Underwriting Guidelines

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1 Underwriting Guidelines 125 S. Wacker Drive Suite 2300 Chicago, IL P: F: A member of Global Indemnity plc Page 1 of 17

2 BASIC RULES CAUSES OF LOSS Basic form CP Coverage available for buildings with a year built after 1801 and after 2. PCs 1-10 (PC 9 & 10 risks will be reviewed by underwriting) 3. No prior insurance requirement 4. Risks with prior losses are subject to underwriting review Special form CP The following guidelines apply: 1. Building must be 30 years or newer or gutted and/or rehabilitated with electrical system, roof and plumbing system completely replaced. 2. Theft coverage available only with an active central station alarm and addition of the Security Alarm Warranty (F278) 3. No losses on the premises within the past 3 years 4. Must be located in PC Must have had continuous prior insurance if not a new purchase 6. Vacant for no more than 3 years EXISTING DAMAGE Properties with prior loss damage that has not been fully repaired are not eligible MINIMUM PREMIUM Non-Admitted Policies: Admitted Policies (except TX): 3 month policy $100 3 month policy $100 6 month policy $200 6 month policy $ month policy $ month policy $100 MINIMUM RETAINED PREMIUM For new Admitted business policies, the minimum earned premium is the greater of: $100 or 100% of the Total Premium for 3 month policies $100 or 50% of the Total Premium for 6 month policies $100 or 25% of the Total Premium for 12 month policies A minimum retained premium does not apply to renewal policies POLICY FEES Policies fees may be charged in states which permit them. The fees must be listed separately from the premium. Page 2 of 17

3 BASIC RULES VALUATION 1. Actual Cash Value Building limit should be written at 100% of ACV or the purchase price (if purchased within the past year). 2. Agreed Amount The Agreed Amount Clause removes the co-insurance requirement. This significantly changes the claims settlement provisions when there is a partial loss on a property. Agreed Amount is highly recommended for properties purchased within the past year for an amount significantly lower than ACV. 1. Properties purchased within the past year should be insured to 100% of the purchase price or ACV, whichever is lower. 2. Properties not purchased within the past year should be insured to 100% of ACV. 3. There is an additional rate charge for this coverage. 3. Replacement Cost (available on a non-admitted basis only). The following guidelines apply: 1. No losses within the past 3 years. 2. Building must be 30 years or newer. If the building has been gut rehabbed and the entire plumbing, electrical system and roof replaced, replacement cost is available with the addition of the EPB 150 (Building Upgrades Requirements) endorsement. 3. Risks located in AR, IA, KS, MO, NE, OK, and TX must include the EPB-107 (ACV for Roof Endorsement). 4. Must be located in PC Must have had prior insurance if not a new purchase 6. Vacant no more than 2 years 7. Replacement cost coverage is only available for risks that are insured to 100% of replacement cost (The co-insurance clause must be 90%). 8. Minimum $1,000 property coverage deductible 9. There is no additional rate charge for this coverage as sufficient premium is collected by virtue of the values being at least 90% of replacement cost Page 3 of 17

4 BASIC RULES PRIOR LOSSES Underwrite risks with prior losses very carefully. Risks with more than 2 losses in 3 years are unacceptable. REDUCTION IN COVERAGE Any endorsement that deletes coverage or reduces the Limits of Insurance must be signed by the Insured. POLICY TERMS: Three, six or twelve month terms are available in most states POLICY EXTENSIONS: Policy extensions are not allowed. COINSURANCE An 80% coinsurance clause applies to building and personal property; 100% coinsurance applies to renovation values and builders risk. The coinsurance clause does not apply to the building limit or personal property (if applicable) if Agreed Amount is selected as the valuation type. However, we will not pay more for loss or damage to property with an Agreed Amount valuation than the proportion that the limit of insurance bears to the Agreed Value (Amount) shown in the commercial property declarations. A 90% coinsurance clause applies to building and personal property when Replacement Cost is the selected valuation. WINDSTORM COVERAGE Windstorm coverage is available in many coastal areas on a Non-Admitted basis. Eligibility information and coverage maps are available in the Resources section of VacantExpress.com. Page 4 of 17

5 VACANT DWELLINGS Coverage is available for dwellings that are totally vacant and not undergoing repairs, remodeling or renovations of any kind. ELIBILITY The following types of vacant dwellings qualify for the program: Dwellings with not more than 4 residential units Dwellings with 3 residential units and 1 commercial unit Dwellings with 2 residential units and 2 commercial units Fully skirted mobile homes that are anchored and/or on a permanent foundation Individual condominium and townhouse units INELIGIBLE RISKS PROPERTY The following types of buildings are not eligible for coverage: Buildings with aluminum wiring or with electrical service not on circuit breakers Buildings built prior to 1801 Buildings located outside a fire protection jurisdiction Log homes Buildings currently damaged (fire or otherwise) Buildings scheduled to be demolished Buildings that are on stilts or open foundations Dwellings that are obsolete or with no further potential Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with more than 2 losses or a Loss Ratio >40% within the past 3 years Dwellings with seasonal occupancy Risks with less than 500 ft. of brush clearance or located in a forest area Page 5 of 17

