Commercial property

THE FOLLOWING PROPERTY WHILE OUTSIDE OF BUILDINGS

1. grain, hay, straw or other crops 2. Fences, radio or television antennas, including their lead- in wiring, masts or towers, trees, shrubs or plants ( other than trees, shrubs, and plants that are ''stock'' or are part of a vegetated roof), all except as provided in the coverage extensions.

Under the coverage extension '' newly acquired personal property'' of the ISO '' commercial building & personal property '' form, if the insured carries personal property (contents) coverage, newly acquired personal property at another location is covered for $---------- for a period of ----------- days

100,000 30 days

The '' maximum period of indemnity'' option of the business income form, limits the period of indemnity to

120 days

Under the ISO commercial property forms, losses due to mold are subject to which of the following limits that would also be included in the limit of insurance on covered property

15,000

The ''commercial Building & personal property-- additional coverages'' will provide up to _______% of the direct amount of the loss, including the deductible to pay for debris removal

25%

The commercial building & personal property coverage form includes an additional coverage for ''perseveration of property'' if the insured removes property from the premises when endangered for a covered peril. The coverage lasts for

30 days while the property is being moved and/ or temporarily stored elsewhere

under a standard ISO commercial property form, the liberalization clause states that if the insurer makes any coverage revision that broadens the coverage under the policy without additional premium charge, the revision will automatically apply to existing policies if the broadened coverage was adopted during the policy period within

45 days prior to the inception date of the policy

''extended business income'' coverage pays for loss of business income after operations have been resumed for no more than

60 days

Vandalism or theft will not be covered under the standard commercial buiding & personal property coverage form if, at the time of the loss, the building has been vacant for more than

60 days

When coverage is provided under a '' business income '' form, the '' period of restoration'' begins

72 hours after the direct damage

COINUSRANCE EXAMPLE (IMPORTANT)

A person insures property with an actual cash value of 100,000 on a policy with an 80% coinsurance requirement, the insured would be required to carry 80,000 coverage on the property (80% of 100,000). However, in this instance, the insured elects to carry only 60% therefore making him a partner with the insurance company on partial losses. The insured understands that he will be required to pay a portion of partial losses because he is underinsured.

All of the following can obtain coverage under the builders risk policy EXCPET

A prospective buyer of the building under construction

Stock

Already sold is valued at its net selling price

EARTHQUAKE And Volcanic Eruption Insurance

An optional coverage that can be purchased in most states under most forms of property insurance EXAM ALERT--- ALL EARTHQUAKE SHOCKS OR COLCANIC ERUPTIONS THAT OCCUR WITHIN AN 168-HOUR PERIOD ARE CONSIDERED TO BE ONE OCCURRENCE. EARTHQUAKE AND VOLCANIC ERUPTION INSURANCE- Masonry veneer is not covered, unless coverage is indicated in the declarations, or unless than 10% of the total outside wall area is faced with masonry veneer. Stucco is not considered masonry veneer

Specific Basis

Building and contents can be specifically scheduled. This is the most popular way to set up coverage on a policy.

Coinsurance

Coinsurance is a property policy provision in which the insurance company agrees to a lower insurance rate per 100$ of coverage, as long as the insured maintains insurance on the property at a specified percentage of the total value of the property. Beneficial to the insured for 2 reasons Requiring a certain minimum limit of coverage helps avoid being underinsured for a major loss. Coinsurance establishes a basic fairness in premium rates, particularly respecting partial losses, which are the most frequent losses to occur COINSURANCE- The Coinsurance clause only APPLIES ON PARTIAL LOSSES, it does not apply to a total loss. In case of a total loss, the insurance company is usually required to pay the face amount of the policy.

Commercial property forms: commercial property conditions form

Contains specific conditions ( rights, duties, obligations) of the parties to contract such as: Control of property- States that any act of negligence on the part of a person who is beyond the insured's direction or control, will not affect the insurance. This condition exempts and protects an innocent insured when damage results from an act or neglect of another person, and the act or neglect relates to come control of the property. LEGAL ACTION AGAISNT THE INSURER- Before legal action (lawsuit) may be taken against the insurer, an insured must have complied with all terms of the policy. The suit must begin within TWO YEARS following a loss. State Laws- Keep in mind that state laws come into play when it comes to suing an insurance company. If state laws deviate from policy language, the state laws will be observed. Other Insurance- if there is other insurance written on the same basis, recovery is pro-rated with the other policies. Liberalization- if the insurer provides more liberal coverage by a revision that is introduced during the policy period or in the 45 days preceding the inception date, the revision applies immediately, as long as there is no extra premium involved.

EXAM ALERT

Coverage extensions will apply if the insured carries a coinsurance percentage of 80% or more, or a value reporting period symbol is shown in the dec section of the policy.

Broad Form Cause of Loss

Covers all perils listed under the basic form cause of loss Breakage of glass an additional coverage falling objects weight of ice, sleet, or snow water damage(accidental discharge or leakage of water or steam as a result of cracking or breaking of a water or steam system or appliance. COLLAPSE as an additional coverage, covers collapse of a building caused by: Any perils specified in the policy hidden decay insect or vermin damage weight of people or property weight of the rain on the roof defective materials or methods used in construction or remodeling.

