Oregon Auto Insurance Mitigation Law - DOC

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                       Department of Administrative Services
                                                                           Effective Date

                       POLICY MANUAL                                           July 1, 1998
                       Issuing Division: Risk Management Division          Approval

                       Subject: Property Self-Insurance Policy Manual

       UNDER ORS Chapter 278, the state pays, through the Insurance Fund, its cost of
       restoring most state property that may be lost, damaged, or destroyed. The purpose
       of self-insuring is to restore property needed for the operation of the state. The
       Insurance Fund is meant to reimburse for accidental loss, not to substitute for your
       duty to prevent and reduce loss or to maintain good repair.
       SEE ALSO, 125-7-201, Liability Self-Insurance Policy Manual for State Agencies;
       125-7-202, Liability Self-Insurance Policy Manual for State Officers, Employees and
       Agents; 125-7-203, Employee Dishonesty Policy Manual, and 125-7-301, Aircraft
       and Pilot Standards, OAR 125-155 Vehicle Use and Access Rules.

       We pay all direct physical loss or damage occurring during the policy period of this
       self-insurance policy unless the loss is excluded or limited in this policy manual.
       Subject to the terms of this policy manual, we will pay to replace or repair property
       that is lost or damaged.
       Changes and exceptions to the terms of this policy manual are only effective if our
       Director or Administrator signs a written amendment. This policy manual is subject
       to change without prior notice.

       In this policy, you and your refer to the state and its agencies. We, us, and our
       refer to the Department of Administrative Services, Risk Management Division
       (RMD). Other terms have the following meanings:
       A. Alternative Use means a use that could not reasonably be made of the property
          before the loss. Exception: New equipment may have standard features that
          were unheard of when the lost or damaged equipment was acquired. Those are
          improvements you cannot avoid. They are not alternative uses.
       B. Control means having the legal ability and responsibility (i) to direct the
          property's use and location; (ii) to direct who may have access to it; and (iii) to
          take possession of it. State control cannot exist when the property is in the
          possession or control of the owner and the owner is not the state. Some
Department of Administrative Services                              Property Policy Manual

Continuation Sheet                                                 Number     125-7-101

      1. Usually, property on loan or lease to the state is in state control. An
          employee's, volunteer's, or agent's private auto is not on loan or lease nor is it
          in state control when being used by its owner on state business.
      2. Employee-owned equipment used at work is most likely not in state control,
          but might be found to be in the state's possession when the employee is not
   C. Exceptional Items refers to three kinds of personal property. These items have
      market value caused by collectors desiring to possess them. The state's need
      for them can often be met by having access to, or information about them rather
      than owning them. Exceptional items include:
      1. Historic Items: Original papers, artifacts, and memorabilia. Their high
         market value comes from their authenticity, rarity, and age.
      2. Collectibles: Their high market value is due to their popularity. People hold
         them for appreciation and transfer of wealth.
      3. Works of Art: These include art owned by the state and art on loan to the
         state for display.
   D. Land means soil, water, rock, timber, and uncultivated plants.
   E. Location means a single campus or complex of buildings owned by the same
      state agency or all structures owned by an agency within the same zip code.
   F. Mysterious Disappearance means property is gone, but no one knows for sure
      when it disappeared or what happened to it. In an office or work space that is
      usually occupied, it means the item was not in a known place near the time of its
      loss. In a vehicle or an area usually unoccupied, it means there is no physical
      evidence of theft or forced entry.
   G. One Percent Art means art purchased as one percent of building cost to fulfill
      ORS 276.080.
   H. Occurrence means an accident, incident, or a series of accidents or incidents
      arising out of a single event or originating cause and includes all resultant or
      concomitant insured losses. Each loss by earthquake, flood, freeze, or
      windstorm will constitute a single occurrence. If more than one earthquake or
      flood occurs within any period of 72 hours during the term of this policy, we will
      determine the moment when the time period began.
   I. Property means real and personal property reported on your annual Risk Report
      or acquired since the last report. It includes property you own and property
      under your possession or control if a written agreement or the operation of law
      makes you responsible for its damage or destruction. It does not include security
      property. It does not include employee, agent, volunteer, or contractor vehicles
      used by them and eligible for state mileage reimbursement.
   J. Personal Property means moveable property. Examples are merchandise,
      furniture, goods, ordinary farm livestock, air, land or water vehicles, moveable
      machinery, tools, equipment, and supplies. Personal property includes media,
      research data and products, valuable papers, cash, negotiable papers and

