1. Insurance Community University Insight on Installation Floaters and Contractor’s Equipment 1  The webinar will begin shortly.  There is no audio at this time.  This presentation is being recorded for your viewing pleasure at a future date.  The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.  The PowerPoint presentation is also available under ‘Materials’.  You will receive the course number for your state near the end of class.  Use the ‘chat’ window for questions on the content.  100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

2. Insurance Community University Disclaimer Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance Consultants is a division of Insight Consulting and Management Inc. In providing these materials, Insight assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2012 All Rights Reserved www.insurancecommunitycenter.com Laurie: 714.803.5830 laurie@insurancecommunitycenter.comlaurie@insurancecommunitycenter.com Marjorie: 714.206.9583 Marjorie@insurancecommunitycenter.com Marjorie@insurancecommunitycenter.com 2

3. Insurance Community University Your Instructor Today Al Parizo, AFIS, CISC In our last session: On Chautauqua Trail, Boulder CO we found a good Builder’s Risk 3

4. Insurance Community University In Depth review 4 We now go deep into issues of installation and Equipment floaters Channel Islands CA

5. Insurance Community University What This Class Will Cover 1.Reasons to purchase an Installation Floater 2.Covered Property/Excluded Property 3.Coverage Locations/territory/valuation 4.Contractors Equipment eligible and non-eligible property 5.Limits and Coverage Structure and review 5

6. Insurance Community University Inland Marine and Contractor’s Equipment The rest of the project beyond Builders’ Risk 6

7. Insurance Community University Inland Marine The client’s exposures should be reviewed and the insurance coverage specifications designed to meet those needs as effectively as possible Fit the coverage to the client – do NOT fit the client to the coverage 7

8. Insurance Community University NAIC Definition of Installation Risk 9. Builders’ Risks and/or Installation Risks covering interest of owner, seller or contractor, against loss or damage to machinery, equipment, building materials or supplies, being used with and during the course of installation, testing, building, renovating or repairing. Such policies may cover at points or places where work is being performed, while in transit and during temporary storage or deposit, of property designated for and awaiting specific installation, building, renovating or repairing. Such coverage shall be limited to builders’ risks or installation risks where perils in addition to fire and extended coverage are to be insured. If written for account of owner, the coverage shall cease upon completion and acceptance thereof; or if written for account of a seller or contractor the coverage shall terminate when the interest of the seller or contractor ceases. www.naic.org 8

9. Insurance Community University Installation Floater 9

10. Insurance Community University Coverages for Builders Contractor’s Equipment Any type of contractor Installation Floater Sub-contractor Builder’s Risk Owner or General Contractor 10

11. Insurance Community University Purpose of the Installation Floater The Installation Floater provides coverage for the materials, supplies, labor and profit of subcontractors for their portion of a building project The Installation Floater coverage ends when the contractor’s portion of the project is complete The policy is typically written on an annual basis and covers all work in progress 11

12. Insurance Community University Comparison Installation Floater and Builder’s Risk Project Begins Builders Risk Policy Begins Project Ends Builders Risk Policy Ends Installation Begins Installation Floater Coverage Begins Installation Ends Installation Floater Coverage Ends 12

13. Insurance Community University Why A Subcontractor Should Purchase An Installation Floater Provides first party coverage for the sub-contractor The subcontractor’s payment might be delayed under the Builders Risk policy 13

14. Insurance Community University Why A Subcontractor Should Purchase An Installation Floater Avoids application of large deductible on the Builder’s Risk policy Insured’s work that is not covered by a Builder’s Risk Policy Insured’s work is below the coverage threshold of the Builder’s Risk policy deductible 14

15. Insurance Community University Commercial Property Policy Will not cover away from insured premises. Limited Transit coverage (if any). Off site storage issues. 15

16. Insurance Community University Covered Property This type of policy is typically written on a blanket “all projects / jobs” basis Check proximity of jobs to each other for adequacy of limit Property owned by the insuredProperty of others for which insured is responsibleMaterials and supplies 16

