Checklist Instructions:

Agent: The coverages listed below are suggested for consideration for financial institutions.  After evaluating each of the listed coverages, check the recommended blank by those that apply specifically to this client. Make sure both the exposure and the coverage are explained to the client.

A brief coverage description is provided when you click on the coverage title.

Client: For each of the coverages that the agent has recommended, initial whether you have chosen to accept or reject that coverage in the blanks provided.

COVERAGE RECOMMENDATIONS

Printable PDF Form

 

PROPERTY COVERAGES

 

 

 

 

 

Recommend

Accept

Reject

Not Applicable

Building and Personal Property Coverage Form

 

 

 

 

    Building

______

______

______

______

    Business Personal Property

______

______

______

______

    Personal Property of Others

______

______

______

______

    Improvements and Betterments

______

______

______

______

 

Building and Personal Property Coinsurance

Percentages     None    80%      90%      100%

______

______

______

______

Bldg                  ___       ___       ___       ___

______

______

______

______

BPP                  ___       ___       ___       ___

______

______

______

______

PPO                  ___       ___       ___       ___

______

______

______

______

I&B                    ___       ___       ___       ___      

______

______

______

______

 

Alternatives to Coinsurance

Agreed Value

______

______

______

______

Functional Replacement Cost

______

______

______

______

Peak Season

______

______

______

______

Reporting Forms

______

______

______

______

Other ________________________

______

______

______

______

 

Optional Property Coverage Forms

Builders Risk

______

______

______

______

Commercial or Manufacturers Output Policy

______

______

______

______

Condominium–Association Coverage

______

______

______

______

Condominium–Unit-owners Coverage

______

______

______

______

Equipment Breakdown

______

______

______

______

Legal Liability  

______

______

______

______

Mortgageholders Error and Omissions

______

______

______

______

 

Property Coverage Options

Additional Debris Removal

______

______

______

______

Ordinance or Law

______

______

______

______

Outdoor Trees, Shrubs and Plants Enhancement

______

______

______

______

Replacement Cost Valuation

______

______

______

______

Utility Services–Direct Damage

______

______

______

______

 

 

 

 

Other Property Options

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

TIME ELEMENT COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Business Income With Extra Expense

______

______

______

______

Business Income Without Extra Expense

______

______

______

______

Extra Expense

______

______

______

______

Leasehold Interest

______

______

______

______

Business Income Coinsurance Percentage ____

______

______

______

______

 

Alternatives to Coinsurance    

 

 

 

Agreed Value

______

______

______

______

Maximum Period of Indemnity

______

______

______

______

Monthly Limit of Indemnity

______

______

______

______

Premium Adjustment

______

______

______

______

 

 

 

 

 

Optional Time Element Endorsements

 

 

 

 

Business Income from Dependent Properties

______

______

______

______

Ordinance or Law–Increased Period of Restoration

______

______

______

______

Utility Services

______

______

______

______

 

 

 

 

 

Other Time Element Coverages

 

 

 

 

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

PROPERTY AND TIME ELEMENT

CAUSES OF LOSS

 

Recommend

Accept

Reject

Not Applicable

                          Bldg       BPP     PPO      BI      EE

Basic                 ___        ___      ___       ___    ___

______

______

______

______

Broad                ___        ___      ___       ___    ___

______

______

______

______

Special              ___        ___      ___       ___    ___

______

______

______

______

Earthquake        ___       ___      ___       ___    ___

______

______

______

______

Flood                 ___        ___      ___       ___    ___

______

______

______

______

 

Other Cause of Loss Endorsements   

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

 

INLAND MARINE COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Accounts Receivable 

______

______

______

______

Commercial Articles

______

______

______

______

Difference In Conditions(DIC)

______

______

______

______

Electronic Data Processing

______

______

______

______

Fine Arts

______

______

______

______

Miscellaneous

______

______

______

______

Signs   (Neon and Electric)

______

______

______

______

Valuable Papers and Records 

______

______

______

______

 

Other Inland Marine Coverages

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

CRIME COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Money, Securities and Other Property

Employee Dishonesty

______

______

______

______

Computer and Funds Transfer Fraud

______

______

______

______

Destruction of Electronic Data or Programs

______

______

______

______

Extortion

______

______

______

______

Forgery or Alterations

______

______

______

______

Fraudulent Impersonation

______

______

______

______

Kidnap and Ransom

______

______

______

______

Lessees of Safe Deposit Boxes

(Securities and Other Property only)

______

______

______

______

Money Orders and Counterfeit Money

______

______

______

______

Telephone Toll Fraud

______

______

______

______

Unauthorized Reproduction of Computer Software by Employees

______

______

______

______

 

Money and/or Securities Only

Theft, Disappearance and Destruction 

______

______

______

______

Robbery and Safe Burglary 

______

______

______

______

Securities Deposited With Others

______

______

______

______

 

Property Other Than Money and Securities  

Premises Burglary 

______

______

______

______

Premises Theft

______

______

______

______

Robbery and Safe Burglary 

______

______

______

______

 

Other Crime Coverages  

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

LIABILITY COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Commercial General Liability

  Occurrence Basis

______

______

______

______

  Claims-Made Basis

______

______

______

______

 

Optional Liability Coverages

Directors and Officers 

______

______

______

______

Employee Benefits 

______

______

______

______

Employment-related Practices

______

______

______

______

Owners and Contractors Protective 

______

______

______

______

Special Events  

______

______

______

______

 

Other Liability Coverages          

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

PROFESSIONAL AND E&O LIABILITY COVERAGES

______

______

______

______

 

COMMERCIAL AUTO  COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Liability

______

______

______

______

Medical Payments

______

______

______

______

Physical Damage

______

______

______

______

Hired Car

______

______

______

______

Nonownership Auto

______

______

______

______

Personal Injury Protection (P.I.P.)/No-Fault

______

______

______

______

 

Optional Automobile Coverages

Garagekeepers

______

______

______

______

Uninsured Motorists

______

______

______

______

Underinsured Motorist

______

______

______

______

 

Other Auto Coverages    

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

WORKERS COMPENSATION  COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Workers Compensation and Employers Liability

______

______

______

______

Federal Employers Liability Act

______

______

______

______

Stop Gap Employers Liability Coverage

______

______

______

______

Voluntary Compensation

______

______

______

______

 

Other Workers Compensation Endorsements

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

EXCESS LIABILITY  COVERAGES

 

Recommend

Accept

Reject

Not Applicable

Excess Liability Policy

______

______

______

______

Umbrella Policy

______

______

______

______

 

AVIATION  COVERAGES

Aircraft Passenger Liability

______

______

______

______

Aircraft Policy

______

______

______

______

 

SPECIALTY COVERAGES

Cyber Insurance

______

______

______

______

Fiduciary Liability Insurance

______

______

______

______

International/Foreign Operations Insurance

______

______

______

______

Media/Communication Liability

______

______

______

______

Terrorism Insurance

______

______

______

______

Title Insurance

______

______

______

______

Unmanned Aerial Vehicles (UAV) (Drones) 

______

______

______

______

Weather Insurance

______

______

______

______

 

Other Specialty  Coverages       

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

BONDS

Fiduciary Bond

______

______

______

______

License and Permit Bond

______

______

______

______

 

Other Bonds           

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

           

OTHER OPTIONS

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

______________________________________

______

______

______

______

 

 Comments

_______________________________________________________________________________

 

_______________________________________________________________________________

 

_______________________________________________________________________________

 

_______________________________________________________________________________

 

_______________________________________________________________________________

 

_______________________________________________________________________________

 

I certify that I have reviewed my coverage needs in accordance with this checklist with my agent and I have accepted or rejected the recommended coverages as indicated by my initials in the spaces above.

___________________________________ Signature of Client      ______________________ Date

_____________________________________________ Title

 

I certify that I have reviewed the coverages outlined in this checklist with my client and that the initials of the client indicate the acceptance or rejection of the coverages recommended.


___________________________________ Signature of Agent     _______________________ Date

PROPERTY COVERAGES

Property coverages insure tangible assets against a variety of causes of loss. There are many coverage forms and approaches, beginning with the general and moving to the specific. This range of options allows an agent to work with a customer to develop a specific approach that is customized for that customer.

Building and Personal Property Coverage Form

·         This coverage form is the most versatile ISO Coverage Form. Almost any commercial entity can use it to cover the following items: The building or structure itself

·         Business personal property

·         Personal property of others

·         Improvements and betterments added by a named insured tenant

One or more causes of loss forms must be attached to complete the coverage.

Financial institutions will normally use this form for most property coverage.

 

Related Article: CP 00 10–Building and Personal Property Coverage Form Analysis

Building

A building is not only the building but also permanently installed machinery and equipment, indoor and outdoor fixtures, owned equipment that is used to service and maintain the building and other structures.

