CAIB 2 Ch 5 - Sept 2024.pptx

CAIB 2: Chapter 5 Commercial Property Insurance – Miscellaneous Property Forms CAIB  CAIB 2 Section 1 Bailee’s Insurance Understanding Bailees for Hire Definition: A bailee for hire is an e...

CAIB 2: Chapter 5 Commercial Property Insurance – Miscellaneous Property Forms CAIB  CAIB 2 Section 1 Bailee’s Insurance Understanding Bailees for Hire Definition: A bailee for hire is an entity that temporarily holds personal property of another for purposes other than sale. Compensation is provided for services such as: Repair or performance of work. Safekeeping or storage. Delivery to others. Common Examples: Repair shops (TV, appliance, small engine). Dry cleaners and laundries. Tailors and shoe repair shops. Storage warehouses. Coat-check stations in restaurants and hotels. CAIB  Legal Duty of Ordinary Care: Bailees for hire have a legal obligation to exercise ordinary care over the property. This means taking the same care as a prudent and diligent owner. Legal Duty Varying Levels of Care: and Levels of Jewellery or Furs: Higher care required. Care for Install intrusion detection devices. Bailees Use safes or secure storage when premises are closed. Consider insurance to cover specific risks. Less Valuable Items: Lower level of care needed. CAIB Insurance Considerations for Bailees Insurance for Bailees: Insurance policies may be necessary to cover the risks specific to the property in custody. A standard Named Perils policy may not be sufficient for high-value items like jewellery or furs. Customizing Coverage: Bailees should evaluate the risks associated with the type of property they handle. Consider additional coverage or specialized policies for high-value items to ensure adequate protection. CAIB  Bailee Liability for Customer Property Loss Due to Negligence Liability of Bailees: Bailees are liable for losses to a customer's property when negligence leads to a breach of the required level of ordinary care. Liability arises when the damage would not likely have occurred without the bailee's negligence. Proving Negligence: The bailee must provide proof to counter claims of negligence. Example: Mildew damage to furs indicates possible negligence in climate control. Defense: Bailee may argue that external factors (e.g., power outages) caused the damage. CAIB Bailee's Additional Contractual Liability Ordinary Care vs. Contractual Liability: Bailees have a legal duty to exercise ordinary care over customers' property. Bailees may assume additional responsibilities through contracts. Not all losses are due to negligence (e.g., theft from a locked safe, fire from neighboring premises, natural disasters). Customer Expectations: Customers may seek more protection than what is provided by law. Contracts may include enhanced coverage for such scenarios. CAIB Insuring Bailee's Contractual and Legal Liability Options for Insuring Liability: a) Stock Insurance: Include customers' property value in the bailee's commercial property policy. Standard commercial property forms cover similar property belonging to others if the bailee is legally liable. b) Separate Liability Policy: Purchase specialized policies like Warehousemen's Legal Liability or Cloakroom Liability. Importance of Adequate Coverage: Ensure the bailee's policy covers both legal and contractual obligations. Consider specialized policies if standard coverage is inadequate. CAIB Specialized Bailee's Customers Policy Comprehensive Coverage Options: c) Bailee’s Customers Policy: Provides coverage without requiring proof of legal liability. Important for maintaining customer goodwill. Insurers see no more risk in insuring others' property than the bailee's own property. Types of Bailee's Policies: Bailees' Customers Form: Used by retail/service businesses. Dyers, Cleaners, and Launderers Policy: Specific to businesses handling clothing and textiles. Furriers' Customers Policy: Designed for businesses dealing with fur storage and cleaning. CAIB Summary and Considerations Key Takeaways: Bailees may assume additional liability through contracts. Customers may demand more protection than what is legally required. Various insurance options exist to cover both legal and contractual liabilities. Considerations for Brokers: Assess the adequacy of current policies for covering all potential liabilities. Understand the specific needs of the bailee's business to recommend appropriate coverage. CAIB  Inland Transportation Insurance Overview Definition: Inland Transportation Insurance covers loss or damage to property during transit, excluding marine insurance. Defined in the Canadian and British Insurance Companies Act and Foreign Insurance Companies Act. Potential Candidates: Existing clients with incoming and outgoing shipments. Moving and storage companies. Freight forwarders, consolidation companies. Trucking and delivery firms. CAIB Determining Insurable Interest Who Has Insurable Interest? Deciding Insurance Responsibility: Owners: The owner of the property in Determine who (owner or carrier) is transit. responsible for the property. Carriers: Includes carriers as bailees for Assess the extent of liability based on the hire, responsible for certain losses. carrier type. Businesses: Companies responsible for delivering goods sold by them. CAIB Types of Carriers and Their Legal Liability Types of Carriers: Common Carriers: Transport goods for the general public. Contract