Business Interruption Coverage for Vehicles and Mobile Equipment

Business Interruption Coverage for Vehicles and Mobile Equipment

Loss Exposures Covered Business income (BI) Extra expense (EE) Extended business income (EBI)

Basic Requirements for Coverage to Apply Loss of or damage to scheduled property While away from the insured s premises Resulting in suspension of insured s operations

Types of Vehicles and Equipment Readily replaceable items don t need BI May want EE or rental reimbursement Many types can be rented or hired from owner-operator Best prospects are specialized items

Food Truck

Mobile Shredder

Mobile TV Studio

Mobile Medical Equipment

Road Striper

Mobile Drill Rig

Dragline Crane

Yarder

Concrete Pumper

Dry Bulk Carrier Trailer

Hot Asphalt Distributor

Boat Trailer

Livestock Trailer

The ISO Endorsements

Exposure Property Damage Event: damage to mobile property Exposure: costs to repair or replace property Previous solution: physical damage coverage available under: ISO Commercial Auto (vehicles and mobile equipment); or ISO Commercial Inland Marine (mobile equipment)

Exposure Business Interruption (Historically) Event: damage to mobile property on premises Exposure: loss of business income and extra expenses incurred (BI and EE) Previous solution: BI and EE on-premises coverage provided under: ISO Commercial Property; ISO Businessowners; or ISO Commercial Inland Marine Off-premises exposures generally not covered

New ISO Endorsements Mobile equipment business interruption coverage options under several ISO lines: Commercial Property Businessowners (BOP) Commercial Auto Capital Assets/Agricultural Capital Assets Commercial Inland Marine

Why ISO CP/BOP Option? All BI/EE under one coverage form Leverage BI/EE knowledge Must have premises exposure Examples Bakery: refrigerated truck Restaurant: mobile BBQ smoker Appliance store: installation services

Why ISO Commercial Auto Option? Can apply to autos and mobile equipment Works whether or not premises exposure Examples Food trucks Mobile document shredders Mobile pet-grooming operations Carpet cleaning

Why ISO Inland Marine Option? For businesses reliant on mobile equipment Generally nonfiled Highly customized and valuable equipment Examples Construction equipment Geophysical exploration equipment Mobile MRI unit

ISO Commercial Property Option Extension of premises coverage Described business activities Coverage triggered by damage to scheduled property No coverage for repair or replacement of property Covered perils flow from premises Collision coverage option

ISO Commercial Property Option, Cont. Subject to selected sublimit (two options) Option A: separate limit for each item Option B: separate limit for two or more items Extended business Income (EBI) time period Can differ from on-premises EBI Sixty days can be increased to two years max Coverage for newly acquired equipment

ISO Businessowners Option Substantially similar to ISO CP endorsement BI and EE coverage Limit of insurance Dollar limit for off-premises mobile BI/EE Contrast with one-year limit for on-premises BI/EE EBI can be increased to one year max

ISO Commercial Auto Option Adapted from ISO CP BI/EE coverage form Key differences BI and EE or BI only coverage options Designed to apply on and off premises BI waiting period Covered causes of loss

ISO Commercial Inland Marine Option Replaces existing time element forms Addresses mobile exposures Covers BI and/or EE Triggered by damage to covered property For any property covered for physical damage Covered perils tied to physical damage coverage Other coverages Loss of use of covered property due to damage to vehicles or scheduled premises/locations Dependent property coverage No coverage for BI earned by autos

Rating Overview Advisory loss costs and rules Similar rating procedures for each line Loss costs per $100 of insurance Separate for Collision and Other Than Collision Frequency based on Commercial Auto Severity based on CP time element, with adjustments Other adjustments for special situations

Insurance to Exposure Factors When do they apply? When a single limit applies to multiple items And limit is not 75% of BI exposure Why needed? No coinsurance provisions in endorsements Limit may be much lower than full BI exposure Encourages insurance to exposure by charging more per unit of exposure

Applying Insurance to Exposure Factors Divide limit by estimated BI exposure Convert result to percentage Use corresponding factor based on percentage From 75% or more From 50% to 74.9% From 25% to 49.9% Under 25%

Inland Marine Underwriting Perspective

Endorsement IH 99 28 Can be attached to any commercial inland marine coverage form Basic 72-hour waiting period Automatic 60-day Extended Business Income coverage Can amend either waiting period or number of EBI days

General Underwriting Concerns Is the equipment unique or one of a kind? Is the manufacturer domestic or foreign? What is the ease of repairing or replacing? Are critical spare parts available?

