ACSR 6 - Causes of Loss and Coverage Forms
True
(T/F) The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible.
C. $250,000
ABC has a Building and Personal Property Coverage Form with a limit on their property of $250,000, a $1,000 deductible and an 80% coinsurance clause. ABC's building was totally destroyed by fire, and the value of the property loss was determined to be $300,000. How much will ABC collect from its insurer? A. $240,000 B. $249,000 C. $250,000 D. $300,000
A. It suspends the coinsurance clause if the insured carries an amount of insurance that the insurer and insured agree equals the property's full value.
Agreed value is an optional coverage of the Building and Personal Property Coverage Form (BPP). Which one of the following explains how this optional coverage modifies the basic coverage of the BPP? A. It suspends the coinsurance clause if the insured carries an amount of insurance that the insurer and insured agree equals the property's full value. B. It automatically increases the amount of insurance by a percentage to maintain the limit at an amount of coverage that will keep up with inflation. C. It provides coverage for most types of property on a replacement cost basis rather than an actual cash basis if the coverage is maintained at the agreed amount. D. It provides that if the insurer and the insured cannot agree on the amount of coverage, either party can request an appraisal by a competent, impartial appraiser.
A. Medical diagnostic equipment
All of the following are included as "covered equipment" under the Equipment Breakdown Protection Coverage Form, EXCEPT: A. Medical diagnostic equipment B. Communication equipment C. Pressure equipment D. Electrical equipment
B. Farm Property—Barns, Outbuildings, and Other Structures
All of the following are specialty farm coverages, EXCEPT: A. Crop-hail insurance B. Farm Property—Barns, Outbuildings, and Other Structures C. Federal Crop Insurance D. Animal mortality coverage
D. Equipment breakdown insurance covers perils that are excluded by the BPP.
An insured who purchases a Building and Personal Property Coverage Form (BPP) may also consider purchasing equipment breakdown insurance because A. Equipment breakdown insurance covers equipment and machinery that is excluded by the BPP. B. Equipment breakdown insurance contains lower deductibles than the BPP. C. Equipment breakdown insurance can be used to extend the policy limits of the BPP. D. Equipment breakdown insurance covers perils that are excluded by the BPP.
A. The insured meets an 80% coinsurance agreement.
An insured who purchases a Building and Personal Property Coverage Form can receive several coverage extensions if a value reporting period symbol appears in the declarations or if A. The insured meets an 80% coinsurance agreement. B. The insured purchases a coverage extension endorsement. C. The insured purchases at least $200,000 worth of insurance. D. The insured obtains coverage limits greater than the replacement cost of the building.
D. The businessperson will need to choose the amount equal to at least the actual cash value (ACV) of the property at completion; that is, $750,000.
Blithe Contractors is building a client a $750,000 office space for a client who has purchased the Builders Risk Coverage Form. Blithe meets with the client and sets out a building plan, which includes a schedule of construction. It is estimated that at week three the property will be valued at $200,000, at week four it will be $350,000, and at week eight it will be worth $540,000. Which one of the following statements regarding the amount of insurance need is true? A. The business person will need to sum up all the estimated values to get the total value of insurance that will need to be selected on this coverage form. B. The businessperson will need to take the estimated values and find the average, which will ultimately become the amount of insurance needed on this policy. C. The businessperson will need to continually change the amount of insurance in the policy as the project nears completion to meet the estimated values. D. The businessperson will need to choose the amount equal to at least the actual cash value (ACV) of the property at completion; that is, $750,000.
A. Beth's unit-owners form will cover the additions as part of "your business personal property".
Bodies by Beth is a fitness studio located in a large commercial condominium unit. Beth, the owner, has installed several fixtures, improvements, and alterations to the studio for her personal training business. A fire causes significant damage to Beth's studio, which is insured under a Condominium Commercial Unit-Owners Coverage Form. Which one of the following is true regarding coverage for the fixtures, improvements and alterations damaged in the fire? A. Beth's unit-owners form will cover the additions as part of "your business personal property". B. Beth's unit-owners form will cover the additions as part of the building described in the declarations. C. The Condominium Association Coverage Form will cover the additions as the form provides primary coverage for building items in individual units. D. The Condominium Association Coverage Form will cover the additions because they are considered "common elements" of the building.
Builders Risk Coverage Form
Buildings under construction are more appropriately covered under the ____, which is specifically designed for this loss exposure.
E
Coverage ____ applies to only those classes of farm personal property for which a specific limit of insurance is shown in the Declarations page. The types of property that can be insured under this coverage include farm products, materials, and supplies; farm equipment; various types of livestock; and several other classes of farm personal property.
F
Coverage ____ insures unscheduled farm personal property under a single limit. To discourage underinsurance, this coverage is subject to an 80 percent coinsurance requirement. This coverage excludes an extensive list of property, such as household personal property, animals other than livestock, racehorses or show horses, certain crops and poultry, and vehicles primarily designed and licensed for road use.
B. Outdoor property
Elin had not agreed to the 80% coinsurance requirement on her Building and Personal Property (BPP) coverage form. Which one of the following types of coverage is unavailable to Elin? A. Pollution cleanup and removal B. Outdoor property C. Electronic data D. Preservation of property
C. Excludes various types of property outside the intended scope of coverage such as computer media.
Equipment breakdown insurance A. Is traditionally called electrical and machinery insurance and covers loss resulting from the electrical breakdown of many types of equipment. B. Does not provide coverage to other property that may be damaged as a result of the accidental breakdown of covered equipment. C. Excludes various types of property outside the intended scope of coverage such as computer media. D. Is a relatively small line of insurance that is only important and useful for large-size businesses.
