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Insuring Electronic Data Processing Equipment


Most businesses are computer-dependent. Only the smallest retailer can operate without a computer cash register. Embedded chips and computers operate manufacturing equipment, contractors’ equipment and equipment found in hospital operating rooms. Rather than insuring computers as office or manufacturing equipment, the Electronic Data Processing (EDP) form protects hardware, software, media and other similar property. Coverage is available for hacking (unauthorized computer system access) and virus damage, power shortages, overload and outages.

Any commercial operation that owns and/or uses computers and other data processing equipment is eligible for EDP coverage. Commonly a policy covers hardware, media, programs/applications, data records, proprietary programs, loss of income and (on- or off-site) Website servers.

How EDP coverage applies depends upon the policy definitions of key terms, including "computer hacking," "computer virus," "data records," "media," "telecommunications equipment" and others. EDP policies have many defined terms because technology is dynamic. Liberal use of specific policy language helps to preserve an EDP policy's intended coverage.

Typically, coverage is provided against a specific list of events that can cause tangible loss to electronic equipment. Different coverage applies to major areas of EDP, such as hardware, software and Website servers. Covered businesses usually must comply with certain provisions to qualify for coverage, such as properly creating and storing back-up programs.

There are certain types of property that, generally, are ineligible for coverage under an EDP policy, such as:

·         Hardcopy accounts, bills, evidences of debt, records, abstracts, deeds, manuscripts, program documentation and similar property

·        Portable computers that are stolen or that disappear

·        Any property used for illegal transportation or that is contraband

·        Any property that is leased or rented to others

·        Currency, food stamps, lottery tickets, money, notes and securities

·        Property held for sale

A business must pay attention to how losses are settled, particularly are claims handled according to the current value of the lost equipment or according to what is necessary to replace the property? ACV settlement is a problem for companies that don't regularly upgrade their EDP equipment. Technology changes so fast that payment for equipment purchased years ago is far less than what is needed to secure new equipment. On the other hand, replacement cost coverage would not be as critical for a firm that regularly changes equipment as damaged property would likely be newer.


COPYRIGHT: Insurance Publishing Plus, Inc. 2013

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Inland And Ocean Marine Coverage


Ocean Marine is the oldest line of insurance. Merchants who traded goods over waterways developed the earliest concept of minimizing risk. Traders shipping goods along the Nile usually divided and loaded shipments onto more than one vessel. Using several barges meant that the loss of one shipment would not result in a total loss.

Ocean Marine coverage protects interested parties against the financial consequences of direct damage or loss of property as well as from their legal liability related to owning or operating a vessel. Ocean Marine policies protect craft of many types such as cruisers, barges, tankers and tugboats that are used on either "blue waters" (oceans) or "brown waters" (lakes, rivers). The policies are also used to insure cargo while shipped between their destination points.

Inland Marine is a varied and flexible line of business. While it shares elements that are found in Property, Automobile, Ocean Marine and Liability coverage, it also has features that are distinct from any of its peer lines of business. Inland Marine coverage protects a wide variety of property. It is used to protect portable commercial property such as construction equipment. It is also critically used to protect tunnels, bridges and other property that facilitates non-marine travel.

For help in identifying inland marine exposures, insurance professionals use a standard called the Nationwide Inland Marine Definition that was developed by the National Association of Insurance Commissioners. Last revised in 1976, it still acts as the major source of reference used by states to guide their approach in recognizing what classes of property are members of the Inland Marine Family.

While inland marine policy language is very similar to other types of insurance, ocean marine is not. Maritime law still heavily influences the latter and its policy wording reflects that unique heritage. If you need such protection, talk to your insurance professional who should be able to provide access to a specialty insurance carrier.


COPYRIGHT: Insurance Publishing Plus, Inc. 2014

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

 

Artisan Contractors


Artisan Contractors are smaller operations that work in a variety of settings. They may be involved on large construction projects under the direction of general contractors, operate in smaller residential projects, specialize in installations or work on renovation or remodeling projects.

Artisan contractors are involved in many types of specialties such as plumbing, electrical work, minor excavation, landscaping, heating, air conditioning, painting, roofing, dry-walling, carpentry, remediation services, asphalt/paving, etc. These operations need a full complement of insurance services, such as general liability, inland marine (to protect their tools/equipment), workers compensation, commercial auto, excess liability and commercial property.

There is no standard definition of an artisan contractor. They are typically defined according to an individual insurance company's underwriting rules. The factors typically considered are:

  • The number of employees
  • Contractor's role in projects (general vs. sub-contractor)
  • The amount of net income
  • Size and number of projects or work sites
  • Type of projects
  • Growth of the particular operation

Construction is a hazardous business under the best circumstances. Artisan exposures are tricky because their small size means less premium dollars, yet many of their loss exposures are the same as much larger construction operations. A new artisan contractor often means an inexperienced contractor and the inexperience usually results in a higher number of losses.

