CHAPTER 8

Introduction:

  • Basic forms may not fully address some exposures.

Leasehold Interest Insurance:

  • When a business is offered premises on very good terms.
  • TD Center, Scotia Plaza, etc.
  • A direct loss could be costly to the insured who may be forced to move.
  • These increases in expenses are difficult for a corporation to anticipate.
  • Business may protect this interest with leasehold interest insurance.
  • The exposure falls as each year passes.
  • Two main features of this coverage are its provisions regarding the insurer’s liability and the amount of insurance.
  • Insuring agreement states that in the event of cancellation of the lease by the lessor after loss by a peril, the insurer shall be liable to the insured for the actual loss sustained not exceeding the amount of insurance that remains in force at the date of the peril (fire).
  • The interest of the insured as lessee as determined by adjustment shall be paid for the first three months succeeding the fire, and the net leasehold interest shall be paid for the remaining months of the unexpired lease.
  • The interest of the insured is the difference between the rent the insured would pay under its lease over the remaining term of the lease and the rental value of the lease.
  • It obligates the insurer to pay this interest for the first three months following the loss.
  • The balance of the loss, for the time remaining of the lease beyond the first three months after the loss, is the net leasehold interest. This is the sum invested for the remainder of the unexpired lease at a specified rate of interest compounded annually, will be equal at the end of that time to the interest of the insured as lessee over that time.
  • Insurer can pay a discounted lump sum after the first three months.
  • Amount of insurance falls each month.
  • Leasehold interest insurance cannot be cancelled except under circumstances described in the policy conditions. These conditions vary among insurers.

Contingent Business Income Extension Endorsement (IBC Form 4116):

  • Insured’s business may be interrupted by loss at other premises.
  • But many businesses might be interrupted by direct-damage loss to property at premises other than those of the insured.
  • Loss to a supplier could affect a manufacturer.
  • A leader property could be a small store in a shopping mall.
  • Loss to a customer could affect a manufacturer.
  • The second exposure to the insured is contingent on the exposure at the premises, such other premises is stated on the Contingent Premises on the Declarations page of a policy.
  • The endorsement requires that the insured identify each contingent premises by its address and type (that is, its relationship to the insured).
  • Coverage can extend to many other types of contingent premises as well as foreign premises.

Contingent Liability From Enforcement of Building By-Laws: Additional Time Required for Rebuilding Endorsement (IBC Form 4117):

  • By-laws exposure normally excluded. This endorsements adds by-laws coverage.
  • Covers:
  • Demolition of any undamaged part of the insured building or structures,
  • Increases the time required for repairing or replacing any part of the insured building oro structures.
  • Excludes:
  • Loss arising because a by-law prohibits the insured from rebuilding on the same or an adjacent site, or prohibits the former occupancy in a rebuilt building or structure,
  • Loss greater than the amount of insurance under the policy to which the endorsement is attached,
  • Any greater share of loss to an item of property than the amount of insurance on that item under the policy bears to the total amount of insurance under all policies that may cover the time, whether the other policies have this endorsement or not.

Additional Increase in Cost of Operations Endorsement:

  • Extra expense insurance may not be enough.
  • Some insureds need conventional business interruption coverage.
  • This endorsement eliminates the economic limit test.
  • This endorsement can be attached to either the standard or extended business income policy.

Tuition Fees Insurance:

  • An insured peril may force refund of fees for the year, or may inhibit students from enrolling the following year.
  • Many schools depend on tuition fees.
  • 2 unique characteristics:
  • Salaries are a fixed expense for the school year
  • Students may be forced to enroll elsewhere
  • Indemnity period extends beyond completion of repairs.
  • This anticipates possible losses of tuition fees.
  • Coverage is limited to the amount of insurance.
  • The school may also want extra expense coverage.

Off-Premises Power:

  • Power-failure shutdown could cost an interruption to the business.
  • Extends coverage for loss of earnings resulting from the interruption of electricity for power, lighting, heating, gas and water supplies.
  • Also extends coverage feor any interruption caused by damage to or destruction of the gas or water supply facilities.

Auditors’ Fees:

  • Older forms do not cover auditors’ fees.
  • This extends coverage under these forms to include any reasonable fees incurred by the insured for the services of auditors to produce and certify the financial details of the insured’s business for settlement of a claim under the business interruption policy.

Start-up Delay:

  • A business committed to opening on a specified day may be prevented from doing so by an insured peril.
  • It covers expenses it would begin to incur on the intended start-up day and continue to incur even if that start-up were delayed by an insured peril.

Inland Marine Property in Transit:

  • Damage to or destruction of material or equipment in transit to the insured’s premises.