SUMAssure Insurance 101. Outline for Today General over view of coverages: Property General Liability Crime EIL Equipment Breakdown Insuring.

SUMAssure Insurance 101



Outline for Today

General over view of coverages: Property General Liability Crime EIL Equipment Breakdown

Insuring to value/coinsurance

First party vs. third party claims

Liability issues

Role of adjusters, examiners, brokers

Claim examples


Coverages

Property

Property of every description (POED)

Business interruption (80% coinsurance, gross earnings)

90 % coinsurance on POED, buildings and equipment insured per statement of values, stock on ACV basis

Deductibles: numerous deductibles


Coverages

Liability

Limits $5,000,000 subject to deductible

Coverage: To protect you against claims made by third parties alleging negligence

Additional Coverage: Employee Benefits Liability, Liquor Liability Protection, Fire Fighting Expenses


Coverages

Crime

Employee Dishonesty

Depositors Forgery

Credit Card Forgery

Computer Theft & Fraud

Money Orders & Counterfeit Paper


Crime

To reduce potential claims insurers require a system of checks and balances

Requirements for Full Coverage ($100,000 limit) Dual Signatures on cheques Individual reconciling bank statement cannot be a cheque

endorser Incoming cheques must be stamped for deposit only Auditors must report to board, not an individual


Employee dishonesty limit is $500,000

Same conditions apply

Depending on size of municipal entity some of the requirements may not be possible to comply with

Crime


Environmental Impairment

Claims Made Policy ,not occurrence based

Covers you for environmental/pollution exposures

Example: a municipality is sued alleging they caused harm to someone, this policy responds. It does not respond to clean up costs.


Equipment Breakdown

Covers equipment Examples — cranes, construction equipment, graders etc.


Insuring to Value

Insurance is purchased to protect your investment and the revenue generated through the use of your property. The significance of insuring to full value of your property cannot be overstated when it comes to managing your risk and protecting your investment.

If you don’t insure to value, you risk possible reduction of your claim. Maintaining adequate protection is very important so that you do not suffer a coinsurance penalty in the event of a partial loss. A coinsurance penalty applies when you do not purchase the required amount of insurance based on the value of the property.


Insuring to Value

How to insure to value? Determine the valuation basis on your policy. There are two

main valuations: “Replacement Cost” (not to be confused with book value, original cost or market value) means the actual cost to replace the propery. “Actual Cash Value” means the depreciated cost to replace the property

Locate a source to determine the current cost of replacement which reflects local labour conditions and material costs. Sources include building trade publications, equipment dealers, appraisers, contractors, and quantity surveyors


Insuring to Value

Prepare a detailed schedule of all assets to be insured showing the proper value derived from above

Building and contents values, once verified, should be kept current by applying an annual inflation factor


Claim Example

ABC Municipality builds a warehouse 10 years ago at a cost of $10,000,000. That amount has been the value every year on the insurance schedule since the building was completed. ABC knew the costs to build things were going up but never thought they would lose the building in a fire. Earlier this year the building was seriously damaged by fire. The cost to replace the building was $15,000,000. ABC is only insured to $10,000,000 and is now uninsured for $5,000,000.


Coinsurance Example

A policyholder owns a building with a replacement value of $1,000,000. Co-insurance is 90%. This means the insured must have at least $900,000 as a declared value for the building. The formula for calculating the payment is: Actual Declared Value / Required Value x Loss

The Insurance schedule lists the building for $600,000. A claim is submitted for $300,000. In this example the insurance company would pay $200,000 and the policyholder would pay the remaining $100,000 (subject to deductible) $600,000 / $900,000 x $300,000


First Party vs. Third Party

First Party: A named insured or an additional insured under a policy

Can include lien holders, sub companies, suppliers, joint ventures, contractors

Third Party: An individual or company making a claim against you.

The individual or company has suffered a loss arising out of your negligence


Liability Issues

In order to establish liability there must be negligence

Negligence is defined as the failure to do or not do something that a reasonable or prudent person would do in the same set of circumstances

Gross Negligence is a higher standard where the court will find the actions of a party were so bad (wanton disregard, extreme carelessness) that the negligence is higher than ordinary negligence


Negligence

Contributory Negligence is what percentage another party may be considered liable

Example: A person slips and falls on ice on a sidewalk outside a

store. They are wearing running shoes with no treads. A court may conclude the footwear was inappropriate and the person who fell is partially responsible for their own injuries


Liability Issues

Duty Owed A court will determine if there was a duty owed by one party

to another

Duty Breached If there was a duty owed then the court must determine if

the party that owed the duty breached that duty

Damages If the court concludes there was a duty owed and a duty

breached then they must assess damages based on the facts


Municipal Government Act

Generally speaking policy decisions do not attract liability

However operational decisions do attract liability.

If you have a policy in place but do not follow it then you open yourselves up to liability


Municipal Government Act

In many circumstances the standard of negligence for municipal entities is gross negligence.

Exceptions to this however usually involve public safety issues

Claims often allege road maintenance or design issues. The standard of negligence for these types of claims is ordinary negligence not gross negligence.


Role of Parties

Adjuster Hired to investigate and handle the claim, typically by an

insurer

Public Adjuster is hired by an insured to assist them with their claim

Examiner Works for insurer and controls the adjuster. The decision

maker

Broker Assists insureds in determining the risk and providing

solutions to minimize and insure those risks


Claim Examples

A driver loses control of a vehicle and damages it severely. The driver alleges the road was improperly designed, poorly maintained.

What do we do?


Claim Example

Pipe bursts in municipal office, causing severe flooding in basement and damage to offices

What do we do?


Claim Example

A farmer alleges that Toradol was sprayed on municipal property but over spraying occurred damaging his crops

What do we do?


Claim Example

Employee accepts cash and credit card payments but only submits a portion of the cash but all of the credit card payments

What do we do?

SUMAssure Insurance 101. Outline for Today General over view of coverages: Property General Liability Crime EIL Equipment Breakdown Insuring.

Documents

market value

book value

proper value

actual cost

replacement cost

actual cash value

original cost

depreciated cost