6 VACANT DWELLINGS APPLICATIONS / INSPECTIONS / PHOTOS: Applications: Photos: Inspections: A completed and signed application is required at new business Photos (front and back) are required at new business Required on dwellings with a TIV of $ 1 MIL or higher *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. LENGTH OF VACANCY Length of vacancy is not an issue under this program as long as the property is in good condition, properly secured and checked regularly. Any properties that have been vacant for longer than 3 years are subject to underwriting review. LIABILITY COVERAGE General premises liability up to $1 million each occurrence / aggregate is available for most classes. A $250 deductible applies to each claim. The following types of risks are NOT eligible for liability coverage. 1. Risks with swimming pools, ponds, lakes, trampolines, swing sets or any other nuisance hazards 2. Risks with land in excess of 5 acres 3. Risks with fuel tanks or formerly containing underground fuel tanks 4. Risks with pollution exposures of any kind 5. Risks requiring liability coverage only *Risks with pools, ponds, lakes, hot tubs, spas or Jacuzzis located in the states of AZ & CA are eligible for liability coverage. Policies are issued with an endorsement which excludes coverage for bodily injury, property damage or medical payments arising from the ownership, operation, maintenance, existence or use of a swimming pool, pond, lake, hot tub, spa or Jacuzzi located on the insured premises. Page 6 of 17

7 VACANT DWELLINGS WITH RENOVATIONS Coverage is available for vacant dwellings that are undergoing renovations, repairs or remodeling. New construction must be written as a Builder Risk. ELIGIBILITY The following types of vacant dwellings qualify for the program: Dwellings with not more than 4 residential units Dwellings with 3 residential units and 1 commercial unit Dwellings with 2 residential units and 2 commercial units Fully skirted mobile homes that are anchored and/or on a permanent foundation Individual condominium and townhouse units INELIGIBLE RISKS PROPERTY The following types of buildings are not eligible for coverage: Buildings with aluminum wiring or with electrical service not on circuit breakers Buildings built prior to 1801 Buildings located outside a fire protection jurisdiction Log homes Buildings currently damaged (fire or otherwise) Buildings scheduled to be demolished Buildings that are on stilts or open foundations Dwellings that are obsolete or with no further potential Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with more than 2 losses or a Loss Ratio >40% within the past 3 years Dwellings with seasonal occupancy Risks with less than 500 ft. of brush clearance or located in a forest area PERSONAL PROPERTY Personal property coverage is not available on risks that are undergoing renovations. Page 7 of 17

8 VACANT DWELLINGS WITH RENOVATIONS VALUATION Two Limits of Insurance are required: 1. Building Limit - Actual cash value of existing structure or if recently purchased, the purchase price; and 2. Renovations Limit - Total cost of renovations. APPLICATIONS / INSPECTIONS / PHOTOS Applications: Photos: Inspections: A completed and signed application is required at new business Photos (front and back) are required at new business Inspections required on dwellings with a TIV of $ 1 MIL or higher *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. LENGTH OF VACANCY Length of vacancy is not an issue under this program as long as the property is in good condition, properly secured and checked regularly. Any properties that have been vacant for longer than 3 years are subject to underwriting review. LIABILITY COVERAGE General premises liability up to $1 million each occurrence / aggregate is available for most classes. A $250 deductible applies to each claim. The following types of risks are NOT eligible for liability coverage. 1. Risks with swimming pools, ponds, lakes, trampolines, swing sets or any other nuisance hazards 2. Risks with land in excess of 5 acres 3. Risks with fuel tanks or formerly containing underground fuel tanks 4. Risks with pollution exposures of any kind 5. Risks requiring liability coverage only Risks with pools, ponds, lakes, hot tubs, spas or Jacuzzis located in the states of AZ & CA are eligible for liability coverage. Policies are issued with an endorsement which excludes coverage for bodily injury, property damage or medical payments arising from the ownership, operation, maintenance, existence or use of a swimming pool, pond, lake, hot tub, spa or Jacuzzi located on the insured premises. Page 8 of 17

