As appeared in "The Stained Glass Quarterly" Summer 2003
http://www.stainedglass.org/main_pages/magazine_pages/031-insurance.html
Insuring Churches'
Stained Glass
Windows
by James Jensen, Church Mutual Insurance Company
Insuring valuable stained glass is something that has caused many questions and has stirred much debate among insurance professionals and building owners. Some insurance companies insure stained glass as part of the building; others insure it under a special Inland Marine "fine arts" insurance policy, and still others may include the stained glass windows as contents within an insurance policy. To add to the confusion, how a claim is paid also differs among companies and policies. Some insurance policies pay claims at full replacement value, others at replacement value, and still others at actual cash value.
Other coverage differences include no coverage for broken glass caused by vandalism and co-insurance penalties at the time of a loss if the building is underinsured. And finding a qualified appraiser is problematic as well.
Now that you are more aware of the difficulties of insuring and valuing stained glass, I will provide you with some tips to make the process easier. First, we should start with a little general information about property insurance and the process of insuring a building such as a church. Churches are rather unique insurance risks, as they tend to be of above-average construction, above average in ornamentation and, therefore, above-average buildings in replacement value. Establishing the facility's replacement value is the starting point in the process of insuring a building and its contents. It is essential that the replacement value be accurate to ensure that the premium charged is fair and proportional to all other policies for other churches that are insured. Replacement value forms the basis of the insurance charge for property coverage.
Construction type plays a role in premium rating. Heavy timber framing is superior to lightweight wood framing, and heavy steel construction is better than light steel framing. Horizontally and vertically reinforced masonry construction is superior to ordinary block and brick construction. Basically, the building that is stronger and more resistive to damage deserves better rates than those buildings that are inferior. Geographical differences play a part in rating as well. Churches located in hurricane-prone coastal areas or high-wind states such as Kansas and Oklahoma will have more differentiation of rates between more-resistive and less-resistive building types.
Those building owners who participate in reducing the overall risk will receive additional credits that will lower the premiums. The added cost of fire alarm systems, sprinklers, burglar alarms and surveillance systems can be offset partially by credits that reduce the insurance premium. Adding protective coverings to stained glass can be considered a risk-reducing measure worthy of credit.
The real amount of credit is proportional to the policy premium. This means it will take a small church with a smaller premium longer to recover the cost of implementing risk-reducing measures than it will a larger church with higher premiums.
Damage to a building and the stained glass windows in it can be caused by such basic perils as fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action, damage by burglars and sonic boom. Other perils include glass broken by vandals, falling objects, weight of ice, snow or sleet, water damage, collapse due to specified causes, accidental breakage, spills, stains, scratching or marring, roof damage due to freezing and resulting water damage, and backed-up water from sewers and drains. Still other perils include earth movement, nuclear hazard, governmental action, war, flood, mudslides and seepage, industrial smoke, pollution and normal wear and tear. Theft is another risk that can happen even to stained glass that is firmly installed into a building.
Designing a property insurance policy that meets the exact needs of a specific customer is something of an artform in itself. Many property and casualty insurance agents can write a basic policy for a church, but it might not really be adequate. In fact, an inadequate policy could end up costing much more than the premium savings over a well-written policy. An underinsured customer could be charged a coinsurance penalty at the time of a loss, and a customer with an actual-cash-value policy will be subject to depreciation in the replacement value at the time of a loss.
Getting the replacement value of a building right is becoming a major issue in underwriting the risk for insurance companies and re-insurers alike. Large losses have made insurance companies very cautious when it comes to building values. Insurers need to know they are collecting sufficient premium to cover the risk. Under-valuing many buildings can cause insurance companies to raise rates overall instead of just for those with greater exposures. This destroys the fairness and proportionality of rates for everyone. After all, insurance companies, especially mutual companies that are owned by the customers, are responsible to their policyholders to stay solvent and fiscally responsible.
Insurance companies do not carry the risk entirely by themselves. Insurance companies re-insure a portion of their "book of business" with large reinsurance companies. Reinsurance spreads the risk out over many companies on a global scale. The reinsurance companies are becoming more and more demanding about replacement values as the market pressures increase. What happens in New York can and has bankrupted a reinsurer in Tokyo. And moreover, something that happens in China can cause increased rates in North Carolina or Texas. Insurance has truly become a global industry.
Certain components in a building, such as stained glass, pews, pipe organs and altars are usually considered to be part of the building value rather than contents of a building. As such, these elements must be identified and included in an appraisal. A complete survey of the building is necessary to develop an accurate appraisal. Insurance companies use computer programs that are updated regularly to aid in the appraisal.
