Unit 11: Commercial Property Insurance

A fire destroys the new clothes an employee has brought in to work to show her friends. Coverage applies under the insured's Building and Personal Property Coverage Form because the clothes are an employee's personal property. When the insurance company settles, who will receive the payment?

Employee. Coverage that applies to business personal property can be extended to apply to personal effects owned by the insured or the insured's officers, partners, or employees. When the personal property of other is lost or destroyed, the insurer pays the property owner directly.

If the monthly limit of indemnity option has been selected under the Business Income Coverage Form, how much will an insurer pay for loss of business income for each month of loss (assume the declarations page shoes a limit of insurance of $150,000 and a fraction of 1/3)?

Lesser of $50,000 or the actual loss for each month.

Which of the following is covered under the builders risk coverage from? A) Signs not attached to the building B) Trees, shrubs, or plants C) Land D) The foundation

The foundation

Which additional coverage pays for the loss of business income, even after operations have been resumed, until the business has been restored, but for no more than 60 days from the date the business is resumed?

Extended business income coverage

Boone's Manufacturing has several long-term contracts with customers. These contracts run for 5 years and uniformly provide that they are automatically canceled if Boone is unable to meet supply dates. If Boone's building is destroyed, it can be rebuilt in 9 months. What form of Time Element Coverage is best suited to protect Boone against the potential loss of income from the long-term contracts>

Extra expense coverage. Boone's cannot afford to have its operation interrupted. With the extra expense coverage form, the insurer pays for any necessary extra expenses the business incurs during a period of interruption that follows a direct physical loss to property by a covered cause of loss.

Insured who depend on a particular business as the primary buyer for their products are covered under what form if the direct physical loss causes their earnings to suffer?

Recipient location

The builders risk reporting form requires a report of value that must be reported to the insurer every

month

The form that covers commercial, residential, or farm buildings that are under construction is called

the builders risk coverage form

Coverage for the loss of business income over a period of time that results from a direct physical loss is also known as

time element coverage

A commercial property policy with the Causes of Loss - Basic Form covers all of the following perils EXCEPT A) sinkhole B) volcanic action C) sprinkler leakage D) earthquake

D) earthquake

All of the following are one of the 11 covered perils on the basic form EXCEPT A) smoke B) mechanical breakdown C) volcanic action D) vandalism

mechanical breakdown

Extensions of coverage are available under the business and personal property form if the

policy indicated that 80% or higher coinsurance applies or the insured has purchased a reporting form.

Which of the following commercial property cause of loss form does NOT cover collapse? A) Basic B) Special C) Limited D) Broad

A) Basic

Which of the following is NOT a component of the commercial property policy? A) Common exclusions B) Cause of loss form (basic, broad, or special) C) Common conditions D) Common declarations

A) Common exclusions

Which of the following is NOT a cause of loss form in a commercial property policy? A) Limited B) Special C) Broad D) Basic

A) Limited

Which of the following endorsements is used to provide coverage based on actual values at certain locations at specific times? A) Value reporting endorsement B) Peak season endorsement C) Spoilage endorsement D) Ordinance or law coverage endorsement

A) Value reporting endorsement

The condominium association coverage form insures a condominium association against a direct physical loss or damage to all of the following EXCEPT A) business personal property B) personal property owned, used, or controlled by a unit owner C) personal property of other in care, custody, or control of the association while it is at the premises D) buildings

B) personal property owned, used, or controlled by a unit owner

Which of the following perils are covered in the causes of loss - basic form? A) Collapse B) Volcanic eruption C) Explosion D) Weight of snow, ice, or sleet

C) Explosion

Which one of the following forms would be most appropriate to protect against a suspension of business operations for an insured that cannot afford to have its operations interrupted? A) Business income with a monthly limit of indemnity B) Extended business income insurance C) Extra expense insurance D) Business income with the agreed value option

C) Extra expense insurance Extra expense insurance pays for the necessary additional expenses the insured incurs following a loss to maintain operations at the level they were before the loss.

Loss caused by a sprinkler leakage is covered under which commercial property causes of loss form? A) Broad B) Special C) Basic D) All of these

D) All of these

Which of the following properties would NOT be excluded under the building and personal property coverage form? A) Cost of excavation B) Lawn C) Driveway D) Animals held for sale

D) Animals held for sale

Which of the following perils/additional coverages are NOT included in the causes of loss-broad form? A) Water damage B) Weight of ice, snow, sleet C) Collapse D) Nuclear hazard

Nuclear hazard

When a loss occurs, the Causes of Loss - Special Form requires the insurance company to

pay for all losses not specifically excluded or limited by the policy.