B. Special Form
Greg owns a convenience store and needs to purchase commercial property insurance with coverage for vandalism. Greg does not keep much cash at the store on a daily basis, but he is concerned about theft of the store's inventory. Based on this information, which one of the following causes of loss forms would Greg need to purchase to ensure that his insurance needs are met? A. Basic Form B. Special Form C. Broad Form D. Custom Form
B. Adhere to an 80% coinsurance requirement.
In order for an insured to receive coverage for outdoor property, property off-premises, and other coverage extensions under the Building and Personal Property Coverage Form (BPP), he or she must A. Be covered under the Causes of Loss—Special Form. B. Adhere to an 80% coinsurance requirement. C. Purchase specific coverage extension endorsements. D. Indicate which coverage extensions are desired on the declarations page.
C. $520,000
Katie is a farmowner and participates in the Insurance Services Office (ISO) farm program by purchasing the Farm Property—Farm Personal Property Coverage Form. The total value of her personal farm property that is not specifically scheduled in the policy is worth $600,000, and she has purchased enough coverage to meet the coinsurance requirement. If she suffers a loss to this property of $520,000, how much will her insurer pay? A. $0 B. $480,000 C. $520,000 D. $600,000
B. Multiple Peril Crop Insurance (MPCI).
Laura owns a farm with fields of corn and wheat. She wants to purchase a farm policy that will cover her crops for drought and tornadoes, both of which are common natural disasters in the region. Laura should purchase A. A crop-hail policy. B. Multiple Peril Crop Insurance (MPCI). C. Animal mortality insurance. D. The Farm Property—Farm Personal Property Coverage Form.
Animal Mortality
One example of livestock coverage designed to meet special needs is ____ insurance. This type of insurance is essentially term life insurance on animals. This type of insurance may be purchased to cover farm animals such as valuable horses, registered cattle, or calves being grown and exhibited under sponsorship of a club (such as 4-H).
Crop-Hail
Private insurers offer a traditional form of crop insurance called ____ insurance. These policies cover crop loss resulting from hail and are frequently extended to cover additional perils such as fire, windstorm accompanying hail, damage caused by livestock, and vehicles. Such policies may also cover harvested crops against named perils while being transported to the first place of storage.
Does Not
The Builders Risk Coverage Form (does/does not) cover land or water; outside lawns, trees, shrubs, or plants; outside radio or television antennas, including satellite dishes; or outdoor signs not attached to the building.
A. Crop-hail policies can be extended to cover additional perils such as fire, windstorm with hail, damage caused by livestock, and vehicles.
Standard farm policies do not cover some loss exposures for which farmers frequently need coverage. Specialty coverages such as A. Crop-hail policies can be extended to cover additional perils such as fire, windstorm with hail, damage caused by livestock, and vehicles. B. Multiple Peril Crop Insurance (MPCI) can be extended to cover losses resulting from neglect, poor farming practices, and theft. C. Multiple Peril Crop Insurance (MPCI) insures against losses as named in the Causes of Loss—Broad Form. D. Crop-hail policies allow nonfarmers who own valuable animals to insure them for their full value and for fortuitous causes, including illness.
C. Private insurers.
Standard farm policies do not cover some loss exposures for which farmers frequently need coverage. Therefore, crop-hail insurance, a traditional form of crop insurance, is offered by A. Array B. State insurers. C. Private insurers. D. An Insurance Services Office (ISO) program.
A. Covers damage to sod, trees, shrubs, and plants for specific perils up to $1,000 per occurrence.
The Builders Risk Coverage Form A. Covers damage to sod, trees, shrubs, and plants for specific perils up to $1,000 per occurrence. B. Insures any building once construction is completed. C. Refers to specific named perils. D. Provides up to $5,000 for materials and supplies if they are owned by the insured.
D. The insureds have a covered, damaged piece of artwork that they no longer want, and they want the insurer to pay for the damage and take the artwork.
The Building and Personal Property Coverage Form contains an "Abandonment" condition. Which one of the following is an example of the application of this condition? A. The property is only allowed to be abandoned for a maximum of 30 days before coverage is suspended. B. The insured property had been abandoned and was destroyed by fire, and the insurer is now denying coverage. C. Property that had been abandoned onto the insured property was damaged, and the insured is now making a claim for it. D. The insureds have a covered, damaged piece of artwork that they no longer want, and they want the insurer to pay for the damage and take the artwork.
Broad
The Causes of Loss—____ Form provides coverage for multiple types of perils over and above those in the Basic Form.
C. $10,000
The Claxton Industries (CI) is the named insured under a Building and Personal Property Coverage Form (BPP). CI's building is insured for $5 million (with replacement cost coverage) and the policy has a $1,000 deductible. CI's building sustains $500,000 in covered damage due to a fire and the insurer agrees to pay this loss, less CI's deductible. One year before the fire, the City Planning Commission changed the local building code, and due to these changes, CI will incur $100,000 in additional construction costs. What amount will be paid toward these increased construction costs under CI's BPP? A. Nothing B. $5,000 C. $10,000 D. $100,000
B. Will not cover business personal property if owned by one unit owner.
The Condominium Association Coverage Form A. Closely resembles the building coverage of a homeowners policy. B. Will not cover business personal property if owned by one unit owner. C. Is excess to Condominium Commercial Unit-Owners Coverage Form. D. Can provide coverage for owners of residential units at a lower premium.
G
The Farm Property—Barns, Outbuildings, and Other Farm Structures Coverage Form, Coverage ____ is used to insure all types of farm buildings and structures other than the dwelling and private garages.
