Commercial 103

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Commercial 103

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TWFG Commercial Business SchoolCommercial 103

Commercial 101 – 104Commercial 101

OverviewCommercial Insurance Basic TermsCommercial Insurance Polices: OverviewImportant Auxiliary CoveragesACORD Forms OverviewCommercial Lines Workflow ProcessSubmission ChecklistPost-Binding Checklist

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How Does the Underwriting Process Operate?Commercial Insurance Policy Coverages: First Level DetailSilverplume Overview (Live Demo)

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Commercial Lines Basics Property: COPECommercial Lines Basics Property: BuildingCommercial Lines Basics Property: Business Personal Property (BPP)Module 3 Case Study

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Commercial AutoMulti-Line Policy TypesWorkers Compensation OverviewEndorsements Common to Most Policies

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Learning Objectives

Understand the four basic elements used in evaluating Commercial Property

Understand what’s covered under Building coverage on CPP

Understand what’s covered under BPP coverage of the CPP

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Commercial Lines Basics: Commercial Property: COPEWhy all those pesky questions

Commercial property generally refers to a building and/or a business’ personal property

4 elements needed for carrier quote. COPEConstructionOccupancyProtectionExternal Exposures

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Commercial Lines Basics: Commercial Property: COPE

Fields on the ACORD applications are designed to capture the

four elements, COPE

The following slides will covered what is being evaluated

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Construction:Type of construction affects buildings performance in the event of fire or wind/hailCarriers want building and roof construction typesCarriers need year built as well as any updates. Especially important on building over 20yrs old

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Construction:Frame – Typical wood construction, including wood frame with stone, brick or stucco veneerJoisted masonry – A mixture of wood and masonry construction, usually only seen in older structures from the 40’s and 50’s. The walls are masonry or solid brick with wood joists supporting floors and roofsNon-Combustible – Any type of non-combustible (not wood) non-masonry construction. The examples include metal shop buildings with steel framing, mini-self-storage units, and auto-body shops

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Construction:Masonry Non-Combustible – Exterior walls are masonry (solid masonry, concrete, solid brick) but the floors and roof are made of metal or some other non-combustible materialFire-Resistive – may be solid masonry for all components or a mixture of solid masonry and heavy, protected steel, such as a high-rise. Depending on the fire-resistive rating of the materials, these structures are classified as modified non-resistive (1 hour rating) or fire-resistive (2 hour rating)

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Occupancy:How building is occupied is used in determining susceptibility to loss. Example:Office Occupants – high volume of combustible(burns easy) materials such as papers/files/furniture Restaurant – this type of occupancy can represent an increased hazard. Example would be cooking with a deep fryerTherefore, the ACORD questions, such as whether or not the building is sprinklered, become very important

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Protections:Protection refers to fire protection. Specifically, how far are the closest fire hydrant and fire departments, what is the Property Protection Class (PPC) rating, is the property sprinklered. The better protected the building, the lower the rate that the insurance carrier can provide

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External Exposures:External Exposures refer to the building’s surroundings, and how that might affect the risk of loss. For example, a metal shop building located in a field full of high grass would represent a greater risk to fire loss than one located in a gravel paved lot

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TWFG Commercial Business School

Commercial 103


When you understand the exposures that the carrier must consider before offering a rate, then you get a better feel for why the underwriter may be “asking so many questions.” Your understanding should lead you to gathering information up front, in order to shorten the time it takes between submission and quote

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Commercial Lines Basics: Commercial Property: Building

What is covered under “Building”?

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TWFG Commercial Business School

Commercial 103


BuildingThe building itself, as described on the dec page

FixturesIncluded are any fixtures, such as light fixtures,

including outdoorsPermanently Installed Equipment

Usually bolted to floor or wall. Can be included on building or BPP. Typically placed on building due to broader coverage

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Some Forms of Personal PropertyIncluded is any personal property used to maintain or service the building.Examples: Fire extinguishers, outdoor furniture, floor coverings, HVAC equipment, dishwashing equipment, lawnmowersThis broad definition allows a landlord to purchase building coverage only, and have all building related personal property included without also having to purchase BPP coverage

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Additions, Alterations & RepairsIncluded are additions under construction,

alterations, and repairs to the buildingRemoves need to purchase separate Builder’s