Artisan contractors need knowledgeable insurance professionals to help them identify their protection needs, especially in the areas of handling exposures to the contractor's tools and equipment. Complete information must also be developed concerning losses that may occur on their customer's premises and damage a contractor may cause to property that belong to third parties, but which is in the contractor's possession or control.


COPYRIGHT: Insurance Publishing Plus, Inc. 2016

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

 

Umbrella Vs. Excess Coverage


A business usually will buy liability coverage for two chief areas. One is to handle its routine, premises liability. The second is to handle liability that is related to the actions a business performs away from its premises or that may addresses its professional-level obligation it owes to others while providing products, goods and services to others. A business that uses vehicles, mobile equipment, watercraft and/or aircraft must consider liability protection for those exposures too.

Whatever form of liability policy or policies selected by a business; they are a primary layer of coverage. Depending upon the available limits, a business may want to purchase a higher level or secondary level of protection. This level is usually called umbrella coverage or excess coverage.

Umbrella coverage and excess coverage have similarities. However, there is an important distinction between these forms. Commercial umbrella and commercial excess coverage both provide an additional level of protection. Both policies can provide this level over a wide variety of primary or underlying forms. This coverage is triggered when the primary protection’s limits have been breached.

An umbrella, theoretically, supplements its excess coverage with a different coverage. It also provides coverage for miscellaneous and unidentified loss exposures. Since there isn’t source of primary protection for these exposures, a form of high deductible, called a self-insured retention, is applied to such losses. An excess policy does NOT provide broader coverage; it only supplements whatever coverage exists in the primary layer. Further, it is becoming increasingly common that such coverage is provided on a following form basis. These forms are written so that it tracks precisely with the coverage and exclusion provisions of the underlying policies.

So, if you seek additional coverage, be sure to pay attention to what is stated in the form. The term umbrella is used even when the form does not provide true umbrella coverage. Be sure to use an insurance professional to get the coverage you need!


COPYRIGHT: Insurance Publishing Plus, Inc. 2016

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Joint Ventures


A joint venture is an entity formed by two or more businesses in order to pursue a specific purpose for a specified period of time. While some states require joint ventures to be legally filed, other states recognize any entity that meets the definition. A partnership differs from a joint venture as the former lasts indefinitely and its purpose may change.

A joint venture (or JV) can consist of sole proprietors, corporations, partnerships or any combination of these entities. Such ventures often bring together two areas of expertise to be applied to a single objective. Therefore, JVs allow the participating entities to capitalize on that combined expertise for a specified time period. JVs may also consist of entities that are, typically, rivals in the same market that may join forces for a commercial activity that they are unable to pursue alone (typically due to size, resources or expertise).

Insurance policies generally do not cover a JV unless its name is shown on the policy. There is no automatic coverage for a business that begins a joint venture during a policy term. For instance, two contractors are interested in bidding on a major project. They decide that it may be beneficial to bid on the project as a single entity. In this case, the joint venture is recognized as a distinct legal entity formed for pursuing the project. Unfortunately, it’s equally common for businesses to fail to recognize that they have formed a JV. The oversight could result in the joint venture suffering a loss that isn’t covered by insurance.

Consider contacting an insurance agent to discuss your possible coverage needs which may include general liability, automobile liability and, if the joint venture has employees, workers compensation insurance. It is also important to determine if the joint venture will need insurance to continue after the JV ceases to exist. While JVs can be extremely beneficial to all participants, they also have the potential for legal and operating problems that are unforeseen. JVs often involve complex contracts and non-disclosure agreements. The coverage issues are unique to each joint venture and should be carefully addressed by legal counsel and the insurance agent in cooperation with the joint venture principals.


COPYRIGHT: Insurance Publishing Plus, Inc. 2014

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Office Functions and Alcohol


The office picnic, office-sponsored sports activities, holiday party, and client party may involve serving and consuming alcoholic beverages. Can a business be held responsible for injuries or damage that result from serving alcohol? Is the current insurance program sufficient to address this concern? Is it necessary to purchase special insurance? State alcohol laws (called Dram Shop Laws in most states) determine a business entity’s liability for injury or damage arising from serving alcohol. Laws vary, but most assign liability for serving persons who are minors or are visibly intoxicated.

The Commercial General Liability (CGL) policy provides coverage for Liquor Liability, EXCEPT for operations 'in the business of' selling, serving, or manufacturing alcoholic beverages. If the event offers alcohol for free, that entity is not 'in the business of' selling or serving. If persons have to pay, even if the charge is only to offset the alcohol’s expense, that creates a different legal situation.

