COMMERCIAL REAL ESTATE

1. COMMERCIAL REAL ESTATE

2. Our Market • Individuals or business organizations that own premises, buildings and related structures for the principal purpose of leasing or rental of space for occupancy as offices, retail, service, light manufacturing or industrial and warehouse uses.

3. Eligible Risks • This classification is broadly described as “Owners of non-residential buildings primarily engaged in the leasing and/or rental of buildings to others.” SIC Code 6512. This SIC code includes a wide range of business. Farmers is only interested in the non-residential buildings found on the next screen.

4. Eligible Building Types • Office Buildings • Retail Shopping Centers • Manufacturing, Industrial, Assembly, Processing or Service Buildings • Warehouses, Private Commercial • Mixed Occupancies – Office, Retail, Light Manufacturing, Industrial, Assembly, Processing, or Service Buildings

5. Office Buildings • Office Buildings are usually divided into smaller units which are rented or leased to a tenant(s) or lessee(s) for their occupancy and use as private offices or work areas including lobbies, conference rooms, storage and restrooms. A snack bar, sandwich shop, or cafeteria may be present.

6. Retail Shopping Centers • We are interested in: • Buildings leased or rented to, and occupied by one or more retail stores and/or shops each of which sell a single product line. • Restaurant buildings or service type occupancies. • Adjacent parking lots maintained for the exclusive use of the customers and employees.

7. Light Manufacturing, Industrial, Assembly, Processing or Service Buildings • Farmers desires buildings leased and occupied by one or more businesses engaged in light manufacturing, industrial, assembly, or processing activities. Service type occupancies are also permitted.

8. Light Manufacturing Means: • Light manufacturing is defined as those manufacturing, industrial, assembly or processing operations that do not require open flame, high heat, furnace, foundry, or smelting processes to cast, mold, form or extrude metals or plastics.(Low temperature plastic extrusion or molding is acceptable.)

9. Mixed Occupancies • Farmers is interested in the following types of occupancies/operations: • Buildings leased or rented and occupied by two or more businesses for office, retail store, or for manufacturing, industrial, assembly, processing or service purposes. • The occupancies must qualify under the rules of the individual industry profiles shown on previous slides, otherwise they are not eligible.

10. Warehouses, Private Commercial • These buildings are leased to a single business entity for warehousing or storage of their non-hazardous business property. These warehouses will typically have a small office area, restrooms, a receiving and loading dock, freight elevators, and open storage areas.

11. Desirable Characteristics • The Commercial Real Estate program is designed to attract and retain potentially profitable quality accounts that will continue to renew over a long period of time. These accounts share the following characteristics: • Experience in this type business • Financially successful • A concern for loss prevention and safety.

12. Desirable Characteristics (Continued) • A well-maintained premises • Low turnover of tenants • Low hazard tenant operations

13. Insurance To Value • Your customer must maintain a minimum amount of insurance which is at least 80% of the current replacement cost of the building and contents values to be eligible for coverage under this program.

14. Maximum Insurable Value • The maximum value Farmers will write on one building is $10,000,000.

15. Maximum (PML) • The Probable Maximum Loss (PML) for any one policy cannot exceed $40,000,000.

16. Ineligible Characteristics • Buildings more than seven stories in height. • Building(s) at a location in which less than 70% of the total combined square footage is occupied. Area pertaining to service or maintenance of the building such as heating/air conditioning, electrical, mechanical, elevator, janitorial, lobby and security station rooms may be disregarded.

17. Ineligible Characteristics (Continued) • Newly constructed building(s) at a location in which less than 70% of the total combined area of the insured buildings are occupied, are Submit for Approval (SFA). • Detached smoke stacks, radio or TV Towers or Remote Transmission Stations • Risks located in Town Class 9 or 10.

18. Ineligible Characteristics (Continued) • Buildings known to have asbestos or plastic foam insulation, such as polyurethane or polystyrene. • Buildings and premises that are not well maintained or in compliance with all critical loss control recommendations.