Risk coverageMay need to increase limit to coverage additions

and alterationsIncluded are all materials/supplies/equipment

used for alterations or repairs as long as the are within 100 of premises

Typically contractors will insure materials/equipment on an Inland Marine Installation Floater. Building coverage would be excess

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As you can see, there’s much more to building coverage than just the building itself

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Commercial Lines Basics: Commercial Property: BPP

There are 7 categories of specific Business Personal Property (BPP) that are described in the Property Coverage Form

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Fixtures & FurnitureFixtures refers to those not permanently installed. Can be removedNot the same as improvements and betterments

Example:A jeweler leases a building and installs special showcases to display his products. If the tenant were to move at the end of the lease, the showcases would be disassembled and taken with him. However, if the same tenant remodeled the interior, constructing a back office and a special concrete encasement for a safe, those improvements would not be taken when the lease expired.

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Machinery & EquipmentMachinery and equipment not permanently

attached to the building nor used to service the building

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StockMerchandise held for storage or saleRaw materials, in-process or finished goodsAll supplies used to pack or ship stock

Assigning a value to stock when determining the BPP limit can be tricky if the operations of the insured are such that the value of “stock” fluctuates. The value assigned should reflect the largest amount that would occur at any one time during the policy term. Note also that this stock is tied to the location. This becomes important if the insured has multiple locations and the stock (raw materials, in-process work) moves from location to location and therefore the values fluctuate. This situation calls for “Blanket BPP” coverage—which will be discussed at a later date.

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All Other BPP Owned and used in the businessCatch-all for any remaining BPP

Labor/Materials/Services furnished by owner on BPP of others

Includes arranged by businessEnsures that the insured’s added value work to other’s

BPP is also covered

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Your Use Interest as a Tenant in Improvements & Betterments

Example:Suppose a tenant does $100,000 of improvements to a rented property and expects to use them for 10 years. Their use interest is $100,000 over 10 years, or $10,000 per year. After 3 years, there is a fire loss and the building is totaled. The tenant’s insurable loss would be the remaining 7 years of use or 7 X $10,000 = $70,000. Note that the owner of the building should have increased the limit of building coverage on their policy to reflect the improvements done by the tenant. It does not violate the principle of indemnity that the owner and the tenant should collect from the same loss, as their insurable interests differ, and each is the subject of a separate insurance policy.

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Leased Personal PropertyLeased personal property for which you have a contractual responsibility to ensure, unless otherwise insured as Personal Property of Others. The typical example here is computers, copiers and other office machines that the insured leases. The leases typically require the insured to provide insurance coverage for the leased items.

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QUIZ

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What does the acronym COPE stand for?

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What does the acronym COPE stand for?

Construction, Occupancy, Protection, Exposures

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Is permanently installed equipment covered under the Building or BPP?

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Is permanently installed equipment covered under the Building or BPP?

It can be covered under either, but most insureds choose to cover it under the building limit

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An insured sets out to add 3500 sq ft to their building. Is the work in progress covered under the CPP? If so, what should the insured do at the commencement of work?

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An insured sets out to add 3500 sq ft to their building. Is the work in progress covered under the CPP? If so, what should the insured do at the commencement of work?

Part 1: Yes, additions and alterations are coveredPart 2: Determine the RCV of the building once the work is completed, and increase the building limit to match this value

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If an insured has stock at several locations, and the value of that stock fluctuates, what form of BPP should they consider for the stock?

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If an insured has stock at several locations, and the value of that stock fluctuates, what form of BPP should they consider for the stock?

Blanket Coverage

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An insured lease a $5000 copier. Can this be covered under the CPP? If so, under what coverage? Is there anything else the insured should consider?

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An insured lease a $5000 copier. Can this be covered under the CPP? If so, under what coverage? Is there anything else the insured should consider?

Part 1: YesPart 2: BPPPart 3: Do they need to increase their BPP limit to account for the additional $5000

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Future Classes

February 21st Commercial 104February 28th Commercial 101March 6th Commercial 102March 13th Commercial 103

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Industry Segment Classes (Beginning in March)

Retail & Service Farm/RanchArtisan Contractor Excess & SurplusCommercial Auto Professional LiabilityWorkers Compensation UmbrellaCommercial Real Estate BondsRestaurant Financial InstitutionsManufacturing Hotels/MotelsAgriculture Medical Technology

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Questions???

Commercial 103

Documents

Transcript of Commercial 103