Tag Archives: business interruption

Business Income And Dependent Property From A Secondary Location

There was a lot that changed with the Commercial Property Forms in the 2013 series. In fact, most forms underwent some sort of modification. One of the most interesting of the changes was the introduction of an optional coverage available on the Dependent Property Forms for Dependent Properties in the Supply Chain (Business Interruption).

By way of background, the Business Income and Extra Expense forms require that there is direct damage at the premises described by a covered cause of loss that gives rise to a loss of income or need to pay extra costs to operate during the period of restoration. In providing this form of coverage, we have been aware of the exposure to a loss of income due to a physical loss at a location that our insured depends on for various reasons. Recognizing that a loss to a dependent location could cause financial harm to our insured, ISO created Dependent Property Endorsements (CP 1508, CP 15 09, CP 1534) provided on a scheduled basis. What this means is that, for our insured, we identify what company(ies) they are dependent on and schedule those locations on the Dependent Property Form attached to their business income policy.

For example, we could be insuring a winery that is dependent on a single manufacturer to manufacture their distinct wine bottle and provide them with their customized cork. If that bottle manufacturer had a loss to their manufacturing facility by a peril insured against on the winery's policy and the winery now has no bottles and the winery can demonstrate they are losing money or incurring an Extra Expense by going to a more expensive alternate supplier then the Dependent Property Endorsement could respond.

What we learned, when losses such as this arise, is that oftentimes the physical loss did not occur at the dependent location we scheduled on the policy but rather to a “location” that the dependent property was dependent upon to supply them a product or service. So to expand on the winery example — the bottle manufacturer is dependent on a single cork manufacturer to supply them with the blank corks they customize and the cork manufacturer has a loss (covered peril) and cannot supply the wine bottle company with the product. We never identified the cork manufacturer on our insured's policy as there was no known or direct relationship.

The new language on the Dependent Property forms have an option for “secondary contributing locations” and “secondary recipient locations.” Secondary locations are limited to direct suppliers and recipients of the dependent property's materials or supplies.

On the form, secondary contributing location and recipient location are now defined terms. There are some important clarifications of the coverage:

  1. The secondary location is not identified in the schedule. However, there is a box on the schedule that has to be marked identifying that a secondary location has been included.
  2. The secondary location cannot be owned or operated by the “contributing” or “recipient” location that is identified in the schedule.
  3. There is clarity that a secondary location is not a road, bridge, tunnel, waterway, airfield, pipeline or any other similar area or structure.
  4. There is clarity that any source of “services” in the area of water, power, wastewater removal or communication supply cannot be a secondary dependent property. These would be covered under Utility Interruption endorsements.
  5. Lastly, there is clarity that the secondary dependent property coverage is subject to the territory of the policy and is not worldwide.

This additional coverage under the Dependent Property Endorsements is very important to consider, especially for manufacturing accounts. This all gets back to our identifying exposure and providing solution.

Sign up for classes today. Either join the University for one low price for the entire agency for all classes and products … or enroll in individual classes. Click here and be ready to learn!

Leap Year: Season 2, Episode 6 – What It Takes To Win

The C3D team are facing a typical entrepreneurial reality. Just when they thought things couldn’t get any tougher, yet another challenge presents itself. Thanks to Aaron and Bryn’s spontaneous make out session at the bar, Bryn hopped on a plane back to San Fran and it’s up to Aaron and Jack to make the TechStars presentation on their own. It might leave a bad taste in their mouths, but subterfuge is now the only way to win this contest, and save C3D. As usual, Jack smooth talks Aaron into going along and then the fun begins.

The sabotage takes many forms, including a Watergate-style meeting in a garage, Aaron as a fake driver and the old glass of water on the keyboard trick. Unfortunately, this is something that’s happened by mistake before (the water on the keyboard that is). For example, say you accidentally spilled water, coffee, RedBull or some other liquid on a client’s laptop, or even your own equipment. Would you be on the hook for the cost of the laptop and the cost of retrieving their data? Is there a way to protect yourself against these unfortunate circumstances? Of course there’s a way to protect yourself. The Electronic Data package as part of your business owner insurance would help pay to replace the damaged equipment, costs to get the data back and any business interruption. A nice, inexpensive safety net to protect against unexpected problems.

It’s too late for the other teams in the TechStars competition, though. Once again, Jack and Aaron made it through and C3D lives on to fight another day. Their welcome reception back in San Francisco is more than a little bittersweet for Aaron as he continues to wrestle with his conscience. The sideways glance Lisa gave him when he talked to Bryn couldn’t have helped his nerves at all.

