COMMERCIAL PACKAGE POLICIES & COMMERCIAL PROPERTY INSURANCE

The additional coverage of the Commercial Property cause of loss forms known as the "Limited Coverage for Fungus, Wet Rot, Dry Rot, and Bacteria" provides:

$15,000 coverage for all occurrences within a 12-month period.

The special cause of loss form of a Commercial Property policy imposes a limitation on the amount of coverage for the theft of jewelry of:

$2,500.

Mason has suffered a $42,000 loss to his commercial building due to fire. The building is covered under the Building & Personal Property coverage form and had been vacant for 74 days. The insurer would have paid the entire loss if the building had been occupied, but what will they pay because the insured building was considered vacant?

$35,700. For a loss that would otherwise be covered for the full amount, a reduction of 15% is taken off the claims payment because the building was considered vacant. 15% of $42,000 is $6,300. If $6,300 is subtracted from $42,000, the insured would receive $35,700.

The Builders' Risk form provides an extension of coverage for building materials within 100 feet of the building being constructed and belonging to others, but under the care, custody, and control of the insured for up to:

$5,000. The Builders' Risk form provides an extension of coverage for building materials within 100 feet of the building being constructed and belonging to others, but under the care, custody, and control of the insured for up to $5,000.

Bert's commercial package policy includes a Commercial Property coverage part, a Commercial Auto coverage part, and a Commercial Crime coverage part. How many "Common Policy Declarations" must be included?

1

The Commercial Building & Personal Property coverage form includes an Additional Coverage for property removed from the premises because of being endangered by an insured peril. The coverage applies for:

30 days after the property is first moved.

A Commercial Property policy has the "Protective Safeguards" endorsement attached indicating that the insured has protective safeguards installed such as a sprinkler system. Should the system become inoperative, how long does the insured have to report this fact to the insurer?

48 hours. If repairs cannot be completed within 48 hours, the insurer must be notified in order to comply with the conditions of the form.

Which of the following would NOT be excluded under the Commercial Property basic cause of loss form?

A fire caused by earth movement.

Billy has his commercial interests covered with a Commercial Package Policy. He would like to modify one of his coverage parts. This change will be made by:

Adding an endorsement to the coverage part he would like to change.

Chad has his commercial building covered by a Commercial Property policy that includes Coverage A of the Building & Personal Property coverage form. He purchases a new building because he has plans to expand his business. Which of the following statements is TRUE regarding coverage for Chad's new building?

Chad's newly acquired building will be covered for 30 days from the date of acquisition for $250,000.

Pete is adding Commercial Property coverage to his Commercial Package policy. Which of the following coverages CANNOT be added to a package policy using Commercial Property coverage forms?

Coverage for the negligence of the insured. Liability coverage (insurance that covers the insured's negligence) cannot be added to a Commercial Package policy using Commercial Property coverage forms. A specific liability coverage part would need to be added to the Commercial Package policy.

Which of the following is NOT TRUE of coverage for Business Personal Property and Personal Property of Others in a Commercial Property policy?

Coverage is provided while the property is located within a covered vehicle at any location as long as the vehicle is owned by the insured business.

Each of the following is true about Builders' Risk Coverage, EXCEPT:

Coverage terminates the day after construction is completed. Coverage normally terminates 90 days after the work has been completed or has been accepted. In addition, coverage will cease once the building has been put to its intended use.

Which of the following is TRUE regarding coverage for a vegetated roof under the Building & Personal Property coverage form of a Commercial Property policy?

Damage to a vegetated roof is considered to be part of the building, therefore coverage is provided by Coverage A - Building.

Flood coverage can be added to a Commercial Property policy by attaching the Flood Coverage Endorsement. If the endorsement is purchased and the property is already covered under a flood policy from the National Flood Insurance Program, then the coverage under this endorsement is considered to be:

Excess over the NFIP maximum limits. If a NFIP policy is in force or was eligible for purchase at the time the commercial property policy was endorsed for flood coverage, then the endorsement becomes excess coverage over the NFIP policy maximum limits.

