Survey of Property

All properties insured by the State Insurance Fund are surveyed to determine condition, correctable hazards and value. The appropriate official of the insured will be contacted to briefly outline the purpose and procedure for the survey. A DORM Loss Control Specialist will then physically inspect, measure, value, and photograph each building/structure. It is important that access be given to each building and any available blueprints. The specialist will provide the appropriate official a weekly summary of survey work until the work is complete. At completion of the survey, the specialist will make recommendations for corrective actions. The insured should provide a status on recommended actions within thirty days.

The recommendations made by the Loss Control Specialists are placed in one of the following action categories. 

1. Mandatory (M) - A hazardous condition is an immediate, serious threat to a property.  Immediate, corrective action is necessary.
2. Needs Attention (N) - Conditions should be corrected as soon as possible, such as housekeeping issues.
3. Advisory (A) - (Colleges and Universities only) - Conditions should be considered for fire and life safety improvements.

Certification of Properties

Pursuant to §41-15-4(b), Code of Alabama 1975, "the officer or person having charge by law of insuring any public building shall annually certify to the Department of Finance the description and value of all buildings and equipment under his supervision or control on forms prescribed by the department for the purpose of showing the character of the risk and determining the rate of premium. No coverage shall be issued unless such certificate is on file in the office of the Department of Finance or the Director has waived, in writing, the filing of the same."

Property Certifications are mailed in May of each year. The Insured is requested to review the list of properties, make changes, deletions, or additions, and return the certification to DORM. The Certifications must be returned to DORM prior to June 30.

Significant value changes. Whenever the certification process uncovers the need for significantly larger amounts of insurance, the insured should request the SIF to increase the amount of insurance immediately. Do not wait for the October 1 renewal date.

Schedule of Properties

The Property Schedule is the official listing of all property insured for the fiscal year. Changes certified by the insured are included. The schedule is mailed to each insured just prior to October 1 of each year. The Property Schedule is an important document, and the insured should keep it with other insurance records. Any changes during the year should be reported to Risk Management in writing. An endorsement to the Schedule will be produced and mailed reflecting these changes. Each property is identified by agency, division, location, name of the building, item number, type of construction, year constructed, percent of insurance, building value, building insured value, contents insured value, and premium before and after discounts.

Remember, all new or increased values must be reported to the Division of Risk Management for proper coverage.

Requesting Coverage

Requests for coverage on property can be made by telephone, email or fax. However, the telephone request must be confirmed in writing by fax, email or regular mail, along with a properly completed Self-Inspection Report & Property Insurance Request. This form can be downloaded from the forms list above and completed on your screen. Once completed, it can be faxed, emailed or mailed to us to initiate coverage. It is important that the name and occupancy of the building be listed on the "Building Name" line. For example, John Doe High School, Smith Hall, contains the gym, cafeteria and classrooms. The information provided is used to establish a tentative rate for premium until the property can be surveyed. A survey will be carried out as soon as a surveyor can be scheduled in your area.

Available Coverage

The State Insurance Fund provides the following coverages::

Replacement Cost Value Coverage (RCV)

Replacement cost insurance may be provided to an agency provided all owned buildings and contents are insured at 100% of their replacement cost, as established by DORM. These values must be agreed to by the State Insurance Fund and the insuring agency via a written Statement of Values. Coverage is capped at 115%. These building and contents values will be automatically adjusted annually, at renewal date, by an appropriate valuation index utilized by the State Insurance Fund.

DORM encourages Replacement Cost Value Coverage to avoid the insured having to fund the difference between depreciated value and replacement value when a loss occurs.

Stated Amount Coverage (STA)

Stated Amount Coverage provides for a specified amount. This endorsement is typically used for an unusual or valuable piece of property that does not fit standard descriptions and, instead of declining, retains its value. Stated value coverage pays to repair or replace the insured item, whichever is less, at the time that a claim is filed.

Salvage Value Coverage (SAL)

Buildings that are vacant for more than 60 days or that are in overall poor condition, as determined by DORM,  will typically be covered under salvage value. Covered losses under salvage value will be paid at 5% of the insured building value less any applicable deductibles.

Builders Risk Coverage (RSK)

From time to time many of you require insurance on buildings in the course of construction.

There are two fundamental situations you will encounter when a new building is being constructed or an addition is being added to an existing building.

1. The SIF Insured is managing the construction.

   In this instance there will normally not be a general contractor involved, although sub-contractors may be engaged for various elements of the project. The State Insurance Fund will normally provide the Builders Risk Insurance to cover the building under construction as well as on-site building materials. DORM will provide this coverage for projects in the amount of $5,000,000 or less.  At the time of project completion, upon your advice we will integrate the insurance into your permanent insurance program.