Airborne volcanic blasts or shockwaves, ash, dust, particulate matter, and lava flow is best described as

volcanic action

Which one of the following types of property is NOT covered under the Building and Personal Property Coverage Form? A) Property that is 75' from the insured premises B) Patios and walkways C) Improvements made by a tenant to the building D) The cost of labor for work done on customer's property in the insured's possession

B) Patios and walkways The Building and Personal Property Coverage Form excludes coverage for bridges, roadways, walks, patios, or other paved surfaces.

All of the following statements about collapse additional coverage additional coverage are true EXCEPT A) the collapse is covered if it was caused by the weight of snow, ice or sleet B) the loss or damage is covered even if the insured knew about it before the collapse occurred C) the collapse is covered if it was caused by falling objects D) collapse is defined as an abrupt falling down or caving in of the building or part of the building that results in the building being unusable

B) the loss or damage is covered even if the insured knew about it before the collapse occurred

The condominium association coverage form may include all of the following property EXCEPT A) refrigerators, dishwashers, or stoves that within the individual units B) owners' business personal property C) unit owners' personal property D) alterations that are part of the building

C) unit owners' personal property

A therapist owns office space in a commercial office building that is legally organized as a condominium. Which of the following best protects the therapist's business personal property? A) Condominium association coverage form B) Commercial package policy (CPP) C) Unit owners form (HO-6) D) Condominium commercial unit owners form

D) Condominium commercial unit owners form. The condominium commercial unit owners form is a commercial property form designed to cover the individual needs of commercial (not residential) condominium unit owners.

Which of the following properties is excluded from coverage in the building and personal property coverage form? A) Completed additions B) Outdoor furniture C) Outdoor fixtures D) Underground pipes

D) Underground pipes

An insured purchases a commercial property policy with Causes of Loss- Special Form that covers risks of direct physical loss. The policy has a $5,000 deductible. An earthquake causes $150,000 in damages to the property. What amount will policy pay?

$0. The 3 Causes of Loss forms (Basic, Broad, and Special Forms) exclude earthquake.

Builders risk coverage that is written with the Causes of Loss- Basic Form will cover loss caused by A) hail B) collapse C) earthquake D) falling objects

A) hail Damage by hail is one of the listed perils covered in the basic form. Falling objects and collapse are covered in the broad and special forms. None of the Causes of Loss forms include coverage for earthquake.

Which of the following statements regarding additional coverages in the building and personal property coverage form is NOT correct? A) The debris removal coverage pays up to 25% of the amount paid for direct loss to the covered property, plus the deductible. B) Preservation of the property pays if the loss occurs within 30 days after the property was removed. C) Extraction of pollutants from land and water is covered. D) The fire department service charge pays up to $500.

The fire department service charge pays up to $500.

Building coverage of the Building and Personal Property Coverage Form insures all of the following things EXCEPT A) desks and office equipment B) personal property used to service the premises C) floor coverings D) permanently installed fixtures

A) desks and office equipment Desks and office equipment come under the heading of personal property and although they are covered under the form, they are subject to a separate insuring agreement.

All of the following items are excluded from coverage under a Building and Personal Property Coverage Form EXCEPT A) outdoor furniture B) currency or securities C) patios or other paved surfaces D) automobiles held for sale

A) outdoor furniture Accounts, bills, currency, deeds, evidences of debt, money, notes or securities, automobiles held for sale, and bridges, roadways, walks, patios, or other paved surfaces are some of the items excluded from coverage.

An insured buys a business income policy with a maximum policy limit of $100,000 and a 25% monthly limit of indemnity. How much can the insured collect if the lost income is $40,000 in the 1st month and $10,000 in the 2nd month? A) $50,000.00 B) $65,000.00 C) $35,000.00 D) $25,000.00

C) $35,000.00

If a building has been vacant for more than 60 consecutive days before a loss occurs, which one of the following types of damages will be covered under a Building and Personal Property Coverage Form? A) Building glass breakage B) Attempted theft C) Vandalism D) Weight of snow, ice, or sleet

D) Weight of snow, ice, or sleet If the building has been vacant for more than 60 consecutive days, the insurer does not pay for any loss or damage caused by any of these losses also water damage, even if the cause of loss would normally be covered. Any amount that would otherwise be paid for a covered loss will be reduced 15%.

All of the following statements about the earthquake cause of loss form are true EXCEPT A) all earthquake shocks or volcanic eruption that occur within any 168-hour period constitute a single earthquake or volcanic eruption B) volcanic eruption means the eruption, explosion, or pouring forth of a volcano C) this endorsement must be used in conjunction with one of the cause of loss forms D) the expiration of the policy does reduce the 168-hour period to 24 hours

D) the expiration of the policy does reduce the 168-hour period to 24 hours

Amy rents space in an industrial building for her yoga studio. At her own expense and with the landlord's permission, Amy replaces the studio's carpeting with bamboo flooring. If the flooring is damaged by a covered peril, the loss will be paid on

an actual cash value basis

Under the Building and Personal Property coverage Form, how much will an insurer pay for fire department service charges?