Flood coverage can be added to a Commercial Property policy by attaching the Flood Coverage Endorsement. If the endorsement is purchased and the property is already covered under a flood policy from the National Flood Insurance Program, then the coverage under this endorsement is considered to be:

Excess over the NFIP maximum limits. If a NFIP policy is in force or was eligible for purchase at the time the commercial property policy was endorsed for flood coverage, then the endorsement becomes excess coverage over the NFIP policy maximum limits.

Which of the following "additional coverages" of the Building and Personal Property Coverage form is paid without the application of the policy deductible?

Fire Department Service Charge.

All of the following are excluded under the Commercial Building and Personal Property form, EXCEPT:

Furniture and fixtures.

Gavin operates a small manufacturing plant and is covered under a Commercial Property Business Income form. Under which of the following scenarios will Gavin be covered?

His loss of profit while out of business as a result of a fire loss.

Which of the following statements concerning the Earthquake and Volcanic Eruption Endorsement to a Commercial Property policy is NOT TRUE?

If the policy expires before the end of the 168-hour period, coverage will not apply to the time period following the expiration date of the policy.

The "period of restoration" for the Extra Expense coverage included on the Business Income form is:

Immediately following the direct physical damage.

Which of the following additional coverages provided by the Building and Personal Property coverage form applies only to buildings to which the replacement cost optional coverage applies?

Increased Cost of Construction. The "Increased Cost of Construction" additional coverage only applies when the replacement cost optional coverage has been selected and purchased by the insured.

The "Pollution Clean-Up and Removal" coverage under the Building and Personal Property coverage form of a CPP:

Is an additional coverage.

An insured is covered under a Commercial Property policy with the special cause of loss form attached. The insured suffers a loss to some valuable papers and records pertinent to his business. Which of the following statements is correct about how this loss will be covered?

It will be covered if the loss was caused by one of the broad form perils.

Which of the following is NOT a coverage extension on the Building and Personal Property coverage form?

Outdoor property up to a maximum of $500. The coverage extension for outdoor property provides coverage up to a maximum of $1,000, not $500.

Which of the following symbols of the Protective Safeguards endorsement to a Commercial Property policy indicates "any system described in the schedule on the Declarations page"?

P-9. Symbol P-9, when indicated on the schedule indicates "any system described in the schedule on the Declarations page".

Which of the following endorsements permits the insured under a Commercial Property policy to increase their business personal property coverage amount for specified periods of time when inventory may be higher than usual?

Peak Season Endorsement. The Peak Season endorsement may be used by businesses such as department stores during the holiday season when their inventories are higher than usual.

Which of the following is NOT one of the three main (general) coverages of the Building & Personal Property coverage form?

Property damage liability coverage.

All of the following would be covered under a Builders' Risk Policy, EXCEPT:

Prospective buyer.

The Business Income from Dependent Properties -- Broad Form is a variation of the Business Income form as it:

Provides coverage for loss of income to the insured business when direct physical damage has occurred at another business upon which the insured business depends in some way.

Which of the following Commercial Property conditions could be referred to as the "subrogation clause"?

The "Transfer of Rights of Recovery Against Other to Us" condition.

Which "conditions" form in a complete Commercial Property policy specifies how a disagreement on the value of damaged property is handled?

The Building and Personal Property Conditions form.

Which of the following Commercial Property coverage forms provides coverage when the insured is negligent and causes damage to property that was in their care, custody and control?

The Legal Liability form.

Which of the following Commercial Property cause of loss forms include the additional coverage for "Fungus, Wet Rot, Dry Rot, and Bacterial"?

The basic, broad, and special cause of loss forms.

