This document provides an overview of Quick Buys Inc., a convenience store chain located in rural Southwest Georgia. It describes the company's operations, locations, building structures, premises, customers, employees, existing insurance policies, and loss exposures. The insurance recommendations section suggests maintaining general liability, commercial auto, umbrella, and property insurance coverage. Detailed information is given about the company's general liability policy limits and exclusions.
Property and Casualty Insurance analysis course project
1. Quick Buys Inc.
Case Study Project
Prof. Atkinson, RMIN 5100, Fall 2016
Dylan Patel
Austin Cain
Dhruv Patel
Sanghoon Lee
Jimmy Portigue
Joseph Kim
Table of Contents
Description of Organization....................................................................
Operations........................................................................................
Location............................................................................................
Building.............................................................................................
3. they operate their core business.There is also a headquartered office
that deals with (invoicing, bad checks, managerial, hiring, new
business opportunities,accounting, bills, financials). The core
business of Quick Buys is as a convenience store that sells gasoline,
diesel,food,drink, and other supplies that one might need when
traveling or when someone is under a lot of time pressure.These
supplies include toilet paper, some cleaning supplies,and motor oil.
25% of their revenue and over than 40% of their profits comes from
beer and cigarettes sales. Quick Buys Inc also offers some minor
banking services such as cashing checks and creating money orders
in store for flat rate fees.The collections on bad checks is another
profitable area for Quick Buys Inc. Another function is that some of
the stores owned and operated by Quick Buys Inc also offerdeli,
pizza, or southern food that is cooked on location. This is mainly for
the more rural stores which serve as not only as a convenience
stores, but the only restaurant for a few miles radius. Every location
also has a cappuccino machine and coffeemachines offering a small
variety of carbonated beverages.Every location also includes a
hotdog and nachos station. Overall, Quick Buys offers avery broad
range of services,from being a corner store, a pit stop, a restaurant,
coffee shop,and even offering some banking services for rural
communities without full service banks.
Location
2. Operations are centered in southwest Georgia,in the City of Cairo.
The location the premises being examined in our projectis 2815 US
Highway 84 E Cairo, GA 39828.Some traffic is from travelers on Highway
84, but most of it is residents of Grady County. It is on the edge of the Cairo
leading to Thomasville which is an area with a lot of farming. This location
was chosen because it is the highest grossing in the company despite not
having any restaurant offerings that some stores have. The location is 1.8
miles away from the nearest Fire Station in the city of Cairo. The drive
takes 3 minutes according to Google Maps, but in the event of an
emergencyit could possiblybe even quicker because of the sirens on fire
trucks forcing traffic out of the way. It is also located within city limits, but
also half a mile away from the County Sheriff’s office,so it oftenis on the
patrol route of City and County police. This greatly reduces the liability of
theft.
Building
3. All of Quick Buys Inc store locations are Joisted Masonry
Construction with glass windows on one side. Some locations under the
4. ownership of Quick Buys Inc. have metal bars in front of these windows,
but the location under examination does not include this feature. The metal
bars are for locations at which theft occurred frequently and the mode of
entry was breaking open the window and climbing in. The building itself is
pretty resistant to fire, but the gas pumps and tank are not as they contain
extremely flammable liquids. The canopy and sign are made of metal and
therefore pretty resistant to fire. The gas pumps are designed so that fire
can not go down the pump into the tank. The only point where fire is a huge
hazard is if gasoline or dieselis spilled.In the event of a spill, there are set
procedures implemented to prevent fires.
Premises
4. The premises includes a main store building as well as 8 individual
gas pumps and a canopy for the gas pumps. Inside the store there is a
large walk in refrigerator and three isle of inventory and a storeroom for
extra supplies.There is a counter on one side of the store with coffee,
cappuccino,nachos, and hotdogs.The location also has two fire hydrants
within proximity. One directly in front of the store, and another adjacent to it
on the left. Both fire hydrants are close to roads, but also close to the main
building of the store for easy access to fire trucks. The premises is 2045
square feet. The parking lot and gas pumps have space for 22 vehicles.
Behind the store is an apartment complexand residential area. Directly in
front of the store is a hotel, and beyond that is the industrial park in Cairo.
Hwy 84E leads to Thomasville and the rural area between is heavy with
Cotton crop. Hwy 84W leads to the City where many places of employment
near by.
Property
5. Quick Buys has a large variety of equipment they need to cover in order to
mitigate their risks. They have drink machines as well as hotdog, nacho, coffee, and
cappuccino machines. Some locations have pizza ovens with conveyer belts going
through, others have deep fryers and sandwich lines. Stores with deep fryers have
barrels to store used oil which gets picked up by a biofuel company at a regular interval.
Every store has a very large refrigerator that includes drinks, beer, milk, and a small
variety of meats. Some stores include deli’s which have bread makers, and serving
tables with many containers with ingredients for the sandwiches.
Customers
6. The clientele and customer base of Quick Buys Inc includes just about anyone in
the city of Cairo or people passing through on US Highway 84. There is an elementary
school within 2 miles as well as a lot of residential area. The Industrial Park of Cairo is
also located half a mile from the store. Many service based business are also in the
immediate vicinity. People going to and from work or dropping their children off at
school often stop by. Children walking back home from school or free during the
summer are also often frequent customers. Much of the check cashing and money
5. orders are done to workers from farms in the surrounding areas. While many customers
come only for gasoline which is a very low margin business, the business that comes
inside the store is what delivers most of the revenue. .building Clientele includes a lot of
lower income for in store sales at certain stores, but mostly working people who are
going to work or coming back, anyone passing by on hwy 84, some truckers for certain
stores that have lot of trucking business, many illegals which are main clientele for
money orders, people coming home for school, basically anyone and everyone goes to
gas stations, only 2. Lots of employees, about 80 regular clerks which restock and etc,
10 managers that manage their store doing invoices and restocking orders,
Employees
7. There are currently 11 employees at the location of interest. There is also a supervisor in
addition to the regular employees, and the supervisor manages a few other stores as well. The
supervisor gets a company vehicle which is insured under the package policy used by Quick
Buys
GeneralLiability Form: BusinessownersLiability Coverage Form
For all inclusive General Liability Claims the Aggregate General Liability Limit of
exactly $1,000,000. This includes Medical expenses, Tenants Fire liability, War liability,
and Liquor liability clauses.
Medical Expenses are capped at $5,000. For medical expenses, the insurance
will pay medical expenses to bodily injury caused by an accident on the premises that is
owned and on ways to the premise. The accident has to take place in the coverage
territory and within the policy period. Moreover, the expenses incurred and the report
has to be within one year of the date with the extent that the injured person submits to
examinations at their expense.
The insurance will make payments regardless of fault but they will not exceed the
limits of insurance. They will pay reasonable expenses for first aid administered at the
time of an accident, necessary medical, surgical, x-ray and dental services, necessary
ambulance, hospital, professional nursing and funeral services.
