Case Studies

Case Studies

Bon Jour Bakery

The Bon Jour Bakery, established in 1975, seeks a loan to expand to serve breakfast and lunch and to add state-of-the-art equipment. Finding an excellent credit history and Certificate of Insurance, First National extends the loan.

Six months later a fire severely damages the 60-year-old building housing the bakery. Updated town codes require demolition and new construction, costs excluded under the bakery’s property and casualty insurance policy – an exclusion not listed on the business’ Certificate of Insurance.

Bon Jour Bakery declares bankruptcy and defaults on its loan.

My Favorite Dinner Corp

The My Favorite Diner Corp has a very good insurance policy on their business. They have a full sprinkler system which was originally installed to reduce any losses from a potential fire due to their cooking and deep fry operations. The cleaning crew accidentally break a pipe. Luckily, there was minimal damage but repairing the system will be a cost they can’t afford during their slow time. The owners decide to wait to repair the system until after the holiday season when they historically get a big bump in sales.
 
Unfortunately, there is a fire from the operations that shuts them down for months, right in the middle of their holiday season. The insurance company does a full in-depth inspection and find out that the sprinkler system was not working. The policy has a warrantee that the building has a fully operational sprinkler system. This becomes an uncovered claim for both the fire damage as well as the business interruption claim.  

Had the policy listed the lender properly, the same insurance policy would have paid the lender the balance of the outstanding loan! 

Nickie’s Nice Fashions

Nickie’s Nice Fashions is a manufacturer of your women’s stylish clothes and accessories. 100 percent of their goods are manufactured overseas and imported. Nickie’s purchases an Ocean Cargo policy for the imported goods. A large shipment arrives and when the three containers are opened at the warehouse it is determined that there is massive damage. The insurance for the goods while on water, in transit over land to the warehouse and in the warehouse is written by 3 different insurance carriers each pointing the finger to the other carrier. 

By simply switching to a “Hybrid” policy written by one carrier on a “Stock Thru Put” eliminates the fighting, allowing your borrower to make the claim and pay off your loan.

Summary

Rivers Insurance Group will provide lending institutions with the expertise to ensure they are not exposed to the unlisted exclusions, limitations and endorsements that are hiding in every insurance policy. We will review a borrower’s insurance contract, including the schedule of coverage (exclusions, limitations and endorsements) to minimize your exposure. We also will review and ensure that policy wording provides you with maximum protection.

We review the borrower’s policies to ensure they meet the insurance requirements identified in step #1 and conform to the requirements of the loan. Insurance Certificates alone do not provide all the facts or policy limitations and exclusions that can result in a borrower’s policy not conforming to your customized loan requirements, leaving your institution exposed.
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