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Continuation Sheet                                                 Number     125-7-101

      securities, and exceptional items.      These are subject to special limits and
   K. Possession means having the property so that you may exclude everyone else
      from it.
   L. Real Property means your buildings, structures, and fixtures erected on, above,
      or under your land within the U.S., its territories, or Canada. Real property
      includes artworks permanently erected on and affixed to state-owned lands or
      buildings. If reported in your Risk Report, real property includes ornamental
      trees and shrubs, crops, orchard trees, or fencing. It includes a residence to
      which you hold title or possession or that you control as landlord, due to default
      on a direct loan or sales contract that you made.
      Real Property does not include security property, septic tanks, wells, or
      underground tanks. It does not include roads, streets, highways, or related
      improvements like highway signs, traffic signals, supports, paving, bike paths,
      and sidewalks. It does not include land, timber, uncultivated plants, earth berms,
      terraces, landscaping, or other earthen forms and structures. Bridges and
      tunnels are excluded unless owned by the state, immediately adjacent to
      covered property, and used for maintenance or access to a covered building.
   M. Replacement Cost for the yearly Risk Reports, means the estimated full cost to
      functionally replace or restore the property to its state just prior to loss. See also
      the Loss Settlements section.
   N. Research Data and Products means property that cannot be replaced except by
      repeating all or part of the projects, research, breeding, or other work that produced
   O. Risk Report is the yearly report form you must use to report your property and
      its estimated cost to replace to us. You are required to report all property that
      you possess on July 1st of each year on which this policy would pay losses.
   P. Security Property means real or personal property you own or have a financial
      interest in, if it is for the purpose of generating an investment gain. It does NOT
      1. Buildings in which at least 51 percent of the floor space is occupied by state
         employees or agents conducting state business;
      2. Single family residences or personal property in which legal ownership has
         defaulted back to you from your loan program borrower and you are working
         to dispose of it or seek new borrowers; or
      3. Other property you own and are holding for eventual sale.
      We will purchase commercial insurance for any security property at your request
      and expense. Our self-insurance is excess over any insurance in force on
      security property.
   Q. Special Plans means expanded coverages described in Section V through VIII.
   R. Valuable Papers means papers that prove or represent rights or which contain
      records or data that cannot be readily replaced. A few examples include

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      Department of Administrative Services                           Property Policy Manual

      Continuation Sheet                                              Number      125-7-101

            mortgages, deeds, title transfer documents, business records, and surveying or
            engineering field notes.
         S. Vehicles means cars, trucks, boats, airplanes, tractors, trailers, and similar

         We will not pay for loss or damage caused directly or indirectly by any of the
         following. Such loss or damage is excluded regardless of any other cause or event
         that contributes concurrently or in any sequence to the loss.
         Except as expressly provided, we do not pay for loss or damage:
         A. Directly caused by laws, ordinances, or administrative rules being enforced.
            Examples: We don’t pay for tearing down a condemned building unless it was
            condemned because of fire or other covered cause, or an order requiring
            removal and clean up of a leaking underground tank.
         B. Intentionally caused by action officially taken or withheld by you.      Example:
            Demolishing one of your buildings.
         C. To security property or to any property that does not belong to you. Exception:
            Loss to property in your possession or control other than security property will
            be paid only if a lawful, written agreement or the operation of law holds you
            responsible for the loss. The agreement must exist prior to loss. It must be in
            accord with the terms of this policy manual.
         D. Due to mysterious disappearance. This exclusion is by law. It is not waived or
            excepted, even under special plans.
         E. Directly due to poor care or maintenance, wear and tear, or condition inherent in
            any type of property that cause it to deteriorate or destroy itself; including loss
            due to rust, corrosion, fungus, or decay that is reasonably discoverable; or
            caused by insects or vermin.
         F. To cash and negotiable securities except as provided in Section V.
         G. Due to electrical or mechanical breakdown necessitating repair or replacement
            that does not also cause physical damage to your covered property except as
            provided in Section VI. Breakdowns include:
             1. Leakage at any valve, fitting, shaft seal, gland packing, or joint connection;
             2. Breakdown of any vacuum tube, gas tube or brush;
             3. Breakdown of any electronic computer or electronic data processing
             4. Breakdown of any structure or foundations supporting the covered property
                or any of its parts; or
             5. The functioning of any safety or protective device.
          H. Due to loss of electric power or electrical spikes, surges, arcs, drops, or
             fluctuations not caused by lightning except as provided in Section VII. Costs of
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Continuation Sheet                                               Number      125-7-101

