Insurance

Facilities Check List
Practical, step-by-step guides for the busy FM
June 1998

Insurance

The Insurance Puzzle — DoesYour Company Have All the Pieces?

Developing a good insurance planis similar to assembling a puzzle with many individual pieces. As with apuzzle, your goal should be to assemble the pieces, filling in any openspaces — the gaps in coverage.

Have you checked your propertyinsurance lately? If not, you probably should. When reviewing yourinsurance, remember that protecting property is only part of the challenge.You must also consider the insurance coverage of the people who work in andvisit your buildings, as well as of your business operations.

Here isa brief summary of the major types of insurance covered in detail inRisk Management and Insurance, an elective course in BOMIInstitute’s Real Property Administrator (RPA®) designation program.

For Property and net income losses:

• Buildinginsurance: Direct physical losses to buildings and buildingitems, which include permanent fixtures, major appliances, and personalproperty linked to a specific building (such as drapes and keys) arecovered; land, foundations below grade, and paving are not. Personalproperty, such as furniture, office and computer equipment, are usuallycovered under other policies.
• Loss-of-income insurance: Forprotection from loss of income a business suffers as a result of physicaldamage to insured property. This would cover lost rent and/or lost netincome (net profit before income taxes).
• Extra expense insurance:Covers costs incurred to relocate to temporary quar ters after physicaldamage to property, including extra rent, emergency shipping of equipment,extra phone lines, and overtime pay to regular employees for extra hoursworked.
• Ordinance and law coverage: Covers the cost ofreconstruction with more ex pensive materials than were required when thebuilding was originally built, due to enactment of tougher building codesand regulations such as ADA.
• Builder’s risk insurance: Coversdamage to a building under construction, for materials bought by thebuilder but for which your company does not yet hold title.
• Valuablepapers insurance: Covers copying and reproducing such papers if lost;not covered under standard property policies.
• Accounts receivableinsurance: Covers losses if insurers are unable to collect payments dueas well as the cost of reconstructing the records.
• Glass insurance:Provides broader coverage for damage to glass than the stan dardproperty form covers.
• Sign insurance: Covers damage to outdoorsigns; especially useful for mall own ers.
• Computer insurance:Provides coverage for mishaps such as power surges and mechanicalbreakdowns (not covered under the standard property form).
• Leaseholdinsurance: For both landlords and tenants, covers the difference between lease rates and current market rates if either party would have topay (or lose) more to rent space after a severe loss such as a fire orexplosion.
• Flood/earthquake insurance: It’s important toremember that natural flooding, mudslides, and earthquake damage are notcovered under standard property policies.
• Equipmentfloaters: Protect against loss or damage to large construction equipment, such as cranes and forklifts, when moved from job to job. (This doesnot include trailers, which are covered under autoliability.)
• Boiler and machinery insurance: Remember, standardproperty forms do not cover damage to or caused by boilers, primaryelectrical or mechanical equipment.

Liability losses

• Commercialgeneral liability (CGL) coverage: Protects a firm from claims ofnegligence arising out of bodily injury to non-employees, damage toproperty owned by others, personal injury (e.g., false arrest, libel,slander, wrongful entry or eviction, invasion of privacy), advertisinginjury (e.g. false or misleading advertising allegations).
• Productsand completed operations coverage: Protects against negligence claimsarising out of a product the insured has sold, handled or distributed, aswell as operations such as repairs, cleaning, wiring, servicing orinstallations.
• Independent contractor liability coverage:Protects companies from claims aris ing out of actions taken byindependent contractors they retain.
• Contractual liability coverage:Covers liability arising out of obligations to con tracts, such asleases and elevator maintenance contracts, but only as long as contractsare in force. (Liabilities arising out of breach of contract are notcovered.)
• Premises medical payments coverage: Pays a goodwillamount to persons in jured in an accident on the insured’s property;intended to minimize the potential for legal action by the injuredparty.
• Fire legal liability coverage: Covers fire damage toproperty you rent, own or occupy. (General liability covers damage toproperty of others.)
• Employee benefit liability coverage: Coversclaims arising out of incorrect inter pretation of employee benefits,investment plans, and mishandling of employee files and confidentialinformation.
• Employment practices liability coverage: Coversclaims of discrimination, ha rassment and wrongfultermination.
• Umbrella liability coverage: Provides extracoverage for amounts not covered in CGL, auto liability, and the employer’sliability section of workers’ compensation.
• Professional liabilitycoverage: Protects the insured against claims of professionalincompetence, miscalculation or dereliction of duty in a fiduciaryrelationship by its employees.
• Pollution liability coverage: CGLpolicies include an absolute pollution exclu sion. Pollution liabilitycoverage is available as first-party (meaning for pollution dam age,loss and cleanup of your own property) or third-party (same fordamage to prop erty of others). Types of insurance include asbestosabatement, lead abatement, asbestos-in-place, environmental remediationproject coverages. Note that specific coverage for indoor air qualityproblems is not yet commonly available.
• Automobile liability:For autos and trucks and trailers (but not for farm and con structionequipment) owned or rented by your company, and perhaps for employees’ carsused to conduct your company’s business.
• Non-owned and hired autoliability: For claims arising from the autos leased, hired and rentedfrom anyone other than corporate officers, their spouses oremployees.
• Auto medical payments coverage: Pays medical expensesof persons injured while occupying, entering, or leaving an automobileoccupied in an accident.
• Uninsured motorist coverage: Coverslosses caused by uninsured drivers and hit- and-run drivers.
• Autophysical damage insurance: Comprehensive coverage coversphysical damage from causes other than collisions or overturning;collision coverage covers damage from these causes. Note that theftof stereos, tape decks, CB radios and tire damage are excluded, as aretowing and rental reimbursement.
• Workers compensation coverage:Part II, employer’s liability, covers claims against an employer onbehalf of those seeking damages because of job-related activities involvingbodily injury or disease to employees.

Personnellosses

• Workers compensation insurance: Part I coversbenefits paid to employees aris ing out of job-related accidents andillnesses, i.e. medical costs and loss of earnings.
• Group healthplans: HMOs, comprehensive major medical plans, dental and vi sionplans
• Group life insurance plans
• Group disabilityinsurance plans: For short- and long-term disabilities that pre ventemployees from performing job duties

Think that coverseverything? There’s always more. You must also consider your tenants’ andcontractors’ insurance, because if their policies are inadequate ornon-existent, disgruntled claimants could come after yourinsurance.

Other considerations include deductibles, exclusions,co-insurance, re-insurance, actual cash value, replacement cost,depreciable basis. Check it all out in Risk Management andInsurance. Both you and your company will be better off.

This article is based on BOMI Institute’s Risk Management andInsurance course, an elective in BOMI Institute’s RealProperty Management (RPA®) program. More and more facility managersare earning both the Institute’s Facilities Management Administrator(FMA®) and RPA® designations to prepare for the increasingchallenges of their profession.