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Property Insurance Coverage

Loss of Income in Business Property Insurance

When a business suffers a loss to a fixed physical asset, such as when a fire damaged a building, the insured may incur an interruption to their business which can result in the loss of income and the incurrence of expenses.

The Property insurance policy will define what a business interruption (BI) loss is and will provide guidelines regarding how a BI loss will be calculated. Business interruption is a broad category that applies to an overall loss of income. While forms will vary slightly, two sample definitions of BI are:

  1. Net income (net profit or loss before income taxes) that would have been earned or incurred plus continuing normal operating expenses incurred during the period of restoration, including payroll.
  2. Gross earnings less charges and expenses which do not necessarily continue during the interruption of business operations. Gross earnings are defined as the net sales values of production, net sales from merchandising or non-manufacturing operations, and any other earnings derived from the operations of the business less various costs associated with production of stock and merchandise.

Rental value income (RVI) is another coverage that pays for a loss of income stream. However, the coverage is a narrow category which applies to lost gross rental income from the use of property when the insured leases or rents property out for a profit.

Continuing expenses cannot be avoided and don’t change because there is an interruption in business.  Examples of continuing expenses include taxes, insurance, rent, licenses, payroll of key employees, interest, and debt. Non-continuing expenses may be saved or discontinued if there is an interruption in business.  Examples of non-continuing expenses include salaries of hourly employees, unemployment taxes, and some utilities.

This article examines how BI and RVI losses may treat depreciation after the damage or destruction of a fixed physical asset.Read More »Loss of Income in Business Property Insurance

Infographics: Market Value vs. Replacement Cost

Don’t overpay for your insurance. Using industry grade professional rating tools we can help you to calculate the replacement cost (RC) of your property and explain the co-insurance requirements, so you’re paying for insurance only what it should cost you. Remember: if the actual replacement cost of your property is $300K but your insurance policy lists $500, all you get in case of a claim is $300K. However, when you go underinsured and the RC of your property insurance policy (or HO policy) is listed at $300K, while the actual RC is $500K, with an 80% co-insurance you will only… Read More »Infographics: Market Value vs. Replacement Cost

Ordinance or Law Insurance Coverage

Generally, Ordinance or Law insurance coverage provides limited protection for costs associated with repairing, rebuilding, or constructing a structure when physical damage to the structure by a covered cause of loss triggers an ordinance or law.

According to Adjuster’s International Disaster Recovery Consulting, compliance with ordinances and laws after a loss can add 50% or more to the cost of the claim*.

Insureds should take a proactive approach to their insurance program and the coverage provided by the program. Learning about important exclusions and limitations after a catastrophe strike will cause the Insured to experience frustration and anxiety. Insureds should always read their policies, and in some states, may be required by law to do so.

Ordinance or Law Exclusion

Most property insurance policies will have an Ordinance or Law exclusion. The exclusion applies to both physical damage and time element coverage.Read More »Ordinance or Law Insurance Coverage

Why Your Employees’ Driving Record Can Be a Reflection on Your Company

You’ve seen it before – a good employee makes a horrible decision in his or her personal vehicle. What are the implications for your company if the employee’s license is revoked, canceled, or suspended due to alcohol, controlled substance or felony violations?

If the employee in question is a CDL driver, he or she will lose driving privileges for one year. But what if he or she doesn’t hold a CDL, but instead drives a sales car or pick-up truck? What if the incident involves excessive speed, reckless driving or bodily harm? What happens then?

As an employer, you are caught in the balance between a good employee and the potential for vicarious liability, which holds you responsible for the actions or omissions of another person – in this instance, your employees. As a result, you need to understand the “Doctrine of Negligent Entrustment” and the potential impact that your employees’ decisions can have on your business.

In its general form, the Doctrine of Negligent Entrustment states:Read More »Why Your Employees’ Driving Record Can Be a Reflection on Your Company

Co-insurance in Commercial Property Insurance Explained

Co-insurance in Commercial Property Insurance ExplainedWhile policyholders should strive to provide the insurer with complete and accurate values for buildings and business personal property that are the subject of insurance, policyholders should also understand the basic workings of the co-insurance condition. In this article, authored by Craig Stanovich, we’ll review potential penalties for underinsurance.

Meet Mitch  – a commercial real estate investor, who owns, under his real estate corporation, over 50 buildings located in the city, as well as the nearby suburbs. Mitch’s real estate portfolio consists primarily of leased retail and office space, with some service occupancies, as well. Mitch is preparing to purchase another building in the city and is arranging a mortgage with a new lender – Paperless Lending. To his surprise, the lender has rejected an insurance binder obtained by his risk manager Jess, from his insurance agent. Paperless Lending does not accept building insurance with co-insurance – and the binder given to Paperless Lending lists 90% co-insurance clause.

Co-insurance As Mitch relies on his risk manager Jess, to understand his insurance coverage, he has never read his insurance policies. But now he is alarmed by “co-insurance,” as it seems to Mitch – based on his limited dealings with health insurance – that his insurance company will never pay more than 90% of any loss that he has, regardless of the amount or limit of insurance he has purchased. This sounds problematic, and he immediately arranges to meet with Jess and his insurance agent, Diana, to discuss this matter.