   SIF will not amend its form to cover the interest of sub-contractors. SIF will also not waive its subrogation rights as they apply to any entity, including sub-contractors. Subs normally carry liability insurance that protects them adequately, although you should assure that they do by asking to be named as an additional insured.

   Contracts that you negotiate for construction, where you are managing the job, should include consideration of the above comments, and therefore, should not agree to provide insurance covering the interest of others.

2. The construction has been assigned to a general contractor under written contract.

   Normally, in this instance, the general contractor will also engage sub-contractors.

   The State Insurance Fund will not provide the Builders Risk Coverage for this situation, because:

   • The ownership interest in the property is primarily that of the general contractor until the construction is complete and the owner takes possession. Therefore, the SIF statute and SIF regulations provide for only marginal involvement.
   • The project and all activities surrounding the construction process are under the control of the general contractor. The SIF insured does not control job-site activities.

The contract for building construction should not provide for the SIF insured to arrange insurance; rather the general contractor should have that contractual obligation. Further, even though the financial interest of the SIF insured may be nominal or non-existent, the insurance should cover the interest of the owner, whatever that interest is. The contract should not agree to any waiver of rights against the contractor or sub-contractors should there be damage to the property.

These procedures are somewhat at variance with past practices of SIF, when we have sometimes insured under the second situation outlined. The reinsurance terms under which the SIF operates, as well as current operating practices, require that we respond to insurance needs for buildings in the course of construction as outlined.

IMPORTANT: Limits of liability must be job specific on large projects, $1 million and up, and limits should be as high as the building value.

Call 334-223-6120 at DORM if you have a question.

Electronic Data Processing Coverage (EDP)

Computers and associated electronic equipment, interconnecting cables, media and data restoration costs can be insured on a "replacement value" basis by using our EDP endorsement. In the past, this equipment has been insured as contents and coverage was very limited. DORM encourages insureds with substantial EDP values to insure on this basis. The cost differential is minimal.

Transit Coverage (TRA)

Property owned by a State Insurance Fund policy holder can now be insured while in transit from one location to another. This coverage can be provided in any amount required.

Extra Expense Coverage (EXP)

This coverage can be used to pay for extra expenses incurred as a result of a covered loss under the State Insurance Fund. An example of this would be renting a temporary building after an insured building is damaged or destroyed by a covered peril. This coverage can be provided in any amount required when higher limits are specifically requested.

DORM encourages this coverage to avoid substantial uncovered losses by SIF insureds. We will be glad to discuss the need, values necessary, and costs.

Protection & Preservation of Property Coverage Endorsement

In the event of actual or imminent physical loss or damage covered by the policy, the expenses incurred in taking reasonable and necessary actions for the temporary protection of property is automatically covered.

Ordinance or Law Coverage

In the event of insured loss to an insured building covered by Blanket Replacement Cost, this insurance will pay for the following:

• Loss to the undamaged portion of the building caused by enforcement of any ordinance or law in force at the time of loss that requires the demolition of parts of the same property not damaged by an insured peril, and/or regulates the construction or repair of buildings.
• The cost to demolish and clear the site of undamaged parts of the property caused by enforcement of buildings, zoning or land use ordinance or law.
• The increased cost to repair, rebuild or construct the property caused by enforcement of building, zoning or land use ordinance or law.

Loss payable shall not exceed 10% of the loss otherwise payable under this policy before the application of this ordinance or law coverage.

Deductible Endorsement

The deductible specified below shall be deducted from property claim settlement.

For all covered perils, a minimum of $5,000* deductible shall apply per occurrence per scheduled line item except:

• For the peril of earthquake, a $100,000 deductible shall apply per scheduled line item.
• Any catastrophe event for which the Insurance Services Office (ISO) issues a CAT Bulletin, a $7,500 deductible shall apply per scheduled item.

*(Please refer to your property schedule for current deductible.)

Special Deductible Endorsement

The occurrence deductible is changed to a higher deductible than $5,000 per occurrence per scheduled line item and applies to each covered loss.
This endorsement is used for entities that have deductibles greater than $5,000.
For the peril of earthquake, a $100,000 deductible shall apply per scheduled line item.

Miscellaneous Property Coverage Endorsement

It is agreed that when Miscellaneous Property is a scheduled line item on the insurance schedule, with the total value of all such items stated under each location, coverage will apply according to the following terms:

Definition. Miscellaneous Property is owned free-standing, non-mobile, anchored, real property not intended for occupancy and not connected to any utilities with a replacement value of $10,000 or less. 

