Commercial Property Case -

The objective of this case is to determine the insurance needs and coverage for a business enterprise. As we see in the coverage in the text, there are limits and exclusions that various commercial insurance has and so a firm buying insurance may experience "holes" in their coverage. An insurance broker should be making sure there are no holes.

The Firm's Description: Campbell Stationery produces 275 proprietary and private label paper products, including envelopes, pads, notebooks, index cards, desk pads, add rolls and so forth. It has sales in the order of $200 million a year. It is quite profitable.

Workforce: The 225 production and warehouse workers are unionized. There are 6 people in the management group. The corporate directors and officers do not work at this location. The workforce is comprised of about 40% female and 60% male employees. Some of the workforce are required to wear steel-toed shoes and some are required to wear hearing protection; some wear the required safety items and some refuse. The ages of the employees range from 19 to 64, with some workers having 40 years with the company. Finally, sometimes a worker's family members may stop by to drop off a lunch or pick up keys, etc.

Location: There is a single location in a rural area. The plant is basically on a single level with 70,000 square feet of space. It sets on a low flat field along the Connecticut River, which floods every year but has never come into the plant, though has covered the parking lots. There is a railroad spur to the plant and employees and any tractor trailers* must cross the mainline tracks to get to the plant. (There are no lights or gates on the railroad tracks.) The state requires workers compensation insurance but not disability insurance. Located in New England, there is often significant snow and ice during the winter.

*The company owns no tractors or trailers.

Physical Plant: Inside the plant, there are usually about 100 pallets of finished product and about the same number of pallets with various raw materials at any one time. These pallets of materials are usually stacked two or three high for a total of about 15 feet. A clamp truck to carry rolls of paper to the processing machines and a few lift trucks to move product all about the plant. There are 40 large and small machines used to process the paper, cut it, do extra processing, and pack the final product. All machines have lots of fast moving parts. The location has its own boiler. Most of the machines have significant electrical and mechanical components, with which workers are often close to in their work. The plant operates 3 shifts, though there are only 15 people, including one supervisor on the 11 pm to 7 am shift. Most light is provided by overhead lighting. There are also sprinklers and smoke detectors throughout the plant. Portions of the plant are long-term storage of old equipment and chemicals. These areas are seldom visited, even for the annual audit. There is a lunch room, though some workers take their breaks at their work area.

Office: Management has an attached, separated part of the plant is an office suite. There are office laptops, which may be taken home. One person brings in his own laptop sometimes. Fred is a supervisor and a hunter; he has a rifle in his truck, as do a couple of the employees in the union. Rita has her purse in the drawer of her desk and usually has some checks in the purse. Chris, though married, has had an affair with one of the production line workers, but that ended recently. The manager has personal use of a company station wagon, which is taken by the custodian each morning to get the mail (which is not otherwise delivered to the plant.) Finally, each week day, various vendors' sales people are likely to show up unannounced and most may be taken out into the plant.

Process considerations: Given the product line of the company, there is often paper dust in the air at some locations within the plant, there is scrap on the floor in some locations for up to an hour at a time. Some processes use stapling equipment. Several processes use glues and hot melt (heated liquid wax-like material that hardens when cooled and holds pads together.) Most machines need regular oiling. Most of the packing is done by hand and the motion is very repetitive. The firm had long term contracts with all the suppliers of the significant inputs. The contracts with customers are usually on an annual basis. Finally, the business is somewhat seasonal with the largest demand coming in the July-September period.

Questions to address:

1. What coverages are needed at this company? List anything you think might apply.

a. flood coverage (example)

2. What exposures do you think will have "long tails" for insurance coverage? (Remember, a "tail" refers to the claim for loss or damage will be entered long after the end of the policy period in which the harm was actually done.)

3. What loss control features would you suggest?

a. put up lights at train crossings. (Example)

4. Explain how this firm might use self-insurance and excess insurance.

5. Why is a CPP appropriate for this firm?