Co-insurance Explained
 At Mitch’s request, Jess and Diana explain the concept of co-insurance. At the outset, they make clear to Mitch that co-insurance in property insurance is not the same as the 80/20 cost sharing in some health insurance policies. Instead, in property insurance, co-insurance generally means Mitch must purchase a certain limit of insurance on his building – the limit purchased must be no less than a denoted percentage of the full value1 of the building. Here, the percentage is 90%. Because Mitch did obtain, as part of his due diligence, a professional appraisal that determined the replacement value of his building as $5 million, Jess and Diana tell Mitch that he must purchase a limit of no less than 90% of $5 million or $4.5 million. If he does not purchase a building limit of at least $4.5 million, Mitch will face a penalty as a “co-insurer.”Read More »Co-insurance in Commercial Property Insurance Explained

Landlord & Tenants and Waiver of Subrogation

Mitch, aka “the coffee man,” has owned and operated his coffee shop for almost a decade. His shop is located on Market Street and comprises about 900 square feet of leased space in an office building. Mitch is having his attorney, Diana, negotiate the renewal of his five-year lease with the building owner/landlord. Diana has arranged to meet with Mitch and Mitch’s insurance agent, Dennis because the landlord is proposing changes to the lease’s insurance requirements. SUBROGATION While the lease requires Mitch to purchase insurance for his contents (and the landlord has agreed to insure the building), the landlord is… Read More »Landlord & Tenants and Waiver of Subrogation

What You Need to Know Before You Lease Commercial Property for Your Small Business

Renting space for your small business involves more than finding the perfect location at a price you can afford. Why? You’ll also need to sign a lease, a complex document that typically favors the landlord—and your success can hinge on its provisions.

But the terms of a lease are usually flexible, and with a little know-how, you can negotiate terms that work for both yourself and landlord.

Things to Know Before You Negotiate Your Commercial Property Lease

These are key areas to consider before you sign on the dotted line.Read More »What You Need to Know Before You Lease Commercial Property for Your Small Business

Vacant and Rental Property Insurance

Home For Rent Sign

Business investors, landlords, and owners of the residential and commercial property have vacant and rental structures for different reasons, including but not limited to a change in tenants,
recurring renovations or refurbishment, and selling the structure. When occupancy changes, the dynamics of loss exposures may shift significantly. Many insurance companies and homeowners policies will not insure or offer adequate protection for such property. If you’re looking for an experienced provider who understands these exposures and is committed to the property insurance market the search is over, as we provide access to coverage for vacant structures and rental dwellings and offer a simple process to convert policies as tenant occupancy fluctuates.

Ask yourself these questions when selecting an insurance provider for vacant and rental property coverage:Read More »Vacant and Rental Property Insurance

Insurance for Multi-Family Real Estate

overcoming-the-challenges-of-placing-multi-family-real-estateThe real estate sector consists of many different types of premises-related accounts, including office buildings, shopping centers, malls, industrial warehouses, and apartments. Due to the frequency and severity of losses, habitational properties or apartment schedules are most commonly placed with E&S markets. This also applies to shopping centers and malls that are located in geographic areas where the crime scores are typically higher than the national average, or where the risk has a higher frequency of claims and is suitable for taking a retention and employing an aggressive third party administrator (TPA).

But the majority of real estate accounts placed in the E&S marketplace are multi-location apartment schedules. In recent years, many casualty markets have struggled with being profitable on these risks, and some have stopped underwriting this class entirely. What makes this class so difficult for carriers to be profitable, and why have so many markets either exited the space or tightened their guidelines?

Obviously, profitability is tied to thin rates and/or overly generous claims settling, but there are several other factors when it comes to this class:

1. Unique claims = general liability? Not always.

One factor is that there are so many more unique claims which ultimately get tagged to the general liability (GL) carrier. Just about anything that goes wrong – other than traditional property losses such as fire, wind, flood, etc. – is considered a GL claim. While it used to be that the owner or manager had to be negligent in order for a GL claim to be paid, that’s hardly the case anymore. Carriers have traditionally been the most concerned with “typical” GL claims including slip-and-falls, violent attacks, and sexual assaults; they now have to also deal with unique, obscure claims for which a GL carrier is ultimately held liable. This diminishes any chance of the account being profitable.Read More »Insurance for Multi-Family Real Estate

Optometrist and Optician Equipment Price Guide for Insurance

Use this guide to help evaluate the new replacement cost value for office and optometry equipment. To get an insurance quote fill out a really short form: Exam Rooms Examination chair and instrument stand $4,500 – $20,000 Chart projector $1,000 – $4,000 Slit lamps $3.000 – $10,000 Lensometer/lens analyzer $ 1,000 – $4,000 Keratometer $2,000 – $7,000 Retinal camera $15,000 – $25,000 Phoropter, or optical retractor $5,000 – $15,000 Tonometer $5,000 – $10,000 Corneal topography system Placido-disc type $15,000 -$25,000 Slit scanning type $40,000 – $50,000 Vision perimeter testing $10,000 – $20,000 General Office Furniture and Equipment Retail Area Display cases $500 – $1,500 per item Frame racks $500 – $1,500 per… Read More »Optometrist and Optician Equipment Price Guide for Insurance