The risk assessment factors commonly abbreviated in the insurance industry as COPE: include building construction, occupancy, protection systems and exposures. These factors are reviewed and described in detail in the Loss Control or Engineering Survey reports used by insurance Underwriters. Underwriters rely on these internal confidential reports to accurately describe what is there, what it not and what needs to be improved. The same terminology may also be found in many fire and building codes defining prescriptive standards as to how a property should be constructed, how it is used, fire and life safety protection features and allowable exposures.

A less commonly recognized factor that can also affect the outcome of fire events are the "Rules of Engagement" for the fire service. As building construction changes and fire loading increases, these Rules of Engagement are evolving as well in an ongoing effort to improve firefighter safety. The impact is a calculated reduction in the risks they are willing to take to save property from the peril of fire and reduce unnecessary exposure to serious injury or death.

Although we can transfer risk through the mechanism of insurance in many cases, knowledge of the methods by which our business property is evaluated in the process of determining insurability can be crucial to making it as desirable as possible to prospective underwriting entity. Also, a reasonable expectation of the outcome of a fire loss event based on these factors can have a great impact on preparation for continuity of your business operations.

This article will review a few insurance related implications related to property protection, and discuss the specifics of how the four factors of COPE are impacted by the ever changing firefighting Rules of Engagement.

Insurance Underwriting

Insurance is one of the most commonly used methods of protecting a property owner from the risk of loss due to the peril of fire. This is accomplished by a contract to transfer the uncertainty of loss to another party (insurer) in exchange for consideration (premium paid). The amount of premium charged is based upon several factors including: the hazards present, the chance of loss, the risk, the degree of risk, and perils being covered by the insurer. This is part of the basic underwriting process. (Mehr, p. 37) Although a basic understanding of the concepts of insurance as a risk transfer method is important, the critical terms for the purposes of this discussion include the following:

Probable Maximum Loss – the portion of the subject property subject to loss in the event of a single fire event where early detection and suppression take place and all protective systems operate properly.

Possible Maximum Loss – the portion of the subject property subject to loss as a worst case scenario or without any intervention on the part of fire control or suppression.

These two terms apply to one of the elements for determining a sufficient premium and deal with degree of risk the insurer is expecting to accept.

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