Carriers: Transport goods for specific, contracted clients. Private Carriers: Transport their own goods or those owned by affiliated companies. Liability Considerations: The type of carrier influences the extent of liability for goods in transit. Common carriers often have broader liability compared to contract and private carriers. CAIB Overview of Liability for Common Carriers Definition of Common Carriers: Include airlines, railroads, trucking companies, etc. Provide transportation services to the public. Common Carriers' Liability: Responsible for safe delivery of goods. Exceptions to liability: Acts of God or unforeseeable natural events. Acts of public enemies or authorities. Neglect or default of the shipper. Inherent vice in goods transported. CAIB  Filing Certificates of Insurance: Regulatory Common carriers must file proof of liability insurance with provincial or municipal Requirement authorities. Large corporations like Air Canada and s for Canadian National/Canadian Pacific Railways often self-insure. Common Self-Insurance for Multi-National Corporations: Not subject to the same filing requirements as Carriers smaller carriers. CAIB Bills of Lading – Establishing Carrier Liability Regulated by government Purpose tariffs. of Bills of Outline shipping rates and Lading: rules, including the carrier’s liability. Standard (Ordinary) Bill of Types of Lading. Bills of Valued Bill of Lading. Lading: Released Bill of Lading CAIB Standard Bill of Lading and Its Limitations Standard (Ordinary) Bill of Lading: Specifies carrier's liability, usually less than the actual value of goods. Liability set at a fixed rate (e.g., $1.50/lb). Owner's Responsibility for Additional Insurance: Owners must purchase adequate insurance if the carrier’s liability under the bill of lading is less than the value of the goods. CAIB Valued and Released Bills of Lading Valued Bill of Lading: Adjusts the carrier's liability to match the true value of the goods. Owners pay additional fees to increase liability coverage. Released Bill of Lading: Releases the carrier from any liability. Typically used when goods have a low value or when owners purchase private insurance. CAIB Liability of Contract Carriers Contract carriers serve specific customers rather than the public. Liability terms are defined within a contract between the carrier and the property owner. Contracts may release the carrier from responsibility, but legal or practical limitations exist. CAIB Liability Considerations for Contract Carriers LEGAL CHALLENGES MAY ARISE IF CONTRACT CARRIERS OFTEN MANAGE MANY CONTRACT CARRIERS STILL CONTRACT CARRIERS ATTEMPT TO HIGH-VALUE GOODS, MAKING LIABILITY PURCHASE INSURANCE TO COVER FULLY AVOID LIABILITY. A SIGNIFICANT CONSIDERATION. POTENTIAL RISKS, DESPITE CONTRACTUAL PROTECTIONS. CAIB  Definition of private carriers. Private carriers transport Liability of their own goods or those Private entrusted to them as bailees. Carriers Responsibility for loss of goods carried lies with the private carrier. CAIB Insurance for Owners Using Private Carriers Commercial property Owners need insurance Owners transporting insurance can provide if carrier liability is their own goods should minimum limited by contracts or have appropriate transportation bills of lading. coverage. coverage. CAIB Additional Insurance Options for Owners of Goods in Transit Insurance options for owners Additional policies may be include: necessary if existing Transportation Floater – Broad Form coverage is insufficient. Transportation Floater Rider – Limited Form Motor Cargo Riders Trip Transit Policy Introduction to Transportation Floater (Broad Form) Definition: A separate policy used to insure goods in transit, covering risks related to transportation. Coverage Options: All Risks: Provides coverage for all risks unless explicitly excluded. Named Perils: Covers specific perils named in the policy. Description of Property Insured Owned by the Insured: Covers goods purchased or being transported by the insured for sale or storage. For Which the Insured is Responsible: Covers customers' property picked up or delivered by the insured. Sold but Not Delivered: Protects goods sold by the insured that are still in transit. Transit of Property Not Restricted to Insured’s Vehicles Coverage applies to property transported by: Railroads, railway express, and freight forwarders. Public or private truckers. Vehicles owned, hired, or leased by the insured. Scheduled airlines (excluding ocean vessels). Selecting Amounts Insured Insured selects limits for each transportation category. Limits include costs incurred in protecting property after a loss (e.g., salvage). Description of Coverage Period Coverage starts when goods leave the premises. Ends when delivered to the final destination. Includes losses "incidental to transit" such as storage at docks or depots. Coverage at Transit Locations Coverage applies at: Docks, wharves, piers, bulkheads, platforms, depots, and stations. Property must still be "in transit" and in the custody of a common carrier. Exclusions: Property Excluded Items not covered unless specifically endorsed: Jewellery Furs Manuscripts Statuary Paintings Livestock. Exclusions: Perils Excluded Examples: Inadequate packing, improper shipment preparation. Gradual deterioration, inherent vice (e.g., spoilage of perishable goods). Loss from delay, moths, rodents, or vermin. Additional