Property Risk Management

 

 

Introduction

Most of the University's real and personal property is insured through the State Property Fire Insurance Fund (the Fund), a division of the North Carolina Department of Insurance. The North Carolina General Assembly created this State Property Fire Insurance Fund in 1945 in order to protect State owned buildings, the life and property within and to provide for the insurance needs of the State agencies pursuant to General Statute §58-31-1.

 

The Fund operates as a risk sharing pool. State agencies contribute to the Fund based on their respective property exposures and funding status in the form of insurance premiums. This premium money is then used to pay property claims, purchase reinsurance or retained by the Fund to increase its insuring capacity.

 

 

Authorization to Purchase Property Insurance

General Statute §58-194.2 requires that all insurance authorized for state agencies be placed by the NC Department of Insurance. Therefore, state agencies cannot obtain insurance directly through private companies. If a particular type of insurance coverage is not available through the NC Department of Insurance, the coverage request will be referred to the State’s insurance broker. Risk Management Services shall serve as the University’s point of contact for coverage requests made to either the Fund or our insurance broker.

 

 

Property Coverages Offered by The Fund

The Fund offers three tiers of coverage, as well as several stand-alone coverages, for insuring the University’s buildings and contents. The most basic tier covers just 1) fire and 2) lightning losses with a $500 per occurrence deductible. All University properties are required to at least carry this tier of insurance and the extent to which we are charged a premium depends on the funding of each specific building or its occupants (refer to “How Property Insurance Premiums Are Applied By The Fund”).

 

Departments can opt for the second tier of coverage, which includes the first tier perils of fire & lightning as well as “extended coverage”. Any department that requests extended coverage will be charged a premium for this insurance, regardless of their funding status.

 

"Extended coverage" includes the following perils with a $500 per occurrence deductible:

The third tier is “all-risk insurance”. All-risk insurance covers all perils unless that peril is specifically excluded. A $500 deductible also applies. All-risk insurance is the most comprehensive coverage you can purchase, and like extended coverage, a premium is charged to all departments requesting this coverage, regardless of their funding status.

 

As with all insurance policies, certain conditions and exclusions apply that can restrict or broaden coverage. Refer to the General Property Coverage Policy that addresses these coverage limitations.

 

 

Miscellaneous Property Coverages Offered by The Fund

In addition to the three tiers of coverage described above, the Fund offers several insurance coverages that can be purchased unbundled, or on a stand-alone basis. These coverages are excluded even when all-risk insurance is purchased. These unbundled coverages are:

Replacement Costs Basis

Insured property losses are adjusted on a replacement cost basis up to the limit of insurance shown in the Fund’s policy Declarations. The replacement cost is considered to be the cost to repair or replace the damaged item(s) at the time of loss with products or materials of like, kind and quality. No claims payment will be made by the Fund until the damaged item(s) has been repaired or replaced.

 

 

How Property Insurance Coverages Are Applied By The Fund

In order to be afforded any of the coverages offered by the Fund, the University must first report the property to them. The Fund's limit of insurance for each loss is the building or content value assigned for each respective asset. An exception is made for newly acquired properties whereby our reporting time is extended to 60 days. Refer to the General Property Coverage Policy for these conditions.

 

All coverage tiers described below are subject to the terms and conditions of the General Property Coverage Policy.

All-risk is the most comprehensive coverage offered by the Fund and is written differently. With all-risk coverage, a loss is afforded coverage subject to the conditions of the policy as long as it is not specifically excluded. With other perils, the covered cause of loss must be specifically named in the policy. Refer to Appendix A for the list of All-Risk exclusions.

 

 

The State of North Carolina’s Reinsurance Policy

To protect the solvency of the Fund, reinsurance is purchased on an all-risk basis to insure all State properties from catastrophic losses. The current limit of liability on this policy for all state-owned properties is $500,000,000. Effective August 20, 2003, the Fund will no longer allow state agencies to rely on the State’s property reinsurance unless coverage for the peril causing the loss is first purchased directly from them.

 

The reinsurance deductible for all covered perils except wind and flood is $2,500,000. For windstorm, the deductible is 1% of the property values for each building including its contents with a minimum $100,000 per building deductible and maximum of $3,000,000 per occurrence. For flood, the deductible is $2,500,000 per occurrence for all locations except those located at or below the FEMA 100-year flood recurrence elevation.

 

 

How Property Insurance Premiums Are Applied By The Fund

There are two criteria that determine when the University is charged for property insurance written through the Fund: 1) specially funded departments and 2) purchasing optional coverages.

