Key Takeaways
- Tennessee commercial property insurance uses the file-and-use rate regulation system
- Commercial property policies cover buildings, business personal property, and business income
- Business owners policies (BOP) combine property and liability coverage for small to medium businesses
- Surplus lines insurance requires a diligent search of 3 admitted insurers (unless on export list)
- Tennessee surplus lines tax is 5% of premium plus stamping fees
Tennessee Commercial Property Insurance
Tennessee commercial property insurance operates under the file-and-use system with specific requirements for surplus lines placement.
Commercial Property Rate Regulation
Tennessee uses file-and-use for commercial property:
| Process Step | Description |
|---|---|
| 1. File | Insurer files rates and forms with TDCI |
| 2. Use | Rates can be used immediately upon filing |
| 3. Review | TDCI reviews filings after implementation |
| 4. Action | TDCI can disapprove if rates are excessive, inadequate, or unfairly discriminatory |
Commercial Property Coverage
Tennessee commercial property policies include:
Building Coverage
- The structure and attached fixtures
- Permanently installed machinery
- Additions under construction
- Building glass
Business Personal Property
- Furniture, equipment, and fixtures
- Inventory and stock
- Tenant's improvements and betterments
- Property of others in your care, custody, or control
Business Income Coverage
- Lost income during restoration period
- Continuing expenses (payroll, rent, utilities)
- Extra expense to continue operations
- Civil authority coverage
Business Owners Policy (BOP)
The BOP is a package policy for small to medium businesses:
BOP Eligibility
| Eligible Businesses | Typical Limits |
|---|---|
| Retail stores | $100,000-$5,000,000 property |
| Offices | $300,000-$1,000,000 liability |
| Restaurants | Varies by classification |
| Apartments (under 6 stories) | Subject to underwriting |
| Wholesalers | Premium size limits apply |
BOP Coverage Components
- Property coverage (building and contents)
- Business income and extra expense
- General liability coverage
- Medical payments
- Optional endorsements available
Tennessee Surplus Lines Insurance
Surplus lines insurance provides coverage for risks not available in the admitted (standard) market.
Surplus Lines Requirements
| Requirement | Details |
|---|---|
| Diligent Search | Must contact at least 3 admitted insurers |
| Export List | Some risks pre-approved without diligent search |
| Licensed Agent | Must use Tennessee surplus lines licensee |
| Surplus Lines Tax | 5% of premium |
| Stamping Fee | Additional stamping fee applies |
| Disclosure | Must inform insured of surplus lines status |
Tennessee Export List Risks
These risks may be placed with surplus lines insurers without diligent search:
- Excess and umbrella liability
- Environmental liability
- Directors and officers liability
- Employment practices liability
- Professional liability (certain classes)
- Aviation
- Railroad equipment
Surplus Lines Producer Duties
- Conduct diligent search (unless export list)
- Document declinations from admitted market
- Place with approved surplus lines insurer
- Collect and remit 5% surplus lines tax
- File affidavit with TDCI
- Disclose surplus lines status to insured
Exam Tip: Tennessee surplus lines tax is 5% of premium. The surplus lines producer is responsible for collecting and remitting this tax to the state.
Inland Marine Insurance
Tennessee commercial inland marine covers:
- Equipment floater (contractors' equipment)
- Electronic data processing equipment
- Installation floater
- Motor truck cargo
- Builders risk (property under construction)
- Signs
- Valuable papers and records
What is the Tennessee surplus lines tax rate?
Before placing a risk with a surplus lines insurer in Tennessee, what must the producer do?
Which of the following is NOT typically a component of a Business Owners Policy (BOP)?