The Fundamentals of Commercial Property Insurance Coverage:

Transcription

1 The Fundamentals of Commercial Property Insurance Coverage: Key Strategies and Insight for Reading and Interpreting Policies Jeremiah M. Welch Saxe Doernberger & Vita, P.C. Stephen O. Clancy Robinson & Cole, LLP April 25, 2011 CBA Law Center, New Britain, CT

2 What s in a Policy Declarations Page(s) Generally states the policy number, policy term, types of coverages provided, limits of liability, etc. Coverage Grant Defines what is covered All Risk; Named Perils Occurrence or Claims Made

3 What s in a Policy Exclusions Defines what is not covered Conditions What the insured must do in the event of loss or to make a claim. Notice is the most often litigated condition Endorsements can change everything

4 Insurance Concepts and Terms POLICY = CONTRACT All the same rules plus a strict, adhesioncontract overlay Standardized NOT uniform language

5 Insurance Concepts and Terms Standard ISO (Insurance Services Office), Statutes, FEMA, State Regulators Manuscript Written for one-off purpose, or for repeated use by one insurance company or brokerage

6 Insurance Concepts and Terms CATEGORIES OF COVERAGE Liability v. First Party Primary v. Excess v. Umbrella Named Peril v. All Risk Package v. Stand-Alone Claims Made v. Occurrence

7 First Party Coverage Basics Damage to Your Property Covered Locations Covered Causes of Loss

8 Third First Party Coverage Issues Some items covered, some not? 0% Covered 100% Covered Valuation of covered items?

9 Coverage Direct Physical Damage Time Element

10 Building Property Covered Buildings Fixtures Permanently Installed Machinery Additions and Repairs Under Construction Business Personal Property Furniture, Office Machinery Stock Personal Property of Others Under Insured s Care

11 Not Covered Currency, Securities, Accounts Foundations, Underground Utilities Roads, Bridges, Patios Piers, Wharves, Docks Crops, Lawns Licensed Vehicles

12 Additional Coverage Debris Removal Pollution Clean Up Preservation of Property (Sue & Labor) Increased Cost of Construction/Code Upgrades Electronic Data Off-Premises Property Outdoor Property Claims Preparation Expenses

13 Time Element Coverage Business Interruption Lost Income Operating Expenses Extra Expense New Costs Because of Loss Limitations: Period of Restoration Extended Period of Indemnity Commencement, Policy Limits, Coinsurance, Deductible

14 Business Interruption Straight BI Interruption due to damage to insured property from a covered cause of loss Contingent BI Interruption due to damage to property of another that you rely upon for your business (i.e., a supplier, anchor tenant, attractive property ) Civil Authority Access to business prohibited Utility Disruption Loss of utility service due to an off-site event

15 Covered Cause of Loss All Risk Named Perils (Basic Form): Fire/Lightning/Vandalism/Windstorm/Hail/ Explosion/Smoke/Civil Disturbance/Aircraft/ Vehicles/Sprinkler/Volcano/Sinkhole Additional Named Perils (Broad Form): Falling Object/Weight of Ice, Snow, Sleet/ Water from Leaking Appliance/Collapse

16 Exclusions Wear and Tear Flood Utility Interruption Precipitation Damage Employee Dishonesty Fungus/Mold Defective Workmanship (and many more)

17 Ensuing Loss Exception But if physical loss or damage by a Covered Cause of Loss results, we will pay for that resulting physical loss or damage.

18 Conditions Pre-Loss Vacancy Protective Safeguards Post-Loss Cooperation Proof of Loss Examination Under Oath Time to Sue

19 Valuation Replacement Cost Like Kind and Quality Today s Prices Actual Cash Value Replacement Cost Less Depreciation Business Income History Versus Predicted

20 Limits and Deductibles Different Limits for Different Categories Different Deductibles for Different Categories Percent-Based Deductibles Highest Applicable Deductible Coinsurance

21 Loss Payment Issues Loss Payee - right to be on check only Mortgagee - right to be on check and maybe more Lien Holder Beware of Municipalities

22 Evolution of a Claim Tender Adjustment Proof of Loss Payment Dispute Resolution Litigation

23 Thank you! Jeremiah M. Welch Saxe Doernberger & Vita, P.C. (203) Stephen O. Clancy Robinson & Cole, LLP (860)