       direct damage or loss due to these causes are not paid. However, if they cause
       a loss that is not excluded, that loss will be paid. Example: A motor or
       computer ruined by a power surge is not paid, but damage caused by a
       resulting fire or explosion is.
    I. Due to gradual rise of ground water, underwater or underground electrolysis,
       rust, corrosion, decay, continuous or repeated seeps, or leaks occurring over
    J. Due to freezing where you unreasonably fail to provide heat or other protection
       from freezing. Example: Turning down heat in winter without draining water
       lines and tanks, or cold-storing a vehicle undrained and without adequate
    K. To real property due to flood if we previously paid for loss due to flood. We will
       not pay losses from subsequent floods unless you complied with local flood
       plain ordinances, state building codes, or other remediation officially required at
       the time of first flood loss.
    L. Of consequential or indirect nature. Examples: Loss of income, cost of re-
       keying locks upon theft of any keys. See the sections on Extra Expense
       Payments and Special Plans.
    M. Arising directly out of a cause that is within your knowledge and power to
       correct. Examples: Water damage caused by repeated backup of a drain that
       is too small. Repeated wind damage to a worn-out roof. Choosing not to make
       structural repairs known to be needed.
    N. Caused by asbestos, PCB's, or other contaminants in the materials from which
       your property is built or in items brought onto the property. This exclusion
       applies to releases caused by abatement efforts, repairs, moving, remodeling,
       demolishing, or disposing of property. It applies to illegal drug manufacturing
       and to industrial or domestic chemicals and processes.            Loss due to
       contaminants is paid for property we do not exclude when caused by some
       other loss that we pay. Examples: Decontamination from a fire is paid,
       because the fire losses are paid. Decontamination caused while repairing an
       old, leaky transformer is not, because losses due to gradual deterioration are
       not paid. Decontamination from vandalism is paid because we pay for
    O. Cost of repeating research upon loss of research product including recreation of
       all or part of the project, research, or experimentation.
    P. To exceptional items, valuable papers, or media beyond the simple cost of
       materials except as provided in Sections V through VIII.
    Q. Losses due to employee dishonesty are not paid under this policy manual. See
       our Employee Dishonesty Policy Manual 125-7-203. Losses due to employee
       dishonesty are subject to the terms of that policy and any bond we may carry.
       Contact us and the Secretary of State Audits Division at once if an employee
       dishonesty loss is discovered or suspected.
    R. To property intended for demolition or disposal.
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     Department of Administrative Services                            Property Policy Manual

     Continuation Sheet                                               Number     125-7-101

         S. To property you possessed on July 1st preceding a loss, but you failed to report
            it on your Annual Risk Report.

        This plan pays losses to cash, negotiable papers, and securities, at reported specific
        locations according to the terms of this policy manual.
        A. Definitions. As used in this section:
           1. Dual Controls means measures which require cross checking or accounting
              by at least two people, which restrict access of funds to no less than two
              individuals, which segregate duties or money handling procedures with
              checks and balances.
           2. Location means a separate structure, a building, or a stadium, and each
              unrelated money center in any single structure, building, or stadium.
           3. Related money center means a part of the same program so that they are
              subject to the same procedural and management controls and purposes. For
              instance, two or more admission gates at a stadium would be related. A
              snack bar and the office where students pay tuition are unrelated even
              though they are in the same building.

        B. Conditions for Payment. You must start and maintain a verifiable written loss
           control program for each reported location and related money centers at a
           location prior to the loss. If a claim is filed, you may be asked to submit a copy
           of your loss control program. The program must include at least the following
           1. Dual Control Measures such as: physical safeguards for cash, limits to
              amount of funds on hand, secure storage and transport of funds, immediate
              posting and receipts of cash, daily balancing by at least two people,
              procedure for correcting and confirming correction of ledger or recording
              errors, regular verification of stored items.
           2. Measures for prompt reporting to police after a loss, then to us without delay.
           3. Measures for prompt recovery from loss.
           4. Periodic internal audits.
           5. Periodic verification that loss control program is being followed.
        C. Annual Report. You must include the total estimated value of covered money
           and securities at all covered locations on the Annual Risk Report. You must
           maintain and provide upon request:
           1.   Name and description of each covered location;
           2.   Description of the money and securities to be covered at each location;
           3.   Amount of money and securities at each location; and
           4.   Summary of applicable seasonal variations.

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      Continuation Sheet                                                Number     125-7-101

         D. Replacement Cost. We will pay documented losses. Proof of amount of loss
            must be made from your accounting and security records. Incomplete or unclear
            records will not support a report of loss. We will also verify your loss control
            program prior to payment.

