Before outlining the structure of a policy it is necessary
to stress the importance of ensuring that the correct limits of indemnity form
the basis of your insurance cover. It is tempting for businesses seeking to
reduce their costs to deliberately underinsure their businesses. This can
potentially prove catastrophic in the event of a loss, as an insurer will
almost certainly invoke the principle of "Average" when underinsurance
is discovered.
The Principle of
Average: In the event of underinsurance any claim settlement will be based on
the ratio of the sum insured to actual value. For example, where a business has
insured stock worth £100,000 for only £50,000, the business has underinsured by
50%. In the event of a loss of £25,000, the insurer will apply average and only
pay a settlement of £12,500.
The example above underlines the importance for businesses
to establish the correct basis of cover with their provider and then negotiate
a competitive premium. An independent specialist broker with access to a number
of alternative markets will help you obtain the right solution at the best
available premium.
Marine Trades Combined Insurance policies generally follow
the same model, with the odd exception as to where a particular item may
appear. For example, some policies will include pontoons in the Material Damage
Section whilst others may bracket them in the Marine Section. Outlined belo is
a typical policy structure:
Material Damage:
This Section will cover all property other than vessels at your business
premises. It is split into various sub-sections that vary from provider to
provider, but the splitting of property into these sub-sections enables you to
benefit from lower premium rates on the lower risk items to be covered.
Typically, a Material Damage Section will be divided as follows:
Buildings (with or
without subsidence cover)
Marine Installations
(pontoons, slipways, wet/dry docks etc)
Computers and
Associated Equipment (at the business' premises)
Machinery and
Equipment (at the business' premises)
General Stock (at
the business' premises)
Valuable &
Attractive Stock (at the business' premises)
All Other Contents
(at the business' premises)
Glass: Some
insurers will include Glass within the cover for Buildings. However, most
Marine Trade insurers will not cover Glass unless specifically requested and
will also levy an additional premium. Cover will be provided for external and
internal glass with additional extensions available for items such as glass
signage and sanitary ware.
Tools &
Machinery
Laptop Computers,
Mobile 'Phones etc
Trailers (thease
can also be covered under the Marine Section)
Frozen Food:
Covers loss or damage to fuel resulting from change in temperature in fridges
or freezers resulting from breakdown or interruption to power supply.
Goods in Transit:
Protects against loss of goods whilst in transit or whilst temporarily stored
in the course of transit. Business owners need to beware of the variation in
scope of cover from policy to policy and of the plethora of exclusions that
each insurer applies to cover.
The premium for
Goods in Transit insurance is based on a combination of the total sum insured
per vehicle, the number of vehicles used and the estimated total annual
carryings of the business.
This Section can
also be extended to insure postal sendings and carriage by third parties.
Goods in Transit
cover for vessels is excluded on many policies unless specifically mentioned.
However, it is possible to include insurance for vessels whilst in transit by
endorsing the Marine Section of the policy. Organising a policy in this way can
save a business money if vessels are the only items to be insured whilst in
transit.
Exhibitions:
Covers exhibits, stands and other materials at exhibitions.
Whilst insurers
include this Section within their policies, a business could reduce costs by
having the Marine Section of their policy endorsed to cover vessels at
exhibitions rather than pay their insurers an additional premium for the same
benefit.
Business
Interruption: Covers the loss of Gross Profit and/or the Additional Cost of
Working in the event of the trading activities of a business being interrupted
by an insured peril, such as fire or flood. Extensions can be purchased to
cover losses arising from perils such as:
Breach of Canal
Damage in the
vicinity of Premises or to Contract or Exhibition Sites
Denial of Access
to the vicinity of Premises
Damage to Moulds,
Patterns, Jigs, Dies, Tools, Plans, Designs, etc
Loss or Damage to
Property stored in locations other than own premises
Loss or Damage to
Property in Transit
Damage to Premises
of Suppliers or Customers
Loss of Utilities
Disease & Illness
Just as it is
essential to insure property on the correct basis to avoid insurers applying
"Average" in the event of a claim, it is vital to ensure the correct
level of Gross Profit is used to determine Business Interruption cover.
Obtain the income
statement for the last full operating month and locate the net profit amount.
Employers
Liability Tracing Office
Review each
individual expense line item on the income statement to identify costs of
operation that are not directly related to production, also referred to as
"standing charges." For example, office rent is due whether the
business is in operation or not, and the price does not fluctuate based on
production, whereas some worker salaries (such as casual, seasonal labour)
would cease when trading is interrupted.
Warranties: A
policy warranty is an instruction by the insurer that must be carried out by
the insured. For example, the business may be warranted to work on vessels
worth no more than £500,000. In such a case, if the business worked on a more
valuable vessel then it would be in breach of warranty.
The breach of a
warranty by a business would enable an insurer to void the whole policy. In the
above example, if the business owner suffered a theft of outboard engines, the
insurer could void the policy on the grounds that the business had breached a
warranty - even though that warranty was totally unrelated to the theft.
As you can see,
warranties can potentially have a huge impact on your business. You should
ensure your insurance provider goes through each warranty with you and explains
what it means. Insurers can impose a warranty for just about anything - some
common examples are below (the list is by no means comprehensive):
Compliance with
Flammable Liquids & LPG Regulations.
No paint or GRP
Spraying.
Automatic fire
alarms to be tested weekly.
Fire extinguishers
to be professionally inspected annually.
Fireproof doors to
remain closed during working hours.
All stock to be
kept at least 15cm off floor
Waste & dirty
cloths to be kept in metal bins.