Additions under construction are building as are materials kept within 100 feet of the premises to be used in the construction project. These items are covered only when not covered elsewhere.

Related Article: CP 00 10–Building and Personal Property Coverage Form Analysis

Business Personal Property

Business personal property is covered while in or on the building. It is also covered when it is within 100 feet of the building but in the open or within a vehicle. The word premises can replace the word building if that would be a greater distance. Business personal property is all owned personal property used in the business. It is also labor, services and material added to property of others. In addition, when the named insured is a tenant, it is improvements and betterments added at its expense that cannot be removed. Property of others is also business personal property when a contract requires the named insured to be responsible for it.

 Personal Property of Others

Personal property of others that is in the care, custody or control of the named insured. It is covered while in or on the building. It is also covered when it is within 100 feet of the building but in the open or within a vehicle. The word premises can replace the word building if that would be a greater distance.

Note: As a separate coverage, this applies only when a limit is entered for it on the Declarations. When the limit is entered, any coverage available for contractually related personal property of others is moved from business personal property to this item so the limit should be sufficient to cover all.

Improvements and Betterments

This applies only if the named insured is a tenant. All additions and improvements that are made to the tenant occupied space are covered if the named insured will not be permitted to take them when it leaves AND the named insured paid for them.

Building and Personal Property Coinsurance

Coinsurance is a technique that encourages the named insured to insure to the proper value. The commercial fire rating in the ISO manuals contemplates 80% coinsurance. Higher coinsurance percentages receive a credit. Lower percentages are debited. The insured selects a coinsurance percentage that is entered on the declarations. Failure to carry sufficient limits to satisfy the coinsurance requirement results in a penalty when the loss is settled.

 

Related Article: Coinsurance Clause

Building and Personal Property Alternatives to Coinsurance

Coinsurance works best in a stable property market because not insuring to value can result in a loss not being completely covered. When values fluctuate throughout the year, at times coverage may be too high, which means paying too much premium or may be too low which means penalties and underinsurance. The good news is that there are a variety of options to “right size” the limit and the premium.

Agreed Value

This approach suspends coinsurance but requires the insured to submit annual signed statements of the 100% value of the property insured. The insured must purchase limits of insurance that equal or exceed 90% of that agreed upon value.  

 

ACORD 139

 Related Article: CP 00 10–Building and Personal Property Coverage Form Analysis

Functional Replacement Cost

This approach allows the insured to purchase only the limits it needs to rebuild or replace building and/or business personal property based on utilitarian needs. Examples include replacing a three-story building that occupies only the first floor with a one-story building or replacing wood office furniture with cubicles.

 

Related Article: Functional Property Valuations

Peak Season

This approach allows the insured to increase business personal property limits at peak times while keeping them lower at other times of the year. The insured picks the time period and the increased limit it needs.

 

Related Article: Peak Season Coverage

Reporting Forms

This approach allows the insured to pay for only the business personal property limit needed while still maintaining insurance to value. The policy is issued with the highest limit anticipated for the year. A deposit premium is established based on 75% of that limit. A report is submitted containing the actual values at selected periods. At the end of the year, the premium is calculated based on the reports and the named insured is expected to pay any additional premium or will receive a refund. The insured has the exact coverage it needs for the time period.

 

ACORD 811

Related Article: CP 13 10–Value Reporting Form

Optional Property Coverage Forms

The Building and Personal Property Coverage Form is available for all commercial insureds. However, it may not be the best approach for all insureds. The following coverage forms should be considered for certain insureds or when a different approach is in order.

Builders Risk

A building under construction does not have any value when the project begins but reaches its full value at the end of the project. This coverage form’s rating structure takes that fact into consideration so that pricing is equitable and frequently endorsing the policy to change limits or periodically reporting values at risk is not required. This coverage form also insures materials that await installation. Any of the causes of loss forms may be attached so coverage can be customized to fit the project’s specific needs.

Note: This is the commercial property version of this form that is often used by the owner of the project. Many contractors purchase the inland marine version of the form because it is more flexible when multiple properties are involved.

 

ACORD 140

Related Article: CP 00 20–Builders Risk Coverage Form Analysis

Commercial or Manufacturers Output Policy

A commercial or manufacturers output policy is a property coverage form originally designed for automobile manufacturers but it is appropriate for any property exposure with large values. The coverage is broader and more flexible than the coverage in standard property coverage forms. There are several built-in coverages but the deductibles also tend to be higher. Both AAIS and ISO have developed coverage forms for their company members. They both also developed agricultural specific versions for agribusiness clients.

Comparing forms is necessary to determine their advantages and disadvantages. Exclusions, property included and excluded, inland marine extensions, property at other locations, and any special limitations must be examined carefully. Rating is unique.

This coverage could be beneficial if the financial institution owns a number of larger properties.

 

Related Articles:

OP 00 01–ISO Capital Assets Program Coverage Form (Output Policy) Analysis

CO 1000–AAIS Commercial Output Program Property Coverage Part Analysis

AG 0100–Agribusiness Property and Income Coverage Part Analysis

AG 00 01–Agricultural Capital Assets (Output Policy) Coverage Form Analysis

Condominium–Association Coverage

This is building coverage for a condominium association. It is comparable to that for a building owner under the Building and Personal Property Coverage Form. This coverage form is uniquely designed to   work with the condominium bylaws. Building coverage applies to fixtures, improvements, and alterations that are part of the building. It also applies to appliances contained in a condominium unit regardless of ownership, provided the association bylaws state that the condominium association must insure them. ISO offers this coverage, but some insurance companies have developed their own variations of it.

Financial institutions may start the condominium association as part of the financing of a project and therefore must obtain insurance to protect its interests.

 

ACORD 140

Related Article: CP 00 17–Condominium Association Coverage Form Analysis and
CP 00 18–Condominium Commercial Unit-Owners Coverage Form Analysis

Condominium–Unit-owners coverage

This coverage form insures business personal property of a unit-owner and personal property of others in its care, custody, or control. It also takes into consideration  the unique features of condominium bylaws and coverage requirements. ISO offers this coverage but some insurance companies have developed their own variations of it.

If a financial institution is a part of a commercial condominium they will need this coverage. The bylaws should be reviewed carefully to confirm that coverage is adequate.

 

ACORD 140

Related Article: CP 00 17–Condominium Association Coverage Form Analysis and CP 00 18–Condominium Commercial Unit-Owners Coverage Form Analysis

Equipment Breakdown Coverage Form

This coverage has ten separate parts:

  • Property Damage
  • Expediting Expense
  • Business Income/Extra Expense
  • Spoilage Damage
  • Utility Interruption
  • Newly Acquired Premises
  • Ordinance or Law
  • Errors and Omissions
  • Brands and Labels
  • Contingent Business Income/Extra Expense

Coverage applies to equipment under pressure in addition to mechanical or electrical equipment that generates energy. Communication and computer equipment is also covered. All are subject to certain restrictions. The major carriers that write this coverage use their own coverage forms, but the structure is similar to ISO’s version.

All building owners and tenants responsible for operating the above types of equipment should seriously consider purchasing this coverage because it resolves a significant gap in coverage in standard Commercial Property Coverage forms.

 

ACORD 155

Related Article: ISO Equipment Breakdown Protection Coverage Form Analysis

Legal Liability Coverage Form

This coverage form insures against direct physical loss or damage including loss of use of property of others in the insured's care, custody and control for which it is legally liable. Coverage is for the property owner’s benefit, not for the named insured’s benefit. That owner must file the claim for damages. A standard ISO coverage form provides this coverage. The named insured chooses basic, broad or special causes of loss. Determining the causes of loss form to use should be based on the wording of the contract or agreement between the property owner and the named insured. Because this is legal liability only, the causes of loss actually covered are the ones the contract or agreement requires. As a result, purchasing broader causes of loss than what the contract requires wastes premium dollars.

 

ACORD 140

Related Article: CP 00 40–Legal Liability Coverage Form Analysis

Mortgageholders Errors and Omissions Coverage Form

Banks, credit unions, savings and loans, and other financial or lending institutions must protect their loan investments in real property against direct property losses. They usually do this by adding loan conditions that require the borrower to purchase insurance on the mortgaged property for an amount at least equal to the amount of the loan.

Because errors can occur, most of these institutions purchase coverage in case a property is not covered because of a negligent act, oversight, error or omission.

A single limit of insurance applies to the four coverages provided by this coverage form:

  • Coverage A–Mortgageholder's Interest

This coverage protects the mortgageholder's interest in a property against the causes of loss it requires its mortgagors to purchase, subject to this form’s exclusions.