The insurance agent begins to prepare the quotation for a church customer by meeting with representatives of the church, such as a property chairperson or trustee. A physical survey of the building begins with measuring the building and drawing a diagram of the building. Characteristics, including square footage, height of walls, type of construction, building-material quality, perimeter footage of footings, number of sections within a building, fire divisions, fire alarm systems and sprinklers, balconies and occupancy types, are entered into the computer program. Location is added in the form of zip codes to input local material costs and labor costs specific to the area. A replacement value is calculated based on the input. Special features such as footage of pews, number of theater seats, number of ranks to a pipe organ, pulpit, baptismal and altars are individually added as itemized elements that are attached to the building.
A "Quality Rank" is applied to the building section by section. The Quality Rank is a measurement determined by adding or subtracting tenths of a point from the scale of 0.5 points to 5 points. Determining an "average" is where this task becomes an artform. Exactly what is an average stained glass window? What is an average steeple? What is an average mural, mosaic, statue, carving, millwork detail, window opening size, chandelier, door or any other building element? This determination is subjective at best. The agent uses a quality-rank worksheet to establish the numerical rank, and the number is added to the computer program.
Insurance companies have departments -- called underwriting -- to finalize premium charges and work with the agent to establish policies. The underwriters then arrange for a loss-control agent to re-inspect the property and do another survey and appraisal to see if the primary agent's determination was accurate. The loss-control agent is a building specialist equipped better to ascertain values than the primary insurance agent. The loss-
control agent also can help the customer by suggesting measures that help to reduce risks.
Final valuation is achieved by applying the cost-of-living index to the appropriate appraised value to keep pace with inflation as the years go by. These many steps are slow and tedious but necessary to guarantee that the customer will receive the amount of money necessary at the time of a loss to replace the damaged items.
It is important to add extra value for "above average" items because ordinary replacement-value policies replace with only enough money to buy the average product with the same "utilitarian" quality or usefulness. An average replacement value insurance policy is adequate only for average- or below-average stained glass... as well as any other building element. If your stained glass is above average, the normal replacement-value policy might be inadequate.
Buildings on the national or state registry of historic places are required to replace with building elements like the original. This is a contractual requirement placed on the owner by the registry agreement. Insurance companies must underwrite accordingly if there is to be sufficient coverage to cover damage at the time of the loss... or else the owner is left responsible for the difference.
Fine-arts coverage is available and can be tailored to the exact needs of a customer by the agent underwriting the risk. A written appraisal is necessary to establish the value of the object. This is done by a professional in the specific trade, art or industry and submitted to the carrier by the customer at added expense to the customer. Getting accurate appraisals is not an easy task, especially for rural churches. Getting accurate and trustworthy appraisals on stained glass that is above-average quality is difficult in that not every stained glass studio is capable of above-average work. It takes a specialist who is capable of producing the same quality to really know the cost of reproducing the same quality of stained glass window. There are fewer and fewer qualified persons as the quality goes up in any craft, including stained glass.
Fine-art coverage for stained glass is additional coverage within "Inland Marine" insurance coverage. Inland marine insurance receives its name from being insurance for property being transported from where it is offloaded from ships to the location "inland" from the sea coast. Today the term still applies in law, particularly to items that are transportable, such as art. Although it is arguable that stained glass is not meant to be moved regularly, like a painting, it is still within fine arts and thus within inland marine coverage. The rates for stained glass windows are generally a bit lower than objects of art that are moveable to compensate. Expensive musical instruments, silver services, communion sets, murals, paintings, statuary and other ecclesiastical art also can be covered by inland marine insurance.
There are two basic factors used to determine if one should insure stained glass as part of the building replacement value or separately, as a fine arts inland marine floater:
1. Is the stained glass above-average quality?
2. Is the stained glass designed by a known artist and/or of original artistic merit?
Regardless of determination, the owner is the primary responsible party for maintenance and preservation of the windows. Deterioration is natural and part of ordinary "wear and tear" that is excluded from every insurance policy. The owner is best advised to get a high-quality stained glass studio representative to make a complete survey of the windows and complete a record of the windows for future reference should something happen to them. The record should include origin notes, pictures, sizes, specifications and descriptions of frames, installation and present condition. This sort of survey can be expensive for large collections. The report needs to be kept somewhere safe for future reference. Any restoration or repairs to the windows needs to be documented as well.
It also is wise to make a videotape record or still photographic record of the windows and frames for future reference (inside and outside). It is nearly impossible to reconstruct the style and design of a set of windows from a pile of ashes after a devastating fire. It is much easier to demand "like" replacement if you have evidence from before the damage. Owners must take this responsibility themselves because the insurer will not.
Not every stained glass window in existence is original or unique. Some are indeed average, but that does not mean poorly crafted or poorly designed. The average stained glass studio or stained glass artist can replace good-quality stained glass windows. Standard replacement-value insurance coverage will normally cover the replacement costs.