Coverage B of the Ordinance or Law Endorsement to a Commercial Property policy covers:

The cost to demolish and remove the undamaged portion of the building, if that destruction must occur because of an ordinance or law requirement.

Which of the following statements is NOT TRUE regarding the "Extended Period of Indemnity" option of the Business Income form?

The coverage applies for 120 days following the period of restoration.

Willie's Widgets has leased a business location for a term of 10 years. In the seventh year of the lease, the location is destroyed by fire. As luck would have it, Willie had purchased "Leasehold Interest" coverage as part of his Commercial Package policy. All of the following would be covered for Willie, EXCEPT:

The damage that Willie caused to the parking lot by bringing large, heavy rigs onto the lot, causing the asphalt to buckle. The Leasehold Interest coverage form would not cover the damage that Willie caused to the parking lot by bringing large, heavy rigs onto the lot, causing the asphalt to buckle. This type of damage would more likely be covered under the Legal Liability coverage form.

Which of the following statements is NOT TRUE of the Builders' Risk coverage form?

The form allows for vacancy of 60 days before coverage will no longer apply.

The additional coverage for debris removal under the standardized Building and Personal Property coverage form will only be paid if:

The insured reports the debris removal expenses to the insurance company in writing within 180 days of the loss.

There are several different Commercial Property coverage forms that can be added to a Commercial Package policy. Which of the following is NOT described on a Commercial Property coverage form?

The number of buildings the insured owns that are not covered by the policy.

The "Alterations & New Buildings" coverage of the Business Income form pays for losses to new buildings and their additions being constructed for business operations. Which of the following best describes the "period of restoration" when a loss occurs under this additional coverage?

The period of restoration only applies under this additional coverage if the loss delays the start of business operations in the new location and begins on the date business operations would have begun had the loss not occurred. Under the "Alterations & New Buildings" additional coverage of the Business Income form, the period of restoration only applies under this coverage if the loss delays the start of business operations in the new location. In this case, the period of restoration begins on the date business operations would have begun had the loss not occurred.

Which of the following would be covered under Coverage B of the Business and Personal Property coverage form?

The stock held for sale by the insured business.

The Commercial Property condition known as "Concealment, Misrepresentation, or Fraud" calls for the policy:

To be voided if the insured intentionally concealed or misrepresented a material fact on the application for insurance.

All of the following would be excluded by the basic cause of loss form under a Commercial Property policy, EXCEPT:

Water leaks from the sprinkler system in the building, causing wall and floor damage.

Under what circumstances does an insurer allow the transfer of an insured's rights and duties under a Commercial Package Policy without the permission of the insurer?

When the named insured dies. If the named insured dies his or her rights and duties are transferred to the deceased's legal representative. This occurs automatically, the insurer's permission is not required.

The Builders' Risk coverage form includes an additional coverage that provides a limited amount of coverage for lawns, trees, shrubs, or plants when located outside of buildings. This limit is:

$1,000, but $250 for any one tree, shrub, or plant.

The additional coverage on the Building and Personal Property coverage of a Commercial Property policy for electronic data provides _________ for the cost of replacing and restoring electronic data that has been destroyed or corrupted by a covered cause of loss.

$2,500 in the aggregate.

All of the following statements are TRUE if Builders' Risk coverage is written on a completed value basis, EXCEPT:

All premiums must be paid up front before construction can begin

Which of the following coverage parts would be eligible for inclusion in a Commercial Package policy?

Commercial Crime coverage.

Which of the following would be covered under a Builders' Risk form?

The foundation of the building under construction.

The Value Reporting Form endorsement to a Commercial Property policy covers personal property at all of the following locations, EXCEPT:

A fair where the property is being displayed. A location at a fair is an excluded location under the Value Reporting Form endorsement.

All of the following are listed in the "Common Declarations" of a Commercial Package policy (CPP), EXCEPT:

A list of perils insured against. A list of perils insured against is not included on the common policy Declarations page of a Commercial Package Policy. The policy period, the premium for each coverage part, and the name and mailing address of the insured ARE listed.

