All types of property face certain risks that can cause physical loss or damage. The most common losses sustained by buildings and their contents include those due to fire, natural disaster, flood, collision, vandalism, theft, and similar causes. Certain safeguards can help reduce the likelihood or magnitude of a loss, such as smoke detectors, automatic sprinklers, security cameras, burglar alarms, etc. Adequately maintained prevention systems are the primary method to reduce the frequency and severity of property losses.
For buildings owned and managed by Harvard, building systems governing security, safety, maintenance, and fire detection and suppression can be implemented and monitored in accordance with University standards, whereas occupants of leased spaces have little to no control over the systems in place nor insights into activities conducted in other spaces in the building or surrounding premises. In leased locations, the lessee is beholden to the lessor to ensure that appropriate protections are in place and properly installed and maintained. When these systems are inadequate, loss likelihood and severity increases. Specifically, substandard prevention systems (fire alarms, sprinkler systems, security cameras, burglar alarms, etc.), lax security, and nearby hazardous or dangerous operations are all contributing factors that affect the probability of sustaining a financial loss.
Compounding direct damages incurred, indirect losses, such as income interruption and extra expenses are also typical following a large property loss. In extreme cases, these indirect losses could result in forfeiture of grant funding if research is delayed or suspended. Additionally, expenses required to repair or replace research materials or data may not be reimbursable from the grant. The indirect impacts of loss events are particularly troublesome when they involve genetically unique animals, biologic materials, or hard to recreate data sets.
Typically, loss or damage to items housed in a leased space is the responsibility of the lessee, though this is not always the case. It is important that the involved parties clearly delineate these financial obligations within the lease. Additionally, before a lease is signed, safety and security systems should be inspected to ensure that all are installed in accordance with the expected occupancy and are functioning properly, and assurances should be obtained that the landlord will regularly test and maintain in accordance with National Fire Protection Association (NFPA) standards. Prudent risk management demands that the owner of building contents, aka fixed assets, maintain a detailed inventory of items being stored or used in a leased location. Ordinarily, this includes photos along with a detailed schedule of items (i.e. makes, models, serial numbers, and any other unique or identifying features), as this data can help facilitate and expedite loss recovery. Additionally, lessee representatives should commit to physical inspections, including regular audits of documentation related to the lessor's mitigation controls and processes. The level of commitment required of a lessee is a function of the potential for financial loss (direct plus indirect) at each leased location.
A properly structured commercial insurance provides final assurance that the needed post-loss funds will be available to aid with loss recovery and resumption of business. The Risk Financing and Insurance department provides several methods for insuring University-owned property, including buildings, goods, and equipment. Which program is right for your property is dependent on its location, use, and values. Harvard's Master Property Insurance Program automatically provides coverage for all Harvard-owned premises and their contents. The contents of leased premises is eligible for participation in this program, but additional steps must be taken by the contents owner to secure coverage. Specifically, site managers must maintain (and submit upon request) a detailed inventory of owned items with current replacement cost values, the leased premises must undergo a periodic loss control audit to determine the adequacy of its protective systems, and payment of any assessed premium charges must be made.(1)
Alternatively, TUBs with contents in leased locations may choose to purchase separate coverage for this property through the Risk Financing and Insurance department's prenegotiated Mobile/Movable Property program. This option is suited to instances of goods such as IT systems requiring special valuation needs (e.g. specified value instead of replacement cost), leased locations not meeting University safety standards, TUBs wishing for standalone limits (not shared with other TUBS), and TUBs looking for lower deductibles than the Master Property Insurance Program offers.
If you have special circumstances or are uncertain how the insurance programs might apply, we encourage you to email or call the Risk Financing and Insurance at 617-495-7971 for details and to speak with a risk management specialist.
(1) For FY2015, all schools and departments with property housed in leased or non-Harvard owned facilities are expected to maintain a detailed schedule of any fixed assets with a current replacement cost value >$25,000 to make those assets eligible for reimbursement under the University's Master Insurance Programs and submit to a loss control review; however no additional premium charges will be assessed. Beginning in FY2016, it is expected that Risk Financing and Insurance will be using the fixed asset system to determine asset values and derive associated insurance premiums.