CHAPTER 13 COMMERCIAL PROPERTY INSURANCE

COMMERCIAL PROPERTY INSURANCE 

When business purchase insurance, we call it commercial insurance. When individuals purchase insurance, we call it personal insurance. 

 

PROPERTY AND MARINE INSURANCE

Real Property: property permanently attached to land. e.g buildings & fixtures. Mobile Property: property to be exported and covered by transportation insurance historically marine insurance.

COMMERCIAL PACKAGE POLICY The insurance office (ISO) designed the commercial package policy to provide insurance coverage to a broad range of profit and nonprofit organizations including manufacturing firms, schools, retailers and apartments building owners. The CPP is preceded by DECLERATIONS and CONDITIONS applying to the entire package. 

Common Conditions

covers policy cancellationassignment of the policyother legal rights and duties

In addition

specific declarations conditions page

PERILS COVERED

The property component requires a causes-of-loss form to complete the contract. There are three main alternatives.

The Basic FormThe Broad FormThe Special Form

FIRE INSURANCE

Fire is not defined in insurance policies. For A peril to qualify as a fire, there must be a clearly visible flame or glow and the fire must be `hostile`.

FIRE INSURANCE

A hostile fire is one that is unconfined and beyond designated boundaries.

  A friendly fire is to collect for loss the

proximate cause must be hostile fire.   If an insured is to collect for a fire loss

the proximate cause must be a hostile fire.

PROPERTY INSURANCE RATING

A fire insurance rate is the cost per hundered dollars of exposed value.

  Insurers calculate the premium by

multiplying the rate times the number of hundreds of dollars of value in the exposure.

There are two different methods:

1. Class Rating operates combining units into a group and then charging a class rate reflecting the loss experience and expenses of the group.

  Factors to be considered: *construction

of the building *occupancy ( owner occupied or not) *community firefighting capability

Scheduled Rating analysis each property individually and is used primarily in rating commercial building.

  A rate for a standard building in the same city

as the building under consideration provides the beginning of the procedure.

  Rate: Standard Building +Charges(morehazardous conditions) - Credits ( less hazardous conditions)  

TRANSPORTATION INSURANCE

Marine is one of the earliest forms of insurance protection.

BOTTOMRY was a transaction protecting an owner from financial loss, if his ship were destroyed.

  If the ship is acquired by means of a loan, an interest

rate was paid to a moneylender.   The moneylender, for a premium beyond the interest

rate, would agree to forgive the loan if the ship were destroyed.

 

TRANSPORTATION INSURANCE

Some points are considered: similar units were exposed to similar

perils non-accidental , losses were excluded

from coverage losses are definite and measurable catastrophes were not likely

RESPODENTIA

Loans were comparable to bottomry loans. The ship`s cargo is the subject not the ship.

    A merchant, placing cargo on a ship, would

take a loan using the cargo as collateral. The money lender, for a premium in addition to the regular interest charged, agreed to forgive the loan if the cargo were lost.

 

Particular average losses are those borne by the owner of the ship or cargo due to direct damage to the property.

  General Average is the loss attributed to

the owners of property where there was not necessarily a loss to their property but other property was thrown overboard to save the ship and then loss was borne proportionately by all who had property exposed to loss during the voyage.

OCEAN MARINE RATING

Unlike fire, ocean marine insurance rates are based on the judgement of the underwriter.

There are some points to be considered: the seaworthiness of the ship the experience and the ability of the captain and

the crew potential for loss of cargo; types of goods that are

carried… the route scheduled to be traveled and the season

of the year the coverage provided by the policy

FOUR DISTINCT TYPES OF THE LOSS EXPOSURES

The hull exposure includes the value of the ship and its equipment

The cargo exposure is the value of the goods being shipped.

The loss of freight is the loss of income the ship owner would have earned. If the cargo delivered rather than lost.

The liability loss exposure is the loss a ship owner would suffer.

INLAND MARINE INSURANCE

Insurance is essentially an American distinction. In other countries, if an insurer ( underwriter) wants to write fire insurance, marine or perhaps even life; it is a private decision.

  Everything (almost) we own has been

transported on a truck or train several times before its purchase.

 

Policies include:

i. Bailees customers policies ii. Instrumentalities of

transportation policies. iii. Personal and commercial

property floaters.

BAILMENT In bailment, property belonging to one party (the

bailor) is temporarily in the possession of a second party( the bailee), ultimate possession is to revert back to the first party.

parking a car in a public garage leaving the clothes at cleaners shipping goods on a truck lending a lawnmower to a neighbour  If not legally but bailee morally responsible for its

safe return to the bailor. 

ANNUAL TRANSIT POLICY is designed to protect the interest of the shipped (bailor) whereas

MOTOR TRUCK CARGO insurance a from of baliee`s liability coverage) is designed to protect the interest of the trucking company.

 

INSTRUMENTALITIES OF TRANSPORTATION

It may cover a variety of different structures including, bridges, tunnel, pipelines, dams and traffic signals.

FLOATER INLAND MARINE INSURANCE 

  It is used to cover property is easily and

frequently moved and is generally of high value.

e.g. for personal there are articles floater to cover valuable assets such as cameras, jewelry or firs.

  For commercial property; there are scheduled

floaters that covers items of significant value such as medical equipment, livestock, fine art etc.

AIRCRAFT PROPERTY INSURANCE

This is applicable to helicopters, hot air balloons, hang gliders and space satellites.

It is parallel to ocean marine insurance that is the owners need to purchase insurance to protect hull, freight and cargo and liability exposure.