Under a Commercial Property policy, all of the following types of outdoor property are covered under the additional coverage for "collapse" if they are damaged directly by the collapsed building, EXCEPT:

A septic system for the insured commercial building.

All of the following statements regarding a Commercial Package Policy are correct, EXCEPT:

Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage. Ocean Marine and/or Aviation insurance are "specialty" policies that cannot be packaged together with other commercial risks into a package policy.

Which "conditions" form in a complete Commercial Property policy specifies the coverage territory?

Commercial Property Conditions form.

The Main Street Gazette is interested in protecting against the additional costs of continuing to print the newspaper, at a temporary location in the event its building was destroyed. Which of the following coverages should the Main Street Gazette purchase for this purpose?

Extra expense coverage. The purpose of the "extra expense" coverage is to pay for any increase in expenses incurred by the insured (after a direct property loss which interrupts the business) to decrease the amount of time the business is idle or interrupted, and keep it operating, even at another location.

All of the following statements are TRUE regarding an interline endorsement used in a Commercial Package policy (CPP), EXCEPT:

It can apply to one or more coverage parts. Interline endorsements are used in the CPP to simplify coverages and conditions among many different forms and apply only to two or more coverage parts.

The "Common Policy Conditions" apply to which coverage parts of a Commercial Package Policy?

All coverage parts of the policy.

The cancellation and non-renewal provisions in property policies are two of the policy provisions that are most frequently subject to statutory amendments by the states. All of the following statements are correct regarding the cancellation and non-renewal provisions in the standardized Commercial Property policy coverage form, EXCEPT:

The standardized Commercial Property forms do not contain cancellation and non-renewal provisions because they are almost always amended by statute.

Manny is purchasing a Commercial Property policy with a Business Income form included. Manny can select from any of the following as a method to provide coverage, while avoiding the coinsurance requirement, EXCEPT:

The maximum monthly limit of indemnity optional coverage.

All of the following statements are TRUE regarding Difference in Conditions insurance (DIC), EXCEPT:

The perils most frequently covered by DIC policies are fire and wind. DIC insurance most frequently covers the perils of flood and earthquake that are typically excluded under standard Commercial Property policies.

Which of the following would be considered vacant on an unendorsed Commercial Property policy?

A leased building in which less than 31% of the building is occupied. In the Building and Personal Property Coverage form, under Loss Conditions, the Vacancy Clause states that when the policy is issued to the owner or general lessee of a building, such building is vacant unless at least 31% of its total square footage is either (a) rented to and in use by a lessee or sub-lessee, or (b) used by the owner to conduct normal operations.

The Extended Business Income additional coverage of the Business Income form covers the first 60 days after the loss for reimbursement of earnings for the insured business:

After the repairs have been made to the insured property. Extended Business Income pays for any additional loss of business after the property is actually repaired and operations are resumed, with reasonable speed, until the operation generates the business income amount that would have existed had no loss occurred. This coverage is usually limited to 60 days. An endorsement can be used to extend the period of time and an additional premium is charged.

Which of the following is NOT covered under the basic cause of loss form of a Commercial Property policy?

Smoke from industrial operations.

The standardized Building and Personal Property Coverage form requires the insured to submit a signed, sworn proof of loss statement:

Within 60 days of the insurance company's request.

A fire in Josh's factory causes him to shut the doors for 45 days. While repairs take place, Josh spends $190,000 renting another building and equipment, to keep production going. Even though Josh's Commercial Property policy doesn't cover his lost business income, he does have Extra Expense Coverage with a $200,000 limit and Limits of Loss Payment set at 40% / 80% / 100%. How much indemnification can Josh recover from his insurer in this case?