  • Coverage B–Property Owned or Held in Trust

This coverage pays for direct physical loss or damage to covered property from the basic causes of loss listed in this coverage form. It does not cover vandalism and sprinkler leakage losses. Coverage applies for up to 90 days after the mortgageholder acquires the property or its fiduciary interest in it begins.

  • Coverage C–Mortgageholder's Liability

This coverage pays amounts the mortgageholder is legally obligated to pay as damages due to its errors or omissions related to arranging and maintaining valid insurance for a mortgagee.

  • Coverage D–Real Estate Tax Liability

This coverage pays damages the mortgageholder is legally responsible for due to its errors or omissions in paying real estate taxes it usually pays.

 

Related Article: CP 00 70–Mortgageholders Errors and Omissions Coverage Form Analysis

Property Coverage Options

 

The ISO Building and Personal Property Coverage Form contains options within the base form and also provides a number of endorsements that can be used to modify coverage. The ones listed are those that could apply to many different types of operations.

 

Related Article: ISO Commercial Property Program Available Endorsements and Their Uses

Additional Debris Removal

Debris is created whenever there is a building or business personal property loss. It must be removed in order for the reconstruction to begin. Payment for debris removal in the ISO Building and Personal Property Coverage Form is limited to 25% of the loss plus an additional $25,000 if needed.

The $25,000 may not be sufficient for some insureds so there is an option to purchase a higher limit.  Limits are purchased on a per-location basis instead of the standard per-building basis. This allows insureds to consider their entire location and determine potential debris removal considerations.

Unusual construction or places that are difficult to access can contribute to increased debris removal expense.

 

ACORD 140

Related Article: Debris Removal Concerns

Ordinance or Law Coverage

The ISO Building and Personal Property Coverage Form does not pay for increases in a loss due to local ordinances that require improvements to a building following a loss. This coverage insures three specific situations when ordinances increase rebuilding costs:

  • The first deals with laws that require a building to be torn down if more than a certain percentage is destroyed and the building does not meet current codes. There is no coverage for destruction of the undamaged portion of the building. Coverage A pays for this.
  • Second, there is no coverage for the costs to demolish undamaged portions of the building and clear the site. Coverage B pays for this.
  • Third, there is no coverage to bring a building up to code in order to obtain permits to build. Coverage C pays for this.

Coverage may be purchased under ISO CP 04 05. Some insurance companies offer this coverage slightly differently.

Financial institutions are often located in properties that are older and may not meet current building code. A partial loss could quickly turn into a total loss and force the establishment out of business if this coverage is not purchased.

 

ACORD 140

Related Article: CP 04 05–Ordinance or Law Coverage

Outdoor Trees, Shrubs, and Plants Enhancement

The ISO Building and Personal Property Coverage Form excludes outdoor trees, shrubs, and plants. A coverage extension provides a small amount of coverage but for only limited causes of loss and for small limits. CP 14 30–Outdoor Trees, Shrubs, and Plants provides broader causes of loss and higher limits. There is an option to include or exclude vehicle damage.

Vegetated roofs are not subject to the limitations for trees, shrubs and plants and do not require this form in order to obtain coverage.

Landscaping is very important to many financial institutions. This endorsement is strongly recommended in those circumstances.

 

ACORD 140

Related Article: ISO Commercial Property Program Available Endorsements and Their Uses

Replacement Cost Valuation

Actual cash value is the standard valuation on insurance coverage forms and policies. Actual cash value is replacement cost on the date of loss less depreciation. While this valuation basis indemnifies the insured and returns it to the same condition after the loss as before, it creates problems because it is virtually impossible to rebuild old for old. Replacement cost valuation provides new for old coverage and is available in many property and inland marine coverage forms as well as some auto coverage forms. It is an important tool but is only effective if the insured purchases sufficient limits.

 

ACORD 140

Related Article: CP 00 10–Building and Personal Property Coverage Form Analysis

Utility Services–Direct Damage

When covered property is damaged because a utility service supplied by an off-site provider fails, coverage applies only if CP 04 17–Utility Services - Direct Damage is attached to the policy. The failure must be due to the off-premises utility being damaged by a scheduled cause of loss. The only utility services covered are those scheduled in the endorsement and only the covered property described in the endorsement is covered. The covered utility services can be water, communication and/or power as defined in the endorsement.

Financial institutions have major disturbances when utility services stop working. If there are items that would be damaged by a sudden loss of water, power or communication, serious thought should be given to purchasing this coverage.

 

ACORD 140

Related Article: Utility Services Coverage

TIME ELEMENT COVERAGES

Time Element Coverage Forms cover the intangible economic losses that follow direct damage losses to tangible property. These coverage forms are forward-looking and coverage is based on loss of anticipated future economic benefits.

Business Income With Extra Expense

Business income with extra expense covers the loss of income a business sustains after direct damage to covered property. Coverage also applies to extra expenses that the insured incurs to remain in operation or to resume operations more quickly above and beyond the amount necessary to reduce the business income loss.

Insurance to value is important so a coinsurance penalty is incorporated into the coverage that applies when insurance limits are less than the required coinsurance amount entered on the declarations.

Banks and other financial institutions MUST be opened or lose their charters. They must spend whatever is necessary to remain open. This coverage will pay for the costs they incur to keep operating. They will lose significant income even as they keep a portion of their operation open in order to meet federal and state mandates.

 

ACORD 810

Related Article: ISO Time Element Coverage Forms Analysis

Business Income Without Extra Expense

Business income without extra expense covers the loss of income a business sustains after direct damage to covered property. It covers expenses the insured incurs in order to reduce the business income loss but only up to the amount by which they reduce the business income loss. There is no coverage for extraordinary measures the insured takes to maintain operations without regard to the impact the expenses have on reducing the loss of income.

Insurance to value is important so a coinsurance penalty is incorporated into the coverage that applies when insurance limits are less than the required coinsurance amount entered on the declarations.

 

ACORD 810

Related Article: ISO Time Element Coverage Forms Analysis

Extra Expense Coverage Form

This coverage provides a way to pay for funds the insured must spend to continue operations or resume operations as soon as possible without regard to income to be generated by doing so. These include, but are not limited to:

  • Transportation fees when using next-day service instead of normal shipping schedules
  • Any surcharge to put a rush on a purchase order
  • Special set-up fees that may be charged for a manufacturing order

This coverage form also covers money legally spent to continue or resume operations.

This coverage should be considered for risks that do not sustain a business income loss but that incur considerable extra expenses to remain open and operating.

Banks and other financial institutions MUST be opened or lose their charters. They must spend whatever is necessary to remain open. This coverage will pay for the costs they incur to keep operating.

 

ACORD 810

Related Articles:

ISO Time Element Coverage Forms Analysis

Extra Expense Worksheet

Leasehold Interest

This coverage form insures the named insured tenant that has a favorable long-term lease. It covers the difference between the rate in that lease and the prevailing rate in the area. Coverage applies only when the favorable lease is cancelled because a covered cause of loss caused loss or damage to the building. Coverage includes the value of up-front amortized costs. The limit of insurance decreases automatically based on the length of the lease.

The insured can choose basic, broad, or special causes of loss. It is important to review the insured’s lease agreement to determine the type of loss that would break the lease and trigger coverage in order to select the appropriate causes of loss form.

Financial institutions often have long-term leases and would suffer considerably if forced to vacate due to loss. This would help in the transition.

 

ACORD 810

Related Article: ISO Time Element Coverage Forms Analysis

Business Income Coinsurance Percentage

Coinsurance is a technique that encourages proper insurance to value. Values that reflect higher coinsurance percentages are subject to lower rates. The lowest rate is at 125% coinsurance. This unusual percentage is used to encourage the insured to cover both the business income and the extra expense that must be incurred beyond the business income loss. Business income coinsurance is based on time and the insured should base limits on the consecutive months that generate the highest income. For example, retailers should consider using winter months instead of summer months. Contractors that do exterior work should use summer months instead of winter months.

Note: Coinsurance applies only to the business income portion of the loss and not the extra expense portion.

Business Income Alternatives to Coinsurance

Coinsurance works best in a business that has a stable or predictable revenue flow. When revenue fluctuates throughout the year, at times limits may be too high, which means paying too much premium or may be too low which means penalties and underinsurance. The good news is that there are a variety of options to right size the limit and the premium.

Agreed Value

This approach suspends coinsurance but requires that the insured submit annual signed statements that show both the prior 12 month’s business income and the anticipated business income for the next 12 months. The insured must then carry a limit that equals at least 50% of the anticipated business income for the next 12 months.

 

Related Article: Business Income Alternatives to Coinsurance

Maximum Period of Indemnity

This approach suspends coinsurance and pays the lesser of the business income loss incurred for up to 120 days following the date of loss or the limit of insurance. Coverage ends after the 120th day even if the limits have not been used up.