Condominium Building Coverage
The ____ applies to these types of property only if the condominium association agreement requires the association to insure them. Otherwise, such property is not included in the association's building coverage. The unit owner's coverage (a personal coverage form) picks up where the association's coverage (commercial coverage forms) ends, and vice versa.
Second
The ____ builder's risk coverage extension covers loss of or damage to sod, trees, shrubs, and plants outside buildings on the premises, but only if the damage is caused by fire, lightning, explosion, riot, civil commotion, or aircraft. The most the insurer will pay under the extension is $1,000 per occurrence, subject to a sublimit of $250 for any one tree, shrub, or plant.
First
The ____ builders risk coverage extension provides up to $5,000 at each covered location for damage to building materials or supplies owned by others, such as a plumbing or roofing subcontractor. To be covered, the materials must be (1) owned by others; (2) in the insured's care, custody, or control; (3) located in or on the building or within 100 feet of its premises; and (4) intended to become a permanent part of the building.
Builders Risk Coverage Form
The ____ can insure any building under construction, including those (such as farm buildings and dwellings) that will not be eligible for coverage under the BPP when construction is completed.
Special
The ____ causes of loss coverage corresponds to the coverage provided by the homeowners ____ Form and the commercial property Causes of Loss—____ form. Most of the exclusions of the farm coverage form are identical to, or closely resemble, the exclusions and limitations found in the commercial property Special Form.
Broad
The ____ causes of loss in the ISO farm program include all the basic causes of loss, plus all other named perils included in the commercial property causes-of-loss broad form and the homeowners ____ Form. Death of livestock resulting from some additional perils is also covered. These additional perils are electrocution, drowning, accidental shooting, attacks by dogs or wild animals, and accidents in loading or unloading.
Basic
The ____ causes of loss in the farm policy are the same as those found in the commercial property Causes of Loss—____ Form, plus four additional perils: theft, collision, earthquake (covering livestock only), and flood (livestock only).
Builders Risk Coverage Form
The ____ contains the same four additional coverages found in other basic property policies (Debris Removal, Preservation of Property, Fire Department Service Charge, and Pollutant Clean-up and Removal) and includes two coverage extensions.
Weight of Snow, Ice, or Sleet
The ____ coverage does not cover damage to gutters, downspouts, or personal property in the open.
Broad
The main difference between Basic and Broad forms is that the ____ Form covers additional perils.
Basic Form, Broad Form, and Special Form
Three causes of loss forms are available:
D. Cannot abandon damaged property and require the insurer to take possession of it.
Under the Abandonment condition of the Building and Personal Property Coverage Form (BPP), the insured A. Has the right to abandon damaged property and require the insurer to take possession of it. B. Must not abandon or dispose of any damaged property before the loss can be properly verified by the insurer. C. Is required to abandon or dispose of any damaged property before being indemnified for the loss. D. Cannot abandon damaged property and require the insurer to take possession of it.
D. Coverage E can insure specified classes of farm personal property and/or individually scheduled items.
Under the Farm Property—Farm Personal Property Coverage Form, A. The insured must select both Coverage E and Coverage F in order to receive full coverage. B. The collision peril has four aspects, including collision damage to crops and domestic animals. C. Coverage F insures those classes of farm property for which a specific limit of insurance is shown on the Declarations page. D. Coverage E can insure specified classes of farm personal property and/or individually scheduled items.
C. Death of livestock resulting from flooding
Under the ISO farm program, the Causes of Loss—Basic Form is expanded to include four additional perils. Which one of the following would be covered by the Causes of Loss—Basic Form? A. Death of livestock resulting from accidental shooting B. Death of livestock resulting from electrocution C. Death of livestock resulting from flooding D. Death of livestock resulting from attacks by dogs or wild animals
A. The Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form
Which one of the following farm policies contains four coverages, which are comparable in most respects to Coverages A through D of homeowners policies? A. The Farm Dwellings, Appurtenant Structures and Household Personal Property Coverage Form B. The Farm Property—Farm Personal Property Coverage Form C. The Crop-Hail Coverage Form D. The Farm Property—Barns, Outbuildings, and Other Farm Structures Coverage Form
C. Coverage E
Which one of the following Farm Property Coverage Parts would be appropriate for covering specified classes of farm personal property? A. Coverage A B. Coverage G C. Coverage E D. Coverage C
A. It suspends the coinsurance clause if the insured carries the amount of insurance agreed to by the insured and insurer
Which one of the following best describes the effect of the agreed value optional coverage? A. It suspends the coinsurance clause if the insured carries the amount of insurance agreed to by the insured and insurer B. It provides a method of settling disputes over the valuation of damaged property C. It provides for mandatory arbitration of disputes about the value of the insured's building D. It requires the insurer to offer the insured the opportunity to purchase replacement cost coverage
C. It does not apply to antiques or rare articles.
Which one of the following correctly describes an aspect of the replacement cost additional coverage? A. It provides that covered losses will be valued on an actual cash value (ACV) basis. B. It provides that damaged property will be valued based on its replacement cost, less depreciation. C. It does not apply to antiques or rare articles. D. It applies to manuscripts and works of art.
C. Land
Which one of the following is NOT considered covered property under the Builders Risk Coverage Form? A. Building materials within 100 feet of the premises B. Fixtures and machinery C. Land D. Equipment used to service the building
B. Telephone systems
Which one of the following is an example of equipment that can be covered by an equipment breakdown insurance policy? A. Computer media B. Telephone systems C. Medical diagnostic equipment D. Vehicles
B. A fire department service charge is covered up to $1,000 at each covered location unless a higher limit is shown.
Which one of the following is true regarding additional coverages provided by the Building and Personal Property Coverage Form (BPP)? A. Debris removal is covered up to $10,000 at each covered location unless a higher limit is shown. B. A fire department service charge is covered up to $1,000 at each covered location unless a higher limit is shown. C. Loss of electronic data is covered up to $1,000. D. Pollution cleanup and removal is covered up to 25% of the sum of the loss and deductible plus an additional $10,000.
C. Appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering are covered as part of the building or structure.
Which one of the following is true regarding coverage for buildings or structures under the Building and Personal Property Coverage Form (BPP)? A. Fences and outdoor signs are considered to be permanent "fixtures" and are covered as part of the building. B. Materials, equipment, supplies, and temporary structures, on or within 300 feet of the premises, used for making alterations or repairs to the building are covered as building items. C. Appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering are covered as part of the building or structure. D. Fire-extinguishing equipment is considered to be personal property and is not covered as part of the building or structure.
A. Building materials or supplies owned by others can be covered.
Which one of the following is true regarding the Builders Risk Coverage Form? A. Building materials or supplies owned by others can be covered. B. Only the building owner can be a named insured. C. Land is considered covered property. D. Equipment used to service the building is excluded.
A. Livestock and poultry are not eligible for Special Form coverage.
Which one of the following is true regarding the ISO Farm Program? A. Livestock and poultry are not eligible for Special Form coverage. B. Crop losses resulting from hail are covered. C. Death of farm animals resulting from illness or disease is covered. D. Barns and similar farm structures are not eligible for Special Form coverage.
C. The deductible applies once per occurrence, regardless of how many items are damaged.
Which one of the following is true regarding the deductible for the Building and Personal Property Coverage Form (BPP)? A. The deductible is applied to the limit of insurance. B. The deductible applies separately to the building and to business personal property. C. The deductible applies once per occurrence, regardless of how many items are damaged. D. The deductible applies once per policy period, regardless of the number of occurrences.
Animal Mortality
____ insurance is also purchased by owners of racehorses, show dogs, circus animals, and laboratory animals. This insurance generally covers against loss of the insured animal by death resulting from accident, injury, sickness, or disease, or by theft, subject to exclusions.
Equipment Breakdown
_____ insurance covers loss resulting from the accidental breakdown of almost any type of equipment that operates under pressure or that controls, transmits, transforms, or uses mechanical or electrical power.
True
(T/F) Recommending Special Form coverage to insureds helps provide better coverage while also minimizing errors and omissions (E&O) claims for losses that are not covered.
C. Awnings or floor coverings
Actual cash value applies to losses under $2,500 for which one of these types of property? A. Personal property of others B. Personal effects C. Awnings or floor coverings D. Stock
C. Property in the open within 250 feet of the premises
All of the following are covered as business personal property in the BPP, EXCEPT: A. Finished goods including supplies used in packing B. Leased personal property C. Property in the open within 250 feet of the premises D. Services furnished by the insured for personal property of others
D. Property in a vehicle
All of the following locations are included under the Property Off-Premises coverage extension, EXCEPT: A. Property at a trade show B. Property temporarily at a location not owned by the insured C. Property at a fair D. Property in a vehicle
C. Earthquake
All of these perils are covered under the Broad Form, except: A. Weight of snow, ice, or sleet B. Water damage C. Earthquake D. Falling objects
B. The Broad Form
Alva is a businessowner who currently has a Causes of Loss—Basic Form. Recently she had a partial roof cave-in because of a heavy snowfall. She would like to expand the covered perils to include weight of snow, ice, or sleet, but does not need any other additional coverage. Which one of the following causes of loss forms should Ava consider using? A. The Special Form B. The Broad Form C. The "All-Risks" Form D. The Insurance Services Office (ISO) Form
C. Causes of Loss - Special Form
Crisp Cleaners is insured by a commercial property coverage form with a causes of loss form that provides coverage for fire, water damage and theft of property from the cleaners. Which one of the following causes of loss forms is attached to Crisp Cleaners' commercial property coverage form? A. Causes of Loss - Basic Form B. Causes of Loss - Broad Form C. Causes of Loss - Special Form D. All of the causes of loss forms provide the specified coverage.
C. Basic Form
If an insured would like to purchase commercial insurance to protect his property from fire, lightning, windstorm, and hail at the cheapest price, which one of the following causes of loss forms should he purchase? A. Special Form B. Broad Form C. Basic Form D. Custom Form
Insured
In the event of a loss, the Basic and the Broad Forms place the burden of proof on the ____.
Special Form
One of the biggest advantages of the ____ as compared is the inclusion of coverage for theft of covered property.
Special
The Causes of Loss—____ Form covers risks of direct physical loss unless the specific cause of loss is otherwise excluded.
BPP; Coverage Form
The ____ provides coverage for buildings; business personal property; and personal property of others in the insured's care, custody, or control. The ____ also lists categories of property that are not covered but that can often be added by endorsement or covered under a different type of policy.
Building and Personal Property Coverage Form (BPP)
The ____ provides several additional coverages and extensions that apply in addition to the basic coverages for buildings, the insured's business personal property, and the property of others.
Limits of Insurance
The ____ section states that the most the insurer is obligated to pay for loss in any one occurrence is the applicable limit of insurance shown in the declarations.
Burglary
The taking of property from inside a building by someone who unlawfully enters or exits the building.
Fixtures
The term ____ is broad enough to include fences and outdoor signs, but these items are specifically excluded from coverage under the Property Not Covered section of the policy.