         This plan pays the costs to replace, rebuild or restore covered boiler and machinery
         objects damaged or destroyed by a covered accident.
         A. Definitions. As used in this section,
            1. Object includes boilers, pressure vessels, air conditioning and refrigerating
               systems, machinery and electrical equipment, motors, generators, electrical
               distribution equipment, transformers, fans, pumps, engines, turbines, gears,
               and compressors. It does not include:
               a) Parts of a boiler, fired vessel, or electric steam generator that does not
                   contain steam or water;
               b) Insulating or refractory material;
               c) Non-metallic vessels, unless constructed and used in accordance with the
                   American Society of Mechanical Engineers code (A.S.M.E.);
               d) Catalyst;
               e) Buried vessels or piping;
               f) Sewer piping, piping forming part of a fire protection system or water
                   piping other than feed water piping between any boiler and its feed pump
                   or injector; boiler condenser return piping; or water piping forming a part of
                   refrigerating and air conditioning vessels and piping used for cooling,
                   humidifying, or space heating purposes;
               g) Part of a vessel that is not under the pressure of the contents of the
                   vessel; or internal vacuum;
               h) Oven, stove, furnace, incinerator, pot, or kiln;
               i) Structure, foundations, cabinet, or compartment containing the boiler or
                   machinery equipment;
               j) Power shovel, dragline, excavator, vehicle, aircraft, floating vessel or
                   structure, penstock, draft tube, or well-casing;
               k) Conveyor crane, elevator, escalator, or hoist, but not excluding any
                   electrical machine or electrical apparatus mounted on or used with this
               l) Electronic computer or electronic data processing equipment unless used
                   to operate one or more insured objects;
               m) Media used with any electronic computer or electronic data processing
               n) Machine or apparatus used for research, medical, diagnostic, surgical,
                   dental, or pathological purposes;

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Continuation Sheet                                               Number      125-7-101

         o) Felt, wire, screen, die, extrusion, plate swing hammer, grinding disc,
            cutting blade, cable chain, belt rope, clutch plate, brake pad, non-metallic
            part, or any part or tool subject to frequent periodic replacement;
         p) Steam tunnels unless damaged by a covered explosion.
      2. Accident means a sudden breakdown of the covered objects. The accident
         requires repair or replacement of the entire object or the damaged part of the
   B. Exclusions. We will pay the reasonable and necessary costs to replace,
      rebuild, or restore covered objects that may be destroyed by an accident. We do
      not pay for damage or destruction caused by:
      1. Deterioration, corrosion, wear, or tear causing or leading to breakdown of any
         parts including, but not limited to, vacuum tubes, gas tubes, brushes,
         computer, or electronic data processors;
      2. Leakage at a valve or fitting;
      3. Breakdown of any structure or foundation which supports an object;
      4. Explosion of unconsummated fuel or gases within a furnace of an object or
         within the flues or passages from the furnace of the object to the atmosphere;
      5. The functioning of a safety device, relief valve, or protective device.
   C. Water Damage Limit. Our total payment for water damage to property as a
      result of one accident to one or more air conditioning or refrigeration systems will
      not exceed $25,000. The water damage limit includes salvage expenses.
   D. Ammonia or other Contamination Limit. Our total payment for ammonia or
      other hazardous material contamination damage by contacting or permeating
      property under refrigeration or a process requiring refrigeration as a result of one
      accident or one or more refrigeration systems will not exceed $25,000. The
      ammonia or other contamination limit includes salvage expenses.
   E. Conditions of Payment. Before we will consider paying any loss, the following
      conditions must have been met:
      1. Inspection. You must have a qualified boiler and machinery person or entity
         inspect all boilers and vessels every three years or according to
         manufacturers specifications, if more frequent. You must keep copies of the
         reports and make them available to us if we ask for them.
         We will suspend this coverage on a specific object when there is imminent
         danger of an accident and you do not cooperate by taking the object out of
      2. Annual Report. You must include the estimated total value of covered
         objects on the Annual Risk Report. You must maintain and provide upon
         request :
         a) Name and description of each object;
         b) Building location of object;

                                   Page 8 of 18
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   Continuation Sheet                                                Number     125-7-101

             c) Quantity at each location; and
             d) Estimated replacement cost.
          3. Required Loss Control. You must have and follow a written loss control
             plan. If a claim is filed, you may be asked to submit a copy of your loss
             control program. Your plan must be at least comparable to the following:
             a) Approved fire suppression system;
             b) Conform to all applicable building codes and regulations;
             c) Regular maintenance schedule and periodic maintenance provided by
                qualified technicians;
             d) Correction of any irregularities in system within 30 days of discovery;
             e) Periodic verification that your loss control program is being followed.

       This EDP equipment, hardware, software, and media plan pays the reasonable and
       necessary cost to replace, rebuild, restore, or repair covered EDP equipment,
       hardware, software, data, and media damaged or destroyed by accident or
       A. Definitions. As used in this section:
          1. Accident. A sudden breakdown of, or damage to the equipment requiring
             replacement or repair of the equipment or part thereof.
          2. Disturbance. Electronic interruption, surge, drop or power supply disruption,
             electrical breakdown, short circuit, blow out, electrical, and magnetic injury to
             your property.
          3. Accident or disturbance does not mean:
             Deterioration, wear, and tear;
             Programming errors;
             Design error or fault;
             Damage during service or repair by a contractor;
             Improper handling or installation of components;
             Costs or expenses associated with year 2000 upgrades or solutions; or,
             Lost or improper results or any costs or associated errors caused by the year
          4. Data means information, in a computer usable form, on which your software
             and hardware perform operations to produce a result or output.
          5. Hardware means an assemblage of electronic machine components capable
             of accepting information, processing the information according to the
             instructions, and producing the desired result.
          6. Media means the material where data is recorded, such as tapes, floppies,
             and CD-ROMs.