 

Related Article: Business Income Alternatives to Coinsurance

Monthly Limit of Indemnity

This approach suspends coinsurance and pays the monthly business income loss incurred up to 1/3, 1/4 or 1/6 of the business income limit, depending on the percentage on the declarations. Payment continues until business operations resume or the limit of insurance is used up, whichever occurs first. For example, if an insured chose the 1/3 option with a $60,000 limit, $20,000 would be available each month. If there was a loss and the loss in the first month was $10,000, it would be paid in full. The next month’s loss was also $20,000 and would also be paid in full. The loss in the third month was $30,000 but only $20,000 would be paid. The loss in the fourth month was $20,000 but only $10,000 was paid because this amount used up the limit of insurance.

 

Related Articles:

Business Income Alternatives to Coinsurance

Business Income–Sample Monthly Limitation Worksheet

Premium Adjustment

This approach suspends coinsurance while ensuring that the insured pays only for the coverage needed. It is similar to a personal property reporting option except that the full premium is paid in advance and the insured receives only a refund, never an additional premium. The insured submits a statement of estimated business income at the beginning of the policy period, chooses a coinsurance percentage and limit, and pays the appropriate premium. At expiration, the insured submits the statement of actual business income and the premium is recalculated. The insured receives a refund if the actual business income is less than the estimate. However, there is no additional premium charged if the actual income exceeds the estimate because the most the insurance company pays is the estimated business income limit.

 

Related Article: CP 15 20–Business Income Premium Adjustment (Reporting Form)

Optional Time Element Endorsements

 

There are a number of endorsements available to modify the time element coverage forms. Many of the endorsements are appropriate only for specific types of insureds, but the ones below are ones that could benefit  almost any insured.

 

Related Article: ISO Time Element Coverage Forms Available Endorsements and Their Uses

Business Income from Dependent Properties

This endorsement covers loss sustained at dependent properties and also secondary dependent properties that cause the insured’s operations to be suspended. A dependent property can be a supplier or a customer of the insured. It can also be the lead store at a shopping center that draws customers to the insured. A secondary dependent property is one that could cause a dependent property operations to be suspended, which would result in the insured’s operations being suspended too.

This endorsement is attached to the policy that provides business income coverage, but carrying business income coverage on the insured’s premises is not a prerequisite to purchasing this coverage.

 

ACORD 810

Related Article: CP 15 08, CP 15 09, CP 15 01, CP 15 34, and CP 15 02–Time Element Dependent Properties Coverage Forms

Ordinance or Law–Increased Period of Restoration

Standard ISO Time Element Coverage Forms do not pay for increases to the time needed to rebuild following a loss due to local ordinances that require making improvements to a building following a loss. This endorsement provides coverage for that increase in time.

Coverage may be purchased under ISO CP 15 31. Other insurance companies may provide this coverage through extensions of coverage.

This endorsement should always be attached to the Time Element coverage form whenever CP 04 05–Ordinance or Law Coverage is attached to the Building and Personal Property Coverage Form.

If it is determined that a financial institution needs ordinance or law coverage for the building and business personal property, then this form must be purchased because of the increase of time needed to bring the building to code.

 

Related Article: CP 15 31–Ordinance or Law–Increased Period of Restoration

Utility Services

When business operations are interrupted because a utility service supplied by an off-site provider fails, coverage applies only if CP 15 45 17–Utility Services - Time Element is attached to the policy. The failure must be due to the off-premises utility being damaged by a scheduled cause of loss. The only utility services covered are those scheduled in the endorsement. The covered utility services can be water, communication, wastewater removal and/or power as defined in the endorsement.

Financial institutions cannot operate without power and communication. If either are disrupted, the income loss can be significant. This coverage will help.

 

Related Article: CP 15 45–Utility Services–Time Element

PROPERTY AND TIME ELEMENT CAUSES OF LOSS

 

ISO property policies are assembled form-by-form so that they can be customized. Once the named insured selects the appropriate coverage form or forms, the causes of loss form or forms must be selected. There are three primary options to choose from. Earthquake and flood coverage also should be considered.

Basic

This causes of loss form insures against fire, lightning, explosion, smoke, windstorm or hail, smoke, damage from aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

Sinkhole collapse does not include the cost to refill the sinkhole. Volcanic action is damage that particulate matter, dust, ash, and lava flow causes. It is also the damage caused by airborne shockwaves and blasts, but there is no coverage for damage due to any movement of the ground.

 

ACORD 140 and 810

Related Articles:

Basic, Broad, and Special Causes of Loss Forms Analysis

Compare: ISO Commercial Property Program Causes of Loss Forms

Broad

This causes of loss form insures against all of the basic causes of loss plus falling objects, weight of ice, snow, or sleet, and water damage from plumbing, heating, ventilating, air conditioning, or appliances breaking or cracking. It also covers collapse due to any of the causes of loss in the basic causes of loss form and the broad causes of loss form.

 

ACORD 140 and 810

Related Articles:

Basic, Broad, and Special Causes of Loss Forms Analysis

Compare: ISO Commercial Property Program Causes of Loss Forms

Special

This causes of loss form insures against direct physical loss or damage except as excluded or limited elsewhere in the policy. This causes of loss form provides the broadest coverage of the three forms available. Theft is one of the major added causes of loss but there are many more.   

 

ACORD 140 and 810

Related Articles:

Basic, Broad, and Special Causes of Loss Forms Analysis

Compare: ISO Commercial Property Program Causes of Loss Forms

Earthquake

All three primary causes of loss forms exclude earth movement. Coverage for all earth movement is not available. However, earthquake and volcanic eruption damage can be provided by any one of three different ways:

  • Provide coverage for earthquake and volcanic eruption damage by using CP 10 40–Earthquake and Volcanic Eruption Endorsement
  • Purchase a Difference in Conditions (DIC) policy that includes earthquake and volcanic eruption as a covered cause of loss
  • Purchase a separate earthquake policy from a nonstandard market that may or may not include volcanic eruption.

The first two options are the most positive way to obtain this coverage. However, a nonstandard market may be the only place to obtain coverage for this cause of loss in certain earthquake-prone areas and with certain types of properties. Deductibles are a percentage of the limit of insurance and usually range from 1% to 10%.

 

ACORD 140 and 810

Related Articles:

CP 10 40–Earthquake and Volcanic Eruption Endorsement

AAIS Difference In Conditions Form–Property Coverage Part Analysis

ISO Difference In Conditions Coverage Form Analysis

Flood

All three primary causes of loss forms exclude flood. Coverage for flood can be provided by any one of three different ways:

  • Include this cause of loss by using CP 10 65–Flood Coverage Endorsement
  • Purchase a Difference in Conditions (DIC) policy that includes flood as a covered cause of loss
  • Purchase a separate flood policy from the National Flood Insurance Program (NFIP)

When coverage under the NFIP is available, flood carriers usually require that the insured purchase the NFIP policy as primary and it then provides excess limits over it.

 

ACORD 301, 303

Related Articles:

CP 10 65–Flood Coverage Endorsement

Overview of the National Flood Insurance Program

INLAND MARINE COVERAGES

Inland marine traditionally has been less regulated than other types of insurance because of the unique nature of the property covered. In order to be consistent in treating it, insurance regulators adopted the Nationwide Marine Definition in 1933. While the basic definition has not changed, amendments have been added over the years that recognize changes in technology and the economy. Inland marine coverage can be provided by standard ISO coverage forms and by independent coverage forms from various inland marine carriers. While there are many common forms, inland marine insurance is known for recognizing and insuring unique exposures. When “it has never been done before” and needs to be insured, the inland marine market comes into play.

 

Related Articles:

Nationwide Inland Marine Definition

Who Needs Inland Marine Coverage?

Accounts Receivable

This coverage protects against loss resulting from an inability to collect accounts receivable due to the loss, damage or destruction of books or records of accounts. This coverage may be written using a standard ISO or AAIS Inland Marine Form.

Financial institutions should carefully evaluate the amount of their exposures to accounts receivable loss.

 

ACORD 145

Related Articles:

ISO Accounts Receivable Coverage Form

AAIS Accounts Receivable Coverage

Commercial Articles

The Commercial Articles policy provides coverage for the commercial user of cameras and musical instruments. Property is covered wherever it is located and does not require scheduling of locations or property.

Commercial article items are often shared among many locations so this coverage could be very useful to financial institutions with multiple sites.

