Don’t Overlook Structures on Property Schedules
Insurance programs with omitted buildings or structures are far too common. Few firms have insurance providing coverage for unlisted buildings or structures. As insurance providers change over time, divisions are bought and sold, or renewal terms become more restrictive, the importance of accurate property schedules is more apparent. Some property programs provide limited coverage for an omitted building or structure, but the problem word is “limited.” The large majority of property programs offer no coverage for an existing building or structure not specifically identified on the statement of values and/or property schedule. Accounts with property in the hundreds of millions or billions of dollars in value often have staggering omissions. Nonbuilding industrial structures, off-site piping arrays, major underground pumping facilities, water towers, owned transformers or power distribution equipment, bridges, communications towers, and individual buildings at multiple building sites are common omissions. Public entity property schedules are plagued with omitted property. Communities with property values in the tens or hundreds of millions of dollars in value regularly have 20 percent to 50 percent of their buildings and/or structures omitted from their schedules. One small city omitted about 40 percent of its total values. An industrial facility omitted the large owned bridge providing its only access. A large regional high school was omitted on a public entity schedule for 20 years. Both insurance programs provided $1 million of coverage for an omitted building or structure. In both instances the extension was nominal when compared to the exposure. What procedures help reduce this problem?
- Change statement of value sequence to a geographic listing with all buildings and structures in a particular location listed as a group.
- List buildings and structures using a north-to-south and east-to-west sequence. This helps create a mental picture for people familiar with the location.
- Ask personnel intimately familiar with each location to review the schedules and tell you what has been omitted. Make sure they understand nonbuilding structures and underground equipment need to be included.
By: James R. Mahurin, CPCU, ARM Insurance Audit Franklin, Tennessee