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Continuation Sheet                                              Number     125-7-101

      7. Off-site storage means storage at a site at least 75 miles from the main
         facility housing your EDP equipment for which a claim is being asserted.
      8. Software means the operating system and applications written to process
         information or data on hardware.

      9. UPS. Uninterruptible power supply. A device that maintains a consistent line
         voltage, and has a source of power to keep the system operating in the event
         of a power outage.
      10. Line Conditioner. A device which maintains constant line voltage out.
   B. Conditions of Payment. You must follow the manufacturer’s maintenance,
      service, and inspection requirements. Defects or deficiencies must be noted.
      Recommendations for service or repair, by the administrator or employee
      charged with operating the system must also be logged. Any deviations from
      these recommendations must be explained in writing.
      You must maintain a description of the equipment including the manufacturer,
      model, and any upgrades or variance from original equipment. You must
      describe the location of equipment. If equipment is portable, the person or
      department to which assigned must be logged. You must identify the number of
      units and estimated replacement cost.
   C. Required Loss Control. You must have and follow a written loss control plan.
      If a claim is filed, you may be asked to submit a copy of your loss control
      program. Your plan must be at least comparable to the following:
      1. Servers, LAN hubs, or large computer systems must be capable of self-
         shutdown in the case of power loss or disturbance or protected by a UPS with
         at least 10 minutes reserve, and/or appropriate power conditioners.
         Tip: If you have added cards, hard drives, etc.; to your system, verify the
         UPS now has the reserve to handle the new wattage requirements of the
      2. PCs or work stations must be protected by a UL approved surge/spike
      3. Data and software must be protected by an appropriate backup system with
         off-site storage.
      4. A system must be protected with appropriate environmental controls. At a
         minimum, the manufacturer’s recommendations as to ventilation, humidity,
         sun or heat exposure, and freezing must be followed.
      5. If the system is accessible from the Internet, an appropriate firewall or other
         security measures must be in place and used. Tip: An EDP audit can help
         you assess appropriate security measures.
   D. Annual Report. You must include the estimated total value of covered property
      on the Annual Risk Report. You must maintain and provide upon request:
      1. Name and description of covered property;
      2. Building location of covered property;

                                 Page 10 of 18
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Continuation Sheet                              Number    125-7-101

      3. Quantity at each location; and
      4. Estimated replacement cost.

                                Page 11 of 18
  Department of Administrative Services                            Property Policy Manual

  Continuation Sheet                                               Number      125-7-101

     We will pay for repair, restoration, or loss, up to market value for loss to artwork or
     other exceptional items. If loss is total or cost to repair exceeds the agreed value,
     we will pay the lesser of the reported appraised value or market value as determined
     by a recognized appraiser whom we may retain.
     A. Definitions. As used in this section:
        1. Appraisal means a documented valuation conforming to normal or
           recognized standards for commercial appraisals of similar items. An
           appraisal must include a description of the item, its market value, date of
           valuation, identification of the appraiser, his or her qualifications, and the
           appraiser’s signature.
        2. Item means pieces that are normally separated from similar items. For
           example, a chess set is an item within a collection of chess sets. A chess
           piece would not normally be an item.
        3. Recognized Appraiser means an expert who appraises similar items in the
           course of his or her state employment or in private practice. It does not
           include the owner of the item.
     B. Conditions of Payment.
        1. You must have and follow a written loss control plan for exceptional items
           valued over $10,000 or collections valued over $50,000. If a claim is filed, you
           may be asked to submit a copy of your loss control program.
        2. If on loan to you, you must have a written agreement with the owner-lender
           that makes you responsible for loss or damage. The agreement must be
           signed before any loss or damage and name the agreed upon market value.
           It is your duty to assure agreed upon values do not exceed reasonable
           market values.
        3. An item valued over $10,000, or a collection valued over $50,000, must be
           valued in writing by a recognized appraiser.
        4. An item valued over $50,000, or a collection valued over $250,000, requires
           our approval by written endorsement. We may elect to purchase commercial
           insurance on your behalf and at your cost.
        5. You must inventory items or collections on loan each time the item or
           collection changes location.
     C. Exclusions. In addition to the exclusions in this policy manual, all market value
        payments for loss to exceptional items exclude:
        1. Loss or damage due to gradual deterioration or due to damp, dry, hot, or cold
           air, unless such damage is the result of some other paid loss.
        2. Results of delay or loss of market.
        3. Loss or damage from acts of dishonesty of any person to whom you may
           entrust these items.