Tenants Fire Liability is capped at $100,000. The tenants fire liability coverage
pertains to damage by fire or explosion to the rented premises that the tenant occupies
at the time or even temporarily. Quick Buys has a great risk of fire or explosion because
of the gas inventory that is sold. Therefore, having the fire liability at a high aggregate
limit is reasonable and necessary.
An unendorsed ISO CGL policy excludes liquor liability coverage for all
businesses that are “in the business” of manufacturing, distributing, selling, serving, or
furnishing alcoholic beverages. The liquor liability exclusion wording contains three main
parts, none of which apply unless you are included in the definition above. For some
businesses it may prove difficult to establish whether or not they are directly profiting
from day to day operations involving alcohol. However, it is obvious that Quick Buys
would be excluded from liquor liability coverage under a standard CGL policy.
6. Quick Buys acknowledges that they can be held liable for accidents that may
result from their alcohol sales. They chose to address this risk by adding an
endorsement to their policy, which amends the policy to include liquor liability.
The Liquor Liability Aggregate limit is capped at $1,000,000. For each cause of
loss the Liquor Liability limit is still capped at $1,000,000 per occurrence. Expected or
intended injury, Workers Compensation, and Employer's liability do not apply. Also
bodily injury, and property damage are not covered arising from “your product” meaning
the alcohol. And if your liquor license is not in effect this coverage does not apply. The
insurance company will cover the alcohol causing or contributing to the intoxication of
any person, the furnishing of alcohol to an underage individual under the state
mandated legal drinking age, any statute or ordinance relating to the sale, gift,
distribution, use of alcoholic beverages. If the limits of insurance run out the other
insurance company afforded to steps in to cover the rest. The Aggregate limit of
$1,000,000 and the Per Occurrence limit of $1,000,000 is the absolute most Southern
Trust will pay for Liquor related liability losses.
Also for better clarification purposes, Liquor liability is excluded when bodily
injury and property damage for which any insured may be held liable by reason of
causing to the intoxication of any person, selling or giving alcohol to a minor, and any
regulations, sales, and distribution of alcohol. It only applies to stores that manufacture,
distribute or sell alcohol in which Quick Buys the convenience store does sell alcohol.
{Annual Premium for General Liability Coverage is $20,074}
{The deductible is $500 per occurrence]
The insurance is legally obligated to pay damages because of bodily injury,
property damage, personal injury or advertising injury and has the right and duty to
defend the insured against any of those damages. With an ability to investigate any
occurrences and settle any claim at their own discretion. However, their right and duty
to defend ends when their applicable limit of insurance in the payments of the
settlement or medical expenses is all used up. Also applies to personal injury and
advertising injury caused by an offense arising out of the business. Moreover, the
insurance only applies to bodily injury, property damages, personal injury and
advertising injury only if it is caused by occurrences that take place in the coverage
territory and within the policy period.
Supplementary payments of any claim that they investigate or settle, or any suit
against an insured they defend include all expenses incurred, up to $250 for cost of bail
7. bonds because of accidents or traffic violations from the use of any vehicle to which
business liability coverage for bodily injuries apply, the cost of bonds to release
attachments but only for bond amounts within our limit of insurance, all reasonable
expenses incurred by the insured at our request to assist us in investigation or defense
of the claim, including actual time off work up to $250, all costs taxed against the
insured in the suit, prejudgment interest awarded against the insured on that part of the
judgement the insurance pays; however if they offer to pay the limit of insurance they
will not pay any prejudgment interest based on that period of time, all interest on the full
amount of any judgement that accrues after entry of judgement and before payment is
within the their limit of insurance.
If they defend and insured against a suit and an indemnitee of the insured is also
named as a party to the suit, they will defend the indemnitee as long as set conditions
are met.
Each individual building has its own set of coverage limits/liability
limits/deductibles for General Liability procedures and claims. Coverages include for BI,
PD, Advertising injury, and duty to defend. With one exception being no Duty to Defend
for insurance exclusions that do not apply to this policy, and no coverage for claims
outside of the property (business premises) such as government owned property or
other privately owned premises near but not legally a part of the property/vicinity.
Under the BOP General Liability Section for Employment Related Practices what
does not apply are Bodily Injury, Personal Injury, Refusal to hire, terminations of a
person's employment and coercion, demotion, evaluation, reassignment, discipline,
defamation, harassment, humiliation, discrimination directed at that person, or any
relative such a spouse, child, aunt, or uncle. War Liability Exclusion also applies to the
BOP: General Liability Section of the policy, as an endorsement. Stating any Bodily
injury, personal injury, advertising injury are not covered under the War Liability
endorsement.
Exclusions that are listed in the General Liability form include Expected or
intended injury for bodily injury or property damage expected or intended from the
insured. However does not apply to bodily injury resulting from the use of reasonable
force to protect persons or property. So if Quick Buys were to deal with a robbery then
the bodily injury that happens toward the robber would be covered in the policy. The
reason why this is an exclusion is because it is rare that there would be damages from
the insured.
Workers’ compensation and similar law which is any obligation of the insured
under a workers’ compensation, disability benefits or unemployment compensation law
or any similar law. Employer's liability is excluded for bodily injury to an employee that
has an employment by the insured and while performing duties related to the conduct of
the insured’s business. Bodily injury to spouse, child, partner, brother or sister of the
employee in consequence to the bodily injury occurred to the employee. This exclusion
applies to whether the insured may be liable as an employer or in any other capacity
8. and to any obligation to share damages with or repay someone else who must pay
damages because of the injury.
However, exclusion does not apply to liability assumed by the insured under the
insured contract. There is really no reason for any employee to get harmed while
performing any duties within the convenience store and gas station other than the risks
of fire or explosion that could happen because of gas.
Pollution is excluded when there is bodily injury or property damage arising out of
the actual, alleged or threatened discharge, dispersal, seepage, migration, release or
escape of pollutants meaning any type of solid,liquid, gaseous, or contaminants. Only
pertains if pollution is at the premises owned or rented, at the premises that is used for
handling, storage, or disposal of waste which are or were transported, handled, stored,
or distributed as waste by which the insured is legally responsible for, or at any
premises that contractors or subcontractors work directly or indirectly on any of the
insured’s behalf of operations if the pollutants or brought on to the premises in
connection with the insured, contractor, or subcontractor; also, if the operations are to
test for the assess of pollution.
However this exclusion does not apply to bodily injury or property damage arising
out of heat, smoke or fumes from a hostile fire. Also excludes any loss, cost, or expense
arising out of any request, demand, or order to assess the effects of the pollution and
the claim or suit by a governmental authority for the assessment of pollution.
