Country Hardware and Lumber is a small hardware and lumber yard located in Port Riell on the north shore of Lake Erie.
The business caters to cottagers and homeowners in the small towns and villages of Norfolk County. The business has
been owned by Donald Springer since 1968. Don purchased an existing lumber yard and has grown the business from its
humble beginnings. The business currently earns an annual revenue of $2,860,000, which has increased considerably in
the past four years since the area has been rediscovered as a vacation destination and properties are being purchased
and renovated by people from Toronto.
Don was the sole proprietor and operates under the trade name of “Country Hardware and Lumber”. About five years
ago, on the advice of his accountant, Don set up a corporation for the business under 1123498 Ontario Limited. Don
owns 51% of the shares in the numbered company and his two sons, Don Jr. and Allen, equally own the other shares.
The two boys, along with Don, work the business. There are two other full time staff who work in the yard, a delivery
vehicle driver, and a part time receptionist and bookkeeper. There is also one other permanent part time worker, and
in the spring, Don takes on two high school students as co-op to work the season.
The business is located on about an acre of land on the outskirts of Port Riell. There is the main building, an 1800 square
foot retail space that houses the hardware store and the office. The main building was built in 1979 and is a concrete
block, steel framed building with a flat tar roof. The building updated its plumbing and wiring in 1997. The building has
a forced air gas furnace installed in 2012. There are two permanent outbuildings, which are wood framed and clad,
which stores the lumber and other building materials. These buildings have electricity but no plumbing and are heated
by electrical baseboard heating. In the spring Don sets up a temporary greenhouse for the bedding plants. This is heated
by electrical space heaters. Much of the lumber, including the stone and brick is stored outside during the nice weather
when the inventory is highest. Don has no mortgage on the property but does have a $500,000 operating line of credit
from the Bank of Montreal in Simcoe for his inventory. The location of the business is 9645 Charlotte Line Road, Port
Reill, Ontario.
The main building has been valued at $860,000 and each of the outbuildings at $550,000 and $190,000 respectively.
The greenhouse is valued at $60,000. Don’s inventory runs from about $500,000 during the off season up to $900,000
during the peak months of May to July.
Country Hardware and Lumber currently have two vehicles registered to the business, a 2018 Ford Econoline van used
for small deliveries and service calls. The vehicle is painted with the company logo and trade name and is predominately
driven by Donald and his two sons. There is also a 2010 Freightliner M2 106 truck used to deliver lumber which is
operated by the delivery driver. One of the full time yard workers also helps with deliveries as needed.
Loss History
A few years ago Country Hardware and Lumber suffered a series of small thefts. The total value of stock that was lost in
any one incident was below their deductible and no claims were made, however, Donald did install security cameras and
mirrors throughout the store to prevent further incidents.
In December 2018 an elderly gentleman slipped and fell in the parking lot outside the store. The business was sued for
injuries with a settlement reached of $15,000.00.In July 2019 there was a fire in the smaller of the two lumber storage buildings. The cause was determined to be arson
although no one was ever charged. Donald and his employees were investigated and cleared. The total value of the loss
was $658,000 for the building and stock.
The Van has had its windshield replaced three times in the past 6 years. There has only been one collision with the
delivery vehicle. It was a single vehicle accident attributed to road conditions in January 2020. The total payout for the
physical damage was $11,387.00.
Underwriting Situation
Country Hardware and Lumber has been insured for the past eight years by the local mutual company. Their policies
have come up for renewal and you have been approached by a broker partner to quote the account. You have been
asked to quote on their property insurance, their Commercial General Liability policy and the automobile policy for the
two business vehicles.
Part A
Complete an analysis of the applicant for these risks. Based on the information contained in the text draft an
underwriting synopsis of this risk, and indicate any concerns you may have and why.