Location and Transit of Equipment Equipment stored or used in NAT CAT areas What is the terrain at job site? Has management planned route and job site? Is there a disaster-recovery or contingency plan?

Three Examples of Equipment Mobile MRI unit Mobile TV studio Coil tubing unit

Mobile MRI Unit

Mobile MRI Unit Underwriting Considerations Can cost up to $3,000,000 BI can run $2,500 per shot Key manufacturers are GE, Siemens, Philips Setup requires full site planning Concrete pad to accommodate 58,000 lbs. Independent power supply Area free from high-power lines Driver selection and preplanned route Manufacturer's warranty Repair vs. replace

Mobile TV Studio

Mobile TV Studio Underwriting Considerations Can cost up to $5,000,000 BI can exceed $1,000,000 Causes of loss include road hazards, CAT perils, electrical fires If garaged or used in NAT CAT areas, is there a disasterrecovery or evacuation plan? What is the territory of operations?

Coil Tubing Unit

Coil Tubing Unit Underwriting Considerations Can cost up to $1,500,000 BI can run $50,000 to $70,000 per day, with jobs lasting seven to ten days Used in the oil/gas industry Site terrain is difficult Needs flat, open surface to operate with all attending equip. Has 15,000 ft. of tubing, pushed into well hole to inject fluids Requires experienced crew of 10 to 13 Blow-out preventer is a must Full maintenance after each project Where will equipment be used, and then stored when idle?

Emerging Mobile-Related Risks

Ride Sharing: What Is It? Peer-to-peer service Enables arrangement of transportation on short notice Smartphone app connects passengers with drivers Social-network sites Advertise services Participants can rate drivers and review their experiences Operations in 60+ cities worldwide Payment (including tip) submitted through app May be characterized as a donation Transportation network company (TNC) usually keeps part

Ride Sharing: Insurance Perspective Commercial-auto-related issues (TNC) Excess liability policy, supplementing drivers personal auto coverages Can drop down to primary coverage Potential gap in coverage Personal-auto-related issues Public or livery conveyance exclusion

Ride Sharing: Potential Concerns Do TNCs fall within traditional regulatory guidelines? Taxis/limos Trends in legislation/regulation vary among states Some proposals appear to require TNC to provide coverage Driver accepts ride passenger arrives at destination Background checks; territory traveled; miles/hours driven Operator expectations regarding insurance coverage What s next? Slugging

Drones Source: http://cronkitenews.asu.edu/assets/images/13/05/04- tractors-tight-full.jpg Source: https://www.faa.gov/about/office_org/field_offices/fsdo/orl/local_more/ media/fy14summit/145safetysummit_nextgenoverview_3_20_14.pdf

Definitions UAS an unmanned aircraft and associated elements (including communication links and the components that control the unmanned aircraft) that are required for the pilot in command to operate safely and efficiently in the national airspace system UA an aircraft that is operated without a possibility of direct human intervention from within or on the aircraft

Drones: Reported and Potential Uses Military Intelligence gathering Combat missions Law enforcement and security surveillance Crime investigation Border protection Security of commercial properties Neighborhood watch

Drones: Reported and Potential Uses Search and rescue Delivery of supplies and food to disaster areas Agriculture Monitor crops Locate livestock and assess available forage Crop spraying Cloud seeding

Drones: Reported and Potential Uses Weather-related data collection Weather and meteorological information Real-time data on storm intensity Storm tracking Generate maps and models Delivery Packaged goods and other mail Photography Real estate Weddings

Drones: Reported and Potential Uses Inspection Insurance claims evaluation Infrastructure evaluation (e.g., bridges and dams) Underwriting inspections (e.g., roof) Communications Movie filming Sporting events High-altitude drone Internet access for developing regions

Liability Exposures Commercial and Personal Bodily injury and property damage liability Potential defect in design or manufacture Collision with persons or property Interruption in data-link transmission; communication failure Personal injury Invasion of privacy Trespass and nuisance Infringement and defamation

Property Exposures Commercial and Personal First-party property damage Perils of aircraft and falling objects Business interruption losses Hacking