Ch. 9 - Commercial Package Policy & Commercial Property Coverage

Under the Business and Personal Property Coverage Form, a commercial building owned by the insured is considered vacant unless at least what percentage of the building's total square footage is rented or used to conduct customary operations? a. 31% b. 10% c. 20% d. 26%

a. 31% A building is considered vacant unless at least 31% of the building's total square footage is rented or used.

Which of the following forms cannot be added to a Commercial Package policy? a. Workers' Compensation b. Commercial General Liability c. Commercial Inland Marine d. Commercial Auto

a. Workers' Compensation While Workers' Compensation is a commercial coverage, it cannot be attached as a coverage part to the CPP.

ABC Industries has insured a factory building for $80,000. The replacement value is $150,000. If the commercial property policy insuring the building has an 80% coinsurance clause, how much will ABC's insurer pay for a $12,000 covered loss? a. $9,600 b. $8,000 c. $10,000 d. $12,000

b. $8,000 The insurer will only pay for $8,000 (two-thirds) of the covered loss. The coinsurance requirement specifies that ABC Industries must maintain insurance equal to 80% of the replacement cost. 80% of $150,000 equals $120,000. Because the amount of insurance the insured holds is only two-thirds of the required amount ($80,000 of the required $120,000), the loss payment is subject to a comparable penalty. ($80,000 / $120,000) * $12,000 = $8,000

A commercial property is insured on a $400,000 Building and Personal Property policy with a $1,000 deductible. A fire breaks out on the loading dock, causing $80,000 in damage and $20,000 in debris removal expenses. What is the maximum that may be received for the loss? a. $400,000 b. $99,000 c. $100,000 d. $90,000

b. $99,000 The insurer will pay $99,000. The entire $80,000 in fire damage, less the deductible, is covered by building coverage provided by the form. The policy also pays debris removal expenses equal to 25% of the loss amount, which will be included in the building limit of liability. 25% of $80,000 = $20,000. $80,000 - $1,000 + $20,000 = $99,000.

A Building and Personal Property Coverage Form will pay up to what percentage of the building loss amount for debris removal expenses incurred after a direct physical loss? a. 5% b. 25% c. 15% d. 10%

b. 25% The policy will pay up to a maximum of 25% of the loss amount for debris removal. In the event that the physical loss and debris expenses exhaust the limit of insurance, the policy will pay an additional amount for remaining debris removal expenses.

Coverage provided by the Builders Risk Coverage Form automatically ends at the earliest of all of the following, except: a. Property is abandoned b. 60 days after construction is complete c. Policy expires d. Property is sold

b. 60 days after construction is complete For the events that determine when coverage ends, the time period regarding completed construction is 90 days after completion. Another event is 60 days after any covered building is partially or fully occupied or is put to its intended use.

Under the Business Income Coverage Form, the period of restoration for business income coverage begins how long after the time of loss? a. 48 hours b. 72 hours c. 24 hours d. Immediately

b. 72 hours For business income coverage, the period of restoration begins 72 hours after the time of loss. The period of restoration ends on the date the property is repaired, or the date business is resumed at a new location, whichever happens first.

When an insured has time element coverage for loss of business income, coverage is provided during the period of restoration, which begins at what time? a. 7 days after the loss b. 72 hours after the loss c. Immediately after the loss d. 168 hours after the loss

b. 72 hours after the loss For business income coverage, the period of restoration begins 72 hours after the loss. For extra expense coverage, the period of restoration begins immediately. Both periods of restoration end on either the date property should reasonably be repaired or rebuilt or the date when business resumes at a new permanent location, whichever happens first.

The purpose of the Reporting Form Endorsement attached to the Builders Risk Coverage Form is to: a. Allow the insured to provide late value reports without a penalty b. Allow the insured to make monthly reports of building values to gradually increase coverage as construction continues c. Report the building's completed value to the insurer d. Change the loss valuation basis to replacement cost

b. Allow the insured to make monthly reports of building values to gradually increase coverage as construction continues Most Builders Risk policies are written on a Completed Value Form, which provides coverage based on the value of the building when it is complete. The Reporting Form Endorsement will change this method to provide coverage based on monthly reported values, allowing the amount of insurance provided to increase as construction continues.

The Causes of Loss - Broad Form contains all of the following additional covered perils, except: a. Falling objects b. Steam boiler explosion c. Weight of ice, snow, or sleet d. Water damage from accidental discharge

b. Steam boiler explosion Steam boiler explosion is not covered under any Causes of Loss form.

How much can be paid under the Business and Personal Property Coverage Form for debris removal due to a covered loss? a. $1,000 b. $5,000 c. 25% of the loss amount d. 15% of Coverage A

c. 25% of the loss amount Under the Debris Removal Additional Coverage, coverage for debris removal expenses has a limit equal to 25% of the amount of the loss, which will not increase the limit of insurance. If the sum of the loss and debris removal expenses exhausts the limit of insurance, an additional amount is provided for debris removal expenses.

