The State Insurance Fund was established in 1923 to
insure state owned properties, K-12 systems and state university properties. The
Fund operates much like an insurance company - establishing premiums based on
loss exposure, issuing coverage documents, and paying for losses.
All properties insured by the State Insurance Fund are surveyed to determine
condition, correctable hazards and value. The appropriate official of the
insured will be contacted to briefly outline the purpose and procedure for the
survey. A DORM Loss Control Specialist will then physically inspect, measure,
value, and photograph each building/structure. It is important that access be
given to each building and any available blueprints. The specialist will provide
the appropriate official a weekly summary of survey work until the work is
complete. At completion of the survey, the specialist will make recommendations
for corrective actions. The insured should provide a status on recommended
actions within thirty days.
The recommendations made by the Loss Control Specialists are placed in one of
the following action categories. Representative
specific recommendations are listed.
a. Fire suppression system in kitchen with
automatic fuel cut off
b. No egress blocked
c. Paint, flammables, and combustibles stored properly
d. No high voltage equipment exposed
e. Fire alarm systems in place and operable
f. Smoke detectors in sleeping areas
g. No combustibles near gas heater or pilot light
h. Effective dust collecting system shall be connected to all wood working
machines with appreciable amounts of refuse
i. All outside exit doors that general public uses must have panic hardware
j. Labs: Gas emergency cut off
k. Provide adequate fire extinguishers
2. Requiring Immediate Attention
a. Improve housekeeping
b. Review insured building and contents value
c. Make necessary repairs
3. Future Renovation
a. Replace fuse box with breaker box
CERTIFICATION OF PROPERTIES
Pursuant to §41-15-4(b), Code of Alabama 1975, "the officer or person
having charge by law of insuring any public building shall annually certify to
the Department of Finance the description and value of all buildings and
equipment under his supervision or control on forms prescribed by the department
for the purpose of showing the character of the risk and determining the rate of
premium. No coverage shall be issued unless such certificate is on file in the
office of the Department of Finance or the Director has waived, in writing, the
filing of the same."
Property Certifications are mailed in April of each year. The Insured is
requested to review the list of properties, make changes, deletions, or
additions, and return the certification to DORM. The Certifications must be
returned to DORM prior to June 30.
Significant value changes. Whenever the certification process uncovers
the need for significantly larger amounts of insurance, the insured should
request the SIF to increase the amount of insurance immediately. Do not wait for
the October 1 renewal date.
SCHEDULE OF PROPERTIES
The Property Schedule is the official listing of all property insured for the
fiscal year. Changes certified by the insured are included. The schedule is
mailed to each insured just prior to October 1 of each year. The Property
Schedule is an important document, and the insured should keep it with other
insurance records. Any changes during the year should be reported to Risk
Management in writing. An endorsement to the Schedule will be produced and
mailed reflecting these changes. Each property is identified by agency,
division, location, name of the building, item number, type of construction,
year constructed, percent of insurance, building value, building insured value,
contents insured value, and premium before and after discounts.
Remember, all new or increased values must be reported to the Division of
Risk Management for proper coverage.
Requests for coverage on property can be made by telephone. However, the
telephone request must be confirmed in writing or by fax along with a properly
Self-Inspection Report & Property Insurance Request. This
form can be downloaded from the website and completed on your screen. Once
completed, it can be faxed or mailed to us to initiate coverage. It
is important that the name and occupancy of the building be listed on the
"Building Name" line. For example, John Doe High School, Smith Hall, contains
the gym, cafeteria and classrooms. The information provided is used to establish
a tentative rate for premium until the property can be surveyed. A survey will
be carried out as soon as a surveyor can be scheduled in your area.
In addition to basic Actual Cash Value scheduled insurance, SIF provides these
Replacement Cost Value Coverage (RCV)
Replacement cost insurance may be provided to an agency provided all owned
buildings and contents are insured at 100% of their replacement cost, as
established by DORM. These values must be agreed to by the State Insurance Fund
and the insuring agency. A blanket average rate will allow full replacement cost
coverage of like kind and quality. Coverage is capped at 115%. Insurance on properties will automatically increase each year
to keep pace with inflation.
DORM encourages Replacement Cost Value Coverage to avoid the
insured having to fund the difference between depreciated value and replacement
value when a loss occurs.
Builders Risk Coverage (RSK)
From time to time many of you require insurance on buildings in the course of
There are two fundamental situations you will encounter when a new building is
being constructed or an addition is being added to an existing building.
a. The SIF Insured is managing the
In this instance there will normally not be a general contractor involved,
although sub-contractors may be engaged for various elements of the project.
The State Insurance Fund will normally provide the Builders Risk Insurance
to cover the building under construction as well as on-site building
materials. At the time of project completion, upon your advice we will
integrate the insurance into your permanent insurance program.