9 VACANT COMMERCIAL BUILDINGS Coverage is available for totally vacant buildings previously used for commercial purposes. ELIGIBILITY The following types of vacant dwellings qualify for the program: Vacant commercial buildings with no storage or business personal property of any kind Vacant apartment/condominium buildings with more than 4 residential units (risks with more than 10 units need to be approved by JHF) INELIGIBLE RISKS The following types of buildings are not eligible for coverage: Buildings with electrical systems that are not on functioning circuit breakers Buildings built prior to 1801 Commercial buildings located in protection classes 9 or 10 Log homes Buildings currently damaged (fire or otherwise) Buildings scheduled to be demolished Buildings that are on stilts or open foundations Dwellings that are obsolete or with no further potential Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with more than two losses in the past three years Buildings that are obsolete or with no further potential Risks involving construction work to any load bearing member of the building Risks involving the adding of additional stories unless the risk is a one story frame building Seasonally occupied buildings Risks involving construction work to any load bearing member of the building Risks involving the adding of additional stories unless the risk is a one story frame building Risks with less than 500 ft. of brush clearance or located in a forest area Page 9 of 17

10 VACANT COMMERCIAL BUILDINGS LENGTH OF VACANCY Length of vacancy is not an issue under this program as long as the property is in good condition, properly secured and checked regularly. Any properties that have been vacant for longer than 3 years are subject to underwriting review. APPLICATIONS / INSPECTIONS / PHOTOS Applications: Photos: A completed and signed application is required at new business Photos (front and back) are required at new business Inspections: Required on commercial buildings with a TIV greater than $500,000 *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. LIABILITY COVERAGE General premises liability up to $1 million each occurrence / aggregate is available for most classes. A $250 deductible applies to each claim. The following types of risks are NOT eligible for liability coverage. 1. Risks with swimming pools, ponds, lakes, trampolines or any other nuisance hazards 2. Risks with land in excess of 10 acres 3. Risks with fuel tanks or formerly containing underground fuel tanks 4. Risks with pollution exposures of any kind 5. Risks requiring liability coverage only *Risks with pools, ponds, lakes hot tubs, spas or Jacuzzis located in the states of AZ & CA are eligible for liability coverage. Policies are issued with an endorsement which excludes coverage for bodily injury, property damage or medical payments arising from the ownership, operation, maintenance, existence or use of a swimming pool, pond, lake, hot tub, spa or Jacuzzi located on the insured premises. Page 10 of 17

11 VACANT COMMERCIAL BUILDINGS UNDER RENOVATIONS Coverage is available for commercial buildings that are undergoing renovations, repairs or remodeling. New construction must be written as a Builder Risk. ELIGIBILITY The following types of vacant dwellings qualify for the program: Vacant commercial buildings with no storage or business personal property of any kind Vacant apartment/condominium buildings with more than 4 residential units (risks with more than 10 units need to be approved by JHF) INELIGIBLE RISKS The following types of buildings are not eligible for coverage: Buildings with electrical systems that are not on functioning circuit breakers Buildings built prior to 1801 Commercial buildings located in protection classes 9 or 10 Log homes Buildings currently damaged (fire or otherwise) Buildings scheduled to be demolished Buildings that are on stilts or open foundations Dwellings that are obsolete or with no further potential Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with more than two losses in the past three years Buildings that are obsolete or with no further potential Risks involving construction work to any load bearing member of the building Risks involving the adding of additional stories unless the risk is a one story frame building Seasonally occupied buildings Risks involving construction work to any load bearing member of the building Risks involving the adding of additional stories unless the risk is a one story frame building Risks with less than 500 ft. of brush clearance or located in a forest area VALUATION Two Limits of Insurance are required: 1. Building Limit - Actual cash value of existing structure or if recently purchased, the purchase price; and 2. Renovations Limit - Total cost of renovation Page 11 of 17

12 VACANT COMMERCIAL BUILDINGS UNDER RENOVATIONS MINIMUM DEDUCTIBLES Limit of Insurance Minimum Deductible Up to $500,000 $500 $501,000 to $1,000,000 $1,000 $1,000,000 to $3,000,000 $2,500 $3,000,001 - $5,000,000 $5,000 APPLICATIONS / INSPECTIONS / PHOTOS Applications: Photos: A completed and signed application is required at new business Photos (front and back) are required at new business Inspections: Required on commercial buildings with a TIV greater than $500,000 *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. LIABILITY COVERAGE General premises liability up to $1 million each occurrence / aggregate is available for most classes. A $250 deductible applies to each claim. The following types of risks are NOT eligible for liability coverage: 1. Risks with swimming pools, ponds, lakes, trampolines or any other nuisance hazards 2. Risks with land in excess of 10 acres 3. Risks with fuel tanks or formerly containing underground fuel tanks 4. Risks with pollution exposures of any kind 5. Risks requiring liability coverage only *Risks with pools, ponds, lakes hot tubs, spas or Jacuzzis located in the states of AZ & CA are eligible for liability coverage. Policies are issued with an endorsement which excludes coverage for bodily injury, property damage or medical payments arising from the ownership, operation, maintenance, existence or use of a swimming pool, pond, lake, hot tub, spa or Jacuzzi located on the insured premises. Page 12 of 17