When a condominium association is responsible for insuring a condo building, the Condominium Association Coverage Form is used in place of which coverage form? a. DP-3 b. HO-6 c. Building and Personal Property Coverage Form d. Condominium Commercial Unit-Owners Coverage Form

c. Building and Personal Property Coverage Form The Condominium Association Coverage Form is used in place of the Building and Personal Property Coverage Form when insuring a condo building for commercial property coverage. The HO-6 and Condominium Commercial Unit-Owners Coverage Form are both for condo unit-owners, not the association, with limited coverage on the building itself.

Unlike other Causes of Loss forms applicable to commercial property policies, the Special Form covers: a. Rust b. Wear and tear c. Chemical damage to glass d. Delay or loss of use

c. Chemical damage to glass Though the discharge or escape of pollutants is an excluded peril on the Special Form, an exception gives coverage back for chemical damage to glass.

The Common Policy Conditions of a Commercial Package policy include all of the following, except: a. Changes b. Transfer of Your Rights and Duties Under This Policy c. Fire Department Service Charge d. Inspections and Surveys

c. Fire Department Service Charge Common Policy Conditions include Cancellation, Changes, Examination of Your Books and Records, Inspections and Surveys, Premiums, and Transfer of Your Rights and Duties Under This Policy.

Which of the following is not included in the Personal Effects and Property of Others Coverage Extension available under the Building and Personal Property Coverage Form? a. Personal effects owned by any partner or member of the insured b. Personal effects owned by the insured c. Loss by theft of personal effects d. Personal property of others in the insured's care

c. Loss by theft of personal effects The Personal Effects and Property of Others Coverage Extension applies to the personal effects of the insured or their partners, members, officers, managers, and employees. However, this coverage does not cover loss by theft. The Coverage Extension also applies to loss to personal property in the care, custody, or control of the insured.

When ordered by a building, zoning, or land use law, the Ordinance or Law Coverage Endorsement covers all of the following losses, except: a. Increased cost of repairing damaged parts of the building b. Demolition of the undamaged parts of a building c. Loss of value in the damaged portion of the building d. Clearance of the undamaged parts of a building

c. Loss of value in the damaged portion of the building This endorsement provides coverage if the enforcement of any building, zoning, or land use law results in the loss of value of the undamaged portion of the building, but not the damaged portion.

All of the following are Causes of Loss forms under the commercial property coverage part of a CPP, except: a. Special Form b. Basic Form c. Modified Form d. Broad Form

c. Modified Form There are three Causes of Loss form options: the Basic Form, the Broad Form, and the Special Form.

What is the limit of coverage for business personal property away from the premises under the Business and Personal Property Coverage Form? a. $5,000 b. $1,000 c. $15,000 d. $10,000

d. $10,000 $10,000 is the limit of coverage for the Property Off-Premises Coverage Extension.

Business personal property is protected by the Business and Personal Property Coverage Form if it is in or on a described building or structure, or if it is located in the open within: a. The distance specified in the Declarations b. 200 feet of the premises c. 500 feet of the premises d. 100 feet of the premises

d. 100 feet of the premises Business personal property is covered if it is located in or on a described building or structure, or if it is in the open or in a vehicle within 100 feet of the premises.

The Causes of Loss - Basic Form covers loss resulting from all of the following perils, except: a. Sinkhole collapse b. Windstorm or hail c. Fire d. Frost

d. Frost Fire, windstorm, hail, and sinkhole collapse are all covered perils. Windstorm and hail coverage excludes losses caused by frost, ice, snow, or sleet.

After a covered loss to a commercial building insured on the Building and Personal Property Coverage Form, notice of the loss must be provided to the insurer: a. Within 60 days of the loss, by oral or written notice b. Promptly, by written notice only c. Within 15 days of the loss, by written notice only d. Promptly, by oral or written notice

d. Promptly, by oral or written notice Notice of loss must be provided promptly to the insurer. This initial notice does not have to be made in writing, meaning oral notice is allowed. A signed, sworn proof of loss must be provided typically within 60 days of the insurer's request.

An insured has commercial property coverages included in their Commercial Package policy. All three Causes of Loss forms would protect against loss caused by: a. Earth movement b. Theft of merchandise c. Chemical damage to glass d. The explosion of gases within a furnace

d. The explosion of gases within a furnace Explosion, including the explosion of gases or fuel within a furnace, is a Basic Form named peril, and coverage is provided by all Causes of Loss forms. Theft of merchandise and chemical damage to glass are covered only by the Special Form. Earth movement is excluded by all forms.

The Common Policy Declarations of the CPP contain all of the following, except: a. The policy period b. Name and address of the named insured c. Description of the business being insured d. Transfer of Your Rights and Duties Under This Policy

d. Transfer of Your Rights and Duties Under This Policy Transfer of Your Rights and Duties Under This Policy is found in the Common Policy Conditions section, not the Declarations.

Which of the following perils is insured against by a commercial property policy using the Causes of Loss - Basic Form? a. Weight of ice, snow, and sleet b. Water damage c. Falling objects d. Windstorm

d. Windstorm Windstorm is a basic peril insured against by all Causes of Loss forms. The other perils are covered under the Broad and Special forms.