Chapter 4-A: Commercial Property
Extended coverage under a commercial policy often provides coverage for damage to outdoor trees, plants, and shrubs. When covered, what is the maximum per-plant amount? A. $250 B. $200 C. $100 D. $50
A. $250
XYZ Computer's production building for circuit boards is struck by lightning, which results in a fire that burns down the entire facility. XYZ Computer cannot continue the production of computers until the facility is rebuilt. Which insurance coverage might indemnify XYZ Computer for lost revenue until a new facility is built? A. Business Interruption B. Extra Expense C. Builders Risk D. Leasehold Interest
A. Business Interruption
In what part of a commercial property policy would you look to see if flood damage to your factory is covered? A. Causes of Loss Forms B. Declarations page C. Conditions page D. Coverage Forms
A. Causes of Loss Forms
If a Building and Personal Property Form has a Causes of Loss - Basic Form attached, which damages are NOT covered by this commercial property policy? A. Earthquake damage B. Damage caused by striking employees C. Smoke damage D. Damage caused by a non-owned airplane
A. Earthquake damage
Each insurance coverage in a commercial property insurance policy will contain a Causes of Loss form. Which of the following is NOT an example of a Causes of Loss form? A. General Form B. Basic Form C. Special Form D. Broad Form
A. General Form
The XYZ Company has an attached balcony on the top floor of their headquarters. During a summer storm, a lightning bolt strikes the metal railing of the balcony, splitting the balcony into two. XYZ Company would like to repair the balcony, but new building codes require more expensive construction materials. What commercial property coverage pays for this extra expense? A. Increased Construction Costs B. Extra Expense C. Newly Acquired Properties D. Preservation of Property
A. Increased Construction Costs
Craig purchased some additional machinery for his business so that he can keep up with customer demand. The problem is that Craig does not have enough space for the newly purchased machinery. He rents a storage unit to house the machinery until he can bring it to the company, but when the storage unit burns down, Craig's equipment goes with it. Which coverage extension might indemnify Craig for his loss? A. Property Off-Premise B. Preservation of Property C. Outdoor Property D. Newly Acquired Property
A. Property Off-Premise
Matt, a real estate developer, must submit a report to his insurer every 30 days listing the value of all his properties over the past month. In turn, the insurer adjusts Matt's premiums based on the values he submits. Which optional coverage does Matt subscribe to? A. Value Reporting B. Optional Reporting C. Agreed Value D. Adjusted Income
A. Value Reporting
In a typical commercial property policy, an insured building is considered "vacant" when: A. for 60 days, the building is either closed or has less than 31% of its available square footage occupied. B. for 25 days, the building is either closed or has no business personal property located in the building. C. for 30 days, the building is either closed or has less than 61% of its available square footage occupied. D. for 45 days, the building is either closed or has no business personal property located in the building.
A. for 60 days, the building is either closed or has less than 31% of its available square footage occupied.
In a commercial property policy, Coverage C of the Building and Personal Property Coverage Form provides coverage for: A. personal property of others. B. liability and medical payments. C. business personal property. D. buildings and structures.
