| Author |
Message |
Jim Flynt (Jimflynt)
| | Posted on Sunday, September 23, 2001 - 11:41 am: | |
Horace, in answer to your question, both insureds paid the same 'deductible' (through Self Insured Retention) in retaining the loss for the first 72 hours.
Another intent of the policy in establishing the 72 hour waiting period was to make sure the civil authority access prohibition was going to be more than temporary (in excess of 72 hours). Where direct damage is the causation, the policy intent was to provide business interruption only in those losses involving low frequency high severity and not those of low severity high frequency.
You have raised a separate question of whether the insured has followed the policy provisions requiring reasonable steps to mitigate and protect the Covered Property from further loss. I will leave that question for you or others to answer under a topic other than business interruption. |
Horace Smith
| | Posted on Sunday, September 23, 2001 - 11:31 am: | |
72 hour waiting period:
Insured #1 is very conscientious, works all night, works overtime to clean up and make repairs and is back open for business on the fourth day.
Insured #2 with approximately the same damage is more deliberate, can't afford overtime workers and it takes a week and a half to be up and running.
Charley Hustle (insured #1)is barred from business income recovery.
Insured # 2, though, gets a substantial business income recovery.
Does the 72 hour waiting period encourage an insured to lollygag? |
Jim Flynt (Jimflynt)
| | Posted on Sunday, September 23, 2001 - 10:44 am: | |
For everyone's benefit, the 72 hour waiting period was originally intended as a SIR or 'self insured retention' to have the insured participate in the loss and risk management techinque as a partner with the insurance companies.
The 72 hour waiting period may not be all that important in the end, as the civil authority provisions limit coverage to that 3 week period under both the BOP and BIC forms.
But I do caution everyone, that for the civil authority provision to apply requires "action of civil authority that prohibits ACCESS to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss" under the exact same language in both the BOP and BIC forms.
That last provision is going to cause a great deal of confusion and misunderstanding with insureds and some adjusters as I will point out later today in a separate post dealing with specific problems of limitation.
So, put on your thinking caps and would someone please wake up Ol' Ghostbuster.......it's time to start asking some tough questions which will make us think and learn, and we need Ghost around to keep us all straight. |
Horace Smith
| | Posted on Sunday, September 23, 2001 - 10:38 am: | |
Thanks Jim and others,
I don't have that latest BOP, but most policy types do evolve. It, is imperative that the adjuster review a specimin of the correct edition and all endorsements. Often, you can get these from the agent.
Newer CP forms also have a 72 hour wait before the
"period of restoration" commences. That 72 hour wait is gonna be a hard pill for some insureds to swallow. I predict that before this thing is over some carriers may waive it. Maybe not. |
Clayton Carr
| | Posted on Sunday, September 23, 2001 - 10:27 am: | |
Jim's last post makes good sense, especially in view of my stupid typo of an acronym without spelling it out first. Messes up what I had hoped was a useful reflection.
I said "LOL", the last "L" is a typo.
Should be "LOI", Loss of Income.
It frustrates me when I encounter that type of thing, and even more so when I do it myself.
Looking forward to Jim's planned commentary. |
Jim Flynt (Jimflynt)
| | Posted on Sunday, September 23, 2001 - 7:37 am: | |
Ok. Since Ghostbuster wants to sleep in this morning, I will assume his role for the next hour or so as 'hall monitor' but actually would prefer to be the 'policy referee.'
May I make a few suggestions here as well as throw in a comment or two which I think will better serve an overall discussion about business interruption insurance in it's many forms.
First of all, let's make sure we are all on the same book and page. In order to do that, please don't use acronyms until you have first spelled them out in meaning. For instance, LOL obviously is a Canadian insurance term as it is 'foreign' to the US insurance vernacular, so I am at a loss in understanding what it means. A guess would be 'Loss of Lease' but Clayton, we need clarification.
Secondly, I have taken the liberty to set up another thread for BOP business interruption discussions as loss of income coverage under BOP differs from the BIC forms. In the long run it will help readers to avoid confusion, while allowing them to understand those crucial differences. Horace seems to have a fairly good handle on the topic, and I would propose making him 'hall monitor' for that thread.
I would further suggest, that posters refer to the policy edition when they post as there have been some important changes in the BIC and BOP forms in just the last few years. (See the next paragraph).
Horace, I would suggest that Business Income under the BOP form for Civil Authority has now been increased to up to Three (consecutive) Weeks under the BP 00 02 (01 97) edition with a 72 hour waiting period from the time of the civil authority action, which is intended as an SIR (self Insured Retention). (I do agree with you BTW that an adjuster can understand a BOP policy with a good hard day's work, but I disagree vehemently that anyone can learn business interruption under the BOP or any policy in one night, one week or one month even.) Just had to throw that in to scare off the bag boys, cotton pickers, cowboys and roof thumpers posing as cat adjusters. :>)
Similarly, the BIC form can cover for Civil Authority under forms starting with the CP 00 30 (06 95). Later today, I will point out some earlier forms which handled civil authority differently as well as make some comments about nonstandard and manuscript forms following.
