Ch. 15 - Businessowners Policy

Under the Businessowners Coverage Form, the Increased Cost of Construction Additional Coverage provides what amount of insurance for increased costs to comply with certain ordinances? a. $10,000 b. $1,000 c. $5,000 d. $2,500

a. $10,000 The Increased Cost of Construction Additional Coverage provides $10,000 for increased costs to comply with an ordinance or law regulating the repair, rebuilding, or replacement of damaged parts of a building.

The insured may extend BOP coverage to insure personal property in transit off the described premises for up to: a. $1,000 b. $10,000 c. $2,000 d. $7,500

b. $10,000 The Personal Property Off-Premises Coverage Extension allows $10,000 to be applied to property in transit off the covered premises or while it is at a premises the insured does not own, lease, or operate. This extension does not cover money, securities, valuable papers or records, or accounts receivable.

The BOP automatically provides a number of Additional Coverages, including coverage for all of the following, except: a. Increased cost of construction b. Off-premises utility failure c. Pollution clean-up and removal d. Debris removal

b. Off-premises utility failure Losses caused by an off-premises failure of power, communication, water, or other utility service are not covered by the BOP.

The Businessowners policy is best described as: a. A monoline policy offering only property coverages b. A monoline policy offering only liability coverages c. A package policy offering property and liability coverages d. A package policy offering coverage against all risks faced by a business

c. A package policy offering property and liability coverages The BOP is a package of insurance that offers property and liability coverages. Though major risks are addressed by the BOP, it does not cover every exposure a business may face, including auto risks and workplace injuries.

All of the following individuals are an insured under the BOP, except: a. Any person acting as the named insured's real estate manager b. The insured's legal representative if the insured dies c. A sole proprietor's minor child d. The manager of a limited liability company

c. A sole proprietor's minor child The named insured, executive officers and directors, and stockholders of any covered organization other than a partnership, joint venture, or limited liability company are covered, as are legal representatives and any person or organization acting as the named insured's real estate manager. The BOP would not consider a minor child an insured, though the sole proprietor's spouse would be covered.

Which of the following is considered property not covered by Section I of a BOP? a. Appliances used for refrigeration b. Personal property in common areas c. Outdoor fences d. Completed additions

c. Outdoor fences Outdoor fences, radio or television antennas, satellite dishes, and their lead-in wiring, masts, or towers are considered property not covered. However, other coverage options may be available for the insured to add coverage for outdoor fences and other outdoor property.

Under Section II of the Businessowners Coverage Form, how much time is allowed for medical expenses to be incurred by the injured third party and reported to the insurer? a. 2 years b. 3 years c. 180 days d. 1 year

d. 1 year Medical expenses incurred and reported to the insurer within 1 year of the date of the accident are covered, regardless of fault, by the BOP.

Under Section II of the BOP, who is covered for medical expenses after being injured while at an insured premises? a. A cleaning crew hired by the insured b. A tenant of the insured c. A person taking part in athletics d. A client of the insured

d. A client of the insured People taking part in athletics, renters, and people hired to do work on behalf of an insured are excluded from medical expenses coverage.

The BOP may be cancelled by which of the following insureds? a. Owner b. Any partner c. Named insured d. First named insured

d. First named insured The first named insured may cancel the policy by mailing or delivering an advance notice of cancellation to the insurer.

Business liability coverage provided by Section II of the BOP includes all of the following coverages, except: a. Liability assumed under an insured contract b. Bodily injury and property damage c. Personal and advertising injury d. Medical expenses

d. Medical expenses Business liability coverage includes coverage for bodily injury, property damage, personal and advertising injury, and the insured's liability assumed under an insured contract. Medical expense coverage is a separate coverage.

The Damage to Premises Rented to You limit under the Businessowners Coverage Form may be subject to which of the following type of limit? a. Per person limit b. Combined single limit c. Split limits d. Per fire limit

d. Per fire limit The Damage to Premises Rented to You limit may be written on a per fire basis or a per premises basis, depending on the insurer.

Which of the following causes of loss is not covered by the Valuable Papers and Records Coverage Extension on the Businessowners Coverage Form? a. Collapse b. Windstorm or hail c. Fire or lightning d. Processing or copying errors

d. Processing or copying errors The policy's covered perils also apply to coverage under the Coverage Extensions, but processing or copying errors are specifically excluded by the Valuable Papers and Records Coverage Extension. Collapse is a covered peril, as provided by the Collapse Additional Coverage.

