Chapter 8 Insurance Quiz

Under the Commercial Building and Personal Property Coverage Form, the commercial building owned by the insured is considered vacant unless at least what percentage of the square footage is rented or is used to conduct operations? A 31% B 61% C 51% D 41%

A.

Which of the following statements regarding Commercial Property insurance is false? A Time element losses and direct losses are the same B The Building and Personal Property form includes an 80% coinsurance provision C The policy limit of the Builder's Risk Reporting Form increases at intervals to correspond with the value of the building D The Condominium Association Form will cover refrigerators, air conditioners and cooking ranges that are owned by the named insured if the Agreement requires it

A. Time element losses are indirect losses, not direct losses.

Under a Building and Personal Property Coverage Form, up to what percent of a partial loss would be available for debris removal? A 10% B 25% C 5% D 15%

B. The policy will pay up to a maximum of 25% of the coverage applying to the loss. In the event of a total loss, the policy will pay up to an additional $10,000 for debris removal.

An insured has a commercial property policy that uses the Causes of Loss - Basic Form. Loss by which of the following perils will be covered by the policy? A Water damage caused by the accidental discharge of water from a plumbing system B Falling objects C Sprinkler leakage D Smoke damage caused by industrial operations

C. Sprinkler leakage is a named peril included on the Causes of Loss - Basic Form. Falling objects and water damage caused by the accidental discharge of water are named perils on the Broad Form. Though smoke is a covered peril for all forms, exclusions apply to smoke resulting from industrial operations or agricultural smudging.

As provided by the Common Policy Conditions, which of the following statements about Commercial Package policies is incorrect? A Changes in the terms of the policy can be made only by an endorsement issued by the insurer B The insurer may audit the insured's books within 3 years after the policy ends C The insurer has the obligation to perform safety inspections D The first named insured is the payee of any return premiums

C. The insurer has the right, but not the obligation, to inspect the property. These surveys are for underwriting and rating purposes, and they do not qualify as safety inspections.

Under the Commercial Property policy, vacancy is allowed for how many days before the peril of vandalism coverage is suspended? A 30 B 120 C 90 D 60

D.

Which of the following is not covered under the Condominium Commercial Unit-Owners Coverage Form? A Improvements B Business personal property C Appliances D Building exterior wall

D. The exterior wall is part of the common property covered by the Condominium Association Coverage Form.

All of the following are Causes of Loss forms under the commercial property coverage part of a CPP, except: A Basic Form B Special Form C Broad Form D Modified Form

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

Which of the following is not an additional coverage under the Building and Personal Property coverage form? A Peak season B Debris removal C Preservation of property D Fire department service charge

A.

Under a Commercial Package policy, which of the following is correct about the Inspections and Surveys condition included in the Common Policy Conditions? A The insurer has the right, but is not obligated, to make inspections and surveys at any time B The insurer has the obligation to make inspections and inform the insured if the property has serious hazards C The insurer may make inspections and surveys only during the first 90 days of the policy period D Inspections or surveys must be made prior to the policy effective date, as the inspections are for underwriting and rating purposes only

A. Inspections and surveys are a reasonable and effective underwriting tool of the insurer. They may be made whenever the insurer believes it to be necessary, including any time up to 3 years after the end of the policy. These inspections and surveys are not safety inspections.

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 Loss by theft of personal effects B Personal effects owned by the insured C Personal property of others in the insured's care D Personal effects owned by any partner or member of the insured

A. 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.

An insured protects their commercial property on the Building and Personal Property Coverage Form. The insured should consider purchasing the Value Reporting Form Endorsement if: A The insured has business personal property values that fluctuate, and needs protection for the values actually at risk B The insured is insuring buildings or structures only C The insured has increased stock during a designated season D The insured is insuring property that has a relatively constant value

A. The Value Reporting Form Endorsement allows commercial property insureds to report values of their business personal property throughout the policy period in order to have coverage appropriate for the fluctuations in value. If the insured only has an increased amount of business personal property during one specific time of the year and wants additional coverage during that time, the Peak Season Limit of Insurance Endorsement would be more effective.

Which of the following perils is insured against by a commercial property policy using the Causes of Loss - Basic Form? A Windstorm B Water damage C Falling objects D Weight of ice, snow, and sleet

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

Which of the following is true regarding the Broad Form under the Commercial Property policy? A The water damage coverage includes sewer backup B After 60 days of vacancy, coverage for glass breakage is suspended C Water damage coverage includes repair of broken or ruptured plumbing D It provides limited coverage for fungus, wet or dry rot, and bacteria up to $25,000

B. If, at the time of loss, the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss, there is no coverage for loss resulting from the following six perils: vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft, glass breakage, or water damage.

The Legal Liability Coverage Form would not cover which of the following losses? A Fire damage to the roof B Fire damage to the insured's cash register C Fire damage to a common wall D Fire damage to a permanent awning

B. The Legal Liability Coverage Form covers the insured's legal liability for loss or damage to real or personal property owned by others. For example, if a commercial unit-owner is operating their business and damage occurs to the building itself, then the unit-owner may be legally liable for damages, in which case the Legal Liability Coverage Form activates. The insured's cash register would be considered their business personal property, covered under other insurance.

Which is true of the Personal Property of Others coverage provided by the Building and Personal Property Coverage Form? A Property of others is covered at up to $5,000 per described location. B The policy covers property of others that is in the care, custody, and control of the insured C The policy covers the interest of others in property that the insured is purchasing on an installment plan D The policy covers the property of others against loss by theft

B. This coverage extension insures personal effects of the insured and the personal property of others in the insured's care, custody, and control for up to $2,500 at each described premises. Coverage does not include loss by theft.

