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Complete the following assignment in groups of no more than 4.  Note the due date for each portion of the assignment and refer to your detailed class schedule for the submission requirements.

Instructions

Complete the following assignment in groups of no more than 4.  Note the due date for each portion of the assignment and refer to your detailed class schedule for the submission requirements.   Marks are allocated as indicated for each section of the assignment.  The total assignment is worth a total of 20% of your final grade, with each section worth 5% of that total.  Late submission penalties apply.

Country Hardware and Lumber

Country Hardware and Lumber is a small hardware and lumber yard located in Port Riell on the north shore of Lake Erie.  The business caters to cottagers and homeowners in the small towns and villages of Norfolk County.  The business has been owned by Donald Springer since 1968.  Don purchased an existing lumber yard and has grown the business from its humble beginnings.  The business currently earns an annual revenue of $1,860,000, which has increased considerably in the past four years since the area has been rediscovered as a vacation destination and properties are being purchased and renovated by people from Toronto.

Don was the sole proprietor and operates under the trade name of “Country Hardware and Lumber”.  About five years ago, on the advice of his accountant, Don set up a corporation for the business under 1123498 Ontario Limited. Don owns 51% of the shares in the numbered company and his two sons, Don Jr. and Allen, equally own the other shares.  The two boys, along with Don, work the business.  There are two other full time staff who work in the yard, a delivery vehicle driver, and a part time receptionist and bookkeeper.   There is also one other permanent part time worker, and in the spring, Don takes on two high school students as co-op to work the season.

The business is located on about an acre of land on the outskirts of Port Riell.  There is the main building, an 1800 square foot retail space that houses the hardware store and the office.  The main building was built in 1979 and is a concrete block, steel framed building with a flat tar roof.  The building updated its plumbing and wiring in 1997.  The building has a forced air gas furnace installed in 2010.  There are two permanent outbuildings, which are wood framed and clad, which stores the lumber and other building materials.  These buildings have electricity but no plumbing and are heated by electrical baseboard heating. In the spring Don sets up a temporary greenhouse for the bedding plants.  This is heated by electrical space heaters.  Much of the lumber, including the stone and brick is stored outside during the nice weather when the inventory is highest.  Don has no mortgage on the property but does have a $500,000 operating line of credit from the Bank of Montreal in Simcoe for his inventory.  The location of the business is 9645 Charlotte Line Road, Port Reill, Ontario.

The main building has been valued at $360,000 and each of the outbuildings at $250,000 and $190,000 respectively.  The greenhouse is valued at $60,000.  Don’s inventory runs from about $400,000 during the off season up to $900,000 during the peak months of May to July.

Country Hardware and Lumber currently have two vehicles registered to the business, a 2011 Ford Econoline van used for small deliveries and service calls.  The vehicle is painted with the company logo and trade name and is predominately driven by Donald and his two sons.  There is also a 2008 Freightliner M2 106 truck used to deliver lumber which is operated by the delivery driver.  One of the full time yard workers also helps with deliveries as needed.

Loss History

A few years ago Country Hardware and Lumber suffered a series of small thefts.  The total value of stock that was lost in any one incident was below their deductible and no claims were made, however, Donald did install security cameras and mirrors throughout the store to prevent further incidents.

In December 2008 an elderly gentleman slipped and fell in the parking lot outside the store.  The business was sued for injuries with a settlement reached of $15,000.00.

In July 2010 there was a fire in the smaller of the two lumber storage buildings.  The cause was determined to be arson although no one was ever charged.  Donald and his employees were investigated and cleared.  The total value of the loss was $658,000 for the building and stock.

The Van has had its windshield replaced three times in the past 6 years.  There has only been one collision with the delivery vehicle.  It was a single vehicle accident attributed to road conditions in January 2013. The total payout for the physical damage was $11,387.00.

Underwriting Situation

Country Hardware and Lumber has been insured for the past eight years by the local mutual company.  Their policies have come up for renewal and you have been approached by a broker partner to quote the account.  You have been asked to quote on their property insurance, their Commercial General Liability policy and the automobile policy for the two business vehicles.

Part A – Due Week 5 In Class

Complete an analysis of the applicant for these risks.  Based on the information contained in the text draft an underwriting synopsis of this risk, and indicate any concerns you may have and why. (20 marks)

Part B – Due Week 6 in Class

Complete an analysis of the property portion of this risk.  Based on the information contained in the text what information would you want to collect from a loss control inspection?  What loss control recommendations would you make?(10 marks)

Using the COPE analysis what information do you have available to you and what information would you need? (20 marks)

Part C – Due Week 7 in Class

Complete an analysis of the liability portion of this risk.  Based on the information contained in the text what duty of care would Country Hardware and Lumber owe to its customers? (5 marks)

What information would need to be collected in order to underwrite the Premises Liability portion of the Commercial General Liability policy? (10 marks)

What information would need to be collected in order to underwrite the Products and Completed Operations portion of the Commercial General Liability policy? (10 marks)

Part D – Due Week 8 in Class

Complete an analysis of the automobile portion of the risk.  Based on the information contained in the text would you consider writing this application for insurance?  Why or why not?  Detail your process in arriving at this decision?  Are there any terms or conditions you would require? (25 marks)

How to Submit your Assignment

All parts of the assignment must be submitted in class.

Grading Criteria

See mark allocation in the instructions above.

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