Professional services are excluded by any bodily injury, property damage,
personal injury or advertising injury from failure of any professional services that are
general such as legal, accounting or advertising services, medical services, any health
services, and even body piercings
Property damage to the property and impaired property that is owned, rented or
occupied is excluded and even damages from the use of Quick Buy products, work,
and recalled products are excluded in the insurance. Any personal and advertising
injury that occurs because of breach of contract or the failure of the goods or services to
the advertised quality is also excluded
The nuclear energy liability exclusion is applicable to both business liability coverage
and medical expenses coverage. The insurance does not apply to bodily injury or
property damage that results from hazardous properties of nuclear waste.
Moreover, the people who are insured by the general liability are employees that
get injured within the scope of their employment or from performing their duties with
respect to the conduct of the business. However none of these employees are insured
for bodily injury to the owner or partners or co-employer, in consequence before the
statement by spouse, child, parent, sibling of that co-employee, for which there is
obligation to share damages of the injury described before, and from his failure to
provide professional health care services. Moreover any property damage is also
excluded for the employee. In addition, the insured also includes any person or
organization acting as the real estate agent, those who have temporary custody of the
9. property if death occurs. What to remember though is that no person or organization
with respect of partnerships is insured if they are not listed as a named insured in the
declarations.
Property Not Included in the General Liability section of the policy include
Aircraft, Motorcycles, Motor trucks, Money and/or securities, government bonds,
travelers checks, federal checks, personal checks, public institutional monies, private
bonds, and trust funds, Contraband (drugs, illegally imported shit through trucks, cars,
planes etc.) Physical land with like streams, lakes, mountains, grass) Outdoor fences or
signs. Though an optional endorsement clause can be purchased to add to the
policy. Also, ANY type of watercraft and equipment associated with watercraft
Additional General Liability Coverages include Fire department charge: Coverage
up to $1,000 to compensate the fire department. Debris removal, but only up to 25%.
Collapse of property from: Hidden decay, hidden insect or vermin damage, Weight of
people (Yes this is legit on it) and/or personal property weight. Employee dishonesty,
but not employees engaging in criminal acts such as stealing money, inventory etc. This
also applies to if they were colluding when carrying out these acts.
Also, included in the General Liability coverages section of the Businessowners
policy (BOP) there is a specific section that lingers around occurrences considered “not
at fault” by the insured. These include Mechanical breakdown of machinery or
equipment BUT leaking of any valve, breakdown of a vacuum tube, gas tube or brush,
breakdown of a computer of computer related objects, Breakdown of a structure (like a
damn statue or water fountain being supported by a foundation) These clauses fall
under “Cause-of-Loss” category such as explosion, water damage, building collapse,
fire, theft, and vandalism.
The explosion of gases or fuel within the furnace or any object within the flues or
passes ways through which the gases that are combustible pass through is an example
of “not an accident” because of the nature and what caused the occurrence to take
place. Which usually includes faulty equipment, insured's negligence, and employee
negligence, therefore is not covered under this particular portion of the General Liability
section.
Property:
Area of focus is location 8 or 9
Why is there no gas coverage at Blakely and Bainbridge 167 whigham
10. Joisted masonry Construction but with glass windows on one side
Mcclain guarantee for unsold expired products, but they are not only wholesaler
purchased from
2815 US Highway 84 E Cairo, GA 39828 To Cairo Fire Department, 555 2nd
Avenue Southeast, Cairo, GA 39828
It’s 1.8 miles
Machinery such as deli meat cutters and ovens and etc in some stores
Registers, scanners, modem, router, cloud based inventory and invoicing system
Various kinds of inventory: refrigerated, meats and milk (all provided by mcclain for the
expiry guarantee, when expired, give credit back for purchase of new inventory, drinks
and beer, each company (Coke, Pepsi, Anheuser Busch, may work through wholesaler)
has certain amount of space rows or entire doors for products they wish to sell in
refrigerators, they chose what those products in the doors are, and they have liability
over those products, Chips candy bread cakes, purchased through various wholesalers,
mostly Mcclain, our liability is if expired products sold, must alert mcclain of expired
products for the Little Debbie/Hostess, chips, bread, etc, to get credit for new products
All property on premises is owned, initially, gas equipment, land, or store building
depending on location were not owned but slowly repurchased
if fridge breaks what happens?
Liability:
Liquor endorsement
Purpose for umbrella, initially liability of a car accident or etc, but for more than just
that, why not more
Price fixing, hurricane came through, suppliers for gasoline raised prices, some people
took advantage of it, we didn’t, stayed within normal margin, but sold out quick because
When gasoline isn’t poured in car, liability
Gasoline suppliers, Murphy, Citgo, Plantation, Darsey Oil Co. , Star Enterprises, Royal
Petroleum Products, Inc.
Reason for large amounts of gasoline suppliers is that most are exclusive contracts, but
because of size and time in business and expiring contracts as well as competition, able
to choose freely, the gasoline/diesel becomes property of Quick Buys Inc when the
gasoline/diesel is transferred from the truck into the underground tanks.
11. Previously liability of not even owning tanks underground as well as other gas
equipment and dealing with that but slowly purchased all gas equipment and transferred
all liability of those to self so that is a huge liability
In the event of a leak from tank underground what happens
Terrorism Endorsement was excluded
Terrorism Insurance is in accordance with the federal Terrorism Risk Insurance act. The
portion of premium attributable to terrorism coverage is set at $0.00. The United States
Government, Department of Treasury will pay a share of terrorism losses insured under
the federal program.
The federal shares are 85% and 84% for years 2015 and 2016 respectively. The
percentage is equivalent to the portion of the amount in insured losses that exceeds the
applicable insurer retention. However, the aggregate limit is set at $100 billion per year
and is subjected to pro rata allocation; assuming the Insurer deductible is met, any
losses in excess will not be paid.
The Nuclear Energy Exclusion Endorsements: Under the Umbrella Policy Section
Coverage Does Not Apply Liability issued to the Nuclear Energy Liability Insurance
Association, and also coverage does not Apply to Atomic Energy. The Insured is
entitled to indemnity from United States government by the Atomic Energy Act of 1954.
The Following are also excluded as per the endorsement: Hazardous properties,
radioactive, toxic or explosive properties Nuclear materials, Source material, Special
nuclear material, or byproduct material Special nuclear material are stated clearly in the
Atomic Energy Act of 1954, “Spent Fuel is any fuel element or fuel component, solid or
liquid, which has been used or exposed to radiation in a Nuclear Reactor. Waste is any
nuclear radioactive waste material containing a byproduct material other than the
tailings or wastes produced by extraction or concentration of uranium or thorium from
any ore processed primarily for its “source material content and finally any person
operating a nuclear facility for energy purposes is excluded.
Water Exclusion: Endorsement
Under Business Owners Property Coverage Form (BOP) includes the Water
Endorsement. This Endorsement covers flood, surface waters, mud, mudflow, tidal
waves, tsunamis and any body of water that causes a loss or damage. This
endorsement also includes water that backs up or overflows, or discharged from a
sewer line or related equipment. Water that seeps into walls, foundations, floors,
basements, doors, windows or other openings is also included. Also damage resulting
from fire, explosion or sprinkler leakage is also covered under this endorsement.