1. The limit of coverage for any single item shall be $10,000 (including contents) and will not apply to items
   which are otherwise excluded from coverage or required to be scheduled under another endorsement.
2. The deductible applicable to this policy will apply to Miscellaneous Property separately for each insured
   location on a per occurrence basis.
3. The limit the SIF will pay for loss or damage to covered property, in any one occurrence, at any one
   location is subject to the terms and conditions of the policy.
4. Adjustments of claims under this endorsement will be based upon replacement cost.

Equipment Breakdown Coverage (Boiler and Machinery)

The State Insurance Fund annually obtains a policy that provides boiler and machinery coverage for SIF clients. Currently, Travelers Insurance Company provides inspection, loss control and claims services.

The covered perils include mechanical breakdown, electrical arcing, explosion, electrical burnout, collapse, bulging, cracking, splitting as well as other perils.

Covered equipment includes air conditioning and HVAC system, transformers, electrical switchgear and panels, motors, pumps, fans, refrigeration equipment, steam boilers and other pressure vessels, air tanks, and even office equipment such as copiers and facsimile machines.

Other coverages may also be available. Contact a DORM underwriter to inquire about special types of coverage.

Your Responsibility Regarding Boilers & Pressure Vessels

The State of Alabama passed The Boiler and Pressure Vessel Safety Act (Alabama Code, §25-12-1, et seq) in 2000 and the rules and regulations were implemented in February 2004. Basically the Act requires all boiler and pressure vessels (fired or unfired) to be inspected with some exceptions. The Travelers Insurance Company is making the required inspections as the Act requires the insurance carrier to complete the inspections and submit reports to the Alabama Department of Labor before an operating certificate can be issued by the State. The following is a list of jurisdictional objects that requires inspections but is not limited to them:

• High Pressure Steam Boilers (over 15 PSI)
• Low Pressure Steam Boilers ( 15 PSI or less)
• Hot Water Heating Boilers
• Hot Water Supply Boilers
• Fired Storage Water heaters 200,000 BTU/HR and over or 120 gallons and over (gas or electric)
• Unfired Pressure Vessels 5 cubic feet or more (Air Tanks do not require an inspection until they exceed 16 cubic feet or 120 gallons). Examples are hot water tanks, heat exchangers, DA tanks, etc.

If you have a question regarding the jurisdictional inspections, you should contact DORM as the required operating certificate is your responsibility.

Automatic Sprinkler Systems

Certain properties insured by the State Insurance Fund are protected by automatic sprinkler systems. In some cases, the existence of these systems is not currently indicated in the schedule we provide our SIF clients.

Sprinkler systems are important fire protection and fire safety devices. Our schedules and records should indicate each location where such a system exists. Consequently, we ask that this office be notified of those buildings that are protected 100% by sprinklers. The SIF provides substantial rate credit for such systems and we need to assure that these credits are properly in place. Credit is given for automatic sprinkler systems if (a) it is properly installed throughout the building, (b) it is under contract to be inspected and certified each year, and (c) this information is properly reported to DORM.

All sprinklered properties must have a maintenance contract with a certified sprinkler service company. A copy of the contract along with a copy of the inspection report on each building should be sent to this office with the certification which is due back to DORM before June 30th each year.

Individual Risk Premium Modification (IRPM)

The State Insurance Fund rates properties similarly to a commercial insurance company. An initial rate per $100 coverage is developed for each property from industry published rates. This rate is called a base or "manual" rate. To this rate, certain discounts are applied across-the-board as mandated by statute. After this, an additional modification is applied to each account. This final discount is called the Individual Risk Premium Modification (IRPM) and can significantly affect the premiums that an agency pays for its property insurance.

When a Loss Control Specialist surveys your agency's property, hazardous conditions may be observed which place the building at reduced or increased risk for loss. Negative conditions, if found, will be brought to the attention of the DORM contact person in your agency along with suggestions for remedy.

Specific areas included in the survey are:

• Overall condition of the premises
• Potential for catastrophic loss
• Susceptibility and damageability of the property
• Public and private protection provided

At the end of the survey the State Insurance Fund will examine overall factors such as:

• Management
• Values (proper amounts of coverage)
• Attitude and cooperation
• Premium payment history

From the above, the State Insurance Fund will develop a single IRPM factor that will be a credit, debit or break-even, and this factor is then applied to develop final invoiced premiums. These credits or debits can cause significant premium differences for your agency. Our Loss Control Specialist will discuss this program with you prior to their survey and explain how it can work to your benefit.