 

Related Articles:

ISO Commercial Articles Coverage Form

AAIS Photographic Equipment Coverage

Difference in Conditions (DIC)

Difference in Conditions (DIC) coverage is occasionally referred to as umbrella coverage for property lines of insurance. It does not provide excess coverage for existing insurance coverages; instead, it provides coverage that is not in underlying coverage forms and policies. Its name derives from the difference in coverage provisions between it and the underlying coverage forms and policies. The greater the number of differences in coverage between the underlying coverage and the DIC, the greater the coverage the DIC provides. It is used primarily to provide earthquake and flood coverage and then insureds are pleasantly surprised to discover that the DIC covers certain perils that their underlying coverage forms and policies exclude.

DIC insurance coverage is designed to close specific gaps in standard insurance policies and is usually available only for larger industrial or commercial risks. DIC coverage is usually provided by a separate coverage form or policy but in some cases is available as an endorsement to the underlying coverage form or policy.

There is no standard form to provide this coverage, but generally it is offered through both inland marine and property markets. The keys to comparison are the limits, deductibles, exclusions, territory, and method of capping.

The broad aspects of the DIC can prove helpful for the unforeseen.

Financial institutions that are located in unusual buildings could have exposures that are not anticipated. The broad aspects of the DIC can prove helpful for the unforeseen. In addition, there are the added causes of loss of flood and earthquake that may be needed.

 

Related Articles:

AAIS Difference in Conditions Form–Property Coverage Part

ISO Difference in Conditions Coverage Form

Electronic Data Processing

Covers loss to electronic data processing equipment, software and media owned, leased or used by the insured. Computerized production equipment may be insured as well as conventional computer equipment. Coverage may include or exclude breakdown and power interruption. This coverage is available through the inland marine markets and coverage is not standardized. Comparisons must be made as to exclusions, on- and off-premises coverage, and transit. Valuation basis is a consideration because most computer systems will not be replaced with like and quality due to changes in technology.

This is vital coverage for all financial institutions.

 

ACORD 148

Related Articles:

AAIS Electronic Data Processing Equipment and Business Computer Coverage Forms

ISO Computer Systems Coverage Form

Fine Arts

Property coverage forms either exclude fine arts or limit payment to their utilitarian value. This coverage provides a valuation clause based on a piece of art’s specified value. The art including paintings, etchings, statuary, stained or etched glass windows are covered against risk of direct physical loss. A breakage exclusion is common but can be bought back for a significant surcharge.

 

Related Articles:

AAIS Fine Arts Coverage Forms

ISO Commercial Fine Arts Coverage Form

 

Any financial institution with special art pieces will need this coverage.

Miscellaneous

There are many types of miscellaneous floaters and forms because not every item that needs coverage falls into a more specific category. These types of floaters tend to be more open and allow for maximum flexibility in developing necessary coverage.  While some of the items covered may be very simple some may require an in-depth knowledge of the items being covered and the underwriting expertise to properly price them. Since the items covered are floating, it is important to determine the limits in effect throughout the floating and while on premises. Limitations can be a concern especially for off-premises situations. Another important consideration is any maximum capping when it is less than the total value of all items being insured.

There are also a number of inland marine coverage forms that may be appropriate for a particular insured. Review the following PF&M articles for a description of forms currently available through ISO and AAIS.

 

Related Articles:

AAIS Non-filed Inland Marine Coverage Forms Overview

ISO Non-filed Inland Marine Coverage Forms Overview

Signs (Neon and Electric)

Neon, fluorescent, automatic or mechanical electric signs are covered against a risk of direct physical loss or damage. This is offered using standard AAIS or ISO Inland Marine Forms. If regular wooden sign coverage is needed, the Building and Personal Property Coverage Form must be used.

Any financial institution with a sign outside the business that is other than wooden should consider the coverage.

 

ACORD 144

Related Articles:

ISO Signs Coverage Form

AAIS Sign Coverage Form

Valuable Papers and Records 

The policy insures on a risk of direct physical loss basis, including misplacement or mysterious or unexplained disappearance. It covers the costs to research and replicate damaged important documents, books, and records or to replace them.  Coverage is provided using standard ISO or AAIS Inland Marine Forms. There is a limited amount of coverage provided in property forms, but it is not as broad as what is provided in the Inland Marine Forms.

All financial institutions must purchase this coverage. Protection, duplication and appropriate valuation are very important.

 

ACORD 145

Related Articles:

ISO Valuable Papers and Records Coverage Form

AAIS Valuable Papers and Records Coverage Form

CRIME COVERAGES

 

The need for crime coverages is due to exclusions in commercial property coverage forms and policies. Most risks of physical loss of commercial property forms cover theft of merchandise and business personal property by other than employees. Theft of money, computer fraud, and employee dishonesty are usually excluded except for minimal amounts in Businessowners Policies, Manufacturers Output Policies and similar products. Crime coverage forms fill in the gaps in coverage.

Money, Securities and Other Property

The coverage forms in this section provide coverage for securities, other property, and in all but one coverage, money.

Employee Dishonesty

Most property coverage forms exclude employee dishonesty. As a result, this coverage is very important because employees have the potential to cause the most damage to an insured. They have access to all of the money, products, and information about the company. Employees who have more authority and access have greater potential to cause loss or damage. Coverage applies to loss of money, securities, and property that the insured owns or leases, or to property of others in its possession. Coverage may be provided under either standard ISO coverage forms or Surety and Fidelity Association of America forms.

Coverage is essential and is purchased using a Financial Institution Bond.

ACORD 141

Related Article: Commercial Crime Coverage Analysis

  Computer and Funds Transfer Fraud

Money, securities, and other property are covered when any computer is used to fraudulently cause a transfer of the insured’s property to another person located off the premises. Coverage also applies when insured funds that are in a financial institution are transferred anywhere due to fraudulent instructions. The ISO Commercial Crime Coverage Form provides this coverage.

Coverage is essential and is purchased using a Financial Institution Bond.

ACORD 141

Related Article: Commercial Crime Coverage Analysis

Destruction of Electronic Data or Programs

This coverage applies to loss or damage when a computer virus is introduced or a person who is not authorized to access the system damages the insured’s electronic data or programs within the computer.

 

Related Article: CR 04 13–Destruction of Electronic Data or Computer Programs

Extortion

Money, securities, and other property that is lost because of an extortion demand is covered by this coverage form. The definition of territory is very important and the insured can select the countries that are included within the definition. Coverage applies to threats of bodily harm to directors, officers, employees, and any of their family members. Threats of damage to the insured’s property or premises are also covered. Coverage is available through standard ISO coverage forms and from specialty markets if the territory(ies) are especially dangerous.

Coverage is essential and is purchased using a Financial Institution Bond.

ACORD 141

Related Article: CR 04 03–Extortion–Commercial Entities and CR 04 04–Extortion–Government Entities

Forgery or Alteration

Covers when someone – not an employee or owner – forges a signature on a check or other monetary instrument in order to obtain money that belongs to the insured. Forgery caused by an employee is covered as part of employee dishonesty.

Coverage may be provided using either a standard ISO form or a Surety and Fidelity Association form.

Coverage is essential and is purchased using a Financial Institution Bond.

 

ACORD 141

Related Article: Commercial Crime Coverage Analysis

Fraudulent Impersonation

Covers when money, securities or property are transferred to another based on instructions from an imposter. The imposter could be a impersonating a customer or could be impersonating an employee but coverage applies only if the person transferring the item is unaware that the person issuing the instructions is an imposter. 

The ISO version will not be available to most financial institutions but excess markets should be consulted for this important coverage.

 

Related Article: CR 04 17–Fraudulent Impersonation

Kidnap and Ransom

This coverage applies to expenses related to the kidnap of a covered person. The expenses include the ransom, the cost to transport the ransom and the rescued person, the security and intermediaries in the negotiations, and more. Coverage applies to employees, directors, trustees, officers, and their relatives. Coverage territory is anywhere in the world except for specifically listed countries.

The ISO version will not be available to most financial institutions but excess markets should be consulted for this important coverage.

 

Related Article: CR 00 40 and CR 00 41–Kidnap/Ransom and Extortion Form and Policy

Lessees of Safe Deposit Boxes

This coverage insures property the insured keeps in a safe deposit box. Theft, destruction, and disappearance causes of loss apply to securities. Burglary, robbery, or vandalism causes of loss apply to all other property. This coverage form does not insure money.

 

ACORD 141

Related Article: CR 04 09–Lessees of Safe Deposit Boxes

Money Orders and Counterfeit Money

Coverage applies when counterfeit money is accepted in exchange for goods. It also applies when money orders are accepted in exchange for goods but when the money orders are presented for payment they are declined.

 

ACORD 141

Related Article: Commercial Crime Coverage Analysis

Telephone Toll Fraud

When an unauthorized person accesses a phone system and uses it to make outgoing calls, that person is not charged any toll. Instead, the telephone system’s owner must pay the bill. This can be very expensive so this coverage is available to pay those fraudulent charges. There are two important conditions. The first is that protective measures must be in place to prevent such fraud. The second is that coverage applies for only 30 days after the initial fraudulent call.

