EIFS - Is it back?

I was rereading an old article by Ann Rudd Hickman (an author at IRMI) about EIFS and the incredible meltdown in General Liability coverage in 2003-2006. Stucco contractors performing EIFS saw rates increase 400-600% in a one year period almost driving the entire industry out of business. Now, 5-6 years later EIFS coverage is available, and while not cheap, it is affordable.

WHAT IS EIFS

Exterior Insulation and Finish Systems (EIFS) are multi-layered exterior wall systems that are used on both commercial buildings and homes. They provide superior energy efficiency and offer much greater design flexibility than other cladding products. In simple terms it's a synthetic stucco that can be easily applied and has both the advantage of longevity and insulation. For more information on EIFS and the pros and cons visit http://www.eima.com/

EIFS received a bad rap due a rash of claims a few years ago which caused insurance companies to panic and pull out of the EIFS market. Price rose and many of the smaller contractors were squeezed out of the business leaving a core group of experience installers. While insurance premiums continue to be higher than a "stucco only" contractor the price for EIFS insurance is no longer exorbitant and quite often can be included inside the General Liability policy limits.

EIFS contractors contacting my agency should plan of providing proof of certification along with references for current and past EIFS jobs. With proper documentation an insurance packet can be put together to validate the carrier extending EIFS coverage for a small additional price.

Feel free to call the agency at 719-531-7000 or visit our web sites www.drywall-insurance.com or stucco-insurance.com or EIFS-insurance.com

Martin

ACV v. Replacement Cost

We get asked a lot about the difference between ACV (Actual Cash Value) and Replacement Cost. Here are the "insurance speak" definitions from IRMI:

ACV: In property and auto physical damage insurance, one of several possible methods of establishing the value of insured property to calculate the premium and determine the amount the insurer will pay in the event of loss. ACV is typically calculated one of three ways: (1) the cost to repair or replace the damaged property, minus depreciation; (2) the damaged property’s "fair market value;" or (3) using the “Broad Evidence Rule,” which calls for considering all relevant evidence of the value of the damaged property.

Replacement Cost: A property insurance term that refers to one of the two valuation methods for establishing the value of most of the insured property for purposes of determining the amount the insurer will pay in the event of loss. It is usually defined in the policy as the cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation.

The easiest way to explain the two (for my clients) is that your home owner insurance cost is replacement cost (your $650k home built in 1930 is still worth 650k and probably more than when it was built when lumber was cheap and milk was .02 cents) while your Auto is ACV (depreciated cost).

For contractors this is important because tools have a purpose and the drill bought 2 years earlier still does the job it was bought for. Some policies have tools (and scheduled equipment - see prior post) at ACV which is a royal pain in the a$$. Imagine your frustration if the 2003 $52k skid loader is stolen and your agent (and adjuster) tell you it's only worth $23k and oh-by-the-way it now costs $75k to buy one.

Make sure your policy has replacement cost for tools and scheduled equipment. Demand it.

Inland Marine Coverage - Are your tools insured?

Are your tools covered? If someone breaks into you pickup truck and steals your tools will your insurance company pay for them and more importantly can your business survive without your tools.

Many contractors believe that their tools are covered under their General Liability policy. It's a shocking revelation when a claims adjuster informs you that tools are not covered under your General Liability policy.

Typically contractor tools are covered under an Inland Marine policy.

The definition of Inland Marine:
A group of property insurance coverages designed to insure exposures that cannot be conveniently or reasonably confined to a fixed location or insured at a standard rate under a standard form. Includes coverage for property in transit over land, certain movable property, property under construction, instrumentalities of transportation and communication (such as bridges, roads, piers, and television and radio towers), legal liability coverage for bailees, and computerized equipment. Many inland marine coverage forms provide coverage without regard to the location of the covered property; these are sometimes called "floater" policies. Inland marine coverage forms are generally broader than property coverage forms due to the relative freedom from rate and form regulation of inland marine insurance as compared with property insurance.

Contractor tools cannot be reasonably confined to one location and therefor fall under an Inland Marine policy. Tools are either classified as "scheduled" or "unscheduled". Unscheduled tools (depending of the carrier) are usually the smaller hand tools of the contractor profession. Insurance companies usually lump the aggregate amount of tools (say $3800 of miscellaneous hammers, screwdrivers, hand saws etc..) into a blanket amount, apply a deductible and either provide Replacement Cost Coverage or Actual Cash Value Coverage (see separate blog about the differences).

Scheduled items are items over a set value (for some carriers $2500). Bobcats, Dumpsters, Skid loaders, Expensive tools all are classified in this category. The insurance company only provides coverage if the item is "scheduled" (thus the name scheduled item). The contractor provides the make/model/serial number and value and the item is scheduled onto the policy. If the item is added mid-term an endorsement is issued by the insurance carrier and mailed to the contractor showing the date the item was added, the information about the item and the value.

Smaller contractors can get a BOP (Business Owner Policy) which usually allows for "scheduled" or "unscheduled" tools but larger contractors, or contractors in fields where standard carriers are unwilling to provide insurance, need to ask their agent to provide an inland marine policy to cover the tools.

Martin Burlingame