12. Lead Exclusion does not apply to bodily injury, property damage, personal injury or
advertising injury caused by actual or alleged exposure to lead, paint containing lead or
any other materials substance containing lead or the manufacturing, distribution, sale ,
resale or rebranding, installation, repair, removal, encapsulation, abatement,
replacement storage, disposal or handling of Lead. Additionally, any form of lead poison
transmission is also excluded. Any legal obligation is excluded, including claims arising
from 1st, 2nd, or 3rd parties
As an added note the specific definition of anything pertaining to lead in the policy
context; for further clarification is located in Section “F”: Liability And Medical Expenses
Definitions of the Businessowners Liability Coverage Form*.
Premium Audit endorsement is contained in the BOP, but “Section A” of the
Premium Audit Common Policy Condition is replaced by this endorsement. The
endorsement states that premiums paid in advance are classified as a deposit premium
only. At the close of each audit period the insurance company will compute the earned
premium for that period and send notice to the first Named Insured of the due date.
Auditing premiums is the date shown as the due date on the actual bill. If the sum of the
advance and audit premiums paid for the policy period is greater than the earned
premium, the insurance company will return the excess to the first Named Insured.
Abuse Molestation is also excluded under the BOP and does not apply to
bodily injury or property damage, advertising injury or personal injury, but the Benefits
added back with Workers Compensation insurance.
6. Existing Insurance:
IntroductorySection to Existing Insurance:
In this section we will be analyzing the existing insurance policies Quick Buys
has felt it necessary to obtain. We will look at all the coverages provided and explain the
purpose for each specific coverage, as well as discuss any endorsements and why they
may be necessary. Our goal is to determine the relevance of all existing insurance
measures, considering the loss exposures the business faces in their current operating
environment.
Quick Buys has taken measures to obtain a comfortable amount of insurance in
order to cover the risks they feel need to be addressed. They have a Businessowners
13. Policy for all their major property and liability insurance risks, as well as a Commercial
Auto policy, and an Umbrella policy. All these products are provided by Southern Trust
Insurance Company. Quick Buys also has Workers Compensation Insurance provided
by the Georgia Oilmen’s Association, as well as flood insurance through the National
Flood Insurance Program. All policies with Southern Trust Insurance Company were
renewed for the policy period 8/29/2015 – 8/29/2018. Complete copies of all policies are
provided in the appendix.
Businessowners Policy (BOP):
Quick Buys has utilized a BOP to package a number of their insurance
coverages into a single contract. As a small business similar to many other gas stations
and convenient stores, they face the same risks that many other stores face, which
made it possible for the insurance company to write their policy on a standardized ISO
form. The policy has then been modified through a number of endorsements, which
provide customization for the business to address more specific or unique risks.
The named insured found on the declarations form is Patel Convenience Stores, Inc.
doing business as “Quick Buys”. The business description also found on the
declarations page is recorded as “Convenience Store/Office/Pumps & Canopy/Deli”. In
return for payment of all premiums, the insurer agrees to provide the insurance as
stated in the policy up to the following limits:
Property Coverage Form:
14. Note that as mentioned previously, Quick Buys is a chain of 10 stores and
a home office, but for this report we will focus exclusively on one store in order to
provide more detail of the property. We chose the store located at 2815 Hwy 84,
Cairo, GA. We feel that this location is the best representation of the standard Quick
Buys store because it has property values, revenues, and insurance limits that closely
resemble the average of the rest of the stores.
Property Limits:
2815 Hwy 84, Cairo $243,331
Personal Property $52,600
Canopy $45,553
Pumps $45,553
Gas $18,100
What is Covered?
First, the form specifies what exactly is considered covered property. This
includes buildings at the premises described in the Declarations, as well as any
completed additions, indoor and outdoor fixtures and permanently installed machinery
and equipment. It also includes personal property being used for business purposes,
such as to maintain, protect, furnish or service the premises. Gas Stations often have
multiple building structures on the same land. This can include a store, bathrooms,
overhead awnings, canopies, fixed signs, and more. The property insurance provided
15. by the BOP would protect Quick Buys when they face a loss to any of these structures
provided the cause of loss is covered.
As a business, Quick Buys provides a variety of services such as selling gasoline
and selling quick snacks, but also offering other convenient household items one might
need to pick up, and even offering money services in small towns where access to
banks may be difficult due to the remote locations. In order to provide these services,
Quick Buys holds a variety of assets such as gas tanks, gas pumps, computers,
vending machines, valuable paperwork, signs, cash registers, point of sale systems, air
pumps, refrigerators and other appliances for food preparation, as well as countless
smaller assets that make business operations possible. All this is considered personal
property, and is covered as long as the cause of loss is not excluded.
What Causes of Loss are Covered?
In order to obtain the widest property coverage possible, Quick Buys utilized a
special causes of loss form to establish and define the perils for which coverage would
be provided. This is sometimes known as “all risks” coverage, because it promises to
pay for any property that may arise so long as it is not specifically excluded in the policy.
While this type of coverage form may sound great, the standard ISO form provided
comes with a long list of exclusions that Quick Buys must take note of and take other
measures to handle risks that are excluded. They should also take care when reading
the policy, the trick is that it should be read differently and more carefully than when
reading a basic or broad form.
16. Overall, the special property coverage form is great for Quick Buys as it is offers
more comprehensive coverage. It can be extremely beneficial to the business since
special form coverage makes allowances for the kinds of curveball hazards one might
never expect. It’s also a convenient type of coverage to have in a constantly
progressing world where we must deal with new and emerging risks. If a new type of
peril arises it will be covered if the insurance company has not yet had time to exclude
it. We will briefly analyze the causes of loss that are excluded from the form and
examine how Quick Buys could be affected from them. The most common damages
that occur from causes of loss not covered arise from wear and tear, rust and corrosion.
These latent risks can be prevented by routine inspections and property maintenance.
Equipment Breakdown Enhancement Endorsement:
This is one of the most valuable endorsements to the policy. Quick Buys has a
number of important appliances such as ventilators, dishwashers, heat lamps, and 14
separate refrigerators or freezers that are crucial to keeping certain inventory cold at all
times. Even more crucial are the gas pumps, fuel tanks and systems that facilitate the
sale of gas. Any of this equipment breaking down would slow down operations or even
create an unsafe environment. A loss due to equipment malfunction would typically be
excluded under the standard “mechanical breakdown” exclusion in the BOP. Quick
Buys acknowledged this exclusion and made a smart decision by gaining coverage
through endorsement. To be even safer they added a coverage extension for
“expediting expenses” that covers extra measures taken to speed along the repair or
replacement process and also cover temporary repairs in order to stay in business.