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      Continuation Sheet                                               Number     125-7-101

            4. Damage due to any repair, restoration, or retouching. But we will pay
               reasonable cost to repair or restore damaged items or to make reproductions
               of lost parts of a pair, set, or collection.
            5. We will not pay diminished market value due to repaired damage or due to
               loss of a piece, item, or unit from a pair, set, or collection.
            6. If you do not elect this special coverage, items on loan to you are still covered
               by our liability policy manual, but only to the extent the loss or damage was
               due to your negligence.
         D. Annual Report. You must include the estimated total value of covered property
            on the Annual Risk Report. You must maintain and provide upon request details
            supporting the summary which includes:
            1.   Name and description of each exceptional item or collection;
            2.   Building location of exceptional item or collection;
            3.   Total value of covered items at each location; and
            4.   Estimated replacement cost.
            5.   Maintain a separate list of Items whose individual value exceeds $50,000 or
                 collections valued over $250,000.

         A. Payments will be made under terms of this policy manual and under terms of any
            excess property insurance we may purchase. We presently buy excess
            commercial insurance with terms similar to this policy manual. Loss amounts
            exceeding our self-insurance retention and all applicable insurance are not
            covered by this policy manual.
         B. Payment for loss of cash or negotiable papers and securities may not exceed
            $750,000 for each loss at any location or building.
         C. Payments for special plans (boiler and machinery, electronic data processing,
            and market value of exceptional items) are limited to $250,000 per occurrence
            and $50,000 per item unless we consent by written amendment to a larger limit.
         D. Extra expense payments are limited to the lesser of an amount equal to the paid
            property loss which caused the extra operating costs or $250,000.

     One deductible applies to each loss as follows:
         A. Special plans, except exceptional items, $5,000 unless we agree in writing
            before a loss to a lesser amount.
         B. All other real and personal property including exceptional items, $500.
         C. We will apply one deductible per location per occurrence. Example: A large
            windstorm strikes the entire state. A state agency has damage to property in 13
            different locations. At each location, the damage exceeds the deductible and
                                       Page 13 of 18
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      Continuation Sheet                                               Number     125-7-101

            multiple structures are involved. We will apply a deductible to each separate
            location. See definition of location.
         D. If we declare an event a catastrophe, we may waive deductibles for each loss
            arising from the event when the loss exceeds the deductible amount.

         A. A Risk Report must be filed each year which includes the following:
            1. Estimated replacement cost must be reported for:
               a) All owned property;
               b) All borrowed, rented, or leased property in your possession or control for
                  which you are responsible in writing for loss or damages; and
               c) Property you intend to cover under any special plan (money & securities,
                  boiler & machinery, electronic data processing, exceptional items).
            2. Loss to property you omit from the report will not be paid. Loss to property
               acquired after your report will be paid subject to this policy manual.
         B. Loss to any property that belongs to anyone other than the state, may be paid
            only if, prior to the loss, you lawfully agreed in writing with the owner to be
            responsible for the loss or damage.
            1. When you agree in writing to cover another’s property this self-insurance is
            2. You must have possession or control of the property at the time of loss.
            3. Security property will not be covered.
            4. We cannot cover vehicles of employees, agents, volunteers, or contractors,
               used by their owners and eligible for reimbursement of mileage at state rates.
               Mileage rates cover all costs, including insurance.
         C. Each Special Plan requires that you take certain risk control steps as conditions
            of payment. You must maintain a verifiable, written loss control plan. If a claim is
            filed, you may be asked to submit a copy of your loss control program. See the
            Special Plans sections.
         D. You must comply with this policy manual, including reporting a loss no later than
            90 days after you discover it.

         A. You must report a loss no later than 90 days after you discover it.
         B. Payment for losses will equal our finding of restoration cost. The deductible will
            reduce our payment. Restoration cost is the lesser of the cost to repair or replace
            in conformance with state purchasing rules or state price agreements. To find
            the restoration cost, we may use:
            1. Appraisals by our staff or our contractors;
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Continuation Sheet                                               Number     125-7-101