13 BRAND NEW CONSTRUCTION / BUILDERS RISK Coverage is available for brand new residential or commercial buildings under construction. Risks that are partially completed should be submitted to JHF for review. INELIGIBLE RISKS Residential buildings located outside a fire protection jurisdiction Commercial buildings situated in Protection Classes 9 or 10 Log homes Buildings that are on stilts or open foundations Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with more than two losses in the past three years Partially completed risks without prior JHF authorization COINSURANCE None. Completed value only. VALUATION The completed value of the new construction. MINIMUM DEDUCTIBLES Residential Property: $500 Commercial Property: Limit of Insurance Minimum Deductible Up to $500,000 $500 $501,000 to $1,000,000 $1,000 $1,000,000 to $3,000,000 $2,500 $3,000,001 - $5,000,000 $5,000 Page 13 of 17

14 BRAND NEW CONSTRUCTION / BUILDERS RISK APPLICATIONS / INSPECTIONS / PHOTOS Applications: Photos: Inspections: A completed and signed application is required at new business Required at new business only for buildings that are partially Constructed (if approved by JHF). Not required *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. COINSURANCE None. Completed value only LIABILITY COVERAGE Liability coverage is not available on builders risks policies. Page 14 of 17

15 RENTAL DWELLING This product is available for well-maintained, 1-4 family dwellings (including their detached structures) that are occupied by tenants only and that have not incurred more than two losses in the past three years and had continuous insurance coverage for the past three years. INELIGIBLE RISKS Dwellings containing more than four living units Buildings built prior to 1801 Buildings outside a fire protection jurisdiction Any dwelling that is owner occupied Any dwelling that is less than 100% occupied Boarding or rooming houses (sharing common facilities other than laundry) Dwellings that do not have kitchens and bathrooms in each living unit Dwellings with a Limit of Insurance less than $50,000 Rentals that do not require an annual lease Student housing, fraternity or sorority houses Dwellings with government subsidized tenants Seasonal, short term rental, timeshares Dwellings with any commercial occupancies Dwellings with open foundations or built on pilings Converted barns or carriage houses Log homes Buildings listed on an historical register Dwellings with aluminum wiring or with electrical service not on circuit breakers Dwellings with wood stoves, space heaters or temporary heating units Risks with more than two losses within the past three years Vacant dwellings, dwellings in the course of construction or dwellings undergoing renovation work however, these may be eligible for the Vacant Express Product Risks that have not been continuously insured (except for new purchases) Risks owing back taxes, filed for bankruptcy or under foreclosure Risks with less than 500 ft. of brush clearance or located in a forest area ELIGIBLE RISKS SPECIAL CONSIDERATIONS Row Homes Condominium or Co-Op units Manufactured/Mobile homes provided they are fixed to permanent foundations, skirted and are not movable Page 15 of 17

16 RENTAL DWELLING MINIMUM DEDUCTIBLE $500 APPLICATIONS / INSPECTIONS / PHOTOS Applications: A completed and signed application is required at new business Photos: Photos (front and back) are required at new business and prior to. each third year renewal thereafter Inspections: NOT required on dwellings with a TIV less than $1 MIL *Wholesale agents must forward photos to JHF within 15 days of policy issuance to avoid cancellation. COVERAGE FORMS Both Basic Form and Special Form (including or excluding theft) are available depending on the specifics of the account. LIABILITY COVERAGE General premises liability up to $1 million each occurrence / aggregate is available for most classes. A $250 deductible applies to each claim. The following types of risks are NOT eligible for liability coverage. 1. Risks with swimming pools, ponds, lakes, trampolines, swing sets or any other nuisance hazards 2. Risks with land in excess of 5 acres 3. Risks with any business or farming conducted on the premises 4. Risks with any exotic pets (including but not limited to snakes, livestock, monkeys, alligators), any animals with a bite history or vicious propensities or any of the following breads of dogs: Akita, Chow, Doberman, Great Dane, Pit Bull, Rottweiler, Wolf and/or Wolf Hybrid or any mix thereof. 5. Risks with fuel tanks or formerly containing underground fuel tanks 6. Risks with pollution exposures of any kind 7. Risks requiring liability coverage only Page 16 of 17

17 CLAIM REPORTING BAA is to report all losses for assignment to Global Indemnity Claims at: Or For emergency service after normal business hours, please call Supporting documentation with policy number can be faxed to or mailed to: Global Indemnity Group, Inc. / Claims P.O. Box 532 Willow Grove, PA Page 17 of 17

10+ Scheduled Dwelling Application

AMERICAN MODERN INSURANCE GROUP 10+ Scheduled Dwelling Application Please attach Fraud Warning Notices, form # FRWR-APP-COMM (02/10) (if applicable) AGENCY INFORMATION Check Company Applicable: 070 American