17. The Equipment Breakdown Enhancement Endorsement also provides additional
coverage for a few other potential loss exposures. It deletes the Power Failure
Exclusion as well as the Electrical Apparatus exclusion that takes away coverage from
losses due to Artificially Generated Electrical Currents. This is important because it
protects Quick Buys from major losses to their appliances. Along with this additional
coverage, perishable goods are also insured through the endorsement with the
inclusion of a Refrigerant Contamination and Spoilage Coverage Extension. A large
amount of their food inventory must be kept refrigerated or frozen, so Quick Buys would
face a major loss in the event of a power outage or equipment malfunction. This
extension is imperative due to the possibility of an event such as this happening. Under
this endorsement damage to perishable goods is covered up to $25,000.
Also related to Equipment Breakdown, the endorsement modifies Pollutant
Cleanup and Removal. By storing and selling gas, Quick Buys always faces major risks
associated with gas leaks and spills. Small spills are not uncommon, but major
damages could arise when more fundamental errors take place. Underground fuel lines
can leak when proper inspections are not maintained, tanks can be overfilled upon
delivery or fuel can be released prematurely. There is simply a large amount of
unavoidable systematic risk involved in the business, and operating in this environment
requires risk to be transferred. The unendorsed policy provides $10,000 in property
coverage for Pollutant Cleanup and Removal. Quick Buys felt this was not enough and
raised that coverage to $25,000 through endorsement. Considering the severity of
potential damages, we feel this limit is not high enough, and we are just talking about
property damage, liability is another issue but it is covered in a separate section.
18. Damages to Quick Buys property can be almost as severe as liability damages and
many times damages may not be visible from the surface. Other gas stations have had
incidents of gas tank leaks causing soil and foundation damages as well as
contaminating on-site septic tanks.
Additional Coverages: The following are some of the less obscure additional
coverages provided by the policy as well as a brief description of how we feel they are
relevant to Quick Buys:
Collapse: This is an important coverage to have as a gas station with a large canopy
on the lot. If it were to collapse due to covered causes of loss, it would be covered. Also,
with older structures potentially subject to decay by “fungus”, wet rot and dry rot, it’s not
a bad coverage to have.
Fire Department Service Charge: Even the smallest indication of an accident at a gas
station would likely lead to a visit from the local fire station regardless of whether or not
there was a legitimate need for them. These trips may be charged to Quick Buys and
coverage prevents the moral hazard of not calling 911 for the sole reason of not wanting
to pay for the visit if it’s not needed. Fire dept service charges are covered up to $5,000.
Business Income: If there were an accident resulting in direct physical loss that causes
business operations to be suspended the loss of income would be paid by the insurance
company. Quick Buys has an additional “extended income” coverage that is above and
beyond the standard business income additional coverage. Extended Income promises
to pay all the way up until the date the business is fully operational again.
19. Money Orders, Counterfeit Paper Currency, Forgery and Alteration: Loss due to
the acceptance of “money” in good faith will be covered when the currency or security
was not valid. Quick Buys offers money services, and bad checks can be a serious risk.
These would be insured through this additional coverage along with defense costs
necessary up to the limit of $2,500.
Exterior Building Glass: Considering the whole front of the store is covered with large
glass windows, this is definitely an important coverage to have. It wouldn’t be hard for
something to fall into a window from either inside or outside the store. Vandalism is also
one of the most common causes of loss to gas stations in small towns, and breaking
windows would likely be the first thing vandals would do.
Coverage Extensions: The following are some of the coverage extensions which are
paid in addition to the policy limits:
Outdoor Property: This extension is very relevant for Quick Buys as it covers their
signs and advertisements located outside the building and along the road. Losses to
outdoor property are covered up to $2,500.
Valuable Papers and Records: Loss or damage to any valuable papers and records
you own is covered under this extension. The limit of $5,000 also applies to costs
associated with recovering or replicating these materials.
Business Owners Plus Endorsement Convenience Food Stores:
This endorsement modifies the special property coverage form in several ways in
order to provide more comprehensive coverage for a convenient store like Quick Buys.
20. First, it helps cover theft by increasing the limits from $2,500 to $3,500 for certain
inventory susceptible to theft. It also promises to reimburse the business for Arson and
Theft Rewards offered to those who provide valuable information leading to a
conviction. This empowers management to take an active role in the loss
indemnification process.
Employee Dishonesty can be a major issue which can lead to serious
unrecovered losses, and many business find it difficult to handle this risk. Fortunately,
this endorsement also covers Quick Buys for most losses caused by employee
dishonesty. It promises to pay for direct loss or damages to business personal property,
“money” and securities up to $1,000.
Liquor Liability:
An unendorsed ISO CGL policy excludes liquor liability coverage for all
businesses that are “in the business” of manufacturing, distributing, selling, serving, or
furnishing alcoholic beverages. The liquor liability exclusion wording contains three main
parts, none of which apply unless you are included in the definition above. For some
businesses it may prove difficult to establish whether or not they are directly profiting
from day to day operations involving alcohol. However, it is obvious that Quick Buys
would be excluded from liquor liability coverage under a standard CGL policy.
Quick Buys acknowledges that they can be held liable for accidents that may
result from their alcohol sales. They chose to address this risk by adding an
endorsement to their policy, which amends the liquor liability exclusion.
The endorsement amends the Businessowners Liability Coverage Form in the
following ways:
1. The endorsement adds all “bodily injury” or “property damage”
arising out of the selling, serving or furnishing of alcoholic beverages to
the insurance provided under Paragraph A. 1. Business Liability.
2. The endorsement essentially states that liquor liability coverage is
still excluded when BI or PD results in a situation where:
- Alcoholic beverages are sold, served or furnished without a proper license.
- Alcoholic beverages are sold, served or furnished to minors.
- Other insurance is afforded, or would be afforded but for the exhaustion of the
Limits of Insurance.
21. 3. The endorsement adds to Paragraph D. Liability and Medical
Expenses Limits of Insurance. It states that the limits shown in the
schedule of this endorsement are the most that will be paid for all BI and
PD as the result of the selling, serving or furnishing of alcoholic
beverages.
The scheduled limits added through endorsement are as follows:
A. Liquor Liability Aggregate Limit: $1,000,000
B. Each Common Cause Limit: $1,000,000
Communicable Disease Exclusion:
The BOP contains an exclusion explaining that under no circumstances will
insurance be provided for BI or PD claims arising out of the actual or alleged
transmission of a communicable disease.
This is a risk that still needs to be addressed, and it may be determined that risk
transfer is not the best method to handle it. Instead, Quick Buys should take proper care
to maintain a sanitary environment to prevent any claims arising due to diseases they
may be held responsible for. They should pay special attention to any food items that
may be handled by customers before purchase, and make sure these items are
packaged properly to avoid the spread of germs.
Employment related practice
Under the BOP, this exclusion does not provide coverage for any damages
arising from an insured’s employment practices, policies, acts, or omissions directed at
the injured person or their families.