 

    Specially Funded Departments - The Fund makes a distinction between generally funded and specially funded departments. If a department receives 50% or more of its funding from receipts/proprietary funds, they are charged for all their property insurance (including the basic tier of fire & lightning coverage).

 

For departments that receive more than 50% of their budget from the general fund, they are only charged if they choose to purchase optional coverages other than the basic fire & lightning coverage.

 

In order to determine those departments that receive 50% or more of their funding from receipts or proprietary funds, Risk Management Services will use a printout of expenditures received from the Budget Office. This information is calculated annually.

 

     Purchasing Optional Coverages - A premium is charged by the Fund for all insurance other than the basic tier of fire & lightning coverage. This charge is made regardless of whether it is requested by a generally funded or specially funded department.

 

 

Insurance for Computers and Peripherals

Insurance for your department's computers and peripherals are handled in the same fashion as described above. Unless you specifically purchase additional coverage such as all-risk insurance, your computers are only insured against fire / lightning losses. You can insure computers with all-risk coverage on a per item basis. You do not have to insure your department's entire inventory. This gives you the flexibility to insure only those items more susceptible to a loss. For additional information, please refer to the RMS Business Manual section entitled “Using the Carolina Self-Insurance Fund”.

 

 

Requesting Optional Property Insurance

Any department interested in purchasing any of these property insurance coverages should contact Risk Management Services. We will provide you with the rates and submit all necessary information to the Fund or our insurance broker on your behalf.

 

Insurance coverage can be purchased at any time during the July 1st to June 30th policy period. If coverage is purchased mid-term, the University will be charged for either one-half the annual policy period or on a pro-rata basis.

 

 

Calculating Your Property Insurance Premium

The amount of premium the Fund charges for each coverage is determined by multiplying the limit of insurance for each building or item by a pre-specified rate. The Fund obtains these rates from industry standard information. For example, if the University insures a building with a replacement cost value of $5,000,000 for extended coverage with a rate of $.0016, the annual premium will be $8000.

 

 

Property Coverages Not Offered by The Fund

While all property insurance authorized for the University must be placed through the Fund, certain property coverages may not be offered by them or they may prefer not to underwrite certain risks. If a particular type of insurance coverage is not available through the Fund, the coverage request will be referred to our insurance broker. The following property coverages are underwritten by a private insurance company rather than the Fund:

 

     Boiler & Machinery - Boiler & Machinery coverage is afforded for boilers and other fire pressure vessels located on the UNC-CH campus and those at the Institute of Marine Sciences in Morehead City.  The limit of coverage is $5,000,000, with an applicable $5000 deductible per occurrence. This coverage is underwritten by Hartford Steam Boiler through our insurance broker with a January 12th renewal date.

 

     Fine Arts - Fine arts are defined as: "paintings, etchings, drawings, rare books, manuscripts, rugs, tapestries, statuary, and other bonafide works of art, or rarity, historic value, or artistic merit. Our fine arts coverage is provided through Huntington T. Block Insurance Brokers and is part of a master policy issued to the entire "State of North Carolina".

 

The policy has a limit of $200,000,000 per occurrence for permanent collections, $200,000,000 limit for on-loan items and $25,000,000 while items are in transit. The applicable loss deductible per occurrence involving items owned is $2500. There is no deductible for items on-loan.

 

     Employee Dishonesty - Employee Dishonesty coverage is provided for "dishonest acts committed by an employee, whether identified or not, acting alone or in collusion with other persons, with the manifest intent to:

 

(1) Cause you to sustain loss; and also (2) Obtain financial benefit (other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other employee benefits earned in the normal course of employment) for: (a) the employee; or (b) Any person or organization intended by the employee to receive that benefit.''

 

The coverage includes all State employees; enrolled students under UNC‑CH's jurisdiction; volunteer workers or campaign solicitors while handling or having possession of property or funds of UNC‑CH.

 

This master policy was purchased to cover all state agencies and is currently underwritten by Great American Insurance with a coverage limit of $5,000,000 and a $50,000 deductible applying per loss. It renews annually on January 6th.

 

    Crime Insurance ‑ Coverage is provided for robbery and safe burglary protection for loss of monies and securities. This coverage also extends to damage to the premises from an actual or attempted theft or robbery. Endorsements for Forgery or Alteration and Theft, Disappearance & Destruction coverage are not included.

 

This master policy was purchased to cover all state agencies and is currently underwritten by Great American Insurance with a coverage limit of $500,000 and a $2500 deductible applying per loss. It renews annually on November 1st.