SIF will not amend its form to cover the interest of sub-contractors. SIF
will also not waive its subrogation rights as they apply to any entity,
including sub-contractors. Subs normally carry liability insurance that
protects them adequately, although you should assure that they do
by asking to be named as an additional insured.
Contracts that you negotiate for construction, where you are managing the
job, should include consideration of the above comments, and therefore,
should not agree to provide insurance covering the interest of others.
b. The construction has been assigned to a general contractor under
Normally, in this instance, the general contractor will also engage
The State Insurance Fund will not provide the Builders Risk Coverage
for this situation, because:
- The ownership interest in the property
is primarily that of the general contractor until the construction is
complete and the owner takes possession. Therefore, the SIF statute and
SIF regulations provide for only marginal involvement.
- The project and all activities
surrounding the construction process are under the control of the
general contractor. The SIF insured does not control job-site
The contract for building construction should
not provide for the SIF insured to arrange insurance; rather the general
contractor should have that contractual obligation. Further, even though the
financial interest of the SIF insured may be nominal or non-existent, the
insurance should cover the interest of the owner, whatever that interest is. The
contract should not agree to any waiver of rights against the contractor or
sub-contractors should there be damage to the property.
These procedures are somewhat at variance with past practices of SIF, when we
have sometimes insured under the second situation outlined. The reinsurance
terms under which the SIF operates, as well as current operating practices,
require that we respond to insurance needs for buildings in the course of
construction as outlined.
IMPORTANT: Limits of liability must be job specific
on large projects, $1 million and up, and limits should be as high as the
Call 334-223-6120 at DORM if
you have a question.
Electronic Data Processing Coverage (EDP)
Computers and associated electronic equipment, interconnecting cables, media and
data restoration costs can be insured on a "replacement value" basis by using our EDP endorsement. In the past, this
equipment has been insured as contents and coverage was very limited. DORM
encourages insureds with substantial EDP values to insure on this basis. The
cost differential is minimal.
Transit Coverage (TRA)
Property owned by a State Insurance Fund
policy holder can now be insured while in transit from one location to another.
This coverage can be provided in any amount required.
Extra Expense Coverage (EXP)
This coverage can be used to pay for extra expenses incurred as a result of a
covered loss under the State Insurance Fund. An example of this would be renting
a temporary building after an insured building is damaged or destroyed by a
covered peril. This coverage can be provided in any amount required when higher
limits are specifically requested.
DORM encourages this coverage to avoid substantial uncovered losses by SIF
insureds. We will be glad to discuss the need, values necessary, and costs.
PROTECTION AND PRESERVATION OF PROPERTY COVERAGE ENDORSEMENT
In the event of actual or imminent physical loss or damage covered by the
policy, the expenses incurred in taking reasonable and necessary actions for the
temporary protection of property is automatically covered.
ORDINANCE OR LAW COVERAGE
In the event of insured loss to an insured building covered by Blanket
Replacement Cost, this insurance will pay for the following:
- loss to the undamaged portion of the
building caused by enforcement of any ordinance or law in force at the
time of loss that requires the demolition of parts of the same property
not damaged by an insured peril, and/or regulates the construction or
repair of buildings.
- the cost to demolish and clear the site
of undamaged parts of the property caused by enforcement of buildings,
zoning or land use ordinance or law.
- the increased cost to repair, rebuild
or construct the property caused by enforcement of building, zoning or
land use ordinance or law.
Loss payable shall not exceed 10% of the loss
otherwise payable under this policy before the application of this ordinance or
The deductible specified below shall be deducted from the actual cash value
(ACV) loss of the property.
For all covered perils, a $1,000 deductible
shall apply per occurrence per location except:
- For the peril of earthquake, a $10,000
deductible shall apply per building and/or contents therein.
- For insureds that have a higher
SPECIAL DEDUCTIBLE ENDORSEMENT
The occurrence deductible is changed to $5,000 per occurrence per location and
applies to each covered loss.
FABRIC CANOPIES AND AWNINGS ENDORSEMENT
In consideration of the additional premium charged, under Special Building Form,
Section III, Item E is changed to read:
"Metal smokestacks and radio or television antennas, including their lead-in
wiring, masts or towers are not covered against loss caused by ice, snow, sleet,
windstorm, or hail."
It is also agreed that when the fabric covering of an awning or canopy reaches
the age of five (5) years, this endorsement will no longer apply and the
exclusions of ice, snow, sleet, windstorm or hail will apply. Submission of
documentation verifying the age of the fabric covering will also be required in
the event a loss occurs when this endorsement is in effect.