This exclusion applies whether or not the insured may be liable during their time
an employer. This is good for the company considering that claims can be made the
moment an interview process begins or post employment. However, because these
cases are written on a claims-made process, the exclusion will apply so long as the
BOP is active
War liability Exclusion
In the BOP, this exclusion does not compensate for losses arising out of war or
warlike actions. This is excluded because insurance companies typically would not be
able to profit or would be able to face millions of dollars of claims.
Cap on losses from Certified Acts of Terrorism
A “Certified Act of Terrorism” is an act that is certified by the Secretary of the Treasury,
in accordance with the provisions of the federal Terrorism Risk Insurance Act and is
considered to be dangerous to human life, property, or infrastructure, and is committed
as an effort of coercion.
22. QBI is not likely to experience acts of terrorism because they are based in a rural and
residential area, however QBI is part of the energy sector, which tends to have a higher
risk involved for terrorism.
Georgia changes - Loss Payment
Under the Businessowners Special property coverage form, this endorsement
applies when a covered loss or damage occurs. We will either pay the cost, repair,
rebuild, or replace the property with other property of similar quality and build. We will
also take all or any part of the property at an appraised value.
Exclusion of other acts of terrorism committed outside the united states:cap on
losses from certified acts of terrorism
Under the Businessowners Coverage form, this insurance does not apply to
“terrorism.” However, this exclusion applies only when terrorism involves using nuclear
or chemical material, and any resulting factor caused from them with intention of using
for terrorism.
Because it is hard to distinguish between terrorism types, the magnitude is based
on the number of people harmed and the total of insured property damage.
Business owners common policy conditions
The common policy conditions form is used with the commercial property, general
liability, and crime forms to elaborate conditions that apply to the policy.
The conditions under this policy relate to cancellation of the policy by either the first
named insured or the insurance company. Generally insurance cannot cancel without a
good reason; they usually relate to necessary operations to be considered a business
entity on good terms.
The first named insured is responsible for the main negotiations of the policy when it
involves direct action between them and the insurance. Insurance policies are in place
to cover for losses, and not allow people to profit or gain more than they should prior to
a loss. Therefore, insureds need to take responsibility for unintentional cases of fraud
Insurance takes cases of fraud seriously, thus audits of the books, premiums, or any
moral, financial, and physical aspect allows them to fully analyze the risks and what
would be covered.
Recording and distribution of material or information in violation of law exclusion
The endorsement modifies insurance under a business owner’s policy. However, the
insurance does not apply to bodily injury, property damage, or personal injury or
advertising injury resulting from any action that violates such conditions:
23. 1. The Telephone Consumer Protection Act(TCPA), including any
amendment or addition to such law
2. The CAN-SPAM act of 2003, including any amendment or addition to such
law
3. The Fair Credit Reporting Act(FCRA), and any amendment of or addition
to such law, including the Fair and Accurate Credit Transaction
Act(FACTA)
4. Any federal, state or local statute, ordinance or regulation, other than what
is listed above, that addresses, prohibits, or limits the printing,
dissemination, disposal, collecting, recording, sending, transmitting,
communicating or distribution of material or information
Special Property Coverage Form
· Will pay for direct physical loss or damage to covered prop from covered losses
· COVERED PROPERTY
o Buildings and structures at the premises as described in the declaration
§ Completed additions
§ Fixtures (including outdoor)
§ Permanently installed machinery and equipment
§ Personal prop in rooms furnished as the landlord
§ Personal prop used to maintain or service buildings and structures
· Fire extinguishers, outdoor furniture, floor coverings, appliances
§ If not covered by other insurance
· Additions under construction, alterations, and repairs to structure
· Materials and equip within 100 feet of the building used for repairs or additions
o Business personal property in or within 100 feet of the premises (including in vehicle)
§ Property you own that is used in the business
§ Property of others in your care or control
§ Tenant’s improvements and betterments (Fixtures, alterations, installations,
additions)
· Made a part of structure you occupy but don’t own
· Acquired or made but cannot legally remove
§ Leased personal prop you have a contractual responsibility to insure
· PROPERTY NOT COVERED
o Aircraft, autos, and all vehicles subject to DMV registration
o Money and securities UNLESS
§ Optional coverage for money and securities or employee dishonesty
o Contraband, or property in the course of illegal transactions
o Land, crops, lawns
o Outdoor fences, radio antennas (and accompanying equipment), signs not attached
to building trees, shrubs, plants UNLESS
§ Outdoor prop coverage ext. or Outdoor signs coverage
o Watercraft
· COVERED CAUSE OF LOSS
o Risk of direct physical loss unless it is excluded in section B or limited (to follow)
· LIMITATIONS
24. o Will not pay for loss of or damage to:
§ Steam boilers, pipes, engines, or turbines caused by or related to equipment
· But will pay for loss of equip caused by explosion of gas or fuel eithin furnace or
other related fired vessels
§ Hot water boilers or heaters
§ Missing property without evidence to where it went (stolen or shorted inventory) (Can
be covered in moneys and securities coverage)
§ Property transferred to a person outside the premises unauthorized
o Will not pay for more than $500 worth of damage to glass anywhere on structure or
attached sign, with a max of $100 per pane UNLESS
§ Covered by “specified cause of loss” except vandalism
o Will not pay for fragile articles such as glassware or damages to china, porcelain,
etc. UNLESS
§ Glass that is a part of the interior of the structure
§ Containers of prop held for sale
§ Photographic or scientific instruments
o Limits for loss or damage by theft:
§ $2500 for furs and fur trimmed garments
§ $2500 for jewelry and watches, precious metals, semi precious stones, alloys
§ $2500 for patterns, dies, molds, and forms
· ADDITIONAL COVERAGES
o Debris Removal
§ Will pay for expense to removal of CP resulting from covered CL that occurs during
the policy period. Expenses paid only if reported within 180 days or the earlier of
· The date of direct physical loss or damage
· The end of the policy period
§ Most will pay under this add cov is 25% of:
· The amount paid for loss or damage to CP plus
o The deductible applicable to loss or damage
· Does not apply to the removal of the following:
o Extracting pollutants from land or water
o Remove, restore, or replacement of polluted land or water
§ If
· The sum of loss, damage, and removal exceeds the limit or the debris removal exp
exceeds the amount payable under the 25% coverage limit above , will pay up to an
additional $10k for each location in any one occurrence under the debris removal
additional coverage
o Preservation of property
§ CP must be moved to another location to preserve it from greater loss
§ Will pay for
· Damage while being moved or stored
· Only if damage occurs within 30 days after the property is first moved
o Fire Department
§ If FD is called, will pay for up to $1k of charges
· Assumed by contract or agreement prior to loss
· Or as required by local ordinance
25. o Collapse
§ Will pay for the direct loss or damage to CP caused by collapse if it is caused by one
or more of the following:
· Specified cause of loss or breakage of glass
· Hidden decay
· Hidden insect or vermin damage
· Weight of people or prop
· Use of defective methods in construction
§ If the direct physical loss or damage does not involve collapse or structure, will pay
for loss or damage to covered property caused by the collapse only if:
· Personal property which collapses is inside a building covered under insureds
policy.
