A Moment of Clarity

Discover some of the tools we offer to help you achieve contract certainty with your clients.

"Contract certainty" may be a buzzword, but it's one of the most important ways we can work together to protect your clients. While no one wants to suffer a loss, they do happen. When a claim is filed, one thing we want to prevent is a misunderstanding arising with respect to coverage or deductible level. To ensure your client has a positive experience, it's important that all parties are clear on the policy language ... before a loss occurs.

A couple of the most common examples of misunderstanding center around valuation and percentage deductibles.

Understanding Values

One common area of confusion concerns the reporting of values. The valuation section of the Affiliated FM policy clearly defines how values are applied; any special valuation must be done before a loss takes place. Take the example below, which outlines our standard property valuations.

The following property, unless endorsed, will be valued at the time of loss as follows:

  1. Stock in process: the value of raw materials and labor expended plus the proper proportion of overhead charges.
  2. Finished goods manufactured by the Insured, and other goods sold awaiting delivery: the regular cash selling price at the location where loss occurs, less all discounts and charges that the merchandise would have been subject to had no loss occurred.
  3. Raw materials, supplies, and other merchandise not manufactured by the insured: the replacement cost.

We can work with you to help your client understand how the value will be calculated in the event of a loss. If your client wishes to modify any values, our production underwriters will work with you to ensure the contract corresponds to the desired coverage.

Another area that should be understood is what a percentage deductible means in terms of actual dollars. If, for example, the deductible for an earthquake loss is shown as 5 percent, that percentage, in and of itself, might not seem substantial. However, that could translate to US$10 million, when calculated against a location valued at US$200 million. Will the client be prepared for that? We believe it’s important to consider what percentages mean in dollar amounts. That way, all parties know what to expect, should a loss occur.

Under the language of the Affiliated FM policy, you’ll know up-front exactly what level of coverage and specific deductibles are in place for certain types of losses. To further support our commitment to clarity, we've developed several tools to help you explain to your clients the intent and scope of our policy.

The wording in the Affiliated FM proVision policy includes definitions that clearly describe the intent of specific coverages. For example, wind and/or hail and flood are clearly defined, as outlined in the example below.

Wind and/or Hail loss/damage is caused when water vapor, spray not from flood, mist, rain, sleet, hail, snow, ice, sand, dust or any other substance, material, object or thing is carried, blown, driven or otherwise transported through the air by wind onto or into a location.

Flood is loss/damage to property caused by any surface water; tidal or seismic sea wave; tsunami; storm surge, including but not limited to the rush of water over or onto land from any body of water.

Policy Commentary and Workshops
To further illustrate the intent of our policy, we offer policy commentaries, which take language directly from the proVision policy and offer simple explanations of the clauses and definitions. The policy commentaries are structured to make finding a specific term, clause or definition quick and easy.

Affiliated FM also regularly conducts policy workshops. To learn more or attend a policy workshop, contact your production underwriter to discuss Affiliated FM's focus on ensuring contract certainty. Together, we will work with you to make sure your client knows, prior to the loss, how our policy will respond to get them back up and running as quickly as possible.

Note: This information does not constitute, replace or supplement policy language. The liability of Affiliated FM is limited to that contained in its insurance policies.