A. personal property of others.
A storm travels through town, partially destroying Wilma's business. Wilma maintains a Business Income coverage policy with $120,000 limit, and the Monthly Limit of Indemnity coverage option. Wilma's business incurred the following expenses: Monthly ExpensesMonthAmountMonth 1$29,000Month 2$36,000Month 3$24,000Month 4$31,000 How much would her policy pay for lost income if Wilma had a monthly limit of 1/4 in place? A. $129,000 B. $113,000 C. $136,000 D. $120,000
B. $113,000
In the Business and Personal Property Form of a commercial property policy, Coverage A - Buildings and Structures coverage would apply to which of the following features of a commercial enterprise? A. A small copy machine in the break room B. A 40-ton printing machine affixed to a factory floor C. A briefcase left in the lunchroom by a client D. A leased mainframe computer
B. A 40-ton printing machine affixed to a factory floor
Ben owns a souvenir shop in a small town. During the winter time, the population consists of about 2,000 locals, but once the summer season hits, it's a mad-house. The island can see over a million travelers during the summer season, and Ben must be ready with enough inventory to handle the demand. Which endorsement to his commercial property policy could temporarily increase Ben's coverage limits during this high-volume time? A. Legal Liability B. Peak Season C. Protective Safeguard D. Tourism Endorsement
B. Peak Season
Which of the following terms refers to the time elapsed between a covered loss to a commercial building and the return to full business operations of the same building? A. Period of Construction B. Period of Restoration C. Period of Indemnity D. Property Preservation Window
B. Period of Restoration
Which of the following coverage options does NOT waive the coinsurance requirement in a commercial property policy? A. Monthly Limit of Indemnity B. Replacement Cost C. Maximum Period of Indemnity D. Agreed Value
B. Replacement Cost
James owns a metal machining shop where he does contract work for local mechanics, manufacturing hard-to-find parts or custom fittings. Being a cautious man, James wants commercial property insurance that provides coverage on an open-peril basis. Which Causes of Loss Form would best suit James' needs? A. Universal Form B. Special Form C. Basic Form D. Broad Form
B. Special Form
When a fire burns through The Chronicle newspaper company, it takes out two permanently-installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered by the Building & Personal Property form under Coverage C - Personal Property of Others? A. The printing presses and fire extinguishers B. The employees' personal laptops C. The printing presses and newspaper stock D. The rolls of newspaper stock
B. The employees' personal laptops
When Bill's business is interrupted because of a fire, he must provide a profit and loss statement to his insurer so they can determine an accurate amount of indemnification. Which three core elements from the profit and loss statement are used to calculate the net income? A. Operating expenses, inflation, cost of goods sold B. Total revenue, cost of goods sold, operating expenses C. Inflation, depreciation, cost of goods sold D. Total revenue, inflation, operating expenses
B. Total revenue, cost of goods sold, operating expenses
Tom leaves his personal laptop at Smith & Co. so a colleague can work on a presentation. While the laptop is in the care of Smith & Co., it is destroyed by a fire in the break room. The laptop was worth $3,200. How much indemnification would Smith & Co.'s Business and Personal Property Form provide for the damaged laptop? A. $0 B. $700 C. $2,500 D. $3,200
C. $2,500
Veronica needs to expand her pottery business and add an extra building to her property for the sole purpose of kiln firing her pottery. She adds Builder's Risk coverage to her commercial property policy to cover the new structure (which is yet to be completed), and finds out she must carry: A. 125% coinsurance. B. 80% coinsurance. C. 100% coinsurance. D. 50% coinsurance.
C. 100% coinsurance.
In the Business and Personal Property Form of a commercial property policy, Coverage B - Business Personal Property coverage applies to all of the following EXCEPT: A. Leased office equipment B. Office furniture C. Commercial flooring D. Business stock
C. Commercial flooring
In a commercial property policy, the Building and Personal Property Form contains three coverages. Which of the following coverages is NOT a part of this form? A. Coverage C - Personal Property of Others B. Coverage B - Business Personal Property C. Coverage D - Loss of Use D. Coverage A - Buildings and Structures
C. Coverage D - Loss of Use
Diana owns a manufacturing company. One evening, a windstorm blows a tree through the side of her building, leaving a hole in the wall and damaging one of her production machines. Diana temporarily fixes the hole with some plywood, but will have to rent a new production machine until hers is repaired. Which coverage in her commercial property policy could indemnify Diana for the cost of the machine rental? A. Profit & Loss Form B. Rental Equipment Coverage C. Extra Expense Coverage D. Operating Expense Coverage
C. Extra Expense Coverage
John purchased some business property a few years ago. In the past two years, the property value has grown 4% each year. John maintains the 80% coinsurance requirement on his business policy, but wants a more automated coverage so he doesn't have to constantly check the appraised value of his property. Which optional coverage can John purchase to help ensure that he always has the right amount of coverage? A. Value Reporting B. Agreed Value C. Inflation Guard D. Appraisal Condition
C. Inflation Guard