 

Related Article: CR 04 16–Telephone Toll Fraud

Unauthorized Reproduction of Computer Software by Employees

Software manufacturers have the right to collect penalties and fines from any company that uses its computer software without authorization. If an employee of the insured adds software that the insured does not know about, this coverage pays those penalties and fines.

The ISO version will not be available to most financial institutions but excess markets should be consulted for this important coverage.

 

Related Article: CR 04 14–Unauthorized Reproduction of Computer Software by Employees

Money and/or Securities Only

The coverage forms in this section insure only money and/or securities. There is no coverage for other property.

Theft, Disappearance, and Destruction

Money and securities inside the insured's premises or at a banking premises is covered for theft, disappearance, or destruction causes of loss. Similar coverage is provided outside the premises when money and securities are in a messenger’s custody.

Coverage is essential and is purchased using a Financial Institution Bond.

ACORD 141

Related Article: Commercial Crime Coverage Analysis

Robbery and Safe Burglary

Money and securities inside the insured’s premises or banking premises that are in a safe or vault are covered against robbery and safe burglary. Money and securities are also covered against robbery while outside the premises and in the care of a messenger.

 

ACORD Form 141

Related Article: CR 04 07–Inside the Premises–Robbery of a Custodian or Safe Burglary of Money and Securities

Securities Deposited With Others

This coverage insures securities against loss caused by theft, disappearance, or destruction while inside a custodian's premises, while transported by a custodian, or while on deposit in a depository. The custodian must be named and the depository must be specifically scheduled. Coverage is provided by entering a limit, a custodian, and a depository on the declarations.

 

ACORD 141

Related Article: CR 04 10–Securities Deposited With Others

Property Other Than Money and Securities

The coverage forms in this section insure only property. There is no coverage for money or securities.

Premises Burglary

Covers property other than money and securities, inside the premises, against loss caused by robbery of a watchperson or by burglary. This is covered using the ISO Standard Crime Form.

 

ACORD 141

Related Article: Commercial Crime Coverage Analysis

Premises Theft

Covers for loss by theft of property, other than money and securities, while it is inside the premises. This is covered using the ISO CR 04 05. This should not be attached if property coverage is provided using the CP 10 30–Causes of Loss Special Form because it would provide duplicate coverage.  

 

ACORD 141

Related Article: CR 04 05-Inside the Premises–Theft of Other Property

Robbery and Safe Burglary

Covers property other than money from actual or attempted robbery or safe burglary. Coverage inside the premises may be written to cover both robbery and safe burglary or be limited to either robbery or safe burglary. Coverage outside applies to robbery of property other than money in a messenger’s care and custody.

 

ACORD 141

Related Article: CR 04 06–Inside the Premises–Robbery of a Watchperson or Burglary of Other Property

LIABILITY COVERAGES

 

Liability coverages include both commercial general liability coverage and common liability coverages that relate to the business’s premises or operations.

Commercial General Liability–Occurrence Basis

This coverage pays for damages the insured becomes legally obligated to pay due to bodily injury, property damage, or personal and advertising injury that arises from its premises, operations, completed operations, and/or products. The occurrence basis means that occurrences that take place during the policy period are covered, regardless of when a claim for injury that results from the occurrence is presented.

Most financial institutions will use the occurrence basis. They should never go without this coverage since slip-and-falls can happen so quickly. The severity can be low, but it can also be high since we cannot control how a person falls, what is damaged or how they will react to treatment.

 

ACORD 126

Related Article: CG 00 01 and CG 00 02–Commercial General Liability Coverage Forms Analysis

Commercial General Liability–Claims-Made Basis

This coverage pays for damages the insured becomes legally obligated to pay due to bodily injury, property damage, or personal and advertising injury that arises from its premises, operations, completed operations, and/or products. The claims-made basis means that only claims presented during the policy period are covered regardless of when the occurrence that resulted in injury took place. A retroactive date often limits how far back the occurrence could have taken place.

Financial institutions will rarely use the claims-made form.

ACORD 126

Related Articles:

CG 00 01 and CG 00 02–Commercial General Liability Coverage Forms Analysis

Compare: ISO Commercial General Liability Coverage Forms–CG 00 01 (Occurrence Basis) To CG 00 02 (Claims-Made Basis)

Optional Liability Coverages

The ISO Commercial General Liability Coverage Forms cover bodily injury, property damage, and personal and advertising injury from operations, premises, completed operations, and/or products. This may be sufficient for many insureds but others have liability exposures that these coverage forms exclude. The coverages described in this section are options that should be discussed with most insureds.

Directors and Officers

This coverage insures corporate directors and officers against claims usually brought by stockholders that allege loss arising from mismanagement. Claims may also be made against the corporation for mismanagement by other than stockholders, which is also covered. An Outside Directorship Liability Policy Form is available as supplementary protection to insure that there are sufficient limits for the exposure created when a company's director, officer, or employee serves in an outside director position at the company’s request. This coverage is not standard and may vary significantly between carriers and by type of business; i.e., for-profit, not-for-profit, closely-held, or publicly-traded.

Any financial institution with outside directors will need this coverage or risk losing the outside directors.

 

ACORD 807

Related Article: Directors and Officers Liability Insurance Overview

Employee Benefits

Mistakes by the insured in administrating its employee benefits program can cost employees. This coverage insures those situations. This DOES NOT INCLUDE fiduciary responsibilities or any situations that involve discrimination or harassment. A simple example is when the insured does not provide the employee with the appropriate COBRA information following termination that result in the former employee losing benefits. Most carriers provide this coverage on their own filed forms by either a separate coverage form or as an endorsement to the commercial general liability coverage. Comparisons should address the types of benefits covered, claims-made versus occurrence, and the employer’s contribution. ISO provides a standard endorsement to attach to the Commercial General Liability Coverage Forms.

Any financial institution that provides employee benefits should purchase this coverage.

Related Article: ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses

Employment-related Practices

Commercial General Liability Coverage Forms are typically endorsed to exclude lawsuits that past, present, and prospective employees or governmental entities bring against the insured employer that allege wrongful discharge, discrimination, or certain types of harassment. A separate coverage form that insures employment-related practices is available. ISO developed its own coverage form but many insurance carriers have their own versions. Using the ISO standard as a starting point to compare coverages can help agents advise their customers on the best coverage form to use for their particular situation.

Financial institutions have experienced many claims of discrimination and other wrongful workplace actions. This coverage is important along with regular procedures and processes to help everyone understand what can and cannot be allowed.

 

ACORD 825 and 827 or 188

Related Article: Employment-related Practices Liability Coverage Form Analysis

Owners and Contractors Protective

This liability coverage is designed to protect either a property owner or a general contractor for the potential liability exposure that results from the hired contractor’s negligent acts to perform work on the property owner’s or general contractor’s behalf. The contractor actually purchases the coverage, but the insurance is for the property owner or general contractor for whom the work is being done. Coverage is limited to a specific location and project.

An unusual feature is that the named insured is the property owner or general contractor who hired the contractor but the contractor pays the premium. Only the named insured property owner or general contractor can cancel.

Using this separate policy instead of being added as an additional insured to the contractor’s Commercial General Liability Coverage Form allows the building owner or general contractor to better control the policy and ensure that other claims against the contractor do not dilute the limits.

Any financial institution that is having extensive work done on their premises may want to consider requesting a contractor obtain an OCP policy in his/her name rather than just requiring a certificate of insurance. The cost may be slightly higher, but the added protection may prove invaluable.

 

ACORD 126

Related Article: CG 00 09–Owners and Contractors Protective Liability Coverage Form–Coverage for Operations of Designated Contractor Analysis

Special Events

Special events generate many exposures an underwriter does not anticipate when covering a particular business. A business that participates in special events may need special coverage during that event. In other cases, businesses may sponsor special events and be exposed to unexpected hazards that must also be addressed. Commercial General Liability Coverage Forms can insure special events. However, the insured may decide to purchase separate coverage in order to participate in the event and to avoid diluting its limits.

Financial institutions that sponsor special events should consider purchasing a special policy to protect the limits on their regular policy.

 

ACORD 126

PROFESSIONAL AND ERRORS AND OMISSIONS LIABILITY COVERAGES

Most liability coverage forms exclude professional and errors and omissions liability. There are many types of professional and errors and omission liability and a number of markets willing to write the coverage.

