Purpose

This assignment is intended to help you learn to do the following:

Recommend an appropriate surety bond for an individual or organization.

Evaluate the effect of an ISO Earthquake and Volcanic Eruption Endorsement after a loss.

Communicate analysis and/or conclusions concerning property and/or casualty insurance policies, coverage, limitations, and/or issues.

Action Items

Answer the following questions in your own words in a Word document.

1. From his military experience, Bob is familiar with all types of demolition work. However, his primary recent experience is in the use of explosives. He wants to put his demolition experience to use by starting his own small contracting firm. Bob is bidding on a contract that includes the use of explosives to demolish an abandoned chemical plant located beside a small river. In a conference with the building's owner and her attorney, the discussion focuses on required surety bonds for the project.

a) What concerns would a surety underwriter be likely to have in providing Bob with the bonds needed for this project?

b) Describe the government program in which Bob might take a part to help him get the bonds necessary to take on the demolition work.

c) Given the contract that Bob hopes to win, what kinds of contract bonds is the building owner likely to require of Bob?

d) Given the type of work Bob plans to undertake, describe two license or permit bonds Bob is likely to be required to provide.

2. A commercial building valued at $3,000,000 was insured on a specific basis under the ISO Earthquake and Volcanic Eruption Endorsement (Sub-limit Form) for a limit of $1,000,000 with a 5% deductible.

a) An earthquake caused damage valued at $600,000. How much should the insured be able to recover for this damage?

b) 48 hours later, an aftershock caused additional damage valued at $50,000. How much should the insured be able to recover for this damage?