When a gas line explodes close to Georgia's business, it destroys most of her landscaping, leveling trees and uprooting shrubs. Which coverage extension could help cover the cost of replacing these plants? A. Property Off-Premise B. Shrubbery Endorsement C. Outdoor Property D. Property On-Premise
C. Outdoor Property
An overhead projector is taken to a conference room at a local hotel for a week. Sometime during the week, the projector falls off its stand and is destroyed. Assuming it is a covered loss, what commercial property coverage might cover the projector? A. Extra Expense B. Preservation of Property C. Property Off-Premises D. Valuable Papers and Records
C. Property Off-Premises
In a commercial property policy, Builders Risk coverage is sold based on which of the following values? A. The value of the land underneath the new construction B. The highest value of a building currently insured by the policyholder C. The value of the completed building D. The value of labor and materials used in construction
C. The value of the completed building
When an insurer decides to not renew an existing commercial property policy, it is obliged to follow the Cancellation and Nonrenewal condition of supplying notice to the policyholder 45 days in advance. If the insurer fails to meet this deadline, it must: A. offer the same premium rates and policy coverage as before for an additional 3 months. B. offer an additional 30 days of coverage without charging any premium. C. offer the same premium rates and policy coverage as before for an additional 30 days. D. pay a fine of up to $5,000.
C. offer the same premium rates and policy coverage as before for an additional 30 days.
Frank found a "favorable lease" for his business two years ago at $10/sq.ft. per year. He ended up leasing a 20,000 sq.ft. space for 6 years to lock in that yearly lease of $200,000. Yesterday, Frank's business was struck by lightning and burned to the ground, forcing him to lease a new building. Unfortunately the going rate now is $15/sq.ft. and Frank still needs 20,000 sq.ft. of space. How much could Frank's Leasehold Interest Coverage pay for the additional costs of leasing a new space for the remaining 4 years? A. $1,200,000 B. $100,000 C. $300,000 D. $400,000
D. $400,000
A fire breaks out in Anton's manufacturing plant, causing extensive damage which will take at least three months to repair. In the meantime, Anton has rent and employees who still need to be paid, and many other expenses that can't wait until the business is up and running again. Which coverage form of his commercial property policy can help Anton with his cash flow? A. Builder's Risk Coverage B. Manufacturer's Risk Coverage C. Rent, Salary, and Repair Coverage D. Business Income Coverage
D. Business Income Coverage
After a fire burns through XYZ Condominiums, they have to replace most of the interior. Which of the following WILL be covered under the Condominium Coverage Form of the condo association's commercial property policy? A. Computers used by one of the commercial units B. Upgrades within individual condos C. Personal property of a commercial unit D. Computers used by the condo as a whole
D. Computers used by the condo as a whole
Cyril recently purchased a small machining shop. When asked on his commercial property insurance application about how the property will be heated in the winter, he replies "central heat," when in fact it will be heated by a wood stove. Under which condition could the insurer deny coverage? A. No Benefit to Bailee B. Changes to the Policy C. Control of Property D. Concealment, Misrepresentation, and Fraud
D. Concealment, Misrepresentation, and Fraud
When a fire destroys a car parts manufacturer in China, USA Motors finds itself without the necessary parts to build its vehicles. Which commercial property insurance coverage option could indemnify USA Motors from lost business due to the damages sustained by its Chinese supplier? A. Inflation Guard B. Order of Civil Authority C. Extra Expense Coverage D. Contingent Business Interruption
D. Contingent Business Interruption
Which of the following will NOT appear on the Declarations page of a commercial property policy? A. Address of the insured business B. Coverage limits C. Coverage deductibles D. Covered perils
D. Covered perils
A fire in the break room kitchen of Helen's small business spreads into the utility room, damaging the computer server. Her server is physically destroyed, along with a lot of vital information: client information, pending shipments, etc. Which coverage can help Helen with the costs associated with losing this information? A. Business Income B. Reasonable Repairs C. Records Recovery D. Electronic Data
D. Electronic Data
In a commercial property policy, the Business Income Coverage Form provides indemnification to the policyholder for the loss of income during which of the following time frames? A. From 72 hours after the initial damage until 72 hours before the business is up and running again B. From the point of initial damage until the moment the business is up and running again C. From the point of initial damage until 72 hours before the business is up and running again D. From 72 hours after the initial damage until the business is up and running again
D. From 72 hours after the initial damage until the business is up and running again
Jim receives a letter in the mail from his insurer notifying him that his commercial policy will not be renewed thirty days from now. Jim protests, saying he needs at least two months time to find a new policy. Jim ends up receiving an additional 30 days' coverage at the same premium as before, because: A. Jim prepays his insurance two months at a time. B. Jim's insurer did not notify him by phone. C. Jim is an exceptional negotiator. D. Jim's insurer did not provide him with 45 days' notice.
