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The three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement are: - 1) the value of the lost or damaged property (ACV)
- the interest of the insured in the property (ex. financial interest, home, mortgage)
- the amount of insurance specified on the "Declarations Page" for the loss or damaged property (least amount|) Identify the four categories that buildings may fall into: - Residential (ex. home) Non-mercantile (ex. hospitals, nursing homes) Mercantile (ex. drycleaners, bakeries) Manufacturing/Industrial (ex. autobody shops) Three classes of property commercially insured are: - building, stock, equipment Identify the two bases that coverage can be provided on: - Scheduled All property Property of every description Identify and give an example of each of the five types of property contained in the definition of Building found in the IBC Commercial Property Broad Form - 1)
Growing plants, trees, shrubs INSIDE the building used for decorative purposes only when insured is the owner of the building (ex. cactus)
- Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
- Additions and extensions IN CONTACT with the building (enclosed walk-way between buildings)
- Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light fixtures, carpeting)
- Fixed structures PERTAINING to building and located on the premises (ex. fence) [GMAPF] Identify the three conditions pertaining to the coverage for growing plants, trees, etc. - - such property was INSIDE the building
- was being used for decorative purposes
- insured was the owner of the building Identify and give an example of the three types of property contained in the definition of Stock found in the IBC Commercial Property Broad Form: - 1) packing, wrapping and advertising materials (ex. bubble plastic, Styrofoam)
- merchandise of every description USUAL to insureds business (ex. goods for sale for business)
Which way is NOT an appropriate means of valuing property for insurance purposes? - Book Value Identify the one word that can summarize the difference between Actual Cash Value and Replacement Cost: - depreciation Who does the onus rest upon to establish the amount of insurance required? - the Insured Identify the five methods that may be used to determine Actual Cash Value: - 1) Actual Cash Value
- True Value to customer
- Market Value/Direct Sales Approach
- Income Approach
- Formula/Cost Approach Method Identify the two types of depreciation used in the Formula/Cost Approach, and give an example of a type of property that would be appropriate using each: - Straight Line Depreciation (ex. buildings) & Plateau Accelerated Depreciation (ex. cars, furniture) A licensed real estate appraiser will generally be consulted to provide an expert opinion when establishing Market Value/Direct Sales Approach. Identify the three items he or she may consider: - Property before the loss Property after the loss the land
When is the Income Approach method most commonly employed? - This method of evaluating a loss is commonly used with income producing properties The Broad Evidence ties together the previous four methods when establishing actual cash value, and the courts will take into account many different factors. Identify any three such factors: - Market Value -assessed valuation Rental Value -use of building Location -resale success, replacement value less depreciation {any of these} Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or Subscription polies. Outline three rules, or guidelines that apply when reinsurance is used to provide insurance coverages: - 1) all insurers share premiums collected and losses incurred
- the policy is controlled by the primary insurer and all claims are paid by it
- the contract is between the primary insurer and the reinsurer Identify four instances when subscription policies may be issued: - - the broker wants to spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance treaties
- the amount of insurance specified on the "Declaration's Page" for the lost or damaged property (least amount) What is the purpose of the deductible? - to eliminate minor maintenance types of claims Insurers agree to 'waive' any co-insurance requirement when a loss meets either of the following conditions: - 2% or $5,000 (up to) In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance Clause, the client must comply with the following: - - files a Statement of Values with the insurer representing 100% of the value of all property insured, such as an appraisal
- maintains these values throughout the term Identify the two types of exclusions found in property policies - properties excluded perils exluded Identify five reasons why exclusions exist and give an example for each: - -some perils are uninsurable (war, nuclear energy) -potential to be catastrophic (earthquake, flood)