§ Collapse was covered by a covered loss in D1.A-F
· With respect to the following:
· Awnings
· Gutters
· Yard Fixtures
· Outdoor Pools
· Piers, wharves, and docks
· Beach or diving platforms
· Retaining walls
· Walks, roadways, and other covered surfaces
§ If a collapse is caused by a cause of loss listed in D1B-F, will pay for loss or damage
to that property only if such loss or damage is a direct result of an insured building
collapsing
§ Collapse does not include settling, shrinking, bulging, or expansion
o Water Damage
§ Loss from covered water water or liquid damage will pay for cost to remove and
replace any part of the structure or appliance from which the water substance escapes.
Will not pay for any defect caused by the loss or damage, but will pay the cost to repair
or replace damaged parts of fire extinguishing equipment if the damage:
· Results in discharge of foam or fire protection substance
· Is directly caused by freezing (pipes)
o Business Income
§ Will pay for loss of income during period of restoration. Suspension must be from
direct physical loss or damage to property at the premises. Loss must be a covered
loss, personal property covered within 100 feet of the premises. If only part of the
premises is occupied by you, “premises means”
· Portion which you rent, lease, or occupy
· Any area within the building or on the site which is used to gain access
§ Will only pay for income loss for 12 consecutive months after the date of the loss,
only pay for ordinary payroll expenses for 60 days following the loss
§ Business income is:
· Net income incurred if no loss would have happened
· Continuing normal operating expenses (including payroll)
o Payroll is all employees besides:
26. § Officers, execs, department managers
§ Extended Business Income
· If BI is paid out, will pay losses that you incur:
o (2A)Begins on the date property except finished stock is replaced and operations
resumed why does it begin now?
o Ends on the earlier of:
§ Date you could restore operations with reasonable speed and generating income
§ 30 days after 2A
· Does not cover loss of income because of poor biz conditions caused by impact of
loss at premises like the wendys not making as much money after burning down when
restored?
§ Extra Expense
· Will pay extra expenses that you incur during restoration that you would not have if
no loss occurred.
· Extra expense are:
o To avoid or minimize suspension of business and continue ops
o Operating at a replacement premises, including relocation costs and operating costs
Auto
$1,000,000 liability insurance $3,278 premium
$1,000,000 uninsured motorists $777 premium
Actual cash value or cost of repair, whichever is less, minus deductible
Comprehensive $298 premium
Collision $649 premium
Estimated total premium $5,002
Car Year Age Comprehensive Collision Total
Nissan Altima 1996 8+ $22 $54 $619
Toyota Avalon 1999 8+ $29 $61 $633
Mercedes Benz 2002 8+ $62 $103 $708
Chevy Suburban 2006 8+ $44 $91 $678
Nissan Maxima 2009 7 $59 $127 $729
Toyota Camry 2003 8+ $25 $57 $625
VW Passat 2014 2 $57 $156 $756
Insurance for rented or hired autos when on travel or something
27. Rate $100 per autos * Factor (if liability premium coverage) Coinsurance factor (.68)
= $68
$186 liability premium based on number of employees.
Auto Dealers Coverage Form
Business Auto Coverage Form
Motor Carrier Coverage Form
No deductible
Uninsured Motorist Coverage
A.Coverage
All sums in excess of deductible which is nothing, recover as compensatory damages from
owner or driver of an uninsured motor vehicle, bodily injury or property damage. Owner or driver
liability for the damages must result from the ownership, maintenance or use of uninsured motor
vehicle
Any suit arising from damages against anyone who is legally responsible for the accident void
us paying for suit
Will not pay for a settlement within limits unless insurer agrees to it
B.
individuals insured, named insurer, anyone named insurer gives right to drive.
If driving substitute vehicle, must have been driving “covered auto”
7. Existing Loss Controls
QBI utilizes loss control measures focusing inside and outside the establishment. Their main
causes of loss are geared towards the gas pumps and the operations of the building.
Signs exist on and near the pumps to remind patrons not to smoke, to turn off their engines
while fueling, not to leave pumps unattended, and to dispense fuel into approved containers.
However, signs can only do so much, therefore, rubber collars are used alongside the fuelling
nozzles to prevent the overflow of fuel. The fuel pumps require pre-payment through the use of
debit or credit to prevent people from filling up gas in containers and driving off. In a overflowing
28. fuel situation, the ground is built to have a slope to encourage any fuel spillage and to direct it
towards the various drainage systems. There are fire suppression sprinklers located above the
fuelling areas and two fire extinguishers conveniently located near the front of the building.
Employees undergo background and reference checks before they are considered as a
potential hire. New employees are trained on how to work, but also to understand what to do in
certain situations, like in accepting payments to handling emergencies. They must know how to
detect counterfeit money and to check identifications for credit card/check transactions to avoid
fraud. CCTV is implemented inside the premises to detect employee theft and robberies.
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Insurance Recommendations
QBI currently has a good insurance policy that pertains to most of its possible risks that could
occur within its premises. The insurance of the tenant’s fire liability is reasonable for a
convenience store that contains a gas station and its possible risks of fire or explosions. With
the high risk of fire from a gas station it is also wise to limit their insurance for the fire liability at
$100,000; however, if they wanted to pay a nominal charge for a higher limit then it would be
reasonable. Moreover, the endorsement for pollutant cleanup and removal is appropriate for the
policy as there are major risks in gas leaks and spillage within its premises that could be
damaging to others. However, like the fire liability the pollutant cleanup endorsement has a limit
of $25,000 that may not be enough if the problem were to actually occur so this endorsement
would improve if the limit were to be increased to about $50,000.
One policy that could be appropriate for QBI would be an insurance in liability for food
spoilage and then having served it to customers. A power failure or mechanical failure of
refrigeration could result in spoiled foods in which the insurance would reimburse the value of
the spoiled foods. However, the insurance does not provide coverage for serving and possibly
causing ill to the customers. Therefore, an added endorsement of a food contamination liability
would be useful in covering the sale of bad food to customers and causing illness. The coverage
could cover bodily injury and pain and suffering coverages and more. These types of insurance
coverages are recommended because of its possible risks.
Non-Insurance Method/Recommendations
QBI needs to make sure the flow of operations go smoothly to avoid potential losses. While
there are many effective loss control methods already existing, there could be more which
would expand upon and synergize efficiently. One loss prevention measure in place is the use
of signs on and near the fueling dispensers that clearly mention not to smoke, filling up fuel only
in permitted containers, etc. Having at least one employee supervising the area and performing
various tasks could help to reduce losses. They could do routine inspections of dispensers,
29. nozzles, and possible obstructions on off-peak hours, while making sure patrons follow the
approved guidelines. The employee would also be viable in the case of emergencies or issues
occurring outside.