ACORD 825 and 832

Coverage can be provided on the following common professional and errors and omissions exposures and coverages:

·         Accountants

Related Article: Accountants Professional Liability Coverage Analysis

·         Insurance Agents

Related Article: Insurance Agents and Brokers Errors and Omissions Insurance

·         Land Surveyors

Related Article: Land Surveyors Professional Liability Coverage Analysis

·         Lawyers

ACORD 833

Related Article: Lawyers' Professional Liability Coverage Form Analysis

·         Real Estate Agents

Related Article: Real Estate Brokers Professional Liability Coverage Analysis

COMMERCIAL AUTO COVERAGES

These forms provide all of the coverages the insured needs for its owned, leased, or hired vehicles. They also cover the insured for non-owned use of a vehicle when an employee or volunteer uses his or her vehicle on company business. The insured can customize the coverage it needs by entering symbols on the schedule. Coverage can apply to all owned, leased, hired, and non-owned autos or just on selected vehicles.

 

ACORD 127, 129, and 163

Related Article: ISO Business Auto Coverage Form Overview

Liability

This coverage applies to bodily injury and property damage to others that an insured vehicle causes.

 

ACORD 127, 129, and 163

Related Article: CA 00 01–Business Auto Coverage Form Analysis

  Medical Payments

This coverage pays the medical expenses of an insured injured in a motor vehicle accident. The coverage follows the insured while inside any vehicle and also if struck by another vehicle when he or she is outside the vehicle. Coverage also applies to family members and any other persons who occupy a covered vehicle at the time of an accident.

 

ACORD 127

Related Article: CA 99 03–Auto Medical Payments Coverage

Physical Damage

There are three physical damage coverages.

Collision

This coverage applies to covered vehicles damaged by impact with another vehicle, object, or animal.

Comprehensive coverage

This coverage applies to covered vehicles damaged by any cause of loss other than collision, unless specifically excluded.

Specified Causes of Loss coverage

This coverage is a more restricted type of comprehensive coverage. Instead of the broad comprehensive coverage, only 11 coverages are provided.  

 

ACORD 127, 129, and 163

Related Article: CA 00 01–Business Auto Coverage Form Analysis

Hired Car

This coverage applies to bodily injury and property damage caused by any vehicle the insured hires. Physical damage coverage may also be purchased. Vehicles hired for less than six months are considered hired vehicles, not leased vehicles. This coverage is available with owned auto coverage or as stand-alone coverage.

 

ACORD 127

Related Article: CA 00 01–Business Auto Coverage Form Analysis

Nonownership Auto

This coverage insures the employer when its employee or volunteer causes bodily injury or property damage to others while using their vehicle on the employer’s business. Coverage is only for the insured’s benefit, but it may be extended by endorsement to also benefit the employee.

 

ACORD 127

Related Article: CA 00 01–Business Auto Coverage Form Analysis

Personal Injury Protection (P.I.P)/No-Fault

This coverage is designed to meet the requirements of state-mandated “no-fault” coverage laws.

 

ACORD 127, 129, and 163

Related Article: CA 00 01–Business Auto Coverage Form Analysis

Optional Automobile Coverages

The Business Auto Coverage Form can be used for any insured. However, ISO has designed coverage forms that more precisely cover specific types of insureds.

Garagekeepers

Garagekeepers coverage insures against loss or damage to customers’ vehicles. Coverage may apply on a legal liability basis or without regard to legal liability. It may be offered as direct coverage that is excess over insurance carried by customers or as direct primary coverage. It is a standard part of the Auto Dealers Coverage Form or can be endorsed to the Business Auto Coverage Form.

This coverage is important to any financial institution that offers valet parking or attended parking of any kind. While general liability does provide some coverage, as soon as the vehicle leaves the premises, general liability ceases and, if there is no garagekeepers coverage, all coverage ceases.

 

ACORD 128

Related Article: CA 99 37–Garagekeepers Coverage

Uninsured Motorists

This is coverage for the insured that is struck by an uninsured motorist. It is a mandatory coverage in many states. It extends to family members and passengers in the covered vehicles. This coverage is usually restricted to bodily injury but some states also require property damage coverage. The limit should be the same as the bodily injury liability limit on the coverage form.

This coverage does not respond if the other driver is underinsured.

 

ACORD 127, 129, and 163

Related Articles:

CA 00 01–Business Auto Coverage Form Analysis

CA 21 Endorsements–Uninsured and/or Underinsured Motorists (UM/UIM) Coverage

Auto Uninsured/Underinsured Motorists Coverage Requirements

Underinsured Motorists

This is excess coverage provided to the insured. It applies when the party that causes the accident does not carry adequate limits to fully cover the insured’s injuries. The limit should be to the same as the bodily injury liability limit on the coverage form. This coverage does not respond if the other driver is uninsured.

 

ACORD 127, 129, and 163

Related Articles:

CA 21 Endorsements–Uninsured and/or Underinsured Motorists (UM/UIM) Coverage

Auto Uninsured/Underinsured Motorists Coverage Requirements

WORKERS COMPENSATION COVERAGES

 

Workers compensation coverage is standardized but what benefits employees receive vary considerably from state to state because coverage refers directly to each particular state’s workers compensation statutes. In addition, certain locations and activities allow non-federal employees to avoid state statutes and instead come under various federally mandated programs.

Workers Compensation and Employers Liability

Part A covers all injuries and diseases that individual state workers compensation statutes require be covered. Benefits are paid according to schedules each state provides. Part B covers liability that an employer may have imposed on it beyond the state statutes. The National Council of Compensation Insurance (NCCI) provides a standard form that is a model for all member companies to use. Certain states have alternatives to NCCI but all are fairly similar. Part A is compulsory with benefits the state mandates. Part B is liability coverage and is subject to standard tort liability.

Financial institutions must carry this coverage.

 

ACORD 130

Related Article: WC 00 00 00 C–Workers Compensation and Employers Liability Insurance Policy Analysis

Federal Employers’ Liability Act (FELA)

This coverage ensures employees who work for or on railroads that cross interstate lines who are not subject to state workers compensation coverages. This coverage is provided by an endorsement to the Workers Compensation and Employers Liability Insurance Policy.

Financial institutions with contracts to operate on or near the railroads or who work on or near federal bases may need to consider this coverage.

 

ACORD 130

Related Article: The Federal Employers’ Liability Act (FELA) of 1908

Stop Gap Employers Liability Coverage

There are gaps in coverage between workers compensation and commercial general liability coverages that can leave an insured uncovered. Part B of the Workers Compensation and Employers Liability Insurance Policy fills the gaps in most states. However, the state covers only Part A in monopolistic states. Another mechanism must provide the equivalent of Part B. Coverage may be offered on a monoline basis, as a stand-alone policy through a workers compensation carrier, or as an endorsement to the commercial general liability coverage.

Financial institutions with locations in any of the monopolistic states should purchase stop gap liability. All other workers compensation policies should include the employers liability as Part B of the policy.

 

ACORD 130

Related Article: Stop Gap–Employers Liability Coverage

Voluntary Compensation

Each state defines who must be covered and who is exempt under workers compensation statutes. The employer then has the opportunity to include the exempt employees using the voluntary compensation endorsement.

Financial institutions should consider including all exempt employees by using this form in order to eliminate coverage gaps.

 

ACORD 130

Related Article: Related Article: Voluntary Compensation Insurance

EXCESS LIABILITY COVERAGES

Excess liability coverages are purchased to provide additional liability limits and/or coverages that supplement the limits of an insured’s commercial general liability, commercial automobile liability, employers liability coverage and other scheduled coverages. The coverage is  triggered when the limits of the underlying insurance are used up or a coverage that is excluded in the underlying is covered in the excess.

Excess Liability Policy

In its purest form, excess liability policies do not contain any exclusions or coverage. They track 100% with the scheduled underlying coverages and simply extend limits. Excess policies never provide additional coverage. However, most carriers are uncomfortable with the pure version and instead use coverage forms that add exclusions and language that make them look more like restricted following form umbrella policies instead of excess liability policies. Key areas to compare are exclusions and following-form terms.

Financial institutions should carry either an umbrella or an excess policy. If unusual terms have been negotiated in the underlying policy, the excess liability could provide the most complete coverage; but if the underlying is standard, the umbrella may provide some gap coverage not available in the excess.

 

ACORD 131

Related Article: What Is The Difference Between Umbrella Policies and Excess Policies?

Umbrella Policy

These policies serve two purposes. First, they provide excess liability limits over the limits in scheduled underlying policies. Second, they fill some gaps in coverage in the underlying coverage. ISO and AAIS have developed standard liability umbrella coverage forms, but many carriers use their own independently filed forms to provide coverage. As a result, comparing coverages is essential. Key areas that should be compared are exclusions, deductibles, whether a following form is offered over unusual underlying exposures, limits, and defense costs (included inside or outside the limits).