Building Programs

Each year hundreds of millions of dollars in new construction will be planned. Part of this planning process might well be a review by Risk Management as to protection and construction types. The type construction selected for renovations should match the construction grade of the existing building to avoid increases in premium on that structure. The following table reflects various construction types, which have been used in DORM since 2011, and are consistent with private sector construction data.

The Insurance Services Office (ISO), which supplies predictive risk scoring tools to the insurance industry, developed the construction classification system to rate fire-resistive qualities of different construction types. These classes, defined by type and percentage of materials used, determine how long a supporting structure can withstand exposure to fire without collapse.

Reporting Property Claims

Property losses should be reported on a “Property Loss Notice” form which can be completed online. If internet access is not available, you can call to request for a form to be mailed. Our claims staff prefers that you call first in the event of extensive property damage. An in-house adjuster will determine if your claim needs to be inspected by a field adjuster or if it can be handled by mail.

The following is a checklist of information obtainable from your property schedule which is requested when reporting a claim:

• Name of building
• Item number on insurance schedule
• Date of loss
• Cause of loss
• Estimated Extent of damage ($)
• Contact person, phone number and  email

In the event of an emergency, you should make any necessary temporary repairs needed in order to protect your property from further damage. For example, if wind damages a portion of your roof, you should immediately patch it to protect the interior from water damage. Do not dispose of damaged equipment before our adjuster has inspected it. An adjuster will work with you on making final repairs and provide continuous instruction to you regarding completion of your claim. Finally, the SIF may require a Proof of Loss from you which is a document that signifies agreement of the settlement amount.

Frequently Asked Questions and Answers

What deductibles are available?

We offer our policyholders a minimum of $5,000 deductible per line item per occurrence; however, higher
deductibles are also available with a discount in premium. (Please refer to property schedule for current deductible.)

How do we secure against burglary?

Our policy does provide coverage for burglary provided that there are visible signs of forced entry on the exterior of the building.

Burglary and vandalism claims are increasing at an alarming rate each year. Make sure all doors and windows are locked and secure at the close of your business day. You may request your local police department to check the premises frequently, especially when your business or school is closed for several consecutive days. Outdoor lighting will also protect the premises.

Is property belonging to my employees covered while at the workplace?

No.

Do I make a claim with the SIF even if someone else is responsible for my loss or damage?

You may claim with the SIF your loss or damage even though another party is responsible. Often, the process of collecting from the responsible party is lengthy. The SIF will pay your claim and secure a Loan Receipt from you. A Loan Receipt states you have received the settlement amount from the SIF and the SIF is now entitled to collect on your behalf. The SIF will then pursue the responsible party for reimbursement of the settlement amount. This process is called subrogation.

If I have the same property insured with the SIF and another insurance company, in the event of a claim, can I collect from both insurance companies?

No. The two insurance companies will prorate or "share" your loss so that you will be reimbursed the amount you normally would have if you had only that coverage with one company. All insurance policies have a principle of indemnity clause which basically states you cannot profit from insurance. If one company pays your loss in full and then realizes you had coverage with another company, the company which paid in full, can collect its "share" from the other insurance company. This process is called contribution.

What should I do if my property is recovered by the police after the burglary claim has been paid?

You should contact the SIF immediately. We will have an adjuster inspect the recovered property and if damaged, determine its value. If you wish to keep the recovered property, the adjuster will negotiate its value with you and you will need to reimburse the SIF. If you are not interested in keeping the property, we will take possession of the property and attempt to collect as much as possible for it. Salvage value might also exist in property damaged by lightning, wind, water, etc. Often, the amount of the repair bill is reduced by the salvage value of the damaged property.

What properties can/should be insured?

Property paid for in whole or in part by State monies. Properties that are "unreasonably dangerous" or otherwise lacking in insurable value cannot be insured. Leased or rented property can also be insured, if required by the lessor.

What constitutes contents?

Moveable property which is not built in or attached to a building. This does not include equipment that services the building such as fire extinguishers, cooking and laundering equipment, etc.

When should a new property or an addition to an insured building or contents be reported for coverage?

As soon as it has been accepted in whole or in part as your responsibility, unless it fits the definition of "miscellaneous property".

When should the State Insurance Fund be notified about a deletion of a property?

As soon as the insured no longer owns the property by selling, removing the property or assigning the property to another agency.

Does the construction of a building affect the rate?

Yes. We can offer advice on how different kinds of construction affects the cost of insurance from SIF. (See also the "Building Programs" section in the Handbook.)

What do I do when I have a Boiler & Machinery claim?

Call our office (334) 223-6146 and give us the name of the building, the date of loss, a brief description of the damage, approximate extent of damage and a contact person and phone number. We will immediately contact the insurance carrier who will contact you to adjust your claim.