D. Business personal property located in a vehicle
Which one of the following is most likely to be covered by the Building and Personal Property Coverage Form (BPP)? A. Airborne business personal property B. Waterborne business personal property C. Automobiles held for sale D. Business personal property located in a vehicle
D. Water damage
Which one of the following perils is covered by the commercial property Causes of Loss—Broad Form but not covered by the commercial property Causes of Loss—Basic Form? A. Explosion B. Windstorm C. Vandalism D. Water damage
A. The Agreed Value option suspends the coinsurance provision.
An insured covered under a Building and Personal Property Coverage Form (BPP) can elect to be covered under the Agreed Value option. Which one of the following is true regarding the Agreed Value option? A. The Agreed Value option suspends the coinsurance provision. B. The Agreed Value option provides protection against inflation up to a certain limit. C. The Agreed Value option replaces actual cash value with replacement cost. D. The Agreed Value option requires the insured to have coverage equal to a specified percentage of the building and personal property's value.
Increased Cost of Construction
Applies only to buildings to which the Replacement Cost Optional Coverage applies. This additional coverage pays the increased costs incurred to comply with the enforcement of an ordinance or law in the course of repairing, rebuilding, or replacing damaged property. This additional coverage pays the lesser of $10,000 or 5 percent multiplied by the value of the damaged building at the time of loss multiplied by the applicable coinsurance percentage.
B. $5 million
Big Company is the named insured under a Building and Personal Property Coverage Form (BPP). Big's building is insured for $5 million (with replacement cost coverage) and the policy has a $50,000 deductible. Big's building is destroyed by a fire and the insurer agrees to pay this loss. It will cost $5.1 million to rebuild the building. Assuming the coinsurance requirement has been met and there are no increased costs due to changes in building ordinances or laws, how much will Big's insurer pay toward this loss? A. Nothing B. $5 million C. $5.1 million D. $5,150,000
C. $185,000
Dayne has a Building and Personal Property Coverage Form (BPP) with a $150,000 limit on his building, a $50,000 limit on his business personal property, and a $1,000 deductible. Dayne experiences a covered loss that causes $155,000 in damage to his building and $35,000 in damage to his business personal property. How much coverage will Dayne's policy provide? A.$183,000 B. $184,000 C. $185,000 D. $190,000
B. No
Does the Special Form cover theft of money in addition to theft of covered property? A. Yes B. No
Fire Department Service Charge
In some areas, the fire department may charge for its services to control and/or extinguish a fire. This clause covers such charges if the charges are assumed by contract before loss or are required by local ordinance. The limit is $1,000 for service at each covered location unless a higher limit is shown in the declarations. This coverage limit is payable in addition to the limit of insurance shown in the declarations and is not subject to any deductible.
Basic
The Causes of Loss—____ Form provides the most limited coverage.
Insurance Services Office (ISO)
The ____ commercial property causes of loss forms are used to determine the perils covered under a commercial property coverage policy.
Appraisal
The ____ condition sets forth a method for resolving disputes about the value of the insured property or the amount of loss. It does not apply to disputes about policy coverage or lack of coverage.
Building and Personal Property Coverage Form
The ____ is the most commonly used commercial property coverage form.
B. The Special Form provides some coverage for the theft of covered property.
Which one of the following is true regarding the Causes of Loss—Special Form for commercial property insurance? A. The Special Form covers damage to covered property caused by wear and tear. B. The Special Form provides some coverage for the theft of covered property. C. The Special Form provides more limited coverage than the Broad Form. D. The Special Form provides coverage on a named perils basis that is more comprehensive than the Broad Form.
D. Underground pipes, flues, or drains
Which one of the following types of property is not included as covered property in the BPP? A. Personal property of others B. Buildings C. Business personal property D. Underground pipes, flues, or drains
BPP
of the insured also includes labor, materials, or services furnished by the insured for personal property of others, or property other than real property that an insured does not own.
B. Newly Acquired or Constructed Property
An insured has not agreed to meet the 80 percent coinsurance requirement on his BPP. Which one of the following coverages is not available to this insured under the BPP? A. Debris Removal B. Newly Acquired or Constructed Property C. Pollutant Cleanup and Removal D. Increased Cost of Construction
Electronic Data
Applies to information, facts, or computer programs that are stored, created, used, or transmitted using computer software. ____ can be contained on a variety of media such as hard or floppy disks, CD-ROMs, tapes, drives, and data processing devices. This additional coverage pays for the cost to replace or restore electronic data that have been destroyed or corrupted by a covered cause of loss, including a virus or harmful code. The most this additional coverage pays for all losses sustained in a policy year is $2,500 unless a higher limit is shown in the declarations.
B. Causes of Loss—Broad Form
Dilworth's Accounting and Tax firm is a new company searching for commercial property insurance coverage. The firm is located in Illinois and Mr. Dilworth must have property coverage for windstorm, hail, and weight of ice, snow, or sleet. Mr. Dilworth does not want to purchase any more coverage than what the business absolutely needs. Which one of the following causes of loss forms should Mr. Dilworth purchase? A. Causes of Loss—Basic Form B. Causes of Loss—Broad Form C. Causes of Loss—Special Form D. Any one of the causes of loss forms is sufficient.
D. Her coverage is inadequate because the Special Form contains a sublimit for jewelry.
Emily owns a store that sells very expensive pieces of jewelry. Emily purchased the Causes of Loss—Special Form with her commercial property coverage policy because she was concerned about her store being burglarized or robbed. She has no additional insurance coverage for the store. Which one of the following best describes Emily's insurance selection? A. Her coverage is adequate because the Special Form covers robbery and burglary. B. Her coverage is adequate because jewelry is not specifically excluded by the Special Form. C. Her coverage is inadequate because the Special Form specifically excludes jewelry. D. Her coverage is inadequate because the Special Form contains a sublimit for jewelry.