Up to $1,000.

The insured is a tenant in a shopping mall. A fire starts in the insured's store, resulting in the following damages: business personal property, $15,000; damage to fixtures installed by the insured, $2,000; damage to property belonging to customers, $1,000; and smoke damage to ceiling and walls, $8,000. How much will the insured's Building and Personal Property Coverage Form pay for the loss?

$18,000. The tenant's policy will pay for all of the loss except for the damage to the ceilings and walls, which are part of the building owned by the landlord.

The insured's business sustains $25,000 damage in a fire. The fire department that was called to the scene billed the insured $1,000. The business is insured under the building and personal property coverage form for $500,000 with a $5,000 deductible. How much will the insurance company pay for this loss?

$21,000

If the policy limits of the Building and Personal Property Coverage Form have been exhausted, how much additional coverage is available for debris removal?

$25,000 The insurer will pay up an additional $25,000 if the total of debris removal expenses plus the amount paid for direct physical loss exceeds the limit of insurance for the covered property, or if the actual debris removal expenses exceeds 25% of the deductible plus the amount paid for direct physical loss.

An insured has a commercial property policy with a Causes of Loss- Broad Form with a $250 deductible. During a snowstorm, a $750 rooftop sign is destroyed. How much will the policy pay for the sign?

$500. Signs attached to the building are covered up to $2,500. After the deductible is applied, the policy will pay the remaining $500.

Business personal property is covered while it is in the actual building, outside the building, or in a vehicle within how many feet of the premises?

100

An insured with an extra expense coverage form will be paid how much of the lost business income if the restoration period was over 60 days?

100%

Under the earthquake and volcanic eruption endorsement, all earthquake shocks or volcanic eruptions that occur within a certain number of hours constitute a single earthquake or volcanic eruption. What is that period?

168 hours

The loss payment condition states that the insurance company will give the insured notice of how it intends to value the loss within how many days after it receives the insured's sworn statement of loss?

30

The insured must send a signed statement of loss to the insurance company within how many days?

60 days

Actual loss of business income payments by an insurer may include the following EXCEPT A) amount required to repair property damage that cause suspension of business B) continuing normal operation expenses C) net income that would have been earned D) payroll expenses

A) amount required to repair property damage that cause suspension of business.

All of the following are examples that can be insured under commercial property insurance EXCEPT A) warehouses B) employee's home C) office buildings D) factories

B) employee's home

Which business income coverage form covers expenses that the insured incurs to reduce loss?

Business income without extra expense coverage

ABC Home Improvement Stores is a nationwide retailer with multiple stores and warehouses located across the country. The value of the property in its stores fluctuates frequently, and merchandise is frequently moved between warehouses. ABC Home Improvement Stores would benefit by adding which of the following endorsements to its commercial property coverage? A) Spoilage B) Protective safeguards C) Value reporting form D) Ordinance or law coverage

C) Value reporting form The value reporting form is used to provide coverage based on actual values at certain locations at specific times.

When an ordinance or law coverage endorsement is added to a property policy, all of the following consequential losses are covered EXCEPT A) increased cost of construction because of stricter building codes B) demolition costs for the undamaged portions of the building C) direct damage caused by an interruption of utility services D) cost to remove the building debris

C) direct damage caused by an interruption of utility services

All of the following losses or damages would be covered under the commercial property Causes of Loss - Broad Form EXCEPT A) glass breakage B) weight of snow or ice C) earth movement D) falling objects

C) earth movement.

The Building and Personal Property Coverage Form can be used to insure each of the following types of property EXCEPT A) outdoor fixtures B) property belonging to others C) money D) plants and shrubs held for sale

C) money Money must be insured under a Crime Coverage Form.

Assume that a toy store has a fairly stable inventory except in November and December, when its inventory triples. What is the best way to insure the increase in the amount of coverage needed?

Peak season endorsement. For example, the inventory coverage throughout most of the year might be $100,000, but the peak season endorsement would raise the limit to $300,000 from November 1- December 1.

Which cause of loss form provides open peril coverage?

Special

The insured buys an office building next door to her insured business. Is the new building covered under her existing building and personal property coverage form?

Yes, up to $250,000 coverage is available.

Under a Business Income Coverage form, business income is

net income plus continuing expenses, including payroll. The amount of business income loss is based on: 1) the net income of the business before the direct loss or damage; 2) the likely net income of the business if no loss or damage occurred; 3) the operating expenses, including payroll; and 4) any other relevant financial records.