Policy Provision Potpourri or Mining Gold in Those “Commodity” Hills Chris Amrhein, AAI Amrhein and Associates, Inc. Lorton, VA

2 Those who view insurance as commodity

3 Reality

In connecting the dots... Lies the opportunity!

Opportunity #1 Property: ITV – Insurance to Value

“Inadequate values are a persistent problem for insurers, particularly for business personal property where carriers lacked a credible valuation tool. When we analyze business personal property valuations for an insurer, we find substantial evidence of underinsurance for whole books of business.” - Hartford Steam Boiler An estimated 64 percent of American homes are underinsured by an average of 19 percent, according to a 2008 survey by Marshall & Swift/Boeckh. A survey by United Policyholders, a consumer advocacy group, said 75% of California homeowners affected by the 2007 wildfires in San Bernardino and Riverside counties were underinsured by an average of $240,000. “60 % of non-residential property is under-insured in North America, some by as much as 40% or more.” - Lewin, Wright & Company

ITV Solutions To get an accurate estimate of rebuilding costs: –Hire a contractor: The very best method is to hire a local contractor to inspect your house and come up with an estimate of how much it will cost to rebuild. The fee will fall roughly in the range appraisers charge — 0.1 percent of the estimate. –Go online: Homes: Accucoverage ($7.95) and HomeSmart Reports ($6.95).AccucoverageHomeSmart Reports Commercial buildings: ($20 per section)

Way past due to update old concepts Contents of old basement: washer/dryer; furnace; Christmas decorations; junk Contents of current “basement” (now recreation room) “Man cave” washer/dryer; furnace; home theater; Nintendo/Xbox/Sony; additional refrigerator, freezer; ice machine; popcorn machine; couches, chairs; pool table; ping pong table; foosball table

Personal Property: iToys Issues for both business and personal: – Steadily dropping hardware costs – Steadily increasing data values – Consumer confusion as to real costs of mobile devices Solution: shift emphasis from insurance coverage to risk management

Opportunity #2 Gap Between “Insured Needs” vs. “Agent Sold”

PL: 2.0? –Homeowners –Auto –Flood –Umbrella –Life –Watercraft –Snowmobile –Recreational vehicles –Health –Disability –Retirement –LTC

CL 3.0? –Liability –Property –Workers Compensation –Auto –Business Income –Flood –Umbrella –Life –Watercraft –D&O –Professional –Health –Retirement –LT DisabilityEPLI –Cyber-liability –Inland Marine –Et al...

Opportunity #3 Flood!

–Misuse/nonuse of endorsements –NFIP controversies –Business Income in NFIP? –Excess flood

Opportunity #4 Business Income

BI First, just write some! Second, look for form gaps/limitations/period of restoration –Example: CP 00 30: “When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises...”

BI (cont) Third: Optional Coverages –Maximum Period of Indemnity –Monthly Limit of Indemnity –Agreed Value –Extended Period of Indemnity Fourth: Endorsements,Endorsements –Ordinary payroll –Dependent properties –Period of restoration –Shorten time periods from 72 to 24 hours

Opportunity #5 Homeowners

HO #1 Other than NI 5."Insured" means: a. You and residents of your household who are: (1) Your relatives; or (2) Other persons under the age of 21 and in the care of any person named above; 11. "Residence premises" means: a. The one family dwelling where you reside; b. The two, three or four family dwelling where you reside in at least one of the family units; or c. That part of any other building where you reside; and which is shown as the "residence premises" in the Declarations.

HO #2 Personal trusts HO Trust Endorsement (ISO 2011 replacement for HO Residence Held in Trust) PP – Trust Endorsement

HO #3 Significant others HO 04 58: Other Members of Your Household: We insure the person named in the Schedule above who lives with you and is a member of your household and who is not an "insured", guest, "residence employee", tenant, roomer or boarder. We also insure a person under the age of 21 who lives with and is in the legal custody of the person named in the Schedule. ISO HO form language: Personal property covered: “Insureds” anywhere in the world Others while the property is on the part of the “residence premises” occupied by an “insured”. A guest or a “residence employee” while the property is in any residence occupied by an “insured”.

HO #4 College Student “Fix” HO Additional Insured - Student Living Away from Home SECTIONS I AND II – CONDITIONS The coverage provided to the person named in the Schedule only applies while that person is enrolled at the school and is residing at the address shown in the Schedule.

HO #5 Home-based Business Way Beyond Amway eBay in the bedroom? - Website liability - Professional liability exposures - Credit card transactions - Marketing - Shipping Solutions - HO Increased Limits on Business Property - HO Home Business Insurance Coverage - HO Business Pursuits

Opportunity #6 Commercial Property

CP #1 Triple Net Leases –Fire legal insufficient –Remedies: CP Legal liability coverage form Direct coverage A.CONCEALMENT, MISREPRESENTATION OR FRAUD This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning… CP 0090

CP #2 Insurable interest 6)Your use interest as tenant in improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions: a)Made a part of the building or structure you occupy but do not own; and b)You acquired or made at your expense but cannot legally remove;

CP #3 Other possibilities CP Increased cost of loss and related expenses for green upgrades –Green means enhanced energy efficiency or use of environmentally- preferable, sustainable materials, products or methods in design, con- struction, manufacture or operation, as recognized by a Green Standards-setter. –Check out CP Debris removal additional insurance CP Additional covered property CP Additional building property CP Additional property not covered

Opportunity #7 CGL Limits

GL #1 Compare Limits to Reality Medical Payments PI & AI Damage to Rented Premises Prod/CO per Occurrence

How much is enough? How do I get it? What are the key considerations? What are the common mistakes? GL #2 Limit Amounts

Limits per location –CG 25 04: DESIGNATED LOCATION(S) GENERAL AGGREGATE LIMIT Limits per job –CG 25 03: DESIGNATED CONSTRUCTION PROJECT(S) GENERAL AGGREGATE LIMIT Limits from others –Wrap-ups –Additional insureds Excess policy GL #3 Limit Options