If we can all agree to define the meanings of 'foreign' words and acronyms as well as post the BIC or BOP edition we are refering to in any discussion, we will avoid any quick confusion for CADO readers.
I will be posting several posts throughout the day today both in trying to point out and show distinctions among these various forms, as well as trying to lay out some potential problem areas and issues which are going to create some major coverage questions for adjusters attempting to handle WTC claims.
So while my buddy Ol' Ghostbuster stays busy sawing logs this morning and dreaming of lush tropical paradises with beautiful nubile natives in hula hula skirts, ya'll get saddled up, take an Advil, grab a pad to take lesson notes with, and get ready to matriculate here at CADO U. |
Clayton Carr
| | Posted on Saturday, September 22, 2001 - 11:59 pm: | |
From the good chat I had with Jim it is apparent that the USA/CDN wordings are packaged differently and it is best that I not comment on a whole wording or its' application until I am in receipt of the USA wordings. The intent of the similar sections are for the most part consistent but Jim has nicely laid out where the differences are found, and I certainly don't want to mislead anyone trying to find what I was talking about in a wording in front of them that didn't contain the issue I was referring to.
Horace, I think you have brought a ray of sunshine to all those that subscribe to the name of this thread, and I look forward to hearing more from you or others that care to relate adjusting practices or claims examples to the Loss of Income cover of these BP and BOP policies.
A major component of any LOL or BI policy is the "Extra Expense" clause. LOL coverage extends to any necessary "EE" to avoid or reduce the earnings loss, but only to the extent it reduces that loss; that otherwise would not have been payable. That is any "EE" incurred during the "IP" that would not have been incurred, had there been no loss.
This is a coverage component where we must be real careful to measure cost (a.k.a. risk) against value. This coverage can be a great "tool" for earnings loss reduction, but it can also be a nightmare for adjusters, vendors and carriers.
A simple math example - if the insured spends $5000 to reduce the loss by $7500, the earnings settlement will include the $5000 expense. But, if the insured spends $5000 and the earnings loss is only reduced by $4000, then the settlement will only include the $4000 reduction in loss of earnings.
The math may be simple but "the plan" must be solid. It is relatively easy to determine (a) the budget of expenses for the planned activity to reduce the loss. But, (b) the resultant activity to reduce the loss of earnings is only really known after (a) has been incurred.
"EE" is a useful tool that has to be considered, but it is a gamble unless well thought out and executed within a budget less than the anticipated resultant reduction in earnings loss.
Think about a small to medium mercantile (other than manufacturing) risk - what can you do to reduce their loss of earnings? Pay a premium to suppliers to speed up restocking of inventory, pay a premium for expediated trucking, pay overtime for staff to set up new shelving or restock the shelves, pay for special advertising to announce the reopening and special sale.
Just some of the things that will get the insured back in operation sooner - and reduce the earnings loss. What is the exact cost of each EXTRA expense? Incurring that expense will it alone contribute or cause the insured to get back in operation 1 or 2 days sooner or 1 or 2 weeks sooner perhaps in combination of extra expense activities?
Can anyone share any examples of this coverage element? |
mark (Olderthendirt)
| | Posted on Saturday, September 22, 2001 - 10:14 pm: | |
Well said Horace; but this is still a Cat for those with an insurance company/ inpedepent adjusting backgound.
This is not the place for contractors and roofers. |
Horace Smith
| | Posted on Saturday, September 22, 2001 - 9:46 pm: | |
To politely interject:
There are tiers, levels, and rungs of business income and time element adjusting. Let's look at the lower levels.
The Business Owners Policy (BOP), written by many carriers and the similar Business Policies written by Big Red and others, are designed for small businesses from mom and pop up to small corporations. If the insured has purchased "loss of income" or "business income" under a BOP,the claims handling can be much simpler than under the Commercial Property (CP) forms.
Two reasons among several: (1) there is no coinsurance clause or requirement under a BOP and (2) there is no monthly limit such as under the CP earnings forms. These two items alone prevent many disagreements.
As with all BI policies there must be direct damage to the building or business personal property, from a covered peril, to trigger the BI coverages. Unless, that is, the claim is caused by "Action of Civil Authorities". In the latter case the direct damage from a covered peril must occur off the premises and the insured's recovery; business income, and extra expense,is limited to a period of two weeks.
There will be numerous unhappy insureds relative to this two week limit but I suspect FEMA and Rudy will bring additional relief.
An adjuster under a BOP still has to obtain or observe evidence determining the net income before and after the event and also determine continuing expenses. Good accounting principles are required, but
an attentive, bright, alert, claims person such as most of us can study and master the BOP policy in an evening.
