TWFG Commercial Business School – Commercial 103

Commercial Lines Basics: Commercial Property: COPE

Why all those pesky questions?

Commercial property generally refers to a business’ personal property. It can also refer to the building, if the insured owns it or is responsible for providing insurance on it. In order for a carrier to provide a quote on property, it needs to understand the basic exposures to four elements, known as COPE (Construction, Occupancy, Protection, and External Exposures). Fields on the Acord apps are designed to capture this information. Here is what is being evaluated—

  1. Construction:
  • The type of construction greatly affects the buildings performance in the event of a fire loss, or its ability to withstand wind and hail storms. The carrier is interested in both the building construction type as well as the roof. The age of building is important, as older buildings which have not been well maintained will not perform well. This is why it is important to include the dates of any updates when you are submitting buildings 20 years old or older.
  • Frame: Typical wood construction, including wood frame with stone, brick or stucco veneer.
  • Joisted Masonry: A mixture of wood and masonry construction, usually only seen in older structures from the 40’s and 50’s. The walls are masonry or solid brick with wood joists supporting floors and roofs.
  • Non-Combustible: Any type of non-combustible (not wood) non-masonry construction. The examples include metal shop buildings with steel framing, mini-self-storage units, and auto-body shops.
  • Masonry Non-combustible: Exterior walls are masonry (solid masonry, concrete, solid brick) but the floors and roof are made of metal or some other non-combustible material.
  • Fire-resistive: may be solid masonry for all components or a mixture of solid masonry and heavy, protected steel, such as a high-rise. Depending on the fire-resistive rating of the materials, these structures are classified as modified non-resistive (1 hour rating) or fire-resistive (2 hour rating).
  1. Occupancy:
  • How the building is occupied is important in determining the overall susceptibility to loss. For example, if a building has primarily office occupants, than it would have a high volume of combustible (burns easily) materials such as papers, files, furniture, office machines. The occupancy can also increase the chance of loss, as the activities taking place inside the building may represent an increased hazard. The common example here would be a restaurant. Cooking, especially deep frying, presents a significantly higher firehazard than an office occupancy. Therefore, the Acord questions, such as whether or not the building is sprinklered, become very important.
  1. Protection
  • Protection refers to fire protection. Specifically, how far are the closest fire hydrant and fire departments, what is the Property Protection Class (PPC) rating, is the property sprinklered. The better protected the building, the lower the rate that the insurance carrier can provide.
  1. External Exposures
  • External Exposures refer to the building’s surroundings, and how that might affect the risk of loss. For example, a metal shop building located in a field full of high grass would represent a greater risk to fire loss than one located in a gravel paved lot.

When you understand the exposures that the carrier must consider before offering a rate, then you get a better feel for why the underwriter may be “asking so many questions.” Your understanding should lead you to gathering information up front, in order to shorten the time it takes between submission and quote.