Endorsements that coordinate Commercial Package policy coverage parts to avoid duplication are called: A Mediating B Coordinating C Interline D Special

C.

A Builders Risk policy insuring a commercial building under construction automatically ends how many days after construction is complete? A 120 B 60 C 90 D 30

C. Coverage automatically ends 90 days after completion. Other circumstances that could initiate coverage termination include policy expiration, the end of the insured's interest in the property, the abandonment of construction, and the end of 60 days after the building is partially or fully occupied or put to its intended use, whichever occurs first.

Which of the following property is not covered under the Building and Personal Property Coverage Form? A Merchandise held in storage B Telephone system C Electronic data D Furniture

C. Electronic data, including information, facts, and computer programs and the cost to replace or restore the electronic information is not covered.

The Causes of Loss - Basic Form applicable to the commercial property coverage part of a Commercial Package policy would not cover losses caused by which of the following? A Sprinkler leakage B Sinkhole collapse C Aircraft or vehicles D Steam boiler explosion

D. Commercial property policies commonly exclude coverage for damage caused by steam boiler explosions, as well as physical damage to the steam boiler itself. Separate equipment breakdown insurance is required to provide these coverages.

Under a Commercial Package policy, which of the following is found in the Common Policy Declarations? A The provision granting the insurer the right to make inspections of insured property B The provision that the first named insured is responsible for all premiums C The insurer's cancellation right D The deductible

D. The Declarations page of any insurance policy will show the premium and deductible amounts. The Declarations will also identify the first named insured, but the provision specifying that the first named insured is responsible for all premiums is found in the Common Policy Conditions. Cancellation rights and the insurer's right to make inspections and surveys are also provisions found in the Common Policy Conditions.

Which statement about commercial property policies is not correct? A Changes in the terms of the policy can be made only by endorsement issued by the insurer B The first named insured is the payee of any return premiums C The insurer may examine or audit the insured's books any time during the policy period, or within 3 years after the policy ends D The insurer has the obligation to inspect the property

D. The insurer has the right, but not the obligation, to inspect the property.

Under the Building and Personal Property Coverage Form, which statement concerning the Agreed Value Optional Coverage is correct? A Agreed value coverage requires coinsurance of at least 90% B Agreed value coverage eliminates the deductible in loss payment C The agreed value is the amount of loss agreed upon by the insurer and the adjuster D Agreed value coverage suspends the coinsurance requirement

D. Under the Agreed Value Option Coverage, the insured and insurer agree on the value of certain property, and that value becomes the limit of liability, which makes a coinsurance requirement unnecessary. The Agreed Value Optional Coverage is often used when insuring rare or unusual property, the value of which is difficult or impossible to determine.

Which of the following is not an additional coverage under the Building and Personal Property coverage form? A Peak season B Preservation of property C Fire department service charge D Debris removal

A. Peak Season is an available coverage that has to be added by endorsement.

Which of the following is not a coverage extension under the Building and Personal Property Coverage Form? A Outdoor property B Inflation guard C Personal effects and property of others D Newly acquired or constructed property

B. Inflation Guard is an optional coverage, not a coverage extension.

Under the Vacancy Clause of a Building and Personal Property Coverage Form, losses caused by vandalism are not covered if the damaged property has been vacant for how many days? A 30 B 120 C 60 D 90

C. Losses caused by vandalism are not covered if the property has been vacant for 60 days or more.

Which coverage may not be added to the Commercial Package policy? A Building and Personal Property Coverage Form B Commercial Inland Marine coverages C Workers' Compensation and Employers Liability D Commercial General Liability Coverage Form

C. The CPP allows insureds to design insurance coverage that fits their business exposures, including general liability coverages and property coverages. A Workers' Compensation and Employers Liability policy is a separate policy altogether and cannot be included as part of a Commercial Package policy.

Collapse is not covered under which of the following property forms? A DP-3 B Causes of Loss - Broad Form C Causes of Loss - Basic Form D HO-2

C. The Causes of Loss - Basic Form, available for commercial property policies, does not cover collapse. The Causes of Loss - Broad Form provides collapse coverage as an Additional Coverage, much like other broad forms (like the HO-2) and special forms (like the DP-3).

All of the following statements about coverage provided by the Builders Risk Coverage Form are correct, except: A Coverage does not apply to business personal property B Coverage terminates when the policy expires or it is cancelled C There is no Vacancy provision D Coverage is always written on an open perils basis

D. Coverage may be written with any of the Cause of Loss forms (Basic, Broad, or Special), and coverage would only be written on an open perils basis through the Causes of Loss - Special Form. A Vacancy provision, which would suspend or limit coverage for certain perils, is not relevant to the Builders Risk Coverage Form because buildings under construction are not considered vacant. Coverage is not provided for business personal property.

Which of the following is true regarding the Broad Form under the Commercial Property policy? A The water damage coverage includes sewer backup B Water damage coverage includes repair of broken or ruptured plumbing C It provides limited coverage for fungus, wet or dry rot, and bacteria up to $25,000 D After 60 days of vacancy, coverage for glass breakage is suspended

D. If, at the time of loss, the building where loss or damage occurs has been vacant for more than 60 consecutive days before the loss, there is no coverage for loss resulting from the following six perils: vandalism, sprinkler leakage, building glass breakage, water damage, theft or attempted theft, glass breakage, or water damage.