When the named insured's personal effects are insured by the Personal Effects Coverage Extension of a Businessowners policy, coverage is provided against all of the following perils, except: a. Sinkhole collapse b. Lightning c. Riot or civil commotion d. Theft

d. Theft Personal effects coverage is not provided for loss by theft. This Coverage Extensions applies to the personal effects of the named insured and the named insured's officers, partners, managers, and employees.

The Additional Coverage for business income on a BOP pays for the actual loss of business income for up to how many months after the date of the direct physical damage to the property? a. 12 b. 6 c. 18 d. 24

a. 12 The policy will pay for the actual loss sustained for a period of 12 consecutive months. Ordinary payroll expenses, however, are only paid for 60 days following the loss unless the insured requests additional time and it is stated in the Declarations.

Within how many days after an insured acquires new business property must the property be added to the BOP policy? a. 30 b. 60 c. 20 d. 45

a. 30 Newly acquired or constructed buildings are automatically covered for up to 30 days, up to a $250,000 limit of insurance. The same time period applies to business personal property, which is covered for up to $100,000 for all personal property in each building. This is provided through the Newly Acquired or Constructed Property Coverage Extension.

Under the Loss Payment condition, what is the method of property valuation used by the Businessowners policy? a. Replacement cost b. Depreciation c. Actual cash value d. Stated value

a. Replacement cost Property losses are typically settled on a replacement cost basis, subject to an 80% Insurance to Value provision.

Generally, businesses eligible for a Businessowners policy cannot make more than what amount in annual gross sales? a. $2 million b. $6 million c. $4 million d. $8 million

b. $6 million According to standardized eligibility requirements, businesses that generate over $6 million in annual gross sales are ineligible for a BOP.

Under the BOP, the insurer may examine and audit books and records at any time during the policy period and up to how many years following policy termination? a. 1 b. 3 c. 7 d. 5

b. 3 The insurer may examine and audit the books and records as they relate to the policy during the policy period and up to 3 years afterward.

Under Section II of the Businessowners Coverage Form, which of the following is excluded from coverage? a. The insured's fire legal liability b. Damage to the insured's property or work c. The cost of defending the insured d. A personal injury sustained by a third party and committed in the coverage territory during the policy period

b. Damage to the insured's property or work Property damage liability does not apply to damage to any property the insured owns, rents, or occupies, except for that which is allowed under coverage for the insured's fire legal liability. Property damage liability is a third-party coverage, not first-party coverage.

Which of the following is not an Additional Coverage provided by the BOP? a. Electronic data valued at $10,000 b. Errors or omissions in storing data c. Business income d. Interruption of computer operations caused by a virus

b. Errors or omissions in storing data Business Income, Interruption of Computer Operations, and Electronic Data are all Additional Coverages on the BOP. Errors or omissions are not covered by an Additional Coverage, and will be excluded by the policy.

Under the Businessowners Coverage Form, an actual cash value loss settlement basis is always used for the following items of property, except: a. Works of art and manuscripts b. Landlord's furnishings c. Property of others in the insured's care and custody d. Antiques and rare articles

b. Landlord's furnishings Personal property in apartments or rooms, as furnished by a landlord-insured, may be insured on a replacement cost basis, which is the automatic loss settlement basis for most business personal property. The property of others, works of art, antiques, manuscripts, and rare articles are always settled at their actual cash value.

When a proper entry is made on the Declarations page of a Businessowners policy, the Outdoor Signs Optional Coverage would cover all outdoor signs: a. On and off the insured premises b. On an open perils basis c. Against named perils d. Only if attached to an insured building

b. On an open perils basis The Outdoor Signs Optional Coverage provides coverage on an open perils basis for all outdoor signs at the described premises. This is beneficial because it would remove the limitations seen with the BOP's automatic coverage for attached signs up to a certain limit and coverage for outdoor signs as a Coverage Extension up to a certain limit.

In which section of the BOP would coverage for equipment breakdown be found? a. Endorsements b. Optional Coverages c. Additional Coverages d. Coverage Extensions

b. Optional Coverages The BOP offers equipment breakdown coverage under the Equipment Breakdown Protection Optional Coverage. Other Optional Coverages include Outdoor Signs, Money and Securities, and Employee Dishonesty. Optional Coverages must be selected by the insured and indicated on the Declarations page, and they are not automatically provided by the BOP.