A. Cash is not considered covered property under commercial property policies.
George owns a convenience store and is looking to obtain property insurance. The store is located in an area that has frequent, violent windstorms. Also, the store has had problems with accidental water leakage in the past. George keeps a large amount of cash and about $1,000 worth of lottery tickets in the store. Which one of the following reasons best describes why George may need a supplemental insurance policy with his commercial property insurance? A. Cash is not considered covered property under commercial property policies. B. Windstorms are excluded by all commercial property causes of loss forms. C. Water damage is excluded by all commercial property causes of loss forms. D. Lottery tickets are not considered covered property under commercial property policies.
Loss Conditions
In addition to the Common Policy Conditions and the Commercial Property Conditions that are included in the Commercial Property Coverage Part, the BPP has a ____ section that stipulates the duties of the insured and the insurer after a loss has occurred, explains methods for establishing the value of damaged property, and provides procedures for adjusting claims.
C. Special Form
Joe owns a home improvement store in a busy shopping center that sells high quality tools. Most of Joe's customers make purchases on credit because the tools are very expensive. While obtaining property insurance for his business, Joe states that he is particularly concerned his store will be burglarized. Which one of the following causes of loss forms would be most appropriate for Joe? A. Basic Form B. Broad Form C. Special Form D. Crime Coverage Form
Pollutant Cleanup and Removal
Pays the insured's expenses to extract pollutants from land or water at the premises if the pollution is the result of a covered cause of loss that occurs during the policy period. An aggregate limit of $10,000 per location applies to all such expenses that occur during each separate twelve-month period.
Preservation of Property
Protects covered property that is moved to another location to preserve it from loss or damage. This clause extends the policy to protect the covered property while it is being moved, but only if the loss or damage occurs within thirty days after the property is first moved.
Building Description
The BPP covers buildings or structures listed and described in the declarations. In addition, the ____ covers additions, alterations, or repairs in progress, including materials, equipment, and supplies used in connection therewith, but only if they are located within 100 feet of the premises and are not otherwise insured.
A. Falling objects.
The Broad Form covers all the causes of loss covered under the Basic Form plus A. Falling objects. B. Volcanic action. C. Riot or civil commotion. D. Sinkhole collapse.
B. Improvements and betterments made at the expense of the insured
The Building and Personal Property Coverage Form (BPP) provides coverage for both buildings and business personal property. Which one of the following is considered business personal property? A. Permanently installed machinery and equipment B. Improvements and betterments made at the expense of the insured C. Fire-extinguishing equipment used to service the building D. Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering
D. $75,000
The John Smith Company (JSC) is the named insured under a Building and Personal Property Coverage Form (BPP). JSC's building is insured for $5 million and the policy has a $1,000 deductible. JSC's building sustains $500,000 in covered damage due to a fire and the insurer agrees to pay this loss, less the deductible. Debris removal costs are $75,000. How much will JSC's insurer pay for debris removal? A. Nothing B. $10,000 C. $50,000 D. $75,000
Agreed Value
The Optional Coverages section of the BPP provides four optional modifications of the coverage form. The first available optional coverage is ____, which is an amount stated in the declarations that the insurer and insured have agreed to in advance and use of this option suspends the BPP's coinsurance provision.
Extension of Replacement Cost to Personal Property of Others
The Optional Coverages section of the BPP provides four optional modifications of the coverage form. The fourth optional coverage is titled ____. Insureds who have selected the Replacement Cost option may also elect to have the personal property of others valued at replacement cost.
Inflation Guard
The Optional Coverages section of the BPP provides four optional modifications of the coverage form. The second available optional coverage is ____ coverage, which provides for automatic periodic increases in the amount of insurance on buildings and personal property to keep an appropriate limit to value.
Replacement Cost
The Optional Coverages section of the BPP provides four optional modifications of the coverage form. The third optional coverage replaces actual cash value with ____ in the valuation section of the form. That is, the insurer is obligated to pay the cost to replace the damaged or destroyed property with new property of like kind and quality without any deduction for depreciation or obsolescence.
B. By covering direct physical losses other than those specifically excluded, the Special Form covers losses that the insured might not have anticipated.
The Special Causes of Loss Form offers which one of the following advantages? A. All causes of loss omitted or excluded under the Basic and Broad Forms are covered under the Special Form. B. By covering direct physical losses other than those specifically excluded, the Special Form covers losses that the insured might not have anticipated. C. One of the biggest advantages of the Special Form is coverage for theft of covered property under a wide variety of circumstances that is not subject to any limitations. D. Earthquake and volcanic eruption are covered causes of loss under the Special Form, but they are excluded under the Basic and Broad Forms.
Specified Causes of Loss
The Special Form defines "____" to include all the causes of loss insured in the Broad Form.
Special
The ____ Form covers risks of direct physical loss, including theft losses, unless the cause of loss is excluded.
Water Damage
The ____ cause of loss covers accidental damage from water leakage or from steam resulting from a broken part of an appliance or plumbing, heating, or air conditioning or another system that is located on the covered property. If the building is covered property, the form also covers the cost to tear out and replace any part of the building to repair damage to the appliance or system that leaked.
Coinsurance
The ____ clause provides that the insured must share in losses to the extent that the insured is underinsured at the time of a loss. This clause requires the insured to carry insurance equal to at least a specified percentage of the insured property's actual cash value. The percentage appears in the declarations. If the amount of insurance carried is equal to or greater than the required percentage, the insurer will pay covered losses in full (subject to any applicable deductible) up to the limit of insurance.