Exclusions No coverage for losses due to: Atmospheric conditions: Dampness, dryness, temperature extremes. Physical damage: Shrinkage, leakage, breakage of fragile items. Material changes: Rust, contamination, change in flavor, color, texture. Premium Provisional A provisional premium is charged at policy inception. Accurate record-keeping required for shipment values. Additional premium charged or refunded based on final values reported. Premium Provisional A provisional premium is charged at policy inception. Accurate record-keeping required for shipment values. Additional premium charged or refunded based on final values reported. Valuation of Property at Time of Loss Insured is entitled to: Actual invoice cost. Actual cash value if no invoice exists. Prepaid freight costs. Other charges incurred since shipment. Real-World Application The Transportation Floater is ideal for businesses involved in: Shipping goods across various transportation methods. Handling customer deliveries or internal transfers between locations. Introduction to the Transportation Floater Rider (Limited Form) Definition: A named perils version of the Transportation Floater (Broad Form). Unique Exclusion: "Loss or damage caused by the coming together of trucks or railroad cars during coupling or uncoupling, or during loading/unloading ope Motor Cargo Riders Motor Cargo Rider (Owners Broad Form): Covers property in the insured’s own vehicles on an all risks basis. Only applies to scheduled vehicles and property in the insured’s custody at the time of loss. Motor Cargo Rider (Owners Form): A named perils version of the above form. Trip Transit Policy Used to insure the transit of a single shipment of property. Applicable for one-time shipments (e.g., moving expensive equipment). Coverage can be on either a named perils or all risks basis. Factors influencing cost: Nature of property. Distance traveled. Method of transportation. Insurance for Carriers: Truckman’s Liability Cargo Rider Covers legal liability for loss to property while in transit. Applicable to carriers under bills of lading or shipping receipts. Coverage Duration: From loading to delivery of goods. Can be endorsed to cover goods temporarily at the insured’s terminal or warehouse. Truckman’s Liability Cargo Rider: Policy Details Co-Insurance Requirement: 100% co-insurance applies. Provisional Premium: Based on shipment reports; final premium determined at the policy's end. Catastrophe Limit: Sets a maximum payout for any one disaster, limiting the insurer’s liability. Challenges with Carrier's Insurance May not provide adequate coverage for all goods. Coverage may lapse or be invalid due to policy breaches. Delayed recovery if the carrier is at fault. Advantages of Private Insurance Direct Recovery: Faster claims processing directly with the insurer. Subrogation: Insurer may pursue the carrier after paying the claim. Broader Coverage: Includes risks like wind, flood, or earthquake, which are often excluded by carrier policies. Reduced Costs: Purchasing insurance directly can be more cost-effective than relying on carrier- provided insurance. Why Choose Private Insurance Broader perils covered. Automatic coverage for all shipments. Ensures prompt and full recovery from losses, even when the carrier’s liability is limited.  CAIB 2 Section 2 Contractor’s Insurance Insurance Coverage for Contractors Common Forms for Contractors: 1.Tool Floater Rider: Coverage for tools used on-site or during transit. 2.Contractors Equipment Floater: Protection for heavy equipment, machinery, and other essential assets. 3.Builders' Risk Insurance: Covers buildings and structures under construction. 4.Installation Floater Rider: Insurance for equipment and materials being installed at a job site. Tool Floater Rider (IFC 51045) Overview Purpose: Extends coverage for tools and equipment used off-premises. Typical Users: Contractors, mechanics, carpenters. Coverage: Includes specified perils like theft and transportation; often provided as an all risks form by most insu Exclusions: Electrical Apparatus: Loss due to short circuits not covered unless fire or explosion results. Mysterious Disappearances: Tools that go missing without explanation are not covered. Coverage Options and Basis of Settlement Coverage Basis: Scheduled Basis: High-value tools listed with detailed identification (manufacturer, serial number). Blanket Basis: Assorted tools under a single coverage limit, usually for tools below a set value. Co-Insurance Clause: Typically 100% minimum standard. Settlement Basis: Actual cash value of the tools at the time of loss Contractors Equipment Floater Overview Purpose: Covers moveable equipment owned, rented, or leased by contractors. Includes: Cranes, derricks, loaders, road building machinery, and miscellaneous tools (air compressors, welders). Prospects: General contractors, road builders, homebuilders, landscaping contractors. Coverage Options Limited Form: Provides coverage for specific perils. All Risks Form: Comprehensive coverage against a broader range of risks. Coverage Basis Scheduled Basis: Detailed listing of each item. Blanket Basis: Coverage for a group of items up to a specified value. Co-Insurance and Catastrophe Limit Co-Insurance Requirement: Typically 90%. Catastrophe Limit: A maximum amount specified to limit the insurer’s liability in large-scale losses. Automatic Coverage for Newly Acquired