D. Jim's insurer did not provide him with 45 days' notice.
When a fire burns through The Chronicle newspaper company, it takes out two permanently installed printing presses, three employees' personal laptops, five rolls of newspaper stock, and in a twist of irony, two fire extinguishers. Which of these would be covered by the Building & Personal Property Form under Coverage B -Business Personal Property? A. The printing presses and newspaper stock B. The printing presses and fire extinguishers C. The employees' personal laptops D. The rolls of newspaper stock
D. The rolls of newspaper stock
After a fire burns through XYZ Condominiums, they have to replace most of the interior. Which of the following will NOT be covered under the Condominium Coverage Form of the condo association's commercial property policy? A. Computers used by the condo B. The common areas of the condo building C. Piping, ductwork, or wire units D. Upgrades within individual condos
D. Upgrades within individual condos
In a commercial property policy, the Monthly Limit of Indemnity coverage option for Business Income insurance: A. requires an insured to parcel the stated policy limit into a fractional maximum amount of coverage available per month during the period of restoration. B. automatically raises the policy limit every month, to protect against the effects of inflation. C. requires the insured to maintain at least an 80% level of coinsurance on the insured property. D. establishes a separate aggregate limit for each month of the entire policy period.
A. requires an insured to parcel the stated policy limit into a fractional maximum amount of coverage available per month during the period of restoration.
The Newly Acquired Property extension in a commercial property policy provides ________ in coverage for buildings under construction at the insured premises, or for any newly acquired business property off the insured premises. A. $50,000 B. $250,000 C. $100,000 D. $1 million
B. $250,000
A storm travels through town, partially destroying Wilma's business, which is covered by a commercial property policy. Wilma maintains Business Income Coverage with a $100,000 limit, and the Maximum Period of Indemnity coverage option. Wilma's business incurred the following losses: Monthly LossesMonthAmountMonth 1$19,000Month 2$16,000Month 3$14,000Month 4$11,000Month 5$6,000 How much would her policy pay for lost income? A. $100,000 B. $60,000 C. $120,000 D. $66,000
B. $60,000
Veronica is in the process of building an extra structure for the sole purpose of kiln firing her pottery. After 40 days of waiting for it to be completed, she decides to go ahead and begin using it, since the kiln is already set up, even though the interior drywall isn't completely finished. Her Builder's Risk Coverage Form is then terminated because: A. interior drywall isn't covered under a Builder's Risk Coverage Form. B. Veronica has now put the building to its intended use. C. Builder's Risk policies are only good for 30 days. D. the risk of fire voided the policy.