MISCELLANEOUS PROPERTY COVERAGE ENDORSEMENT
It is agreed that when Miscellaneous Property is a scheduled line item on the
insurance schedule, with the total value of all such items stated, coverage will
apply according to the following terms:
1. Definition. Miscellaneous Property
consists of, but is not limited to owned real property such as fences,
flagpoles, light and utility poles, signs, fuel tanks, storage sheds,
playgrounds, dugouts, scoreboards and satellite antennae when any single
item has a replacement cost of $10,000 or less and is not otherwise
excluded from coverage.
2. Coverage will apply on a blanket basis and will be at full cost of
repair or replacement, up to a limit of 115% effective October 1, 2006.
3. The deductible for this policy will apply to Miscellaneous
Property separately to each insured location and not on a per
BOILER & MACHINERY EQUIPMENT COVERAGE
The State Insurance Fund annually obtains a policy that
provides boiler and machinery coverage for SIF clients. Currently, Travelers Insurance Company provides inspection, loss control and claims
The covered perils include mechanical breakdown, electrical arcing, explosion,
electrical burnout, collapse, bulging, cracking, splitting as well as other
Covered equipment includes air conditioning and HVAC system, transformers,
electrical switchgear and panels, motors, pumps, fans, refrigeration equipment,
steam boilers and other pressure vessels, air tanks, and even office equipment
such as copiers and facsimile machines.
Other coverages may also be available. Contact a DORM underwriter to
inquire about special types of coverage.
Your Responsibility Regarding Boilers & Pressure Vessels
The State of Alabama passed The Boiler and Pressure Vessel Safety Act (Alabama
Code, §25-12-1, et seq) in 2000 and the rules and regulations were implemented
in February 2004. Basically the Act requires all boiler and pressure vessels
(fired or unfired) to be inspected with some exceptions. The Travelers
Insurance Company is making the required inspections as the Act requires the
insurance carrier to complete the inspections and submit reports to the Alabama
Department of Labor before an operating certificate can be issued by the State.
The following is a list of jurisdictional objects that requires inspections but
is not limited to them:
- High Pressure Steam Boilers (over 15
- Low Pressure Steam Boilers ( 15 PSI or
- Hot Water Heating Boilers
- Hot Water Supply Boilers
- Fired Storage Water heaters 200,000
BTU/HR and over or 120 gallons and over (gas or electric)
- Unfired Pressure Vessels 5 cubic feet
or more (Air Tanks do not require an inspection until they exceed 16
cubic feet or 120 gallons). Examples are hot water tanks, heat
exchangers, DA tanks, etc.
If you have a question regarding the
jurisdictional inspections, you should contact DORM as the required operating
certificate is your responsibility.
AUTOMATIC SPRINKLER SYSTEMS
Certain properties insured by the State Insurance Fund are protected by
automatic sprinkler systems. In some cases, the existence of these systems is
not currently indicated in the schedule we provide our SIF clients.
Sprinkler systems are important fire protection and fire safety devices. Our
schedules and records should indicate each location where such a system exists.
Consequently, we ask that this office be notified of those buildings that are
protected 100% by sprinklers. The SIF provides substantial rate credit for such
systems and we need to assure that these credits are properly in place. Credit
is given for automatic sprinkler systems if (a) it is properly installed
throughout the building, (b) it is under contract to be inspected and certified
each year, and (c) this information is properly reported to DORM.
All sprinklered properties must have a maintenance contract with a certified
sprinkler service company. A copy of the contract along with a copy of the
inspection report on each building should be sent to this office with the
certification which is due back to DORM before June 30th each year.
INDIVIDUAL RISK PREMIUM
The State Insurance Fund rates properties similarly to a commercial insurance
company. An initial rate per $100 coverage is developed for each property from
industry published rates. This rate is called a base or "manual" rate. To this
rate, certain discounts are applied across-the-board as mandated by statute.
After this, an additional modification is applied to each account. This final
discount is called the Individual Risk Premium Modification (IRPM) and can
significantly affect the premiums that an agency pays for its property
When a Loss Control Specialist surveys your agency's property, hazardous
conditions may be observed which place the building at reduced or increased risk
for loss. Negative conditions, if found, will be brought to the attention of
responsible persons in your agency along with suggestions for remedy. Specific
areas included in the survey are:
Overall condition of the premises
Potential for catastrophic loss
Susceptibility and damageability of the property
Public and private protection provided
At the end of the survey the State Insurance Fund will examine overall factors
Values (proper amounts of coverage)
Attitude and cooperation
Premium payment history
From the above, the State Insurance Fund will develop a single IRPM factor that
will be a credit, debit or break-even, and this factor is then applied to
develop final invoiced premiums. These credits or debits can cause significant
premium differences for your agency. Our Loss Control Specialist will discuss
this program with you prior to their survey and explain how it can work to your
Each year hundreds of millions of dollars in new construction will be planned.