I do not recommend attempting to adjust Morgan Stanley or businesses in the collapsed buildings, or anything even near ground hero. I'm saying there are thousands of small claims out on the periphery, under BOP and Business Policies that you would be reasonably comfortable with. |
Ghostbuster (Ghostbuster)
| | Posted on Saturday, September 22, 2001 - 6:59 pm: | |
(Whisper in the ear.) Uhhh...Clayton,
Here's a special hint. Yawl might wanta lighten up a touch. You know, maybe emulate Red Green from the New Red Green TV show or throw in a little Monte Python, maybe a little razz-ma-tazz. It ain't that we'uns is completely uncouth but we do like to chuckle it up every now and then. Lord knows, we don't want to upset any of the rest of us nursing home residents here and crank up the Revolutionary War again.
(I'm getting tired of being the hall monitor, would someone else please take over?) |
Jim Flynt (Jimflynt)
| | Posted on Saturday, September 22, 2001 - 6:50 pm: | |
Just a note to let CADO readers know that Clayton and I have talked by telephone a short while ago, and we are not as far apart in our thinking and/or intent as it might seem to some readers.
I have advised Clayton that the policy architecture and format under Canadian BIC policies is different from US BIC forms, and I will be faxing him a copy of the US forms so we can all be talking from the same book and page.
Further, civil authority causation BIC triggers which are automatic under Canadian policies are optional under US policies, and without the endorsed option, there would be no BIC coverage for civil authority acts without actual physical damage at the risk location. Damages which trigger BIC coverage under the US BIC forms can follow either the Basic, Broad or Special CPP cause of loss forms.
There are many other essential differences between the Canadian and US policies, and I will point out any discrepancies in this discussion where they vary from the US ISO forms. Generally speaking, the Canadian forms include many coverages which the US forms provide only as optional coverages by endorsement. Canadian forms being more automatically liberal while US forms require additional premiums for added coverages and limits. Canadian BIC policies have no co-insurance penalties while US forms do except by endorsing out.
Again, Clayton, thanks for a nice chat and for your understanding, and I look forward to working side by side with you to educate our CADO readers in BIC coverages, issues and practices. |
Horace Smith
| | Posted on Saturday, September 22, 2001 - 6:22 pm: | |
Preach on, brother! |
Clayton Carr
| | Posted on Saturday, September 22, 2001 - 5:46 pm: | |
Well, I see Jim has formed the lineups for us to follow. I don't fit into either of the other two which fit on either side of this new thread; isn't democracy great.
As I stick my neck and all my tail feathers out here I want to make it clear that this is presented for several reasons. I have gained an insight (a.k.a. knowledge) from others who have posted to this web site and I know I will continue to do so; and I sense that maybe I can give some insight, help or thought back to others relative to BI. I am not a scholar or a guru on BI, but I have a personal comfort level with it and perhaps can be of some small measure of help in dealing with some of its' issues. Yes there will be $M dollar claims, but there will also be lots of "ma & pa" retail shops with $100K BI values with CP limits in the same area.
I'll start my offering - and simply it is an offering, if this commentary does not provoke positive discussions and thoughts of these issues, I'll stop and talk to myself as I continue my review - with what I think is the most basic BI form. In "Maple Leaf Valley" we call it the "Monthly Earnings Endorsement Form", it was derived from your basic Earnings No Co-Ins Form. It seems we chose to call it a rider because we attach it to a standard CP policy.
The object with starting at this point is that if you have a good understanding of the principals and coverages of this basic form, you will have more confidence and less difficulty in understanding the more complex BI forms. If such is not the result with you, then I must echo Jim's sentiments that NYC BI claims are not for you.
This basic Earnings form has only 8 sections as follows;
(1) Indemnity Agreement
(2) Measure of Recovery
(3) Expenses to Reduce Loss
(4) Media Limitations
(5) Interruption by Civil Authority
(6) Additional Exclusions
(7) Waiver of Term or Condition
(8) Definitions
Whereas, perhaps a more widely used mercantile Earnings form has 12 sections, the above 8 plus the following (not in policy numerical order);
(9) Co-Insurance Clause (not found on No Co forms)
(10) Payroll Options
(11) Premium Adjustment
(12) Resumption of Operations
I do hope the "language / terminolgy" of the wordings I'm working from is consistent with what you may be reviewing from. However, the intent of the coverage is the same.
Perhaps, if someone wanted to fax me (fax# @ roster) the basic BI wordings you feel are appropriate; I'll both feel better about my former statement and will be able to keep our collective apples to the same brand.
Due to space constraints, please refer to the next post and we will deal with each section.
I'll wait a while to see if there are any or many who feel this exercise is foolhardy - no hard feelings from me. |
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