Commercial Insurance - Commercial Property
Boiler & Machinery Insurance: A Business Bust
What equipment does your business have that can cause major problems? This serious question is often forgotten when the subject of insurance comes up. Boiler & Machinery Insurance is invoked when problems arise out of mechanical, pressure, refrigeration, electrical and turbine devices. The newer forms of Boiler & Machinery Insurance cover direct damage to property caused by a covered cause of loss. These have four extensions of coverage:
- Automatic coverage for a newly acquired location.
- Supplementary payments (covering costs if you are sued).
- Expediting expense (to get you back in business quickly).
- Defense (against claims of others).
Boiler & Machinery Insurance additionally covers some liability to others and their property for damage inflicted by your equipment. For example, it will cover the damage when the florist's cooler breaks down and all the wedding flowers are damaged beyond use. There is also Boiler & Machinery Business Interruption Insurance to cover lost business when a machinery problem has resulted in a business ceasing operation for repairs.
Boiler & Machinery services require an annual inspection from the insurance company. These inspections are performed by licensed insurance company personnel for insurance purposes, but they satisfy legal inspection requirements too. Moreover, the inspectors can 'tag' objects to prevent governmental penalties and recommend loss-control measures that can improve an operation's efficiency and give equipment longer life.
In Boiler & Machinery terminology, 'objects' include pressure vessels, refrigeration equipment and electrical, turbine, heating, air-conditioning and production machinery. Think about it; businesses are surrounded by objects that may explode, break and catch fire. For example, one office building suffered a flow switch failure in a 125-hp refrigeration system, damaging chiller tubes and resulting in a loss totaling $34,525. A church's cast iron boiler cracked, causing $34,969 of damage to the church organ, choir robes and public address system. Add to this the interruption of a business' activities, and the loss can become increasingly expensive. The Commercial Property Policy (CPP) commonly written on buildings overlaps with a Boiler & Machinery Policy only in minor ways. Our agency can show you the importance of carrying both coverages.
Retail Theft
No store is immune from retail theft. Studies show that the average retailer loses 1% to 3% of gross revenue to shoplifters. Though these crimes cannot be entirely stopped, they can certainly be slowed by simple and inexpensive methods. One good preventive measure is to establish closed-circuit televisions. A simpler, less obtrusive (and less expensive) deterrent is to train store personnel to recognize and deal with shoplifters. Professional shoplifters have ways of distracting untrained employees, which can be guarded against. Shoplifters like to be left alone, so staff should offer assistance as much as they can without irritating honest customers. Also, consider lowering shelves and widening aisles, since shoplifters thrive in crowded stores with plenty of hiding space.
Clearing Up Coinsurance
Coinsurance mystifies most people. But it shouldn't - it simply requires Insureds who don't fully insure their property to share in the losses. If you don't like mysteries, there is an optional coverage called Agreed Value. With this option, the Insured and the Insurance Company agree on an amount of insurance, and presto! the coinsurance clause is suspended.
Dependent Properties: A Case Study
After years in the corporate world, Sylvia quit and opened her own business, a boutique sandwich shop. She chose to locate her shop in a classy-looking strip mall that drew in an upscale clientele. Sylvia knew she would suffer a loss of business if the neighboring businesses burnt down or had to be closed for a time, so she looked into Dependent Property Business Interruption Insurance.
If other mall properties suffered direct physical damage from a covered cause of loss, and Sylvia had to suspend operations during the period of restorations, Dependent Properties coverage would pay for the actual loss of business income. She can also consider purchasing Dependent Properties coverage with Extra Expense from Dependent Properties. This pays the necessary extra expense she would suffer because of a dependent property's loss. This policy covers necessary expenses during the dependent property's restoration, plus the expenses of continuing operations or minimizing their suspension. For example, Sylvia might rent a vacation lot across the street for parking until the mall's parking lot is completely open again, or she might rent a temporary location nearby. Expenses add up fast in such situations. Financially, Business Interruption Insurance is often more important to a business than Direct Damage Property Insurance, since the loss of income can easily exceed the cost of replacing damaged property.
What are Other Dependent Properties?
- Contributing Location: a business that you rely on to deliver materials or provide services to you (or to others on your account).
- Recipient Location: a business that accepts your products or services.
- Manufacturing Location: a business that makes products for delivery to your customers under a contract of sale.
- Leader Location: a business that attracts customers to your location.
Highly Protected Risk - A Way to Save Money
Do you manage superior properties and employ superior methods of loss protection? You may be able to reduce your premium costs by obtaining classification as a Highly Protected Rick (HPR). To achieve HPR status, a property must meet certain general criteria related to loss control (loss prevention and reduction). The time to develop HPR protection is while planning for a new or renovated location. Loss control is easier to build in sooner than add on later.
Here are some general criteria for HPR status:
- Fire-resistant construction.
- Protection against natural catastrophic losses, particularly those common to the location.
- Adequate water supply and sprinklers where feasibly (Consider mist sprinklers as well as standard sprinklers).
- Top-line maintenance of buildings and equipment, including good housekeeping by employees.
- Proper procedures for collecting and disposing of waste material.
- Personnel trained for regular inspections and emergency response.
Even if a business fails to win HPR status, it will still find loss control a valuable management tool.
Exclusion Explained
Since the birth of insurance, property policies have excluded 'unexplained loss, mysterious disappearance or loss or shortage disclosed on taking inventory'. This gap was accepted because if such protection existed, no one could determine whether a loss was insurable or if intentional dishonesty had occurred inside (or outside) the business. With modern electronic devices, such as electronically tagged goods, businesses have gone far to protect against shortages due to outside criminal activity. Has your business thought of reviewing your Property Insurance with us? We have ideas and answers to business problems.
Fighting Fire with...water?
The era of using Halon for extinguishing computer fires is over. Detrimental to the ozone, it has been phased out of existence by industrial countries. Halon's cost will rise and supplies will dwindle until it's extinguished once and for all. Among Halon's potential successors, the foremost may be water mist suppression systems, which battle fire with a fog of water (droplets a fraction of the size of normal sprinkler system drops). Water mist extinguishes fires by cooling the flames and displacing oxygen as the mist turns to steam. The mist also absorbs and scatters radiant heat generated by the fire, preventing the 'flashover' that can occur when materials in a room absorb so much heat that they burst into flames. Electrical equipment suffers only limited damage, and the thermal shock a carbon dioxide extinguisher would create by too-fast cooling is reduced or eliminated.