17. Insurance Community University Excluded Or Limited Property False Work Cribbing, scaffolding, forms, temporary fencing, temporary lighting The policies often have a sub-limit or may exclude entirely Landscaping Excluded or a very low sub-limit 17

18. Insurance Community University Excluded Or Limited Property Fine Arts Although these items may be included if part of the materials, supplies, labor of the described project, these items may need stipulated (agreed to) valuation as these items may not be easily replaced Stained Glass, Leaded Glass, Statues, Art Work, such as murals 18

19. Insurance Community University Museum Quality Installation 19 Museum of Fine Arts Job Site

20. Insurance Community University Excluded Or Limited Property 20 Property while airborne Cross check to Rigger’s Liability and Non-Owned Aircraft coverages Verify how HVAC equipment will be set in place – crane or helicopter Property while waterborne Cross check to Marine transportation and coverage territory description

21. Insurance Community University Covered? 21

22. Insurance Community University Any waterborne exposure? 22

23. Insurance Community University Excluded Or Limited Property Retaining Walls Often excluded, particularly if not attached as part of the project structure(s) Signs Temporary Structures Often not covered or if included, a low sub- limit This exposure will also necessitate an increase in the Limit of Insurance (above the project cost) to provide coverage in the policy 23

24. Insurance Community University Coverage Locations Should include: In transit At the job site In storage Temporary locations 24

25. Insurance Community University Coverage Territory Typical Inland Marine language United States, its territories or possessions Puerto Rico or Canada Some forms may limit to Continental US 25

26. Insurance Community University Valuation The policy should always be written at Replacement Cost Value Include labor and profit 26

27. Insurance Community University When Coverage Begins and Ends Coverage begins Pick up and delivery of materials and supplies specific to their work Coverage ends When one of the following first occurs: Work is accepted and Named Insured’s interest ceases Policy ends or is canceled 27

28. Insurance Community University Covered Causes of Loss Typically Special Form perils There are very few forms that use named perils – this would be when the underwriter wants to exclude theft Equipment Breakdown coverage may be needed Earthquake, Flood, Wind (Tier 1) or Named Storms 28

29. Insurance Community University Typical Exclusions Pollution Clean Up – Many policies have a limitation for extraction or removal of pollutants from land or water at the coverage location only and will be limited to $10,000 or possibly $25,000 – This is clearly inadequate for most construction sites – Review the need for Pollution Remediation Coverage 29

30. Insurance Community University Exclusions Civil Authority Earth Movement Flood Fungus Ordinance or Law Penalties Sewer Backup Contamination or Deterioration Criminal, Fraudulent Employee Dishonesty Electrical Currents Loss of Use Mechanical Breakdown 30

31. Insurance Community University Typical Exclusions Testing – Frequently excluded, either by specific language or by removing any loss caused by Mechanical Breakdown, Explosion, Arcing (Artificially Generated Electrical Current), Steam Boiler or Pressure Vessel explosion 31

32. Insurance Community University Typical Exclusions Error, omission or deficiency in design, specifications, workmanship or materials as respects the cost of making good such error, omission or deficiency – ALWAYS make sure that the policy contains an exception to this exclusion, such as: – However, resulting physical loss or damage to the insured property is covered 32

33. Insurance Community University Typical Exclusions Terrorism – The coverage offer needs to be addressed for both TRIA and other acts of terrorism, such as domestic – Domestic terrorism could be a significant risk exposure, depending on the geographic siting of the project – Domestic environmental groups have been known to destroy property while under construction 33

34. Insurance Community University Waiver of Subrogation Contracts often require a waiver of subrogation Not all forms allow a waiver and can void coverage 34

35. Insurance Community University Contractor’s Equipment Floater 35 Tools of the trade

36. Insurance Community University Coverage Purpose The purpose of the Contractors Equipment Floater is to provide coverage for loss or damage to business tools and equipment 36

37. Insurance Community University Named Insured Include any owned entity that has an insurable interest The insured may have leased equipment or a lender on some or all of the machinery Include as Loss Payable or Lender’s Loss Payable – get bank instructions 37

