Commercial Property Insurance Essay
Commercial Property Insurance
When starting up a new business, one of the most important factors for a business owner to decide on is the location of that business. With a white-water rafting business there are several important factors that a company must look at before they can proceed. First item is the legal aspects of acquiring, holding, and disposing of both real and personal properties. This aspect is more important because it is the first steps that the client needs to make to get their business up and running. The next item is to analyze the business for insurance purposes. White water rafting can be a dangerous sport, and therefore it is essential that the business is protected from injury lawsuits.
The final item that any business needs to be aware of is the environmental issues and other regulations that come with the location. In order to determine the best location for the client’s white water rafting business should be located, we will look at three locations in Florida, Ohio, and Texas to compare which location will be the best fit for this business. Evaluate the Legal Aspects of Acquiring, Holding, and Disposing of Real Property In the U.S. the River-Rafting business is considered to be real property, this due to riverbeds and banks being owned by the state. If a river is physically navigable, then is considered to be pubic property. According to Cheeseman (2007), “Real property is immovable or attached to immovable land or buildings, whereas personal property is movable” (p. 755). Real property has a major role in the United States economy of property and ownership rights.
Real property deals with the legal rights of property rather than physical attributes of tangible land. When acquiring real property it is important to understand the concepts the property and how to transfer rights of the property so that the execution of the property can take place. There are normally two classifications of property, personal and real. Most commonly real property takes the place of land. Landowners purchase surface rights to the land which gives them the right to occupy the land. This allows the owner the right to enjoy, develop, and use the property as needed, however can be subject to applicable government regulations. In the State of Florida the legal aspects surrounding the acquirement, holding, and disposal of real property are that the buyer must record all deeds with the public records office of the specific county courthouse.
This recording suggests that the property has been sold and any subsequent purchases should be careful. The title of the property holds the rights and ownership to the said property and is considered documentary ownership. The company is also given a warranty deed which provides protection to the purchaser. This is proof that the purchaser is the legal owner of the purchased property with no outstanding mortgages, liens, or other holds against the property. The State of Ohio works in a similar way to Florida by requiring a deed, mortgage, lease, or another similar document that spells out who the ownership is being transferred too and contains a detailed description of what the property is that is signed by the grantor and then notarized. The buyer is then also given a warranty deed that verifies and protects the property.
Texas also requires a deed, mortgage, lease, or other form of verification of property ownership once it is purchased. Land is also considered real property so if our client wants to purchase the land to put his mobile home on, the purchase will most likely be funded by a community bank or rural land lenders that are familiar with the lending of land. If after time our client would rather construct their building for business, they can write off the interest on the construction of the property if it will also be his residence (“East Texas Land”, 2014).
In the state of Texas, if an entity wants to sell their real property, they need to get a letter by the potential buyer of the property making an offer for either the purchase or lease of the property. The current owner of the property has to disclose all current and existing appraisal reports to ensure that the owner’s opinion of the value of the property is backed up. Taxes will also have to be paid to the state of Texas for any real property that is purchased in the state. Evaluate the Legal Aspects of Acquiring, Holding, and Disposing of Personal Property
The U.S. economic system is formed by the private ownership of personal property. According to Cheesman (2007), “Personal property is tangible property such as automobiles, furniture, and equipment, and intangible property such as securities, patents, and copyrights” (p. 739).
Personal property consists of a person’s rights related to possession and ownership of property, including land, structures, or buildings on land and the materials beneath land. In the state of Florida all tangible personal property is taxed at the local level and varies from county. As of 2007, Florida no longer taxes on intangible personal property. Fee Simple Deeds are the most commonly used form of ownership for property in Florida. Fee Simple Deeds gives the owner the rights to sell, posses, and use as security, improve land/buildings, and pass on to beneficiaries.
For Ohio, personal property rights vary by the type of personal property. When buying personal property make sure to check into specific laws for different items, but know that most have some type of transferable clause in them if anything would happen to the owner.
The state of Texas has the authority to tax any and all tangible personal property purchased in the state. Intangible personal property is only taxed if the property is owned by a resident of the state, or if the personal property is located in the state and is used for business purposes (“Tax Code”). For our client, he will be taxed for all equipment purchased and used for his river-rafting business. The current tax rate will be used at the time of purchase. Analyze the Business of Insurance for Various Risks
There are a several forms of insurance that will need to be acquired to minimize the risk of performing a River-Rafting business. Injuries are the main risks a River-Rafting company face. They need to be concerned with injuries that could potentially happen to both the clients and employees. Other risks would be the damage that could occur to the rafts and other equipment used for rafting as well as the flooding of the mobile home office.
In addition to the insurance need for performing the business, there are also several types of insurance that minimize monetary loss and professional liability. The professional liability insurances include workman’s compensation insurance, property insurance, and business interruption insurance. The property insurance will provide compensation to the company in the event that a flood occurs and business interruption insurance covers lost revenue that occurs due to a disaster.
The two forms of liability insurance that would need to be acquired are on-water and floater liability. These policies provide compensation to the clients in the event an injury occurs while rafting. The insurance also covers any physical damages that may have occurred to the raft or other equipment.
Florida’s insurance premiums are fairly low due to their enhanced tort reforms. Florida has fairly low caps on punitive and non-economic damages, which lower the total damages provided by the insurer to the plaintiff in the event of a claim. This in turn increases the insurer’s profitability and lowers premiums.
The state of Texas would also require the same type of insurance as the other states. Along with employee and customer protection, a business would also need to protect their property from damage. There are three different types of commercial property policies in Texas that our client can choose from which are basic form policies, broad form policies, and special form polices. These policies will provide either replacement cost coverage, actual cash value coverage, or a combination of both. Depending on where the client chooses to open their business and operate, an insurance company in Texas may exclude windstorm and hail coverage so our client may have to purchase additional policies if they want to be covered (“Commercial Property Insurance”, 2014). Identify Environmental Issues and Regulations Related to the Site
The land that we are suggesting to purchase is a piece of land in Volusia County Florida close to Gemini Springs County Park. This piece of land is used by rafters often and would be a great location to start up a rafting business. If you choose to purchase this piece of land, your company needs to cautious about any environmental hazards you could be held liable for. We suggest that an evaluation of the land be done to ensure these hazards do not exist. Your company also needs to keep in mind that the land must be purchased in the parts of the county that rafting is allowed by the local government. Keep in mind that any hazardous emissions, contaminations, or underground oil leaks could fall under the liability of the company as the new land owner. Any changes to the land purchased need to be permitted by local, state, and federal regulations.
The location in Ohio that we suggest is a spot down the Great Miami River. This location is located near the Cincinnati area that is currently home to several white water rafting sites. This particular location is less crowded and therefore less prone to direct competition from other rafting locations (Whitewater).
Since there hasn’t been a lot of rain in Texas in the last few years, most of the Texas rivers and lakes are very low. The place that we would recommend for our clients business is along the Guadalupe River. Customers can experience a nice scenic view with a variety of trees, cliffs crowned with mesquite, and rocky bluffs and rolling hills. Our client needs to make sure that they do not disrupt natures order and comply with all environmental laws. Our client needs to make sure that the water level of the river is adequate for rafting and that depending on the water level of cfs, different rules may apply. Best decision for our client
Most of the property laws are the same among Florida, Ohio, and Texas so when deciding where to start a new river-rafting business for our client, we believe that Texas would be their best option. Texas has many rivers that our client can choose from and may be able to choose a place where windstorm damage is covered under their insurance policy. Some parts of the state do have low water levels but with the great size of Texas, there are still plenty of options to choose from.
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