19. Ineligible Characteristics (Continued) • Buildings over 40 years of age that have not been renovated. • Note: “Renovated” indicates the building has been substantially reconstructed. This means that all new wiring, plumbing, heating, air-conditioning systems, and roofing materials have been replaced meeting all current building codes for the type of occupancy. Buildings which meet this description can be considered a new building for determining building age using the renovation completion date.

20. Inherently Hazardous Occupancy or Operations • The following occupancies are considered inherently hazardous and are not eligible: • Handling, storing, producing, or using significant quantities of combustible or flammable liquids, gases, dust, explosive, or use of urethane foams, fiberglass, pyroxylin, or combustible fillers, glues or laminates. • Examples of these occupancies would be chemical manufacturers or dealers and tire recapping.

21. Inherently Hazardous Occupancy or Operations • Premises where large numbers of persons assemble or reside, such as schools, hotels, motels, theaters, lodges or resorts, recreational facilities, auditoriums or playhouses, bars and nightclubs.

22. Submit for Approval • The following risks are not to be bound and must be submitted for approval. A loss control survey or inspection will be ordered by the underwriter as part of the procedure. • Buildings more than 30 years of age unless completely renovated to current building codes. Note: Buildings over 40 years old that have not been renovated are ineligible.

23. Submit for Approval (Continued) • Risks which within the past three years have had their insurance coverage canceled or non-renewed, or were without insurance coverage for a substantial period.

24. Submit for Approval (Continued) • Building Owners who require tenants to maintain the boiler, heating, plumbing and electrical systems. • Inexperienced Building Owners with less than one (1) year of ownership, unless management of the property is contracted to a professional property management company.

25. Inherently Hazardous Occupancy or Operations • Manufacturing, industrial or fabrication industries producing primary metals or plastics that require the use of open flame, high heat, extensive welding, foundry molding, forming or extrusion processing.

26. Inherently Hazardous Occupancy or Operations • Storage or processing operations involving electroplating, fusion, thermal coating or concentrations of combustible, toxic, flammable, explosive, corrosive or other such materials, such as with wood working or refinishing, lumberyards, feed, hay or grain, boat marinas, diesel truck repairs, dismantling, salvage or junk, public or freight handling warehouses.

27. Inherently Hazardous Occupancy or Operations • Occupancies located near highly controversial businesses or organizations such as abortion clinics, trade unions or halls, or political or campaign offices.

28. Submit for Approval • Business operations conducted on the premises by the Insured. A complete description of the these business operations is required in the remarks section of the application or attached with the new business submission. Evidence of insurance for the other business operations must be included.

29. Submit for Approval • Buildings occupied for any manufacturing purposes. Full description of the activities, operations and products must accompany the submission. • Newly constructed building(s) at a location at which the total occupied area is less than 70% can be submitted for approval (SFA).

30. Submit for Approval • Buildings with highly unusual construction characteristics. • Requests for coverage in heavy windstorm or coastal areas • Requests for earthquake coverage

31. Coverage/Contract • Farmers Commercial Real Estate policy is based on the Standard ISO Businessowners contract which you studied earlier. If you desire to review that contract, refer to the Retail/Service materials.

32. Primary and Premier Options • Farmers offers both a Primary and a Premier coverage option to commercial real estate owners. • Each of these packages includes property and liability coverages. The Primary coverage package is included on all policies. The Premier coverage package is an extra cost option.

33. Coverage Differences • Most of the differences between the Primary and Premier coverage options relate to coverage limits. For example, the Premier coverage option provides $25,000 in Money and Securities coverage. The Primary coverage option provides only $10,000.