Loss Payment Additionally, the insurer must pay the insured within thirty days after the parties have agreed on the amount of loss or completion of an appraisal (subject to the limit of the insured's financial interest in the covered property).
The ____ condition describes how an insurer will pay a claim. Among its key provisions are those indicating that the insurer must notify the insured of its intent either to pay the claim or to deny payment within thirty days after receipt of a satisfactory proof of loss.
Falling Objects
The ____ coverage does not include damage to personal property in the open, such as a glass-topped table. This cause of loss also does not include damage inside a building unless a falling object first damages the roof or an outside wall.
BPP
The ____ covers such property only while it is in the insured's care, custody, or control and in or on the building described in the declarations or within 100 feet of the building or premises.
Special Form
The ____ does not list covered causes of loss. Instead, the form states that it covers direct physical loss, subject to the exclusions and limitations expressed in the form. This coverage has been called "all-risks," but this term can be misleading to insureds and opens the possibility for broader-than-intended interpretations of coverage by the courts.
BPP
The ____ imposes several duties on the insured when a loss occurs. Failure to perform any of these duties may relieve the insurer of its obligation to pay for the loss.
BPP
The ____ is designed to provide coverage for physical damage to buildings and to personal property used for business purposes.
BPP
The ____ item also includes leased personal property for which the named insured has a contractual responsibility to procure coverage. An example of such property is phone or computer equipment leased by the insured under an agreement requiring the insured to purchase insurance on them.
Recovered Property
The ____ loss condition states that if either the insurer or the insured recovers property (such as stolen property) for which the insurer has paid a loss, the party that makes the recovery is obligated to notify the other party promptly. The insured has the option of taking the recovered property and refunding the loss payment to the insurer.
BPP
The ____ provides additional coverages and coverage extensions that apply in addition to the basic coverage for buildings and personal property and also includes important conditions regarding the limits of insurance, application of the deductible, loss conditions, and additional conditions.
Property Not Covered
The ____ section of the BPP lists building and personal property categories that are not included as covered property. Some of these types of property, such as autos, watercraft, or aircraft, are more appropriately covered in another policy more specifically designed for insuring such property.
Proximate Cause
The concept of ____ usually applies to liability losses, but it can also apply to property losses that involve multiple causes of loss—for example, fire following a lightning strike.
Valuation
The final loss condition is the ____ provision, which sets forth rules for establishing the value of the insured property. Subject to a few exceptions, the insured property is valued at its actual cash value.
Stock
The form defines ____ as "merchandise held in storage or for sale, raw materials, and in-process or finished goods, including supplies used in their packing or shipping."
BPP
The insured's interest in improvements and betterments is also insured as ____, even though improvements and betterments are actually part of the building. Improvements and betterments are alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them based on provisions in the lease.
Debris Removal
The most that a policy will pay under this clause is 25 percent of the sum of the direct loss payment plus the deductible amount. Because this amount may not be sufficient in some cases, the limits of insurance section of the BPP coverage form provides an additional $25,000 limit per location under certain policy conditions.
Coverage Extensions
The protection provided by the ____ section of the BPP coverage form applies only if at least 80 percent coinsurance or a value reporting period symbol appears in the declarations.
Robbery
The unlawful taking of property from the care and custody of a person by one who has caused or threatened to cause that person bodily harm; includes situations in which the thief commits an obviously unlawful act that is witnessed by the custodian of the stolen property (such as an observed "smash and grab" theft from a shop window).
Vacancy
Under the ____ condition, if the building where a loss occurs has been vacant for more than sixty consecutive days before the loss occurs, the insurer will not pay for a loss caused by vandalism, water damage (including leaks from sprinklers left unprotected from freezing), theft or attempted theft, or building glass breakage. If any other covered peril causes the loss, loss payment decreases by 15 percent.
Abandonment
Under the ____ condition, the insured cannot abandon damaged property and require the insurer to take possession of it. Although the insurer reserves the right to take all or any part of the damaged property after loss payment, the decision to exercise this option belongs to the insurer.
D. Theft
Which one of the following causes of loss is covered by the Causes of Loss—Special Form and not the Basic or Broad Forms? A. Ordinance or Law B. Steam boiler explosion C. Vandalism D. Theft
A. Vacancy—following 60 days of vacancy, the insurer does not pay for specified losses, e.g., vandalism
Which one of the following correctly describes a loss condition of the Building and Personal Property Coverage Form (BPP)? A. Vacancy—following 60 days of vacancy, the insurer does not pay for specified losses, e.g., vandalism B. Recovered property—the insured is obligated to attempt to recover stolen property for which the insured has been paid C. Abandonment—the insured is authorized to abandon damaged property to the insurer D. Valuation—the insured's damaged property is valued at replacement cost
C. It is covered up to $10,000 per location per policy year in addition to the policy limits, under specified circumstances
Which one of the following correctly describes coverage amount for pollutant cleanup and removal resulting from a covered cause of loss under the Building and Personal Property Coverage Form (BPP) Additional Coverages? A. The BPP provides no coverage B. It is covered up to the policy limit C. It is covered up to $10,000 per location per policy year in addition to the policy limits, under specified circumstances D. It is covered up to 25% of the amount of the covered building damage that caused the pollution discharge
C. Perils are specifically listed.
Which one of the following describes the named perils coverage provided by the Basic Form? A. No exclusions apply. B. Provides open perils coverage. C. Perils are specifically listed. D. All perils are covered unless excluded.
B. The Special Form provides theft coverage.
Which one of the following is a significant advantage of the Special Form as compared to the Broad Form? A. The Special Form provides utility service coverage. B. The Special Form provides theft coverage. C. The Special Form provides mechanical exposure coverage. D. The Special Form provides earth movement coverage.