Which of the following is a duty of the insured in the event of a property loss covered by a Businessowners policy? a. Abandon damaged property to the insurer b. Provide a prompt notice of loss to the insurer c. Immediately hire an appraiser to appraise the loss d. Resume business operations within 90 days after the loss

b. Provide a prompt notice of loss to the insurer The insured must provide a prompt notice of the loss to the insurer, including a description of involved property. Though the insured must also resume all or part of business operations as quickly as possible, this rule is not subject to a specific time limitation. Under the Abandonment condition, the insurer may deny property abandoned to them. Under the Appraisal condition, appraisal is only necessary if the insurer and insured disagree on the amount of loss.

Building coverage under Section I covers all of the following personal property, except: a. Refrigerators b. Floor coverings c. Personal property of others in the insured's care d. Outdoor furniture

c. Personal property of others in the insured's care Building coverage under Section I of the BOP applies to the insured's personal property that is used to maintain or service the building, structures, or premises. This includes firefighting equipment, outdoor furniture, floor coverings, and appliances, like refrigeration, ventilation, cooking, and laundering appliances.

Under a Businessowners policy, medical expenses coverage: a. Pays only sums for which the insured is legally liable b. Prohibits further action for recovery after acceptance of payment c. Provides coverage without regard to negligence d. Is written in place of bodily injury liability coverage

c. Provides coverage without regard to negligence Medical expenses coverage pays for reasonable medical expenses to an injured party, regardless of fault. In other words, the insured does not have to be found legally liable by a court in order for medical expense coverage to apply.

For an insured to have the Increased Cost of Construction apply to a loss, the loss payment basis of the building must be: a. Agreed value basis b. Open perils basis c. Replacement cost basis d. Actual cash value basis

c. Replacement cost basis The building must be insured for the replacement cost loss payment basis in order for the Increased Cost of Construction Additional Coverage to apply.

Under the BOP, all of the following are covered under building coverage, except: a. Completed additions b. Property used to maintain or service a building, like outdoor furniture c. Tenant's improvements or betterments d. Machinery or equipment permanently installed in a building

c. Tenant's improvements or betterments Tenant's improvements or betterments are covered as business personal property.

Which of the following is considered an insured by the Hired Auto and Non-owned Auto Liability Endorsement? a. An executive officer using an auto their spouse owns b. A partner using an auto they own c. The named insured using a rental car for business purposes d. An employee using a hired auto without the named insured's permission

c. The named insured using a rental car for business purposes Under the Hired Auto and Non-owned Auto Liability Endorsement, insureds include the named insured, any person using a hired auto with the named insured's permission, and any partner, executive officer, or employee using a non-owned auto for business purposes. Partners and executive officers using autos that they own or their family members own are not considered insureds.

The Resumption of Operations condition requires that the insured do which of the following? a. Return to the building within 60 days b. Submit a proof of loss within 30 days c. Use damaged property to resume operations d. Replace damaged property on a reimbursement basis

c. Use damaged property to resume operations The Resumption of Operations condition will reduce the amount of business income loss to the extent that the insured is able to use damaged or undamaged property to resume operations. This reduction occurs even if the insured does not resume operations. The insured is responsible for submitting a proof of loss within 60 days of the insurer's request, as provided by the Duties in the Event of Loss or Damage condition.

The limit of insurance applying to building coverage provided by the BOP automatically increases by: a. 5% each year b. 25% each year c. 31% each year d. 8% each year

d. 8% each year The automatic increase in the building limit of insurance is an 8% annual increase. A different percentage may be indicated on the Declarations page.

The Businessowners Coverage Form could provide property coverage for all of the following, except: a. Tenant's improvements made to structures not owned by the tenant b. Business personal property located outside the building c. Building materials, equipment, or supplies located in the open d. Vehicles subject to motor vehicle registration

d. Vehicles subject to motor vehicle registration Vehicles subject to motor vehicle registration cannot be insured on any policy that is not an auto policy, so the BOP would not be able to provide auto coverage. Tenant's improvements and betterments are covered as business personal property, in the event the tenant-insured does not own the building, but has made alterations to the building that need coverage.