Latest crisis averted. Now on to the next one — will Bryn keep working to complete the prototypes in time, or has her romantic interest in Aaron thrown everything completely off track once again? And what happens when Olivia tells everybody that Derek is a spy in their midst?

Leap Year: Season 2, Episode 2 – One Of Those Nights

From the looks of things, C3D has started to attract a lot of attention in Silicon Valley. Some of this is positive buzz from the press like the semi-successful appearance Jack made last week on What’s Trending. But the specific attention to the C3D office — that is smashing it up and stealing their latest prototypes — is much less welcome. Not only did Jack promise a product launch in three months, three times faster than they planned, now Bryn will need to start from scratch to get their new product ready in record time.

Maybe their benefactor Glenn Cheeky can help? Kind of, but while he did put them in touch with detective Smiley, he also instructed them not to file a police report and suffer the related bad publicity. Glenn’s advice makes sense. Bad press can quickly rub the shine off an exciting new company for analysts, investors and consumers. But operating without funds can do just the same — and probably quicker.

The C3D team is in a unique situation with the intense media and gossip network of Silicon Valley influencing their judgment. But what if this was just a normal business? How would they get back on their feet after a break-in?

Well, if C3D had a business owner policy (BOP), they would have been able to get compensated for their damaged equipment to start out, even if it’s leased. This policy typically also pays to remove debris left behind from the break-in and for damaged personal items. It will even pay to restore electronic data destroyed on electronic files (luckily Bryn learned from last year and started to back their files up off site) and for business interruption claims for lost income due to the break-in. Since C3D is a startup working to get a new product on the market, business interruption might not apply, but for many businesses this coverage can be a lifesaver and keep a temporary setback like a break-in or a fire from becoming something that truly threatens the future of their businesses.

So, what’s the next step for C3D? Finding the people who broke into their office could let them exact some revenge, but will it help them get their product to market on time?

Certificate of Insurance Management – Essential Protection Against Unexpected Liability

Risk managers are responsible for identifying and mitigating areas of risk in their business. They perform their role by implementing processes to manage and improve environmental controls, promote employee safety knowledge, training, and practices, and ensure adequate business insurance coverage to protect the people and assets of the company from injury and catastrophic loss.

But proactive risk managers also must think beyond their own firm. They need to ensure that those with whom they do business, including contractors, subcontractors, vendors, suppliers and tenants, all have sufficient insurance coverage to protect their firm in the case of accidents or claims, so the contracting company isn’t exposed to unprotected third party liabilities. This process of monitoring and tracking certificates of insurance is an essential task that, to be done correctly, should be as systematic and reliable as any other business process.

For example, a large manufacturer of animal supply products needs to require evidence of insurance from the company that supplies it with chicken feed. A technology firm needs to require a certificate from their security company. And a real estate management firm would require a certificate from a retailer that rents space in one of their office buildings.

The certificate of insurance management process can get complicated very quickly, and manual solutions seldom provide the reliability or efficiency even medium-size companies need. If you have more than just a handful of contractors or suppliers to track, with three or four lines of insurance each, it can quickly consume a risk manager’s valuable time. Manually tracking when various lines of insurance are about to expire or whether coverage limits are up to date is very time-consuming, even on a spreadsheet. It requires constant checking, cross-referencing, and follow-up, and frequently can still produce oversights and errors. This could leave your organization vulnerable.

Yet if you fail to track a certificate of insurance and a workplace incident should occur, you could find your organization held liable for insurance claims and costly lawsuits. Consider this scenario: let’s say a mining company hired a trucking company who in turn hired independent truckers who were responsible for their own insurance. If the mining company and the trucking company failed to verify the insurance of their respective subcontractors and one of the drivers were to cause an accident, the resulting lawsuit could hold the driver and both companies liable for damages.

Using an automated system to manage, track, and qualify your certificates of insurance can help ensure that your organization is adequately protected. This lowers your risk, perhaps even reduces your insurance premiums, and results in a more secure and robust bottom line.

Importantly, a dependable certificate of insurance management process protects your company from unexpected claims and litigation, potential business interruptions, and lets you focus on building a successful, safe, and secure organization.

Succeed Management Solutions, LLC offers a complete Certificate of Insurance Service, designed for organizations in any industry to deliver proactive management, control, and reporting of certificates of insurance. Succeed also offers a free webinar to review the needs for certificate of insurance management, proper contractor reviews, and audits. Learn how to save time, reduce costs, and ensure accuracy managing certificates of insurance. The live webinar occurs at 9:00 am Pacific/12:00 pm Eastern every Friday. Learn more about our Certificate of Insurance Management Service by emailing clientservices@succeedms.com to register for the webinar.