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CPCU 551 Chapter 6

Flood, Earthquake & Specialty Forms

WYO - Write Your Own Program allowing private insurers to write flood insurance under the National Flood Insurance Program
National Flood Insurance Program: Eligibility available to owners of prop located in comminitied that participate in NFIP-
To participate in NFIP, communities are required to: regulate new construction and substantial alterations, and improvements of existing structures by adopting and enforcing community floodplain management ordinances
What is SFHA? Special Flood Hazard Area- areas with 1%< chance of flooding in any given year
What 2 programs make up the National Flood Insurance Program? Emergency Program & Regular Program
NFIP: Emergency Program initial phase of a communities participation in the NFIP program in which prop owners in flood areas can purchase limited amounts of ins at subsidized rates-
NFIP: Regular Program Second phase of the NFIP in which the community agrees to adopt flood-control and land0use restriction and in which property owners purchase higher amounts of flood insurance than under the emergency program
NFIP: Emergency Program: limits Non Residential Properties: $100k bldg $100k contents-
NFIP: Regular Program: limits Non Residential Properties: $500k bldg $500k personal prop-
NFIP: Residential Condominium Associations: limits $250k bldg covg x #units- $100k contents/bldg-
NFIP:General Property Form covers direct physical loss cause by flood,at the premises described on the declarations form- covs bldg & contents ACV no RC opt except of res risks- no coins- no blanket- excludes contents in basement
NFIP:General Property Form: Coverage A- Building Property covg for bldg prop generally more restrictive than covg offrd under standard comm prop form- additions/extensions attached to covd bldg- scheduled fixtures/machinery/equip- materials/supplies to be used for construction @ loc-bldg under construction
NFIP:General Property Form: Coverage B- Personal Property covs either household personal prop (usual to living quarters) or other than household personal prop (not both)- Other than house hold personal prop: furniture & fixtures, machinery/equip, stock(merch/raw materials/in process or finished goods)
NFIP:General Property Form: Coverage C- Other Coverages Debris Removal- loss avoidance measures- pollution damages
NFIP:General Property Form: Coverage C- Other Coverages: Debris Removal includes covg for removal of debris of other prop- does not include 25% sublimit, does not include $10k additional coverage
NFIP:General Property Form: Coverage C- Other Coverages: Loss Avoidance Measures pays for measures to protect prop from immenent flood dmg- allows reasonable expenses up to $1,000 for cost of sandbags or other supplies to protect prop- $1k cost of moving prop to safer loc
NFIP:General Property Form: Coverage C- Other Coverages: Pollution Damage $10k for dmg to covered prop cause by the discharge, seepage, migration, release, or escape of pollutants b/c of flood- does not cover cost of testing/monitoring pollutants unless required by law
NFIP:General Property Form: Coverage D- Increased Cost of Compliance (ICC) Only pays for compliance cost related to floodplain management- $30k for activities necessary to comply w/ state/local floodplain laws-only available with covg A
Residential Condominium Building Association Policy insures res condominium associations as well as contents owned by the unit owners in common or by the condo assoc- $250k x #units- offers Replacement Cost on bldg prop- 80% conins
Flood Coverage Endorsement (CP 10 65) part of comm prop policy, follows that policy's terms and conditions- written on replacement cost of functional valuation options
Flood Coverage Endorsement: Limits of Insurance limit may be substantially lower than regular policy limit
Flood Coverage Endorsement: Exclusions & Limitations subject to all exclusions/limitations in causes of loss form attached to pol, except: any part of water excl- covers loss by tsunami- excl dmg to prop in open- O&L unless endorsed- no flood covg unless 72 hrs after inception- no subsidence loss
Flood Coverage Endorsement: Property Not Covered Prop in open unless scheduled- prop not eligible for flood ins CBRA or CBIA- boathouses & open structures on water- bulkheads, pilings, wharves, docks, retaining walls- doesn't exclude: foundations below basement, underground pipes, flues, drains
Earthquake and Volcanic Eruption Endorsements (CP1040)subject to same coins as rest of the policy (CP1045 sublimit) no coins
Earthquake and Volcanic Eruption Endorsements: Exclusions standard exclusions +:landslide, mine subsidence, tidal wave, tsunami, flood, mudslide, or mudflow- loss caused by earthquake of volcanic eruption before the inception of the insurance
Does the Earthquake and Volcanic Eruption Endorsements exclude coverage for loss to Masonry Veneer? Yes, unless, veneer is limited to 10% of less of the exterior walls area- can be added by placing words "including masonry veneer" in the premises description on the declarations and paying appropriate premium
