action – insured can’t sue insurer after 2 years over expiry.

9)      Policy Period, Territory – Canada USA, time period always shown

10)  Records – blank value only

11)  Valuation – securities are ACV at day of loss

12)  Loss Sustained During Prior Insurance – if had old, continuous insurance, if a claim comes late, this new policy will cover it.

3. Comprehensive Dishonesty, Disappearance, & Destruction Policy

Can take any or all of options, continuous until canceled, can add more by endorsement.

Insuring Agreement:

1)      Employee Dishonesty: hard to value, can go on unnoticed for a while.

Coverage Options: Form A) all employees for cash, property, and securities

                               Form B) specialized employees only for cash, property, and securities

What is Employee – natural person hired, temp. workers, directors, trustees, joined thru merger

             Dishonesty – intend to sustain a loss

        - obtain financial benefit, other than normal earned benefit

Looking at the Coverage:

                        Form A                                                            Form B

            * all employees                                                * scheduled employees

            * not required to identify                                * good coverage for risky employees

               persons who caused loss                              * $ available per employee involved

            * $ available per incident only                        * discovery is 2 years after expiry

* discovery 1 years from expiry

If an employee is caught once, he/she can’t be covered again (but all other workers OK).

Good pre-employment action (screening/interview/references) and post-employment action is helpful.

           

2)      Loss Inside the Premises Coverage

Insures : Loss of money/securities by actual destruction, disappearance on premises or bank

               premises.

               Loss of other property by safe burglary/robbery (can be anything).

               Damage to premises caused thereto.

* money must be new, clear, and real cash.

            Exclusions : money in coin operated machines

                                 loss by fire to property other than money/securities/safe/vault.

                                 loss via electronic means, if unauthorized.

            3)  Loss Outside the Premises Coverage

Loss anywhere in Can/USA as long as being conveyed by a messenger.

Money and Securities – conveyed by messenger - within living quarters of messenger

      - conveyed by armor plated car

      Other Property – anything as long as being conveyed by messenger

      Exclusions: insurance only for what armor car company doesn’t cover by its policy

            4)  Money Orders & Counterfeit Paper Currency

Loss due to the acceptance in good faith, in exchange for merchandise/service, counterfeit Can/USA currency.

            5)  Depositors Forgery Coverage

 Forgery – altering writing of another or acting as another

Recommendations – safer paper for cheques

                               - protection of cheques

                               - controlled use of fax machines