34. Coverage Differences • In addition, the Premier coverage package offers four coverages not available on the Primary coverage program. These are: • Equipment Breakdown Coverage • Extended Replacement Cost Coverage • Tenant’s Move Back Coverage • Extended Premises Boundary

35. Limits Differences • Coverage Primary Premier Pollution $10,000 $25,000 Clean-up Outdoor Signs $10,000 $25,000 Premises Boundary Definition 100 feet 1000 feet

36. Limits Differences • Coverage Primary Premier Accounts Receivable $5000 $10,000 Valuable Papers $5,000 $10,000 Money & Securities $10,000 $25,000

37. Limit Differences • Coverage Primary Premier Employee Dishonesty $10,000 $25,000 Fire Extinguisher Recharge $2,500 $5,000 Lock Replacement $100 per lock$100 perlock $5,000 total $10,000 total Computer Coverage $10,000 $25,000

38. Optional Coverage Summary • Earthquake Coverage • Earthquake sprinkler leakage • Building Ordinance or Law Coverages • Mine Subsidence (Indiana or Illinois)

39. Optional Coverage Summary • Outdoor Fences and Walls • Non-owned and/or Hired Auto coverage if not included with insured’s Business Auto Coverage • Glass Deductible Buyback

40. Optional Coverage Summary • Employee Benefits Liability • Employers Liability (Stop Gap) • Fine Arts Coverage

41. Optional Coverage Summary • Aggregate Limits Per Owned Location • Additional Insured Endorsement • Owned Auto

42. Coverage Descriptions • In this section we will discuss some special coverages which have been included in the Commercial Real Estate program, but are not found in the ISO Businessowners policies. These unique coverages add value to our contracts and distinguish them from our competitors.

43. Extended Replacement Cost • Up to 125% of the Property Coverage Limits of Insurance is provided by the Premier Package Endorsement to pay the repair or replacement of the building(s) at the described premises if the buildings(s) were insured to 100% of their replacement cost.

44. Extended Replacement Cost • The insured must accept each annual adjustment in the building(s) limits and notify us within 90 days of the start of any physical changes, additions or remodeling to the building(s). This coverage does not apply to earthquake, outdoor signs and other outdoor property, or enforcement of ordinance or law.

45. Back-up of Sewers and Drains • The Primary Package Endorsement will pay up to $1,000 per occurrence at each described premises for loss or damage caused by water backing up or overflowing from a sewer or drain, or from sump pump or other systems designed to remove subsurface water. Limits up to $5,000 are available under the Premier Coverage endorsement.

46. Tenant’s Move Back Coverage • Will pay up to $10,000 per occurrence for expenses the insured incurs to move displaced tenants back to the described premises after completion of repairs made necessary because of loss or damage by a covered cause of loss to the building. This coverage is a part of the Commercial Real Estate Premier Package Endorsement.

47. Employers Liability-Stop Gap • This endorsement may be attached for those policyholders who have employees located in states where private carriers cannot write Workers’ Compensation. This insurance pays damages the insured is legally obligated to pay up to the limits of insurance from bodily injury by an accident to an employee of the insured. The bodily injury must arise out of and in the course of employment during the policy period in the state listed in the schedule. • Bodily injury includes disease if it results from an accident or is caused by conditions of the employee’s employment during the policy period.

48. Employee Benefits Liability • This coverage form will pay damages because of any negligent act, error or omission committed by the insured in the administration of the employee benefit program (as an example, failure to enroll an eligible employee). The occurrence must be after the retroactive date shown in the Declarations and before the expiration of the policy. Expenses and costs in connection with claims or suits, judgment and prejudgment interest will also be paid. An automatic extended reporting period of 60 days is allowed after expiration of the policy, if no subsequent policy is purchased.

49. Non-Owned and Hired Auto • Non-Owned Auto Coverage provides Bodily Injury and Property Damage protection to the named insured arising out of the use by others of any non-owned autos in the course of the business. This includes autos owned by employees or members of their households. Note: This coverage does not apply to use of the auto by the named insured, nor does it benefit the owner or operator of the auto.

50. Aggregate Limits of Insurance • Applies the aggregate limits of insurance for business liability and medical expenses separately to each of the owned locations.