CHAPTER 13
COMMERCIAL
PROPERTY
INSURANCE
COMMERCIAL PROPERTY
INSURANCE
When business purchase insurance, we call it
commercial insurance.
When individuals purchase insurance, we call it
personal insurance.
PROPERTY AND MARINE INSURANCE
Real Property: property permanently
attached to land. e.g buildings &
fixtures.
Mobile Property: property to be
exported and covered by
transportation insurance historically
marine insurance.
COMMERCIAL PACKAGE POLICY
The insurance office (ISO) designed the commercial
package policy to provide insurance coverage to a
broad range of profit and nonprofit organizations
including manufacturing firms, schools, retailers and
apartments building owners.
The CPP is preceded by DECLERATIONS and
CONDITIONS applying to the entire package.
Common Conditions
covers
policy cancellation
assignment of the policy
other legal rights and duties
In addition
specific
declarations
conditions page
PERILS COVERED
 The
property component requires a
causes-of-loss form to complete the
contract. There are three main
alternatives.
 The Basic Form
 The Broad Form
 The Special Form
FIRE INSURANCE
Fire
is not defined in insurance
policies. For A peril to qualify as
a fire, there must be a clearly
visible flame or glow and the
fire must be `hostile`.
FIRE INSURANCE
A
hostile fire is one that is unconfined and
beyond designated boundaries.

A
friendly fire is to collect for loss the
proximate cause must be hostile fire.

 If
an insured is to collect for a fire loss the
proximate cause must be a hostile fire.
PROPERTY INSURANCE RATING
A
fire insurance rate is the cost per
hundered dollars of exposed value.

 Insurers
calculate the premium by
multiplying the rate times the number of
hundreds of dollars of value in the
exposure.
There are two different methods:
 1.
Class Rating operates combining units
into a group and then charging a class
rate reflecting the loss experience and
expenses of the group.

 Factors
to be considered: *construction of
the building
 *occupancy ( owner occupied or not)
 *community firefighting capability

Scheduled Rating analysis each property
individually and is used primarily in rating
commercial building.


A rate for a standard building in the same city
as the building under consideration provides
the beginning of the procedure.






Rate:
Standard Building
+Charges(morehazardous conditions)
- Credits ( less hazardous conditions)
TRANSPORTATION INSURANCE


Marine is one of the earliest forms of insurance
protection.
BOTTOMRY was a transaction protecting an owner
from financial loss, if his ship were destroyed.


If the ship is acquired by means of a loan, an
interest rate was paid to a moneylender.



The moneylender, for a premium beyond the
interest rate, would agree to forgive the loan if the
ship were destroyed.
TRANSPORTATION INSURANCE
 Some
points are considered:
 similar units were exposed to similar perils
 non-accidental , losses were excluded
from coverage
 losses are definite and measurable
 catastrophes were not likely
RESPODENTIA

Loans were comparable to bottomry loans.
The ship`s cargo is the subject not the ship.




A merchant, placing cargo on a ship, would
take a loan using the cargo as collateral. The
money lender, for a premium in addition to
the regular interest charged, agreed to
forgive the loan if the cargo were lost.
 Particular
average losses are those borne
by the owner of the ship or cargo due to
direct damage to the property.

 General
Average is the loss attributed to
the owners of property where there was
not necessarily a loss to their property but
other property was thrown overboard to
save the ship and then loss was borne
proportionately by all who had property
exposed to loss during the voyage.
OCEAN MARINE RATING

Unlike fire, ocean marine insurance rates are
based on the judgement of the underwriter.

There are some points to be considered:
the seaworthiness of the ship
the experience and the ability of the captain
and the crew
potential for loss of cargo; types of goods that
are carried…
the route scheduled to be traveled and the
season of the year
the coverage provided by the policy





FOUR DISTINCT TYPES OF THE LOSS
EXPOSURES
 The
hull exposure includes the value of
the ship and its equipment
 The cargo exposure is the value of the
goods being shipped.
 The loss of freight is the loss of income
the ship owner would have earned. If
the cargo delivered rather than lost.
 The liability loss exposure is the loss a
ship owner would suffer.
INLAND MARINE INSURANCE
 Insurance
is essentially an American
distinction. In other countries, if an insurer
( underwriter) wants to write fire insurance,
marine or perhaps even life; it is a private
decision.

 Everything
(almost) we own has been
transported on a truck or train several
times before its purchase.

Policies include:
 i.
Bailees customers policies
 ii. Instrumentalities of transportation
policies.
 iii. Personal and commercial
property floaters.
BAILMENT

In bailment, property belonging to one party
(the bailor) is temporarily in the possession of
a second party( the bailee), ultimate
possession is to revert back to the first party.

parking a car in a public garage
leaving the clothes at cleaners
shipping goods on a truck
lending a lawnmower to a neighbour




If not legally but bailee morally responsible for
its safe return to the bailor.
ANNUAL TRANSIT POLICY is designed to
protect the interest of the shipped
(bailor) whereas
 MOTOR
TRUCK CARGO insurance a
from of baliee`s liability coverage) is
designed to protect the interest of
the trucking company.

INSTRUMENTALITIES OF TRANSPORTATION
 It
may cover a variety of different
structures including, bridges, tunnel,
pipelines, dams and traffic signals.
FLOATER INLAND MARINE INSURANCE


It is used to cover property is easily and
frequently moved and is generally of high
value.
e.g. for personal there are articles floater to
cover valuable assets such as cameras,
jewelry or firs.


For commercial property; there are
scheduled floaters that covers items of
significant value such as medical equipment,
livestock, fine art etc.
AIRCRAFT PROPERTY INSURANCE
 This
is applicable to helicopters, hot air
balloons, hang gliders and space
satellites.
 It is parallel to ocean marine insurance
that is the owners need to purchase
insurance to protect hull, freight and
cargo and liability exposure.