Part of this planning process might well be a review by Risk Management as to
protection and construction types. The following table reflects various
construction types and private/public protection. As you can see from this
example, the final fire and EC rate applicable to these structures and resulting
premium for the life of these new buildings vary greatly. Fire walls
strategically located may prevent a high rate from being applied throughout a
large building. Therefore, the type construction selected should be consistent
for the occupancy so that premiums over the years will not be exorbitant.
REPORTING PROPERTY CLAIMS
Property losses should be reported by telephone immediately upon discovery. A
claim number will be assigned at the time of the call. A
Property Loss Notice Form is available on our website or we will mail it upon request and it should be returned
with the necessary documentation (Our fax number is (334)223-6282.). You
also have the option of reporting your claim on our website (www.riskmgt.alabama.gov)by entering the information
directly onto the form and emailing it to us. In the event of extensive property
damage, our claims staff prefers that you call first. An in-house adjuster will
determine if your claim needs to be inspected by a field adjuster or if it can
be handled by mail.
The following is a checklist of information that will be requested when
reporting a claim:
Name of building
Item number on insurance schedule
Date of loss
Cause of loss
Estimated Extent of damage ($)
Contact person and phone number
In the event of an emergency, you should make any necessary temporary repairs
needed in order to protect your property from further damage. For example, if
wind damages a portion of your roof, you should immediately patch it to protect
the interior from water damage. Do not dispose of damaged equipment before our
adjuster has inspected it. An adjuster will work with you on making final
repairs and provide continuous instruction to you regarding completion of your
claim. Finally, the SIF may require a Proof of Loss from you which is a document
that signifies agreement of the settlement amount.
FREQUENTLY ASKED QUESTIONS
What deductibles are available?
A $5,000 deductible is available along with negotiated higher
deductible amounts as well as percentage deductible. Check with our SIF
underwriter for details.
How do we secure against burglary?
Our policy does provide coverage for burglary provided that there are visible
signs of forced entry on the exterior of the building.
Burglary and vandalism claims are increasing at an alarming rate each year. Make
sure all doors and windows are locked and secure at the close of your business
day. You may request your local police department to check the premises
frequently, especially when your business or school is closed for several
consecutive days. Outdoor lighting will also protect the premises.
Is property belonging to my employees covered while at
Do I make a claim with the SIF even if someone else is
responsible for my loss or damage?
You may claim with the SIF your loss or damage even though another party is
responsible. Often, the process of collecting from the responsible party is
lengthy. The SIF will pay your claim and secure a Loan Receipt from you. A Loan
Receipt states you have received the settlement amount from the SIF and the SIF
is now entitled to collect on your behalf. The SIF will then pursue the
responsible party for reimbursement of the settlement amount. This process is
If I have the same property insured with the SIF and
another insurance company, in the event of a claim, can I collect from both
No. The two insurance companies will prorate or "share" your loss so that you
will be reimbursed the amount you normally would have if you had only that
coverage with one company. All insurance policies have a principle of indemnity
clause which basically states you cannot profit from insurance. If one company
pays your loss in full and then realizes you had coverage with another company,
the company which paid in full, can collect its "share" from the other insurance
company. This process is called contribution.
What should I do if my property is recovered by the
police after the burglary claim has been paid?
You should contact the SIF immediately. We will have an adjuster inspect the
recovered property and if damaged, determine its value. If you wish to keep the
recovered property, the adjuster will negotiate its value with you and you will
need to reimburse the SIF. If you are not interested in keeping the property, we
will take possession of the property and attempt to collect as much as possible
for it. Salvage value might also exist in property damaged by lightning, wind,
water, etc. Often, the amount of the repair bill is reduced by the salvage value
of the damaged property.
What properties can/should be insured?
Property paid for in whole or in part by State monies. Properties that are
"unreasonably dangerous" or otherwise lacking in insurable value cannot be
insured. Leased or rented property can also be insured, if required by the
What constitutes contents?
Moveable property which is not built in or attached to a building. This does not
include equipment that services the building such as fire extinguishers, cooking
and laundering equipment, etc.
When should a new property or an addition to an insured
building or contents be reported for coverage?
As soon as it has been accepted in whole or in part as your responsibility,
unless it fits the definition of "miscellaneous property".
When should the State Insurance Fund be notified about
a deletion of a property?
As soon as the insured no longer owns the property by selling, removing the
property or assigning the property to another agency.
Does the construction of a building affect the rate?
Yes. We can offer advice on how different kinds of construction affects the cost
of insurance from SIF. (See also the "Building Programs" section in the
What do I do when I have a Boiler & Machinery claim?
Call our office (334) 223-6120 and give us the name of the building, the date of
loss, a brief description of the damage, approximate extent of damage and a
contact person and phone number. We will immediately contact the insurance
carrier who will contact you to adjust your claim.