When hosting an event that includes liquor, some businesses have decided that hiring a bartender will reduce their risk of being held liable. This step at least offers the benefit of another party being held primarily responsible and reducing the amount the business might be required to pay. The main issue is obtaining proof from the bartender to confirm that he or she carries an adequate level of Liquor Liability insurance. Proof should be obtained PRIOR to the event. Otherwise, it may be too late when you find out that there isn't a policy or that the limits are insufficient.

Society is less tolerant of drinking and driving. An impaired driver who causes an auto accident is much more likely to be sued. Besides the driver, a lawsuit will likely include a business that provided alcohol. Why, because such a business is considered as contributing to the loss and is called on to share (or fully bear) the cost of injury or damage. The Commercial General Liability policy could provide the necessary defense for the business.

Example: Business A and Business B are both insured by CGL policies and each company recently sponsored a Christmas party. After each party, a very inebriated employee leaves and, before reaching home, causes a collision. The injured drivers sue the businesses along with the drunken employees. Business A is an accounting office and its CGL handles the lawsuit. Business B is a tavern; its CGL denies the claim.

The solution is to discuss the types of events your business sponsors or hosts with your agent to determine if you need to purchase special coverage. This discussion may also help you take steps to reduce potential lawsuits. Some businesses may find it easiest and safest to ban drinking during business hours, including business lunches, dinners or other events. Your insurance agent and legal counsel can assist you in determining ways to protect your assets.


COPYRIGHT: Insurance Publishing Plus, Inc. 2014

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

 

Museum Collection Coverage – Part 1

Museums are in a unique position. Most of the protection they need involves property that regular insurance has difficulty in handling. Consider that the characteristics of most property is that they are standard, with common features that make them readily replaced and their value typically diminishes over time. Property that make up museum collections are the opposite. They tend to be rare, often impossible to replace and have values that significantly increase as time passes. Museums also contain valuable property that is borrowed from other parties (primarily museums and private owners or estates) and all such property is on display to the viewing public.

The coverage provided protects against direct physical loss or damage a covered peril (source or loss) causes to the applicable museum’s collection property. What type of property is protected? Eligible property includes fine arts or rare objects that have artistic, historic, cultural, and scientific significance. Categories that fall within eligible property include the following:

  • Property the museum owns
  • The museum’s interest in jointly owned property
  • The museum’s interest in property that has been promised to the museum as a gift
  • Property of others on loan to the museum
  • Property under the museum’s care, custody, or control while being considered as a gift or a purchase

Museum collection coverage may be offered on two bases, blanket or scheduled protection. Blanket refers to an overall insurance limit that would be generally applied and available to all or a portion of the eligible property on the specific museum location. Scheduled coverage refers to individual insurance limits that apply to specifically described items, again which consists of eligible property on a given, described museum’s location.

Museums that are typically eligible for coverage under a museum collection policy are those museums (either for profit or not-for-profit) that collect fine arts and historic, rare, or scientific items that have artistic or cultural merit. Ineligible institutions include primarily scientific, non-collecting museums and art galleries that exhibit pieces for sale.

Please see part two of this discussion for additional information.


COPYRIGHT: Insurance Publishing Plus, Inc., 2018

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

 

Museum Collection Coverage – Part 2

Museum Collection coverage, besides responding to direct losses that occur to certain types of property that a given museum owns or has financial interest in, also offers a set of other coverages that are considered supplemental or extensions.

Coverage Extensions

Museum Collection coverage typically includes extensions. In other words, the base policy’s coverage is stretched or extended to the following situations:

Additional Debris Removal Expenses – A modest amount (such as $5,000) is made available to handle costs associated with removing debris from a museum that suffers an eligible loss, such as hauling away property damaged during a fire.

Defense Costs – This portion handles the cost of providing the covered museum with protection against lawsuits related to losses to covered property. Usually, protection granted under this area reduces the amount available to pay losses.

Supplemental Coverages

Each of these items provide additional limits of coverage. The actual amounts are usually specified somewhere with a given policy.

  • Bailee Legal Liability – being held liable for damage to property of others that is in the covered museum’s possession
  • Items used to Display, Pack, or Ship Covered Property – covers loss to items such as stands, frames, easels, packing material, crates, and similar items
  • Reference Library  - protects property such as photos, catalogs, books, letters, reference articles, and other documentation
  • Transit Coverage  - protects against loss to eligible property while it is being transported to another location
  • Unnamed Location Coverage - provides coverage for eligible property while it is temporarily located somewhere besides the given, insured museum.

Museum Collection Policies do not cover several categories of property when it is considered illegal property (contraband) or when there is a loss of value due to market value changes; nor does coverage apply to property in which proper ownership cannot be solidly established. The latter limitation recognizes the fact that fine arts and similar property are often stolen from rightful owners.

Museums involve institutions with very high concentrations of vulnerable, valuable property that must be protected with the help of qualified insurance professionals.


COPYRIGHT: Insurance Publishing Plus, Inc., 2018

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.