“COPE” – Property Underwriting and
Effective Loss Control
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
The advent of the modern property policy can be traced back to just after
the Great Fire of London in 1666
Property underwriters from the very beginning have used the same
information to evaluate a risk:
 Construction (C)
 Occupancy (O)
 Protection (P)
 Exposure (E)
Collectively known as “COPE” data within the insurance world.
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
The “Construction” element of COPE is broken into three
sub-parts:
 Construction materials
 Square footage
 Age
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
ISO defines six construction classifications based on the
combustibility and damageability of the “major structural
features”
“Major structural features” are defined as:
 Exterior, load-bearing walls (primary element)
 Roof (secondary element)
 Floors (secondary element)
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Exterior, load-bearing wall types (“Primary”):
 Masonry
 Fire resistive/modified fire resistive
 Non-masonry / non-fire resistive
 Combustible (i.e. wood)
Roof and floor types (“Secondary”):
 Concrete
 Fire resistive/modified fire resistive
 Non-combustible/slow burning
 Wood or materials not included above
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Primary and secondary elements combine to delineate
the construction class. The lower the number, the more
susceptible to fire damage the structure is considered to
be:






“1” – Frame
“2” – Joisted-Masonry
“3” – Non-Combustible
“4” – Masonry Non-Combustible
“5” – Modified Fire Resistive
“6” – Fire Resistive
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
1. If the exterior load-bearing wall is frame (wood), the
entire building is rated as frame, regardless of the roof
material
2. If the exterior load-bearing wall is anything OTHER
THAN masonry, modified fire resistive or fire resistive, the
structure’s construction class is based on the roof and
floor construction material
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
3. If the load-bearing walls are masonry, fire resistive or
modified fire resistive, the construction class becomes a
function of the floor and roof materials.
4. “Major structural features” are often an assembly of
several parts. When this is the case, the entire assemblage
is classed using its most combustible or susceptible
member
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Wall Material
Floor/Roof Material
Construction Class
Code
Wood / Combustible1
Non-Combustible / Metal
Masonry2
Modified Fire Resistive
Fire Resistive
Wood / Combustible1
Wood / Combustible1
Wood / Combustible1
Wood / Combustible1
Wood / Combustible1
Frame
Frame
Joisted Masonry
Joisted Masonry
Joisted Masonry
1
1
2
2
2
Wall Material
Floor/Roof Material
Construction Class
Code
1
3
Wood / Combustible
Non-Combustible / Metal
Masonry
Modified Fire Resistive
Fire Resistive
Non-Combustible / Slow Burning
Non-Combustible / Slow Burning3
Non-Combustible / Slow Burning3
Non-Combustible / Slow Burning3
Non-Combustible / Slow Burning3
Frame
Non-Combustible
Masonry Non-Combustible
Masonry Non-Combustible
Masonry Non-Combustible
1
3
4
4
4
Wall Material
Floor/Roof Material
Construction Class
Code
Concrete, Modified Fire Resistive or Fire Resistive
Concrete, Modified Fire Resistive or Fire Resistive
Concrete, Modified Fire Resistive or Fire Resistive
Concrete or Fire Resistive
Concrete, Modified Fire Resistive or Fire Resistive
Modified Fire Resistive
Concrete or Fire Resistive
Frame
Non-Combustible
Modified Fire Resistive
Fire Resistive
Modified Fire Resistive
Modified Fire Resistive
Fire Resistive
1
3
5
6
5
5
6
1
Wood / Combustible
Non-Combustible / Metal
Masonry4
Masonry4,5
Modified Fire Resistive
Fire Resistive6
Fire Resistive6
1
Includes a “Combustible Assembly”
One layer of non-load-bearing bricks covering metal studs is not considered a masonry wall; it is a non-combustible wall with a brick facade.
3 This includes Built-Up Tar and Gravel Roof
4If the masonry does not meet the requirements of footnote “5” but is at least 4 inches thick, then the structure is classed as modified fire resistive.
5To qualify, the wall must be either: 1) solid masonry at least 4” thick; 2) hollow masonry at least 12” thick; or 3) hollow masonry between 8” and 12” think with a listed fire
resistance rating of at least 2 hours.
6”Fire Resistive” is defined as a non-combustible material or assemblies with a fire resistance rating of at least 2 hours. Can be accomplished based on the material or by the
application of a sprayed on cementitious mixture covering all exposed metal. If between 1 and 2 hours fire resistance rating, the member is considered “modified fire
resistive.”
2
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
What affect does a combination of diverse
construction materials have on a building’s
construction classification?