Earthquake and Volcanic Eruption Endorsements: Deductibles CP1040 (coins form) ded is % of limit of ins applicable to the property that has sustained loss or damage- CP1045(no coins) ded % of value of prop that has sustained loss or dmg
Which Earthquake and Volcanic Eruption Endorsement has an aggregate limit equal to the occurrence limit? CP 10 45 (sublimit endorsement
Earthquake and Volcanic Eruption Endorsements: Ensuing Loss Provision in the event of ensuing loss caused by another peril that is covered by the policy, the most the policy will pa for the entire loss is the limit for the other covered peril
Difference in Conditions (DIC) covers on an "all risks" basis to fill gaps in teh insureds commercial property coverage, especially gaps in flood and earthquake coverage
Difference in Conditions (DIC): Property Covered buildings & business personal property
Difference in Conditions (DIC): Perils Covered equivalent to causes of loss-special form but with basic perils excluded-
Difference in Conditions (DIC): Equipment Breakdown Exposures excludes loss caused by steam boiler explosion or mechanical or electrical breakdown
Difference in Conditions (DIC): Advantages cost effective method of flood/earthquake covg- do not require coins- forms easier to modify to meet insds needs- forms offer broader coverage for some perils & exclusions less restrictive
Difference in Conditions (DIC): Disadvantages limited market- no standard interpretation-policy language not approved/reviewed- m/p makes covg disproportionately expensive for small insds- takes longer to negotiate
Difference in Conditions (DIC): Endorsements named perils forms- no coins- covg for amount less that carried on prop underr cpp- subject to higher deductibles- advantaqes: convenience of 1 policy- avoidance of MP's for DIC covg
Output Policy combines all or most of the property coverages a commercial organization needs- provide broader prop covg but no liability covg- judgment rated-
Output Policy: Building & Other Structures coverage extends to materials and equipt w/in 1000 ft of described premises
Output Policy: Personal Property at Unspecified Locations personal property can be covered anywhere- important for insds with multiple locations that frequently change during the year
Output Policy: Personal Property in Transit broad transit coverage including personal property on the insureds vehicles and in the custody for the insureds salespeople
Output Policy: Personal Property of Others only if the insured has agreed before the loss to insure it for the benefit of the owner or the insured is legally liable for the damage
Output Policy: Other Coverage Options: Auto Physical Damage Coverage option for insds with large fleets of automobile that are at risk of a loss involving several vehicles at one time, $5k or larger ded
Output Policy: Other Coverage Options: Equipment Breakdown Coverage enables insurers to provide equipment breakdown coverage in a package policy- creates seamless coverage to avoid gaps
Output Policy: Other Coverage Options: Flood and Earthquake Coverage include opt to add flood and earthquake coverage, also includes backup of sewers and drains
Highly Protected Risks (HPR's) a large property whose construction meets high standards of risk mitigation and control characteristics and whose management maintains best practices loss control and risk mitigation techniques for the specific occupancy
Characteristics of HPR Insurance insd manager determined to control property losses- insurer able to provide the loss prevention engineering needed to implement a complete protection plan for the insds prop
Characteristics of Properties covered under HPR Insurance fire-resistive, masonry noncombustible, or heavy timber (mill) construction- auto sprinkler systems and other loss prevention equip- adequate water supply/pressure- adequate public/private fire protection
Highly Protected Risks (HPR's): Property Covered "real property and personal property" - all property except that which is excluded- coverage extended to property located w/in 1,000 ft of described locations
Highly Protected Risks (HPR's): Perils Covered open perils coverage- "all risks" wording- usually do not limit covg for collapse to named perils- covers back up of water through sewers/drains, artifically generated electric current
Highly Protected Risks (HPR's): Supplementary Coverages unintentional errors clause- provides covg for prop that have been unintentionally omitted or erroneously described in the listing of covd locs- up to $5mm for debris removal or 25% of loss whichever greater-
Layered Property Coverage two or more property policies arranged in levels of coverage; the policies in the second or higher levels provide coverage only when the loss exceeds the coverage afforded by the lower-level policies
Advantages of Layered Property Coverage Obtaining adequate and flexible limits- pricing considerations- availability of broader coverages- accessing additional markets
Disadvantages of Layered Property Coverage conflicts in wording & interpretation resulting in disputes- insurer unwilling/unable to participate in layered program- market can be competitive & expensive- higher m/p's
Created by: hongaro
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