$160,000 Josh can collect 40% of the limit or $80.000 in the first month. (40% X 200,000=80,000) He can collect up to 80% of the limit in the second month (80% X 200,000=160,000) He has suffered a 190,000 loss in 45 days so 160,000 is payable as that is the most he can collect in the first 60 days.

Which of the following "additional coverages" under the Building & Personal Property coverage form does not increase the limit of liability of the policy?

Preservation of Property.

Which of the following Commercial Property conditions is meant to prevent "over indemnification" of the insured?

The "Insurance Under Two or More Coverages" condition. The "Insurance Under Two or More Coverages" condition prevents the insurer from paying more than the total amount of the loss, even if the policy limit has not been met.

Katrina has her commercial building covered by a commercial package policy. Which of the following is the section within her policy where she would see the dimensions of her building listed?

The Commercial Property Declarations page.

All of the following statements are TRUE regarding the Flood Coverage Endorsement to the Commercial Property policy, EXCEPT:

Back-up or overflow of a sewer or drain is covered if that overflow occurs within 48 hours after the flood recedes and the overflow was caused by the flood.

Kyle owns a woodworking shop where he makes and sells custom furniture. One night, Kyle's shop is destroyed by a fire, and he files a claim with his insurance company. Which of the following items would be covered under Coverage A - Buildings of the Building and Personal Property Coverage form of Kyle's Commercial Property policy?

A bandsaw affixed to the floor. "Building" by definition is the structure and anything permanently attached to it. The bandsaw is affixed to the floor. The other choices are all personal property and not part of the building.

If the Agreed Value option of the Business Income form is selected by the insured, the coinsurance requirement is:

Waived The Agreed Value option removes the coinsurance requirement from the covered property for which it is designated and substitutes an agreement to cover any loss in the same proportion as limit bears to stated Agreed Value. The Agreed Value condition extends until the Agreed Value expiration date marked on the Declarations or the actual expiration date of the policy, whichever occurs first. After expiration, if the provision is not renewed by the company, the coinsurance condition is reinstated.

Under the Commercial Building and Personal Property Coverage form, if no optional coverages are selected, loss valuation/settlement is based on:

Actual cash value. Losses are settled on an ACTUAL CASH VALUE basis. If the insured desires replacement cost coverage, then that option must be selected by indicating it on the property declarations. The insured limit should be increased to reflect the higher values involved with a replacement cost settlement.

What is generally excluded on the Condominium Commercial Unit-Owners form?

Building coverage.

Mr. and Mrs. Smith own a building worth $100,000 and have it insured on the same basis under three separate policies. Carrier A provides $10,000; Carrier B provides $10,000, and Carrier C provides $80,000. If there is a $20,000 fire loss, how will the claim be paid by the policies?

Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000. Because more than one insurance policy written on the same basis covers the loss, the "Other Insurance" clause will be invoked. Each carrier will pay its "pro rata" share of the loss. Remember from the Insurance Fundamentals chapter that the percentage of coverage that each insurer provides to cover the building is also the percentage of the loss they will pay. Therefore, if Carriers A & B provides $10,000 of coverage, that is 10% of $100,000. This means that Carriers A & B would also cover 10% of the loss. 10% of $20,000 is $2,000.

Coverage for all reasonable expenses incurred by an insured in order to continue as nearly as practicable the normal operation of his/her business after a loss is:

Extra Expense coverage.

Which of the following is NOT covered by the Extra Expense coverage of the standardized Commercial Property insurance policy?

Loss of income. Extra Expense Coverage is a form of Business Interruption Coverage. It covers all reasonable extra expenses incurred by the insured in order to continue as nearly as practical the normal operation of a business that has been damaged by an insured peril. It does not cover the loss of income a business may suffer. Other forms like the "loss of income" forms would cover the loss of income.

All of the following losses are excluded by the Earthquake & Volcanic Eruption Endorsement of a Commercial Property policy, EXCEPT:

Loss to stucco on a covered building when it is damaged or lost due to earthquake or volcanic eruption.