Unless the superior construction materials constitute
66 2/3% or more of that ratable “major structural
feature,” the entire feature is assigned the lower class
Two examples follow
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Exterior and Interior features may affect combustibility
and damageability. These are known as “Minor” or
“Secondary” construction features
 A large amount of combustible interior walls (including
assemblies)
 Combustible flooring (think bowling alleys)
 Combustible exterior attachments
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
The main aspect of structure size from the underwriting
aspect is in the comparison of the building’s “maximum
possible loss” (MPL) versus its “probable maximum loss”
(PML)
 Requires the insurer to review the possibility of a total or
constructive total loss
 Necessitates a review of the “Protection” (“P”) features in
place
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Underwriters will concern themselves with the building’s
major systems (roofing, plumbing, HVAC and wiring) when
underwriting an older structure




Have the systems been maintained and updated as necessary?
When were the last updates?
What was the extent of those updates?
Who did the updates?
Agents should concern themselves with the age issue due to
changes in construction-related ordinances and laws. May
create the need for additional coverage
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
“Occupancy” information is broken into two parts:
1. What the insured does
2. How the insured manages the “hazards” associated with what
they do (known as the “Hazards of Occupancy”)
“Hazard” is defined as:
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Two primary occupancy classifications:
Each class of insured presents its own basic relative risk
of property loss.
The greater the basic risk of loss, the more closely the
underwriter analyzes the operations/occupancy.
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Similarly classed insureds do not necessarily manage their
operations similarly.
Since each insured manages its exposures and hazards
differently, each presents its own “hazards of occupancy.”
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Body Shop “A”
Body Shop “B”
Body Shop “C”
All three share the same construction classification, protection class,
square footage, general methods of doing business and experience. The
only difference is how flammable/ combustible liquids are stored.
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
 Housekeeping
 The amount of combustible materials within the building
 The condition of major systems (heating and wiring)
 Dust-collection systems for woodworking and like operations
 Use of spark-reduction/arresting equipment where necessary
 The amount and storage of any other potentially hazardous
materials
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Property underwriters view property protection measures in
regards to their ability to lessen the amount of property
damage
Primary property protection provided by:
 Sprinkler systems
 Fire extinguishers
 Alarm systems
 Fire doors and fire walls
 Public fire protection
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Merely having a sprinkler system is not sufficient
Main question: Is the system adequate and proper for the
occupancy? (Fire load, water supply, etc.)
Other necessary underwriting information:
 The type of system;
 The condition of the system;
 If the location and number of sprinkler heads is adequate;
 The size and location of any non-sprinkered area; and
 Whether there is adequate sprinkler protection in the situation where there is high-rack
storage
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
What the underwriter needs to know about extinguishers:
 Are there an appropriate number for the building
 Are they properly located and at eye level
 Are they in the path of natural exit
 Are they the correct size
 Are the fire extinguishers the correct type:
o
o
o
o
o
Class A – Paper, wood, etc. (anything that produces “A”sh)
Class B – Flammable or combustible liquids (anything that “B”oils)
Class C – Electrical fires (anything that has a “C”harge)
Class D – Combustible metals such as shaved magnesium
Class K – Cooking oils and fats (“K”itchen)
 Are the extinguishers inspected and, if necessary, charged annually
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Underwriter Concerns:
 The type of system in use
 If at an off-site location, is the monitoring company listed
by Underwriters Laboratory (UL)
 Where does the alarm sound?
 Is the system installed properly?
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Directly affect the “Probable Maximum Loss” (PML)
Fire WALLS must meet certain minimum standards:
 Continuous masonry wall
 At least 6” to 8” thick (based on the masonry material used)
 Must come into direct contact with fire resistive, masonry or non-combustible
roof or walls
 Must pierce “slow burning,” or combustible (including assemblies) roof or
walls
 HVAC ducts must be protected by at least ONE 1½ hour damper
 Any openings must be protected by proper “fire doors”
What is a “Proper Fire Door”
 Self-closing
 Listed for 3 hour protection (Class “A” by UL) or have a sprinkler curtain
 Cannot be blocked open
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Fire departments are graded on a scale of 1 to 10 based on response time,
personnel, training, equipment and water supply (including alternative
water sources); the lower the number, the better the rating.
Country Wide
30.000%
25.000%
20.000%
15.000%
Country Wide
10.000%
5.000%
0.000%
1
2
3
4
5
6
7
8
9
10
What about “Split Classes” (i.e. 6/9)
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Is the insured property exposed to any external hazards?
External exposures relevant to property underwriters include:
 The insured structure’s proximity to a high-hazard operation
 The local wildfire risk
 The possibility for damaging winds and/or water
 The structure’s flood zone location (located in or near a special flood
hazard area (SFHA))
 The structures earthquake exposure
 The jurisdictions building code requirements
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance
Allows better planning when gathering the property
information
Knowing what to provide and why to provide specific
information makes the underwriting process smoother and,
hopefully, quicker
Agents can better assist clients when they are planning
upgrades to current structures or constructing new buildings
Insurance Journal’s Academy of Insurance Training Series
“COPE” – Property Underwriting and Effective Loss Control
© 2011 Insurance Journal Academy of Insurance