      2.   Competitive bids;
      3.   Published cost services or your purchase price;
      4.   The same method you used to determine values for Risk Reports; or
      5.   Other data.
   C. Definitions. As used in this section:
      1. Market Value is the likely price of property had it been offered for sale
         immediately before loss. In nearly all cases, replacement cost will not exceed
         market value.
      2. Reproduction Value is the cost of duplicating building materials or
         techniques. However, repair of one percent art or of some property damage
         may call for some repairs that, by their nature, approach reproduction.
         Example: Restoring a damaged building of historical significance to its pre-
         loss state.
      3. Betterment is replacing the property with something better than it was
         before. It is covered by this self-insurance when new materials must be
         used, new models must replace discontinued models, or when changes are
         required by current codes in order to restore a damaged property to
         functional use.
   D. In the event of a loss, we may require records of your ownership or your control
      and responsibility for damage. We may also need to know how you determined
      your reported cost.
   E. For the following types of property, restoration cost is determined by:
      1. Vehicles owned and purchased new by you qualify for the lower of the
         necessary and reasonable cost to repair or replace the vehicle with one of
         similar make and model. Replacement cost will be paid when the cost to
         repair exceeds 80 percent of NADA book (retail value) or similar depreciated
         value as determined by us or our contractors. Any vehicles you do not own,
         did not purchase new, or will not replace with a new vehicle, qualify for
         depreciated value instead of new replacement cost. We pay necessary
         towing and storing charges for your damaged vehicles. We do not pay fees
         for storage on any state-owned or state-rented lands.
      2. Commercial Rental Vehicles. We will pay a commercial rental company
         loss or damage you become obligated to pay according to the terms of the
         agency’s rental contract. We will negotiate the reasonable value of the
           a)   Necessary and reasonable repair or replacement cost.
           b)   Reasonable administrative fees.
           c)   Documented diminished value.
           d)   Loss of use during the time the vehicle is actually and reasonably
                unavailable to the rental company due to the loss or damage.

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Continuation Sheet                                               Number        125-7-101

      3. Aircraft and vessels used principally in the ocean qualify for the lower of
         actual cost to repair to its pre-loss condition or actual cash value. If we
         determine the hull a total loss, settlement is limited to actual cash value, or
         market value, prior to the loss. We will take into account any depreciation for
         age, wear and tear, condition of hull at time of loss, and/or obsolescence
      4. Buildings and structures qualify for the lower of necessary and reasonable
         cost to repair or construct a new building that will functionally replace the old
         a) Cost to replace includes the necessary use of modern construction
            materials and techniques; one percent art; and cost to comply with current
            minimum building codes.
         b) It does not include, even if required by current building codes:
             1) Adding or replacing parking, paving, sidewalks, or utility pipes or
                conduits not destroyed in the loss;
             2) Items excluded from the definition of real property; or
             3) Any increased cost caused by new or expanded functions or intended
      5. Other nonexpendable or expendable personal property qualify for the
         lower of necessary and reasonable cost to repair or the cost of replacing it
         with property of equivalent function and reasonably similar to the old.
         Expendable personal property has the same meaning as that given in the
         Oregon Accounting Manual. It includes all assets purchased for under
         $5,000 or that have a useful life of less than two years. It is still your
         responsibility to maintain adequate records to document loss of expendable
      6. Exceptional items and all research products and valuable papers qualify
         only for the cost of replacing the property with common, everyday materials
         similar to those of which the item was composed unless covered by a special
         plan. See the Special Plan sections.
      7. One percent art qualifies for the reasonable and necessary cost to replace
         the work of art with a similar piece by the same artist. When that is not
         feasible, we pay for a reasonably similar work of art. Non-artistic elements,
         such as a storm window covering a work of stained glass, will be valued as
         any ordinary structure or personal property.
         Before taking any action on one percent art except that necessary to
         immediately protect the damaged piece, you must contact The Oregon Arts
         Commission. The Oregon Arts Commission will review the contract for the
         specific art piece and advise on the best course to repair, replace or restore
         the artwork. We will only authorize payment for repair, replacement or
         restoration expressly authorized by the Oregon Arts Commission at an
         amount approved by us.

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Continuation Sheet                                             Number     125-7-101