Financial institutions should carry either an umbrella or an excess liability policy because of the potential for catastrophic loss due to the number of persons in the establishments who could be damaged.

ACORD 131

Related Article: CU 00 01–Commercial Liability Umbrella Coverage Form Analysis

AVIATION COVERAGES

Specialty markets provide aviation coverages. Any operation that utilizes aircraft in its business needs these coverages. The applications are extensive and coverage is unique and more closely related to Ocean Marine Insurance than other types of coverage.

Aircraft Passenger Liability

Bodily injury to passengers on aircraft is written on a per seat/aggregate basis. All aircraft coverage is written by non-admitted carriers on forms they developed. Key points to compare are the limits by type of coverage and exclusions.

This coverage should be purchased when an aircraft is owned to protect any passengers who may be aboard.

 

ACORD 330, 331, 332, and 333

Related Article: Aircraft Insurance Coverage Analysis

Aircraft Policy

Aircraft policies are business auto policies for vehicles that fly. Four coverages are available:

  • Liability for bodily injury or property damage to parties the aircraft injures
  • Passenger liability for bodily injury or property damage to parties in the aircraft
  • Medical expense coverage for the aircraft’s passengers and crew
  • Hull coverage or physical damage coverage on the aircraft itself

 

Aircraft coverage is very specialized. The marketplace is limited and there are few standardized forms.

Financial institutions that require officers or staff to fly on a regular basis may find that a small airplane is more convenient  and cost effective than commercial airline flights.

 

ACORD 330, 331, 332, and 333

Related Article: Aircraft Insurance Coverage Analysis

SPECIALTY COVERAGES

These are unique coverages for particular types of insureds. The coverage forms used to provide the coverage are not standardized and are usually written with excess and surplus lines markets.

Cyber Insurance

This is the most rapidly changing liability area today. The growth in the number of persons who use the Internet regularly has led to businesses promoting and marketing their products and services online. Most companies have home pages and communicate with others via text, email, chat, blogs, Facebook, and other social media. Exclusions are being added to liability coverage to restrict coverage for many cyber liability-related activities. A number of carriers are responding to the need for this cyber insurance coverage. Comparing coverage forms is important because there is no standard coverage form. The following coverages should be part of any cyber insurance coverage:

·         Security and privacy liability

·         Website content coverage/intellectual property and domain name coverage

·         Virus coverage

·         Civil regulatory actions

·         First-party coverage for breach notifications, forensics, and credit monitoring expenses

·         Cyber extortion

·         Loss of data

·         Loss of income due to loss of network resources

This should be mandatory coverage for a financial institution.

ACORD 834

The Insurance Marketplace has additional information.

Fiduciary Liability Insurance

A fiduciary that manages a pension or employee benefit plan faces substantial liabilities that are primarily framed by the Employee Retirement Income Security Act (ERISA.). Private pension and employee benefit plans are subject to ERISA, whether sponsored by single employers, multi-employers, unions, or joint labor-management trusts.

The insured is a trust or employee benefit plan, any trustee, officer, or employee of the trust or employee benefit plan, employer who is sole sponsor of a plan, and any other individual or organization designated as a fiduciary. The coverage provided uses nonstandard forms. The most important information to obtain in any coverage form is that it conforms to current pension law.

All financial institutions have significant fiduciary liabilities.

 

ACORD 828

Related Article: Trustees and Fiduciaries Liability Insurance

International/Foreign Operations Insurance

Policies written in the United States usually define territory to include only the United States of America, its territories, Puerto Rico, and Canada. Some provide limited worldwide coverage for incidental travel and some products liability losses.

Many companies have international exposures that exceed the limited coverage that standard policies provide. Companies that have physical assets outside of the United States need international coverage for property, liability, automobile, appropriate workers compensation, and inland marine. Many major insurance companies have facilities to provide international coverage or can assist in placing the coverage.

There are two kinds of policies for property located and land operations conducted abroad. Non-admitted insurance policies are written in English in the United States or a branch office of the company abroad. Protection may apply to more than one country and premiums and losses are paid in dollars.
Admitted insurance policies are products of the insurance market of the country involved with which the American underwriter has a working agreement. They are written in that country’s language and premiums and losses are paid in the local currency. American businesses that do not establish facilities abroad but still import or export products require international coverage for risks that arise from using certain of their products. Many major carriers have developed the international equivalent of Businessowners Policies to cover these risks.

Financial institutions with international exposures should consider this coverage.

 

Related Article: International Insurance

Media/Communication Liability

Any company that distributes information to the public via a website or other means of communication faces the exposures of a traditional publisher. Easy access to electronic technology is contributing to a huge influx of newsletters, periodicals, and educational services.

Media liability errors and omissions claims seek to impose liability on the publisher for physical injuries or economic loss allegedly caused by some error or negligent publication in the ideas or expressions that the published material contains. A claim or lawsuit may not involve a clear error or omission in some cases. A client who is unhappy with the result of a firm's efforts may file a claim to obtain a different result or avoid paying a fee. Media liability insurance usually pays the costs to defend spoken statements by a publisher or broadcaster, and infringements of copyright, slander, libel, and false light suits are a few of the areas covered. Commercial general liability insurance usually excludes personal and advertising injury claims against publishers or broadcasters and this coverage is used to provide it. This coverage is nonstandard and comparing coverages is important, especially with respect to definitions and exclusions.

Financial institutions are involved in significant media communication through Internet, print and other methods. This coverage is very important, especially when communication is handled in-house.

 

Related Article: Media/Communications Liability Coverage Analysis

Terrorism Insurance

Standard ISO coverage forms do not specifically exclude terrorism. However, many companies exclude both domestic and foreign terrorism by endorsement. Insurance companies are mandated by the federal government to offer terrorism coverage for specific lines of business. If the named insured rejects the coverage an endorsement is issued and attached to the policy. When the terrorism coverage offer is accepted, the insurance company that provides the other coverage also provides terrorism coverage.

The mandatory terrorism coverage was initially based on the 2002 federal legislation called T.R.I.A. It is now based on the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) that extends federal backup coverage until 2020.

 

Related Article: Terrorism and Insurance

Title Insurance

Title insurance guarantees that the title for newly purchased or newly financed property does not have any hidden liens and claims. It is different from other types of insurance because it protects against possible past occurrences rather than future events. Defective titles must be fixed or adverse interests eliminated before the property can be legally transferred to a new owner.

Financial institutions must protect the titles on all assets.

 

Related Article: Title Insurance Coverage Analysis

Unmanned Aerial Vehicles (UAV) (DRONES) Coverage is needed by any commercial operation that uses unmanned aerial vehicles as part of its operations. It covers the bodily injury, property damage, and personal and advertising injury that can occur. Some coverage will include the physical damage to the vehicle itself. The liability coverage can be added by endorsement to a commercial general liability policy, but a separate inland marine or aircraft policy is needed to protect the vehicle.

Drones can be used by financial institutions to inspect collateral assets and verify information supplied by applicants. As the technology improves, many other uses will be developed.

Weather Insurance

Unpredictability of weather can impact many types of activities. This insurance provides monetary benefits when the desired weather event does not occur or if an unwanted weather event does occur. This specialty type of coverage can cover nonrefundable fees and other expenses plus the revenue that is not generated due to the event being cancelled. It can also cover lost revenue when lack of snow results in certain products not being purchased. The markets that provide this coverage are very precise with respect to the type of weather and/or amount of rain or snowfall that must occur.

Financial institutions that hold or sponsor events that require an outlay of fixed expense regardless of the outcome of the event should consider this insurance.

 

Related Article: Weather Insurance

BONDS

 

The surety market offers many types of bonds. The two primary categories are Contract and Non-contract bonds. Contract bonds include bid, contract, and payment bonds and are used when there is a contractual obligation with respect to a specific contract. Non-contract bonds include license, permit, and judicial bonds and relate to obligations and performances that must be met that are not due to a contract.

 

Related Article: Surety Bonds Overview

Fiduciary Bond

 

Fiduciary bonds protect parties that have a financial interest in an estate or in property involved in proceedings such as bankruptcy, conservation, or liquidation. Interested parties may be heirs, infants, incompetents, creditors, or other beneficiaries. Administrators, executors, guardians, and trustees are the most familiar fiduciary risks. The fiduciary is the principal and may be an individual or an institution.

Financial institutions are often required to purchase bonds for specific fiduciary obligations. 

 

Related Article: Fiduciary Bonds

License and Permit Bond

Most municipalities and states require that businesses provide license or permit bonds to a governmental entity as part of their application to obtain needed permits or licenses. The bond guarantees that the entity will abide by the conditions of the license or permit. If the business violates the conditions, the surety pays the bond penalty to the governmental authority and then collects the penalty from the business.

 

Related Article: License and Permit Bonds