Equipment Eligibility: Equipment similar to what’s scheduled. Coverage Duration: Ceases after 30 days if not added to the schedule. Limitations: Coverage amount may be insufficient for total losses. Exclusions Overview Operational Limits: Loss from overloading or wear and tear. Excluded Items: Waterborne vessels, aircraft, motor vehicles, trailers. Other Exclusions: Mechanical breakdown, underground operations, blasting, extreme temperatures, rust/corrosion. Additional Exclusions Details Blasting Operations: Damage during insured’s blasting operations is excluded. Rust/Corrosion: Often excluded due to poor maintenance. Builders' Risk Insurance Overview Purpose: Designed to cover buildings during construction. Standard Policies: Regular commercial property policies are inadequate for construction coverage. Coverage Options Named Perils Form: Covers only specified risks. Broad Form: Provides more extensive coverage, similar to Commercial Building, Equipment, and Stock - Broad Form. Who Can Purchase the Policy Eligible Buyers: Project owner or general contractor. Contractual Responsibility: Insurance responsibilities are typically outlined in the construction contract. Blanket Policies for Multiple Projects Purpose: Covers multiple projects or ongoing construction. Requirements: Insured provides estimates of project number, value, class of construction, and location. Builders' Risk — Broad Form (IBC 4042) Coverage: All risks basis, similar to ongoing business policies. Property Insured: Property in construction (owned or third-party). Landscaping. Temporary structures. Property Coverage Details Construction Materials: Includes both insured's and others’ materials. Landscaping: Coverage for trees, plants, and flowers. Temporary Work: Scaffolding, forms, hoardings. Exclusions in Builders' Risk — Broad Form Contractor’s Tools: Not covered. Faulty Workmanship: Coverage excludes costs for faulty materials or work, but resultant damage may be covered. Natural Disasters: Floods and earthquakes are excluded. Extensions of Coverage In Transit: Covers materials while transported in Canada and the continental U.S. (excluding Alaska). Any Other Location: Coverage for materials at off-site locations, excluding transit and manufacturing processes. Cessation of Coverage Coverage Ceases: When the building is occupied or used for other purposes. Permitted Uses: Construction work or testing, office or habitational use. Limit of Insurance and Premium Adjustments Insurance Amount: Based on the completed value of the project. Premium Adjustments: Based on the final value reported after project completion. Builders' Risk Named Perils (IBC 4041) Comparison: Similar to Broad Form but only covers named perils. Exclusions: Does not cover in transit or off-site locations. Special Considerations Policy Variations: Check specific policy wordings for exclusions and coverage details. New Exclusions: Terrorism, Data Problems, Mould, Asbestos, Drug Cultivations. Introduction to Installation Floater Rider Purpose: Designed for contractors specializing in machinery and equipment installation. Applicable Industries: Plumbing, heating, and air conditioning firms. Coverage: Includes property of the insured and property for which the insured is legally liable. Coverage Options Forms: Available on a Limited or Broad Form basis. Coverage Includes: Property while in transit. Property awaiting installation. Property during installation until accepted or interest ceases. Basis of Coverage and Premium Basis Single vs. Annual Policies: Available for individual projects or on an annual basis. Premium Calculation: Based on annual receipts, covering materials and labor. Premium Adjustment: Provisional premium charged, with adjustments based on actual values reported. Exclusions from Coverage Property on Insured’s Premises: Excluded. Tools and Equipment: Excluded. Faulty Workmanship: Coverage excludes losses from faulty materials or workmanship, except when resulting from fire or explosion. Co-Insurance and Coverage Limits Co-Insurance Clause: Generally not included. Coverage Limits: Must reflect maximum exposure at any one location or conveyance. Importance of Adequate Limits: Avoid under-indemnification by selecting appropriate coverage limits. Overview of Specialized Dealer’s Policies Purpose: Tailored to businesses with specialized merchandise that standard policies do not adequately cover. Types of Coverage: Floater policies for specialized merchandise. Coverage includes high-value items and specific business risks. Jewellers' Block Policy Coverage Includes: Goods usual to the jeweller’s business. Property of others held for sale, repair, or appraisal. Property in transit and in custody of other dealers. Additional Coverage: Building and equipment can be added. Application Requirements: Detailed application with warranties. Furriers' Block Policy Coverage Includes: All risks coverage for fur merchants and dealers. Similar to Jewellers' Block but specific to furs. Exclusions: Property of others accepted for storage is not covered. For property on premises for repair or alteration, coverage is included without proof of liability. Other Specialized Dealer Forms Available For: Fine arts dealers. Stamp and coin dealers. Equipment dealers. Automobile dealers. Camera and musical instrument dealers. Purpose: To address unique risks and high-value items associated with each type of dealer.