   F. Mitigation and Clean-up qualify for payment if they arise out of any covered
      loss we also pay. (See self insurance agreement.) When we determine the loss
      is covered, we will also pay:
      1. The cost of protecting damaged property and reducing further damage to
         property such as boarding up, covering and securing. Pre-loss cost of
         prudent loss reduction are not paid.
       2. An amount, not to exceed 20 percent of the total loss, for the necessary cost
          of removing debris.
       3. We will pay your costs and overhead charges only to the extent they exceed
          your costs for normal operations had no loss occurred.
   G. Extra Expense Payment. We pay your direct expenses of continuing normal
      operations which were disrupted by a covered cause of loss. The extra
      expenses we pay are the necessary costs of operating that exceed the normal
      operating costs, had the loss not occurred. This payment is limited to the lesser
      of an amount equal to the covered property loss or $250,000.
   We do not pay the following extra expenses:
      1. Expenses that are not the result of a covered property loss.
      2. Expenses beyond the time we conclude you are able to resume normal
      3. Loss of income.
      4. Loss due to strikers on your property.
      5. Costs to replicate data processing media, valuable papers, research
         products, data, or records.
      6. Any other costs expressly excluded by this policy manual.
      Some of these exclusions can be covered by Business Interruption insurance
      which we can purchase for you. Call us if you feel you need it.
   H. Alternative Use of Funds. ORS 278.050(2) allows you to apply loss payments
      to alternative uses. If you will apply payments to an alternative use, we will
      decide the payment for loss at the lowest reasonable amount in accord with this
      self-insurance policy. A loss approved for restoration may be reduced for an
      alternative use. For example, we will not pay the costs of meeting new code or
      legal requirements or providing one percent art on a building that will not be
      1. Advise your claims adjuster in writing if you want to apply loss payments to
         alternative use.
      2. We must approve your plan for alternative use. Our approval is hereby given
         for all lawful alternatives, provided:
             a) Total cost is under $50,000;
             b) You have sufficient spending authority for the proposed use; and
             c) The proposed use was not removed from your requested budget by
                DAS or the Legislature.

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   Continuation Sheet                                              Number     125-7-101

         3. Proposed alternative uses which do not meet all of the above conditions
            require our written approval as specified in ORS 278.050(2).
      I. Subrogation. If we make payment on your loss, we will handle any recovery
         actions against third parties. Our recovery will reduce your losses used in
         determining future risk charges.
      J. Sensitive Claims. It is our policy to consult with you on our actions on sensitive
         claims. You should alert us in writing if a loss is of a sensitive nature.
      K. Salvage. We may decide that damaged property can be sold for salvage. If so,
         we will request your titles or evidence of ownership. These must be assigned
         and transferred to us upon our request. We will arrange for any disposal of the
         Funds recovered will be credited against your losses and used in calculating your
         future risk charges.
      L. Other Insurance. If we purchase commercial property insurance for your
         specific property (real or personal), that coverage is your sole remedy for
         indemnification of loss subject to the policy terms and conditions. This includes
         any coverage you purchase under purchase authority we delegate to you. There
         is no coverage under the Insurance Fund even if the specific policy is not as
         broad as Insurance Fund coverage.
         Of course, all of your other reported property is covered by the Insurance Fund
         under terms of the policy manual. The Fund pays for losses and for the Fund’s
         excess or catastrophic commercial coverage.

      A. If you need coverage for something not mentioned or something excluded or
         limited by this self-insurance policy, please tell us. We may be able to form a
         plan of self-insurance to meet your needs. Any plan we develop must be
         consistent with ORS Chapter 278 and actuarially sound. We may have to obtain
         legislative approval for the plan. We may be able to obtain commercial
         insurance to meet your needs.
      B. We may be able to help you develop a risk control plan that will remove or
         reduce your need for coverage.
      C. Our staff may be able to help you pursue a claim against your contractor’s
         insurance company. How much help we provide depends on your need, our
         expertise, and available resources. There is no charge for this help.

One of two forms must be used to report and apply for payment of a loss.
      A. Fast-Track Property Loss Report Form should be used for losses that meet
         these tests:
                                    Page 18 of 18
     Department of Administrative Services                              Property Policy Manual

     Continuation Sheet                                                 Number     125-7-101

               1. Damaged property is owned by the state;
               2. It doesn’t appear a state employee caused the accident or loss;
               3. The damaged property is a vehicle;
               4. If not a vehicle, you expect the loss will be under $10,000. This dollar limit
                  does not apply to state-owned passenger vehicles, including cars, pickups,
                  and vans. They qualify for this form regardless of value; and
               5. The loss is not covered under one of the Special Plans.
               The Fast-Track form describes when we need supporting documents. We
               usually don’t need any.
          B. The State Self-insurance Claim Report Form should be used on large or
             complex losses. It is an all-purpose, self-insured loss and lawsuit report form. It
             should be used for all losses except those a Fast-Track form can cover. Do not
             use for workers’ compensation and inmate injury claims. These coverages have
             their own multi-part forms. Attach supporting information, such as:
               1.   Evidence of state ownership or responsibility;
               2.   Copy of DMV Traffic Accident and Insurance Report;
               3.   Copy of any police or fire department report;
               4.   Repair estimates, photographs, other data on cost of damages; and
               5.   Information on any adverse party’s insurance;
               6.   Evidence you complied with any conditions of payment specified in applicable
                    Special Plans.

Sample forms are attached. Photocopy them (front and back) as needed. Or contact us
for a supply of forms if you have frequent claims.
HISTORY: Effective July 1, 1998. Replaces policy dated July 1, 1997.

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Description: Oregon Auto Insurance Mitigation Law document sample