Currently, QBI has fire suppression sprinklers and fire extinguishers in the case of a fire,
but great additions could include having a fire alarm system and a emergency fuel shut off
switch. The location of QBI is generally close in proximity to other entities and buildings and
could face possible further losses. The fire alarm system could help to alert others and the fire
station which is only a couple miles away. The emergency fuel shut off switch would cease all
flows of gas to remove further losses.
Adding a panic alarm that alerts the police could lower the chances of robbery even
further. QBI is conveniently located near a police station as well, and while police routes may
coincide with a robbery in progress, the panic alarm would essentially allow the police to catch
the perpetrator right-handed or in pursuit.
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(this is room for the questionnaire) -joseph
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Personal PropertyValue Estimates
Description Quantity Cost ea. Total
Checkout stands 1 $4500 $9000
Slushee Machine 2 $2400 $4800
Cups dispenser 1 $650 $650
Soft drink dispenser 1 $4500 $4500
CO2 Tanks 3 $900 $2700
Soda Syrup racks 2 $600 $1200
Ice machine in soda dispenser 1 $2500 $2500
Microwave 1 $300 $300
31. Loss Exposure
All business face loss exposures, Quick Buys Inc. (QBI) is not immune to any of these.
Exposures to the business’s property as well as liability risks from customers could cause
issues to QBI if not properly covered and accounted for. Property loss exposures such as fire,
theft, damage to structure, and environmental risks from the sale and storage of gasoline are all
common in this industry. Liability losses from potential damage to customer’s vehicles,
rotten/past date food, and injuries from accidental falls or other injuries on the premises of QBI
should all be insured against to indemnify the owners from any harm. In order to operate
32. successfully and safely, QBI aims to identify and mitigate these potential areas of risk via
insurance, retention of risk, or other methods.
QBI could face potential risk to their premises from both the multitude of customers that
flow in and out daily, as well as negligence on their own part if they do not properly maintain the
structure and all that surrounding it. While fire is a prevalent risk to any business, “between
2004-2008 5,020 gas station fires were reported…causing nearly $20 million in property
damage” due to the intrinsic risk of storing and serving highly flammable gasoline (NFPA). QBI
is covered for this risk, and has the non-insurance benefit of a fire station only 3.3 miles away to
respond to all fire calls. The Georgia Department of Agriculture has specific guidelines in order
to minimize the risk of storing and selling gas products, and if followed properly with routine
maintenance and inspection will mitigate fire damage losses. Fire damage could potentially
affect the structure, inventory within the store, injuries to clientele and employees, as well as
clientele property (cars).
In addition to fire, the environmental risks for storing gasoline are immense. If tanks and
lines are improperly maintained, slow leaks which contaminate the ground around it could cause
a long term environmental risk. The tanks and lines are covered under an equipment
endorsement, but this does not cover any losses that could occur should the tanks fail overtime.
This is a long tail/latency issue that could affect QBI negatively in a large way should their
ground become polluted from gasoline. If groundwater is nearby, the aquifer could spread this
pollution around exponentially increasing their risk exposure. QBI should undertake non-
insurance steps such as annual testing of their ground and groundwater, as well as having a
cleanup/reactive plan in place should any loss be traced to them. We recommend adding
coverage to insure against the costs for cleanup and defense frompossible suits that
come with it. The Encon group has identified similar risks and examples of them in reports, and
lists occurrences and these policies typically covered up to $1,000,000 in costs.
33. As a retail business QBI will encounter theft, but it is important to note that these risks
typically should be retained. The National Association for Convenience and Fuel Retailers
(NACS) states that losses from gas theft can total “up to $1500 a month” but only in densely
populated areas (population of Cairo=$9,806) and is “only a problem at stores that do not
require prepay”, so all pumps should be modernized to meet this standard (NACS). Theft of low
priced food and sundries within the store would not cost efficient to insure, and loss reduction
techniques such as “greeting each customer, keeping the store clutter free, and monitoring the
shop” all mitigate these losses (NACS). Cairo falls far below the national, and Georgia average
for violent crime with only 14 robberies committed in 2015. This low number leads to a safer
operating environment, and coupled with the proactive employees will deter theft. Industry
standard safes and registers with little cash also wards off violent criminals looking for an easy
score.
Areas of risk to the structure such as cars driving through the front glass structure would be
covered in part by the driver’s insurance, and QBI’s coverage would also potentially pay as well
in the event of an uninsured motorist. At a rate of “60 concrete car crashes a day (sic)(which
includes storefront crashes)” QBI should be prepared for the potential loss of product and
damage to their structure, employees, and customers (Miami Herald). Vandalism is also an
imminent threat, but with the current coverage and safe environment of Cairo, no extra
coverage is recommended. These risks are all properly insured and no additional coverage is
needed.
Liability risks from injuries such as slips, falls, from tainted product, and falling debris are
properly accounted for and no further insurance is needed. However, liability stemming from the
sale of tainted gas is not endorsed under this policy. Bad gas typically has a higher water
content, has broken down/settled from sitting for too long, or foreign objects have entered the
system (NACS). All of these can be addressed by constant vigilance of tank levels and
conditions. However, in the event a suit is brought because a customer’s car is damaged from
34. tainted fuel, coverage should be added to the policy. In 2013 State farm sued a Louisiana based
Shell Gas Station which stemmed from damages to one of their insureds cars from tainted fuel
(Louisiana Record). If the fuel caused an overall engine failure damages will be in the tens of
thousands. We recommend insuring against tainted fuel damage.
Conclusion
Gas stations and convenience stores face many areas of potential loss exposure. But
with the right mix of insurance and noninsurance transfer, QBI will be able to operate
successfully for years to come.
Works Cited:
http://www.propertycasualty360.com/2006/02/01/identifying-clients--environmental-loss-
exposures
http://louisianarecord.com/stories/510583748-shell-gas-station-sued-for-allegedly-providing-
bad-fuel-that-damaged-vehicle
http://www.nacsonline.com/YourBusiness/FuelsCenter/Basics/Articles/Pages/Bad-Gas-What-Is-
It-and-How-Can-You-Avoid-it.aspx#.VxXGTfkrLcs
http://www.nacsonline.com/Research/FactSheets/Motor%20Fuels/Pages/GasolineTheftatConve
nienceStores.aspx
http://www.neighborhoodscout.com/ga/cairo/crime/
https://www.google.com/maps/dir//midway+fire+station,+GA-
93,+Cairo,+GA+39827/@30.8893668,-
84.202171,14z/data=!4m8!4m7!1m0!1m5!1m1!1s0x88eda92034492ca5:0xb9909645a9f104ff!2
m2!1d-84.2056757!2d30.9014029
http://www.nfpa.org/research/reports-and-statistics/fires-by-property-type/business-and-
mercantile/fires-at-us-service-stations