Waste bins to be
kept outside premises out of working hours.
Intruder alarm to
be set whenever premises is unoccupied.
Electrical
circuits to be inspected within 30 days of policy inception.
Cash registers to
be left empty & open when premises closed.
Vehicles to be
fitted with immobilisers and alarms.
Premises to be
inspected daily.
No artificial
heating to be used on premises.
Machinery only to
be running when premises is occupied.
No flammable
liquids to be kept on premises.
Moorings to be
lifted & inspected at least annually.
Terms of trade to
incorporate BMF Terms of Business.
No work carried
out on commercial vessels
Trailers to be
secured with a wheelclamp whilst unattended.
Vessel not be let
out for hire or reward.
Vessel will not
tow or be towed
British Marine
Federation (BMF) Terms of Business
Most Marine Trade
policies warrant that you operate under BMF Terms of Business. You do not have
to be a member of the BMF to use their terms. The essential point from an
insurance aspect is that you ensure all your customers insure their own boats.
This is a crucial factor that defines the mechanics of how your Public
Liability insurance works and how it differs from non-Marine commercial
insurance policies.
If you have a
customer's boat, outboard etc in your custody or control and it is lost or
damaged due to your negligence, your legal liabilities in respect of the
property are covered under the Public Liability Section of your Marine Trade
policy.
This cover would
not be provided on a non-Marine policy as legal liability in respect of goods
in custody or control is specifically excluded. To insure these items you would
have to procure specific insurance which, as leisurecraft and associated
equipment are very expensive, would be financially prohibitive for a business
to purchase.
Other Insurances for your Marine Trades Insurance Programme
Directors & Officers Liability Insurance (Management
Protection)
Modern legislation now means company directors can now be
sued as individuals in respect of their decisions and actions as directors or
managers of businesses. The duties of company directors are established in law
and include the following areas of responsibility:
Duty of Care:
Directors are required to act with 'the care an ordinary man would take in the
same circumstances on his own behalf' and with the skill expected from someone
with his 'particular knowledge and experience'. Where duties are delegated the
Director is responsible for ensuring that the person to whom the duties are
delegated is sufficiently experienced, reliable and honest.
Fiduciary Duty:
Directors must act honestly, in good faith and in the best interest of the
company and must ensure they do not have any conflict of interest.
Statutory Duty:
Company directors are legally bound by legislation such as the Companies Act
1985, Insolvency Act 1986, Financial Services Act 1986, Environmental
Protection Act 1990, Health and Safety at Work Act 1974.
How Can Claims Arise?
Whilst public bodies such as the Health & Safety
Executive can prosecute directors if they are perceived to have failed to
comply with their statutory duties, claims could also arise from numerous third
parties such as employees, creditors, customers or suppliers.
With the number of employees injured at work increasing by
over 100,000 in 2010 and lawyers able to act on a "No-Win, No-Fee"
basis, directors appear to be more exposed than ever.
What Are The Financial Implications of a Claim? Directors
will be personally liable for meeting the cost of legal expenses as well as any
damages awards, fines or penalties. This means assets such as their cars,
houses, stocks and money could be lost. Companies are prohibited from indemnifying
their directors in the event of their insolvency.
How Can Directors & Officers Liability Insurance Help?
Whilst a D&O policy will not cover any fines against
directors it will cover the cost of defending a prosecution until the point
when guilt is established. This could potentially save tens, if not hundreds,
of thousands of pounds of an individual's assets in legal expenses. A D&O
policy can also cover awards for damages and legal expenses made against
directors in civil cases.
Professional Indemnity Insurance
If you give advice, conduct surveys or inspections for a
fee, your legal liabilities in respect of these activities are excluded on your
Marine Trade policy. A stand-alone Professional Indemnity policy will fill the
gap in your insurance cover.
Tractor & "Special Types" Insurance
Tractors and other special type vehicles which are
road-registered are excluded from standard public liability policies, as are
many unregistered vehicles, if travelling on, or crossing, public highways.
This may also apply to areas where the public have access such as ports,
harbours and boatyards. Types of vehicles that fit into this class are:
Tractors, Cranes, Fork Lifts, Cherrypickers, Boat Lifts and other
self-propelled mobile plant.
Third Party insurance is compulsory and a failure to have
this basic cover is considered one of the most serious offences. A substantial
fine and disqualification are amongst the recommended penalties.
Driving uninsured (or allowing your employees to do so) is
an absolute offence which means there is no discretionary defence available, ie
the vehicle is either insured or it is not. If, for any reason it is not
insured, the offence is committed.
Without insurance your business and your personal assets are
at risk from potentially huge compensation claims being made against you
Comprehensive Road Risks insurance in for tractors and
"Special Types" is available at very competitive rates from your
specialist broker.
Summary
Modern businesses need modern insurance programmes. Cutting
cover to cut costs is not the solution. Your 9-point step to getting the right
cover for your business at the best available premium is:
1. Choose an independent specialist broker.
2. Ask them what they can offer you in terms of support in
the event of a claim.
3. Ask them to visit you to look over your business.
4. Ensure you fully disclose all relevant information about
your business
5. Accurately assess the value of your premises &
property and the levels of your turnover, payroll and gross profit.
6. Request 3 quotations.
7. Ensure you have all conditions, exclusions, warranties
explained to you verbally - a written summary is not sufficient.
8. If you think some of the exclusions or warranties are
unreasonable then ask your broker to negotiate their removal.
9. Finally, negotiate the best premium you can get from your
appointed broker.
Article Source: http://EzineArticles.com/9012296
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