D. Causes of loss excluded under the Broad Form are covered in the Special Form.
Which one of the following is an advantage of the Special Form as compared to the Broad Form? A. Fungus and dry rot are included in the Special Form. B. The Special Form is generally less expensive than the Broad Form. C. Ordinance or Law is not an exclusion in the Special Form. D. Causes of loss excluded under the Broad Form are covered in the Special Form.
C. Personal property of other's in the insured's custody
Which one of the following is covered by the Business Personal Property Coverage Form (BPP)? A. Roadways, walks, patios, or other paved surfaces B. Underground pipes, flues, or drains C. Personal property of other's in the insured's custody D. Personal property while airborne or waterborne
C. Cost to restore information on valuable papers or records
Which one of the following is listed under the Building and Personal Property (BPP) policy's Property Not Covered Section? A. Personal property of others B. Materials used for making additions or repairs to the building C. Cost to restore information on valuable papers or records D. Business personal property
B. Falling Objects
Which one of the following is not an exclusion in the Broad or Special causes of loss forms? A. Utility Services B. Falling Objects C. Governmental Action D. Earth Movement
A. Walks, patios, or other paved surfaces
Which one of the following is not covered under the Building and Personal Property Coverage Form (BPP)? A. Walks, patios, or other paved surfaces B. Outdoor furniture C. Fire-extinguishing equipment D. Appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering
A. The Broad Form covers additional, specific perils not covered in the Basic Form.
Which one of the following is the main difference between the Basic and Broad causes of loss forms? A. The Broad Form covers additional, specific perils not covered in the Basic Form. B. The Basic Form contains exclusions for certain perils that are not included in the Broad Form. C. The Broad Form provides more comprehensive coverage for certain perils, such as theft, than the Basic Form D. The Broad Form provides coverage on an "all-risks" basis while the Basic Form provides coverage on a named perils basis.
D. Improvements and alterations made by the insured on a rented building are covered as business personal property.
Which one of the following is true regarding business personal property covered under the Building and Personal Property Coverage Form (BPP)? A. Only personal property located in the building or on the described building is covered. B. Personal property of others in the insured's care, custody, or control is excluded from coverage. C. Automobiles held for sale are considered business personal property and are covered. D. Improvements and alterations made by the insured on a rented building are covered as business personal property.
A. Rust or other corrosion
Which one of the following perils is specifically excluded by the Special Form but not the Basic and Broad Forms? A. Rust or other corrosion B. Earth movement C. Water D. Steam boiler explosion
C. Under the Loss Payment condition, the insurer must pay the insured within 30 days after the parties have agreed on the amount of loss.
Which one of the following statements is true regarding Loss Conditions in the Building and Personal Property (BPP) Coverage Forms? A. Under the Vacancy condition, if the building where a loss occurs has been vacant for more than 30 consecutive days before the loss occurs, the insurer will not pay for a loss caused by vandalism. B. The Appraisal condition sets forth a method for resolving disputes about policy coverage or lack of coverage. C. Under the Loss Payment condition, the insurer must pay the insured within 30 days after the parties have agreed on the amount of loss. D. Under the Abandonment condition, the insured has the right to abandon damaged property and require the insurer to take possession of it.
B. The Replacement Cost option does not apply to property of others or contents of a residence.
Which one of the following statements is true regarding additional conditions and/or optional coverages on a Building and Personal Property (BPP) Coverage Form? A. If the insurer cancels the policy for any reason other than nonpayment of premium, it must give 10 days' notice to the mortgageholder. B. The Replacement Cost option does not apply to property of others or contents of a residence. C. Agreed value is an amount stated in the declarations that two appraisers agreed upon in advance. D. The Optional Coverages section of the BPP provides six optional modifications of the coverage form.
D. Foundations of buildings, structures, machinery, or boilers are excluded if their foundations are below the lowest basement floor.`
Which one of the following statements is true regarding property covered under a Building and Personal Property (BPP) Coverage Form? A. Materials, equipment, and supplies within 1,000 feet of the described premises, used for making additions; alterations; or repairs to the building or structure, are covered under a BPP. B. There are no coverage extensions provided for any excluded property in the BPP. C. Other forms of insurance are available for all items listed in the BPP Property Not Covered section. D. Foundations of buildings, structures, machinery, or boilers are excluded if their foundations are below the lowest basement floor.
B. No
Would the Special Form provide coverage for loss of or damage to a steam boiler used to heat the premises due to a condition inside the boiler? A. Yes B. No
BPP
____ also includes coverage for personal property of others while such property is in the insured's care, custody, or control. This coverage applies to businesses, such as a lawn mower repair shop or furniture reupholsterer, that have temporary possession of customers' property.
Fixtures
____ are items attached to a building or to the land. Outdoor ____ include items outside the building but attached to the land, such as light poles and flagpoles.
"Your business personal property"
____ covers personal property owned by the insured and used in the insured's business or located in or on the described building or in the open (or in a vehicle) within 100 feet of the building or 100 feet of the premises, whichever distance is greater; this includes furniture and fixtures, machinery and equipment, stock, and other similar personal property except those items excluded under the Property Not Covered section.
Concurrent Causation
____ is a related concept to proximate cause, indicating that if a loss to covered property can be attributed to two or more causes of loss, one of which is excluded and one of which is covered, then the policy covers the loss.
Personal Property
____ is any property other than real property, which includes land, buildings, and other property attached to land.
Covered Property
____ is insured against direct loss or damage at the premises caused by a covered cause of loss.