-exclude losses for which more specialized policy forms have been developed ( such as automobiles, aircraft) -wholly or partially in control of the insured (ex. application of heat, scratching) -exclude losses which are not common to a large number of insureds, but represent an increased potential for loss so an additional premium may be charged (building in course of construction, satellite receivers) Identify three 'permissions' allowed in a commercial property policy: - - for other insurance concurrent with this form (2 insurances)
- to make additions, alterations or repairs
- ???to do such work and keep and use such articles, materials and supplies in such quantities as are usual or necessary to the insureds business??? What may an Insurer do when there has been a Breach of Conditions in the policy? - the Insurer may have grounds to deny coverage Identify two instances when an Insurer may NOT deny coverage when there has been a breach: - - the loss was not caused or contributed by the breach
- the breach condition occurred in a portion of the premises over which the insured has no control
- the insured shall notify the insurer forthwith when provided with NOTIFICATION OF THE SUSPENSION OF POLICY SERVICE N RESPONSE TO ANY OF THE ABOVE SYSTEMS Identify the class of property to which the Premium Adjustment clause will apply:
- Stock Identify two guidelines before a premium adjustment will be permitted: - - claims for return of premium must be submitted no later than 6 months after the policy expiry date
- claims must be presented on a Premium Adjustment Form, showing actual cash value of stock on the last day of each month. Identify three things the Verification of Values clause allows the |Insurer to do: -
- allows the insurer THE RIGHT TO CONFIRM THE VALUES INSURED UNDER THE POLICY ARE REASONAABLE AND ACTUALLY EXIST
- permits the insurer THE OPPORTUNITY TO DETERMINE VALUES ON HAND AT THE TIME OF A PREVIOUS LOSS
- enables the insurer to DETERMINE THE EXISTENCE OF ANY OTHER POLICIES OF INSURANCE WHICH MIGHT BE CALLED UPON TO SHARE IN THE PAYMENT OF A LOSS.
Identify under Basis of Valuations how losses will be paid on items of stock: UNSOLD & SOLD: - UNSOLD: restricted to its "actual cash value at the time of a loss" SOLD: the selling price charged to the purchaser, less any discounts allowed. Identify three types of discounts that will be considered when adjusting loss on sold stock: - 1) picked up by purchaser
- trade-ins
- any reduction in selling price because of negotiation between seller and buyer Identify two types of property which are subject to a 'special basis of settlement':
- records Identify the liability of the Insurer when there is loss to tenants improvements: - - if repaired or replaced with due diligence and dispatch
- if not repaired with due diligence and dispatch, the insurer will pay according to the un-expiry of the LEASE. Identify the liability of the Insurer when there is loss to: a) Books of account kept on a manual system:
Identify three breaches of good faith that would be considered contrary to Statutory Condition 1: (misrepresentation) - - any false description of property to insurer
- any misrepresentation of material fact
- any fraudulant omission of material fact Give two samples of what courts have ruled to be material: - - previous claims
- vacancy
- existence of other insurance
- previous cancellations or refusals of insurance Identify five facts NOT deemed to be material: - Facts which are known or which may reasonably be presumed to be known by the Insurer; Facts which the Insurer can discover upon inquiry; Facts which the Insurer has waived the requirement for information; Facts which tend to lessen the risk; Facts which need not be disclosed by reason of a policy condition Explain the effect of Misrepresentation on an application for insurance: - if misrepresentation is proved, the insurer is entitled to void the contract
Explain the effect of a 'reported' material change during the term of the policy: - - cancel the policy and return the unearned premium
- continue to insure the risk and advise insured of additional premium required and allowed 15 days to make payment Explain the effect of an 'unreported' material change during the term of the policy: - When a loss arises out of an unreported material change, there is no coverage provided by the policy Identify five Additional Conditions contained in a number of commercial property forms: - 1) notice to authorities
- sue and labour
- no benefit to bailee
- pair and set
- parts Briefly explain the effect of any three of the additional conditions contained in the commercial property forms: - PAIR & SET: if loss or damage to only one item does not constitute loss or damage to entire pair or set. PARTS: if loss or damage to any part of property, the insured is not liable for more than the insured value of the part lost or damaged, including cost of installation. NOTICE TO AUTHORITIES: when loss is due to malicious acts, theft or burglary, robbery, or attempt thereat, the insurer shall give immediate notice to police or other authorities having jurisdiction.
