Quick Buys Inc.

 

Case Study Project

Prof. Atkinson, RMIN 5100, Fall 2016  

Dylan PatelAustin CainDhruv Patel

Sanghoon LeeJimmy Portigue

Joseph Kim         

Table of Contents Description of Organization....................................................................          Operations........................................................................................

Location............................................................................................Building.............................................................................................Premises...........................................................................................

Property.............................................................................................Customers..........................................................................................Employees…………………………………………………………………

Loss Experience........................................................................................

Loss Exposures.........................................................................................

Existing Insurance..................................................................................... Property Liability General Liability Commercial Auto Endorsements and Exclusions Umbrella    

Existing Loss Controls..............................................................................

Insurance Recommendations...................................................................

Non-Insurance Method/Recommendations..............................................

Appendices..................................................................................................Risk Management Questionnaire…………………………………………Personal Property Calculations…………………………………………...A.M. Best’s Insurance Report……………………………………………..

Quick Buys Inc:*Please Keep in mind its one individual property/store and not all of them, but the coverages, limits, exclusions, endorsements, and property types and many

other things are very similar.

Operations1. Quick Buys Inc is a privately incorporated convenience store chain

and also is franchised to a handful of other stores. It is located in rural Southwest Georgia. For the scope of this project, only the first party operations will be examined. Quick Buys Inc has 10 locations where 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 offer deli, 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 coffee machines offering a small variety of carbonated beverages. Every location also includes a hotdog and nachos station. Overall, Quick Buys offers a very 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.

Location2. Operations are centered in southwest Georgia, in the City of Cairo.

The location the premises being examined in our project is 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 emergency it could possibly be 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 often is on the patrol route of City and County police. This greatly reduces the liability of theft.

Building3. All of Quick Buys Inc store locations are Joisted Masonry

Construction with glass windows on one side. Some locations under the 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 diesel is spilled. In the event of a spill, there are set procedures implemented to prevent fires.

Premises4. 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 complex and 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.

Property5. 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.

Customers6. 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 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,

Employees7. 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

General Liability Form: Businessowners Liability 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.

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 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 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 excludedThe 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 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

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.

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.

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:

Introductory Section 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

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:

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

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.

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.

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.

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.

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.

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.

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:         $1,000,000B.     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 activeWar 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.

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 conditionsThe 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 exclusionThe 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:

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 PROPERTYo   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 additionso   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 COVEREDo   Aircraft, autos, and all vehicles subject to DMV registrationo   Money and securities UNLESS§  Optional coverage for money and securities or employee dishonestyo   Contraband, or property in the course of illegal transactionso   Land, crops, lawnso   Outdoor fences, radio antennas (and  accompanying equipment), signs not attached to building trees, shrubs, plants UNLESS§  Outdoor prop coverage ext. or Outdoor signs coverageo   Watercraft·       COVERED CAUSE OF LOSSo   Risk of direct physical loss unless it is excluded in section B or limited  (to follow)·       LIMITATIONS

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 unauthorizedo   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 vandalismo   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 instrumentso   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 COVERAGESo   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 pluso   The deductible applicable to loss or damage·       Does not apply to the removal of the following:o   Extracting pollutants from land or watero   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 coverageo   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 movedo   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

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 expansiono   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:

§  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 opso   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 premiumCollision $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

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

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.

------Insurance RecommendationsQBI 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/RecommendationsQBI 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,

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.

-----

(this is room for the questionnaire) -joseph

----Personal Property Value EstimatesDescription 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

Safe 1 $3400 $3400

Cappuccino/Coffee maker 1 $1600 $1600

Coffee warmers 2 $225 $450

ATM Machine 1 $2500 $2500

Hot food merchandiser 2 $1200 $2400

Ice merchandiser 2 $2000 $4000

Pastry merchandiser 1 $400 $400

Freezer- 3 door 1 $7200 $7200

Shelving (singles) 50 $150 $7500

Trash containers 2 $250 $500

Computers 1 $1500 $1500

Bulk storage shelf 1 $3000 $3000

Totals $52,600

----

A.M. Best Insurance Report

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

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 from possible 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.

            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

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-exposureshttp://louisianarecord.com/stories/510583748-shell-gas-station-sued-for-allegedly-providing-bad-fuel-that-damaged-vehiclehttp://www.nacsonline.com/YourBusiness/FuelsCenter/Basics/Articles/Pages/Bad-Gas-What-Is-It-and-How-Can-You-Avoid-it.aspx#.VxXGTfkrLcshttp://www.nacsonline.com/Research/FactSheets/Motor%20Fuels/Pages/GasolineTheftatConvenienceStores.aspxhttp://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!2m2!1d-84.2056757!2d30.9014029http://www.nfpa.org/research/reports-and-statistics/fires-by-property-type/business-and-mercantile/fires-at-us-service-stationshttp://www.miamiherald.com/news/local/community/miami-dade/article1978643.html

http://www.wsvn.com/story/30961324/car-drives-into-fort-lauderdale-convenience-storehttp://www.filerins.com/business/service-station-insurance.aspxhttp://www.encon.ca/English/resources/ClaimsExamples/Documents/Construction/Pollution_Liability_and_Cleanup_Costs_Insurance_for_Storage_Tanks.pdf

http://www.appraisalinstitute.org/assets/1/7/18gasstationvaluation.ppt

http://www3.ambest.com/ratings/entities/CompanyProfile.aspx?ambnum=2012&URatingId=2711551&bl=0&AltSrc=9&PPP=&AltNum=0&Ext_User=&Ext_Misc=&Portal=0&Site=

http://www.iii.org/article/does-my-business-need-terrorism-insurance