38. Insurance Community University Eligible Property Everything to get the job done 38

39. Insurance Community University Tools & Equipment Hand tools Power drills Concrete mixers Compressors Pumps Generators Bulldozers / fork lifts / Power shovels Derricks / cranes / Cherry-pickers / hoists / elevators Road construction and resurfacing equipment 39

40. Insurance Community University Covered Property Broad Definition 40

41. Insurance Community University Owned All tools and equipment Scheduled Blanket Combination 41

42. Insurance Community University Scheduled Description of the equipmentManufacturerSerial numberLimit of insurance per item More restrictive but usually less expensive than blanket 42

43. Insurance Community University Blanket Each piece is itemized and provided to the underwriter A single limit of insurance is used to cover all defined Covered Property Often used for small hand tools Can contain a sub- limit per item 43

44. Insurance Community University Combination Large / valuable items Scheduled Small hand tools blanketed 44

45. Insurance Community University Newly Acquired Newly acquired tools or equipment coverage is often limited: Same or similar type as the scheduled % of total values insured (maximum is often 25%) Time restrictions often apply (30 days is common) 45

46. Insurance Community University Non-Owned NEVER assume that coverage is automatic Leased Hired Rented Borrowed from others Loaned to others 46

47. Insurance Community University 47 Excluded or Limited Property

48. Insurance Community University Tools or Equipment Loaned or Rented to Others Many forms exclude If the insured allows others to borrow equipment, determine if with or without an operator and whether the borrower is required to sign any liability or damage agreements Endorse when necessary 48

49. Insurance Community University Employee Tools Endorsement subject to underwriting approval May be costly to do so Frequency of loss high Rate, deductible or renewal may be affected Contractor may be required to insure under union contract 49

50. Insurance Community University Underground or Underwater or Airborne/Waterborne Review job sites and job site access for this exposure and negotiate removal where necessary Tunneling equipment that is under the ground surface May need to be negotiated and covered 50

51. Insurance Community University Vehicles Designed for Highway Use Road construction contractor will need this coverage Determine if other type of contractor has this exposure 51

52. Insurance Community University BAP vs. Marine Highway exposure vs. job site. Don’t depend on BAP Physical Damage. Contractor’s equipment policy covers anywhere in policy territory. Can go broader than collision and other than collision coverage in BAP in tailoring consequential loss and rental reimbursement. 52

53. Insurance Community University Limits and Coverage Structure Non controlled form gives you flexibility 53

54. Insurance Community University Covered Locations While in transit While at any job site In temporary storage At the insured’s premises Should include language “while anywhere in the coverage territory” – This is a safety net of coverage for the insured 54

55. Insurance Community University Covered Territory United States of America and its territories and possessions While in transit between points within the U.S. Other territories may be added by endorsement, subject to underwriting approval and availability 55

56. Insurance Community University Coinsurance Most companies use coinsurance: 80%, 90%, 100% – Used to ensure that the limits of insurance submitted are at value – Penalties will apply if the limits do not meet or exceed the coinsurance percentage selected Signed statement of values Attempt to waive coinsurance 56

57. Insurance Community University Valuation ACV is typical RCV can be used Agreed value Uncommon Used when insured has customized equipment 57

58. Insurance Community University Deductible The policy can also be written using a flat deductible or a percentage of value The % method is often used when coverage is on a schedule basis Typically applies per loss Can apply per item Negotiate a maximum per loss 58

59. Insurance Community University Covered Perils Normally written for “special form” perils – direct physical loss unless excluded or limited 59

60. Insurance Community University Commonly Excluded Perils Inventory shortage Dishonesty of insured, employees Wear and tear Gradual deterioration / Hidden or latent defect / inherent vice Rust, dampness, or dryness 60

61. Insurance Community University Commonly Excluded Perils Mechanical breakdown or failure / electrical arcing War and nuclear Loss to crane or derrick – Specified perils are often covered as an exception to the exclusion – Attempt to negotiate elimination or modification of this exclusion 61