B. Veronica has now put the building to its intended use.
A fire in John's factory causes him to shut the doors for 90 days. While repairs take place, John rents another building, along with some machinery and manufacturing supplies, for $90,000. John's total loss is $300,000, but by renting the new building and equipment he manages to reduce that loss by $50,000. Assuming John's commercial property policy includes Business Income Coverage With Extra Expense, how much will his insurer indemnify him? A. $420,000 B. $300,000 C. $340,000 D. $120,000
C. $340,000
A fierce windstorm blows through town, stripping the shingles off of the roof and shattering all of the windows at Gradient Industries. What commercial property coverage might pay for the cost of cleaning up the shingles and broken glass? A. Legal Liability coverage B. Preservation of Property C. Debris Removal D. Increased Construction Costs
C. Debris Removal
ABC Paving owns a warehouse where they store all their pavers. Lightning strikes the warehouse, which burns to the ground and destroys the entire fleet of pavers. In order to complete the projects they are currently working on, ABC Paving has to lease four pavers from another company. What commercial insurance coverage might pay for this expense? A. Preservation of Property B. Legal Liability C. Extra Expense D. Order of Civil Authority
C. Extra Expense
In a commercial property policy, Extra Expense Coverage provides indemnification to the policyholder for additional expenses incurred during which of the following time frames? A. From 72 hours after the initial damage until the business is up and running again B. From 72 hours after the initial damage until 72 hours before the business is up and running again C. From the point of initial damage until the moment the business is up and running again D. From the point of initial damage until 72 hours before the business is up and running again
C. From the point of initial damage until the moment the business is up and running again
Mackey Manufacturing signs a five-year lease at a new location, only to have the building burn down one year into their new lease. Now they have to lease a new property, and the rental prices have increased, so the company now has to pay higher rental costs. Which commercial property coverage form might indemnify Mackey Manufacturing for the difference in lease costs? A. Property Off-Premises Coverage Form B. None C. Leasehold Interest Coverage Form D. Preservation of Property Coverage Form
C. Leasehold Interest Coverage Form
Acme Insurance is trying to attract new commercial clients, so they decide to broaden coverage for business personal property items without increasing the premium. Which condition would allow the current clients of Acme Insurance to benefit from the newly expanded coverage? A. Policy Period B. Changes in Policy C. Liberalization D. Control of Property
C. Liberalization
Jim has several trailers in the supply yard of his business which belong to his respective buyers. Jim's business loads the trailers and then contracts with another company to ship the goods to their final destination. One day while loading up a trailer, Jim accidentally pierced the side of a covered trailer with his forklift. The damage to the trailer would be covered by the _____________ coverage extension. A. Newly-Acquired Property B. Outdoor Property C. Non-Owned Detached Trailers D. Property of Others
C. Non-Owned Detached Trailers
ABC Computers experiences a fire overnight at their corporate offices. ABC Computers had purchased an older building to house their offices, and the repair costs include upgrading the old building to adhere to modern fire codes. Which coverage might indemnify ABC Computers for the added expense of these upgrades? A. Legal Liability coverage B. Builders Risk coverage C. Ordinance or Law endorsement D. Extra Expense coverage
C. Ordinance or Law endorsement
Jeff's commercial property policy includes coverage for Fire Department Service Charge, with a limit of $500. When one of Jeff's business premises catches fire, he calls 911. The fire department arrives and puts out the fire, saving the majority of Jeff's business. Later that week, Jeff has to call the fire department again when another fire breaks out, this time at his second business location. When the bill arrives for the fire department's services, it shows a $600 fee for each call, totaling $1,200. Jeff files a claim with his insurer for the charges. How much of the bill will Jeff have to pay? A. $0 B. $700 C. $1,200 D. $200
D. $200
After a heavy hailstorm cut the power to Julia's bakery, she had to rent generators to keep her business going for a few days. Which of the following coverages in her commercial property policy would protect Julia the MOST in this situation? A. Business Income B. Contingent Business Interruption C. ACV valuation D. Extra Expense coverage
D. Extra Expense coverage
Which of the following is NOT a universal commercial property policy exclusion? A. Warfare B. Floods C. Earthquakes and land movements D. Lightning
D. Lightning
Celina's business is growing and she needs more space for her inventory. A week ago, a crew started work on constructing a new building on Celina's business premises. Last night, a bolt of lightning set fire to the still-unfinished new building and burned it to the ground. Celina's property is fully insured under a commercial property policy. Which coverage extension in her policy would cover this loss? A. Personal Effects B. Property On-Premise C. Outdoor Property D. Newly Acquired Property
D. Newly Acquired Property
