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Conditions

180 Day ‘Limitation’ in the Commercial Property Policy: Dazed and Confused

Within the wording of the commercial property policy’s replacement cost provision there is a 180 day “limitation.” How does this supposed limitation actually apply and to whom does it apply? For whatever reason, some insurance carriers routinely use this supposed limitation incorrectly.

Actual Cash Value and the Depreciation of Labor

The concept of actual cash value (ACV) is far more complicated than “replacement cost minus physical depreciation.” In fact, the meaning of replacement cost differs based on the state. To further complicate the “problem” with defining ACV is whether or not labor is depreciable. Again, the answer differs based on the state in which the property is located.

Commercial Property Agreed Value Option

The Agreed Value Option (AVO) is an alternative to coinsurance in the ISO Building and Personal Property Coverage Form (CP 00 10). Agreed Value can be used with buildings or personal property, on either an actual cash value (ACV) or replacement cost (RC) basis. However, many agents are not aware of how this option must be used very carefully.

COVID-19 and Commercial Property Vacancy Concerns

As of this writing 38 states and countless cities and counties have enacted some form of stay-at-home order amid the pandemic panic arising from COVID-19. If the operation is not considered an “essential” business, its doors are shut - for now. How long such orders will or even can stay in place is anyone’s guess.

How Many Claims Would Be Considered for Riots Lasting Multiple Nights?

An agent asks: We have a few clients with multiple retail locations throughout various states with various policies. If they have locations which receive damages from riots on multiples nights, how many claims would this be considered and therefore how many deductibles? Our VU volunteer faculty provides the answers.

Property Deductibles: Subtracted from the Limit or the Loss

A concept as common as the application of a “property deductible” is rarely taught or even considered, it is simply “understood.” The problem is we tend towards the belief that everyone “understands” the application of a property deductible the same way. They don’t.

Replacement Cost and the 180-Day Limitation Myth

Carriers seem to believe that a property loss must be discovered within 180 days of the event causing the damage for the policy to respond on a replacement cost basis; even some agents believe this. Well, it just isn’t true. Find out why.

The Commercial Insurance Vacancy Clause Important to Today’s Commercial Real Estate Owners

Work patterns since COVID-19 sent millions of workers home had a big impact on the commercial real estate market. And although JP Morgan predicts commercial real estate will come “bouncing back” in 2022, it’s a great time to remind your clients of the need to understand their commercial property policies’ vacancy clauses.

Why Defining Actual Cash Value is Amazingly Difficult

The concept of actual cash value (ACV) is far more complicated than “replacement cost minus physical depreciation.” In fact, the meaning of replacement cost differs based on the state. To further complicate the “problem” with defining ACV is whether or not labor is depreciable. Again, the answer differs based on the state in which the property is located.

ACV vs. Market Value vs. Functional Value vs. Agreed Amount

Your insured buys a building for $250,000. The ACV of the building is closer to $750,000, but the insured only wants to insure the amount of his financial investment. Since coverage is usually based on ACV or replacement cost, underinsurance could result in a huge coinsurance penalty. What can you do?

Coinsurance 101

You'd think after 100+ years of application that coinsurance questions would rarely arise. However, few commercial property provisions are debated more often than coinsurance. In this article, we'll take a look at several coinsurance issues – a couple of them basic, but fundamentally important, and another one a little more complicated – and we'll also link to another article that you can use to explain coinsurance to your clients.

Coinsurance and Valuation - Part 1

The building is currently insured for replacement cost. The insurer did a new valuation and said the policy limit is 70% of the RC value, which would result in a coinsurance penalty for a partial loss. Is the insured who probably won't rebuild with a total loss better off, if the company will allow it, remaining at RC with a coinsurance penalty or going to ACV because a partial loss would still be replacement less the coinsurance penalty?

Coinsurance and Valuation - Part 2

Under the valuation condition in a property policy, you can choose to settle a claim using ACV instead of RC (even if you have RC on the declarations page). In such a case, if there is a coinsurance penalty, is it based on ACV or RC? In this article, which builds on a prior article, we'll examine this issue.

Coinsurance Visualizer

One of the most difficult insurance concepts to explain to insureds is coinsurance. To assist you, there are several VU articles listed below that should be helpful. In addition, John Wheeler, CPCU, an agent in Lake City, Florida has come up with a graphical Excel spreadsheet that visually displays how the coinsurance penalty works. John has allowed us to share this very cool tool with IIABA member agencies.

How to Explain Coinsurance to Clients

One of the toughest tasks facing insurance agents involves how to go about explaining coinsurance...why it exists, what's its purpose, and how it works. Below is an explanation that you might find of value in discussing the purpose of coinsurance with your clients, along with a deposition excerpt from an agent who couldn't explain it.

Profit & Overhead When Insureds Repair Their Own Damage

Your insured is a contractor. He wants to repair insured damage to his own building to ensure that the job is done right. Or, let's say he negligently causes damage to a customer's property that is covered by his CGL policy and wants to make repairs himself. Is the insurer obligated to pay an amount that includes profit and overhead for the work done by its insured?

Replacement with Materials of "Like Kind and Quality"

As we all know, insurance seminars and articles can be a little on the 'dry' side. So, every now and then, when you select an article from the Research Library, you may get the unexpected. We want the Virtual University to be more than some stale, stoic repository of insurance technica...hey, let's have a little fun! Now, on with the topic at hand...

Tenants I&B and Insurable Interest

The carrier has denied payment for covered damage to our insured tentant's improvements and betterments based on a clause in the lease that states that all additions, alterations, etc. become the property of the landlord and, consequently, the insured has no insurable interest in that property. The adjuster who wrote the letter advised me that she is instructed to issue these letters and the directive to do so comes from people much higher than her or her manager. Huh?

Understanding the Agreed Value Option

Question: I have always understood Agreed Value to do away with the coinsurance clause. I have also understood it to stand alone, meaning no ACV or RC noted on the Dec. page for the particular item showing agreed value. Am I correct or mistaken? If I am correct in both instances, is it correct for the company to show either ACV or RC as well as coinsurance on the Dec. page?

Valuation Methods Don't Measure Up (Part 1 of 2)

This is Part 1 of 2 from my Agent & Broker magazine column that generated the most 'fan mail' of any columns I've written over the years. If you use 'toy' valuation systems like room counts or square footage in determining building values (in either commercial or personal lines), you need to read this two-part article!

Valuation Methods Don't Measure Up (Part 2 of 2)

This is Part 2 of 2 from my Agent & Broker magazine column that generated the most 'fan mail' of any columns I've written over the years. If you use 'toy' valuation systems like room counts or square footage in determining building values (in either commercial or personal lines), you need to read this two-part article!