An intermediary step that an owner can take is to insure all buildings and all contents combined in a "Blanket Limit" policy. The blanket limit is the church building value, contents value and any other owned property added together to form a single limit at the time of a loss for any of the specified locations. Doing this increases the limit above the church by itself or the contents by themselves. If a loss occurs, the only limit is the one, high, blanket limit. This is more than enough to normally guarantee enough money at the time of the loss to replace the damaged portion of the building. If the stained glass windows are broken by a hailstorm, the blanket limit is the only limit to repair or replace the windows. The blanket limit is the alternative to setting specific limits that could be inadequate.
A blanket-limit policy that is based on a good appraisal to begin with is adequate for even "good" stained glass windows contained within a church building. The blanket-limit policy is the best way for most building owners to protect themselves.
It is necessary to comment that not all commercial insurance policies are exactly alike. The combination of Special Form Coverage, Replacement Value Coverage and an affordable deductible are the starting points to creating a good insurance policy. Specifying a policy with a blanket limit also is a recommended point to consider. Yet another element of an adequate policy is to specify "Agreed Value" within the policy to eliminate any co-insurance penalty.
Insurance policies to stay away from include actual-cash-value policies that contain provisions for deprecation at the time of the loss. In these policies, the owner could receive much less than the cost of replacement or even nothing at all in some policies. This would be a horrible surprise at the time of need. You also want to avoid the presence of a co-insurance penalty provision. This would allow the insurance company to lower a claim payment if the building is not insured to value. Both Actual Cash Value and co-insurance penalty policies are less expensive but can be extremely more expensive if a loss occurs. Unless you are an experienced risk manager, these policies can be risky for a church.
There are three forms of insurance--basic, broad and special forms. Basic-form coverage might be inadequate because it does not cover glass breakage caused by vandalism and usually does not cover theft. Broad-form coverage does cover glass broken by vandalism, but could have a low limit of only $1,000 per building, not enough to repair or replace expensive stained glass windows. Theft is optional under broad-form coverage. Special-form coverage should always be specified at churches with stained glass. The added cost is low and well worth the difference in coverage. Special-form coverage tells the customer only what is not covered, and the list is very short.
Remember that the insurance policy is actually a legal and binding contract. Both the insured and the insurer have specified responsibilities. There are dozens of optional coverages, variations and differences to consider. Read the contract. Ask questions of the agent if you do not understand the wording. Demand the agent respond to your questions formally at a board meeting. Well-educated and ethical agents should appreciate the opportunity to explain the policy to your board of trustees or church group. After all, an informed customer is a wise buyer and is not easily persuaded by a low price that is of lower value to the customer.
Church insurance is difficult to write if the agent does not know the exact needs of the customer, and every church is a bit different. Arbitrary values and underestimated value can result in inadequate coverage. Although this article is centered on specifically insuring fine art such as stained glass and mosaics, there is a myriad of other issues to consider when specifying church insurance. The services of a specialist are always a welcomed element. Selecting property and casualty insurance coverage can be a time-consuming process. There are companies that specialize in insuring churches. The company that specializes in insuring churches has specific knowledge and resources that are passed on to agents in the field to aid churches in protecting congregations in the time of need.
This is not to say that the local agent cannot insure a small church with average risks, but the job is made much harder for him because he does not have access to the same resources as the specializing agent. Most specializing companies do not insure through independent agents; they employ their own "captive" agents and therefore are better able to afford and control the specialized training and computer programs and surveys necessary to meet the demands of a specific market such as churches.
Knowing what kind of stained glass your church has is the first step in knowing what kind of insurance best fits your needs. Inviting reputable stained glass studios to visit your church is a way to gather information about your windows. Specially prepared reports on your windows will require the church to pay for the services of professional stained glass studio representatives. Keeping your windows safe with well-designed and well-engineered protective storm coverings is an important way to reduce the risk of breakage and slow deterioration of the windows. Selecting the services of a specializing insurance agent can prevent future problems and ensure your church will have enough money to replace your valuable and beloved stained glass windows if they are damaged or destroyed.
James Jensen is an agent with Church Mutual Insurance Company, the nation's leading insurer of church properties. Mr. Jensen joined Church Mutual Insurance Company in 1997 after more than 25 years working in stained glass, as an artist, preservation specialist and studio representative for firms such as Willet Stained Glass Studio in Philadelphia, Hauser Art Glass company in Minnesota, Shenandoah Studio in Virginia and Gaytee Stained Glass Studio in Minnesota. Mr. Jensen received a master's degree from the University of Wisconsin-Madison in hot glass and art history while studying with Harvey K. Littleton in 1977. Mr. Jensen works with the loss control department of Church Mutual to help train other agents on valuation of stained glass and other ecclesiastical art located in churches throughout the country.