62. Insurance Community University Commonly Excluded Perils Weight of a load exceeding lifting capacity – Attempt to negotiate elimination or modification of this exclusion Upset or overturn – This is a variation on the weight of load or loss to crane or derrick – Attempt to negotiate elimination or modification of this exclusion 62

63. Insurance Community University Crane Considerations 63

64. Insurance Community University Outriggers add stability Operator failure can have a bad outcome 64

65. Insurance Community University Outrigger Failure 65

66. Insurance Community University Boom goes the Crane 66

67. Insurance Community University Operator training and supervision 67

68. Insurance Community University Exceeded Lifting Capacity 68

69. Insurance Community University Boom goes the Boom 69

70. Insurance Community University Wind Damage 70

71. Insurance Community University Endorsements Boom coverage – Removes the boom limitation – The underwriter will want to know job supervision, operator training and experience before adding the coverage, which will often still be limited, depending on the length of the extension. Overload coverage – Removes the exclusion wherever possible. 71

72. Insurance Community University Endorsements Rented, Leased or Borrowed From Others Equipment – Provides coverage for equipment that belongs to others while in the care, custody or control of the insured – Often limited to the type of owned property already insured Property loaned to others – Removes the exclusion when the insured’s own property is in the care, custody or control of others 72

73. Insurance Community University Endorsements Rigger’s Liability – This endorsement provides coverage for damaging another person’s property while in the insured’s care custody or control. – If not available on the Equipment form, check with the Inland Marine underwriter for stand alone or cross check to the CGL and ask the underwriter to consider removing or modifying the exclusion for care, custody or control in that form. 73

74. Insurance Community University Low tech submission, Rigger 74 Sometimes all you need is a good dog and some rope

75. Insurance Community University Consequential Losses and Optional Coverages Loss of use issues 75

76. Insurance Community University Loss of Income Covers loss of income arising out of a covered loss to covered property A time deductible may apply This coverage may be critical, especially if the insured has specialized or customized equipment Loss of the equipment may cost the insured a job This coverage is not widely available 76

77. Insurance Community University Extra Expenses Time deductible may apply Coverage applies if a consequence of covered loss to covered property Additional costs to repair, restore or rent equipment Less widely available than Rental Reimbursement 77

78. Insurance Community University Rental Reimbursement Limit per day with a maximum for all rental costs Can sometimes apply using a time deductible, such as first 24 or 48 hours Loss must be a consequence of a covered peril to covered property This coverage endorsement is often available 78

79. Insurance Community University Underwriting Considerations The more information provided with the submission, the more leeway the underwriter will have to modify coverage 79

80. Insurance Community University Underwriting Considerations Type of work performed and where Type of equipment and inherent exposures Assists in establishing exposures and rates. Total values at risk Maximum values at job sites Employee tools 80

81. Insurance Community University Underwriting Considerations Method of transporting equipment Maintenance records and mechanic qualifications Security At the job site and at insured’s yard or storage facility Where and how garaged when not in use 81

82. Insurance Community University Underwriting Considerations Experience of personnel Loss history Loss control / prevention measures Union status and labor relations Financial condition of insured – Insured in poor financial condition will often skip routine maintenance, training, security, etc. thereby increasing loss potential 82

83. Insurance Community University Good supplemental information 83

84. Insurance Community University Summary No standard form in the industry MUST review the form to verify it responds for risk exposures of the insured – Not as easy as it may seem 84

85. Insurance Community University The rest is up to you A good Marine Underwriter is your best asset to tailor appropriate coverage. There is insurable interest during the life cycle of construction for everyone in the project. Help your client identify and cover theirs as an installer or contractor. 85

86. Insurance Community University 86 Upcoming CE Classes FREE Community Classes 4/5/12Integrated Disability Management 4/11 – 4/12Errors & Omissions 4/18/12Manufacturers Insurance Coverages 4/4 Insuring Wineries 4/10 Email Encryption Join the Community TODAY at: www.insurancecommunitycenter.com