Valuation Condition

Describes how losses are settled most losses are paid at ACV. However, if the Coinsurance conditions are met and costs are $2,500 or less, the policy will pay the cost of building repair or replacement without taking depreciation into account.

MISCELLANEOUS PROPERTY FORMS AND ENDORESEMENTS

Difference in conditions insurance- written to cover certain perils that may otherwise be excluded by the commercial insurance forms or commercial package policy. For example flood and earthquake coverage, usually with large deductibles.

Commercial Property Insurance

Dwellings are not eligible for coverage under the commercial property forms

Additional coverage

Electronic data- provides up to $2,500 for the loss of the electronic data from a covered cause of loss. This is an aggregate amount available for all losses during the policy period. If the loss begins in one policy year and continues into the next policy period, only the aggregate limit for the first policy period is available.

The '' period of restoration'' that applies to the business income coverage under a commercial property form

Ends on the date when the property should be repaired within reason.

ALL of the following are covered under the commercial property basic cause of loss form except

Falling Objects

Basic Form Cause of Loss- A ''named peril'' form covering 11 perils

Fire lightning explosion windstorm or hail smoke aircraft or vehicles riot or civil commotion vandalism sprinkler leakage(accidental leakage) sinkhole collapse volcanic action

A business located adjacent to an insured's business is damaged by fire. Because of the damage to the adjoining property, the insured is denied access to his business by the fire department. The insured's commercial policy contains a ''business income '' coverage form as a part of the entire contract, therefore, the insurance company will cover the loss of business income

For a maximum of four weeks

recovered Property

If the insured or the insurance company recovers property after a loss, the recovering party must notify the other promptly and inform it of the recovery. The insured has the right to return the claim payment or keep the property or allow the insurance company to keep the recovered property. the insurer is responsible for any expenses in recovering the property or any repair to the recovered property subject to the policy limit.

EXAM ALERT:

If the property is eligible for, or has a flood policy issued by the national flood insurance program, the coverage on this endorsement is CONSIDERED TO BE EXCESS over the NFIP maximum limits.

Condominium Association form

Included in the definition of a building is permanently installed machinery, outdoor fixtures that are part of the building, and specifically named personal property. Excluded is the unit- owner's personal property.

Tenants Improvement and Betterments

Is valued at actual cash value if the insured-tenant makes the repairs promptly or at a proportion of the original cost of the improvements if the repairs are not made promptly.

The coverage limit is 5,000 for property in the insured's care, custody and control. The perils and exclusions are those listed on the cause of loss forms that are attached to the builders risk form AND

Land or water lawns, trees, shrubs, or plants (coverage extension provides up to $1,000 but not more than $250 on any one tree, shrub or plant) radio and TV antennas

Leasehold interest

Leasehold interest insurance protects against financial loss suffered by a building tenant, when a favorable lease is cancelled before expiration because of a loss or damage to the building by an insured cause of loss.

Form revisions EXAMPLE

Lightning has struck the insured building and it catches fire. Rain enters the building along with water from the fire department hoses. Subsequently, mold grows behind the walls of the building as a result of the water that settled there. In cases of fire or lightning, THE 15,000 LIMIT DOES NOT APPLY. if that same mold was caused by a pipe bursting and not by lightning, the $15,000 limit would apply deductible- has been increased from $250 to 500$

Extra Expense Coverage Form

Limits are applied to recovery depending on the period of restoration. For example, limits might be stated in the Dec page as 40%/80%/100%. This means if the restoration period was 30 days or less, 40% of the full amount of insurance would be paid. 31-60 days, 80% of the full amount of insurance would be paid. Over 60 days, 100% of the full amount of insurance would be paid.

EXAM ALERT !!!!!! BUILIDERS RISK POLICIES

MOST builders risk policies are written on a completed value basis and require the insured to cover the risk for the ultimate completed value (100% coinsurance required) of the building under construction. If the insured does not cover the risk for the completed value and a partial loss occurs, there will be a coinsurance penalty that the insured must pay.

Coverage Extensions

Newly acquired or constructed property- if the insured carries building coverage, a newly acquired building is covered for $250,000 for 30 days Newly Acquired Personal Property- if the insured carries contents coverage, newly acquired personal property at another location is covered for 100,000 for a period of 30 days. Personal effects and personal property of others- is covered for a limit of $2,500 NOTE theft of personal effects is not covered valuable Papers and records(other than electronic data) for a limit of $2,500. Money is not considered to be '' valuable paper''.

Coverage extensions

Outdoor property- fences, radio, and television antennas, including satellite dishes, trees, shrubs and plants for up to a maximum of $1,000 but not more than $250 for any one tree, shrub or plant. This limit does not apply to trees, shrubs or plants that are '' stock'' or part of a vegetated roof as this is already considered covered property. Non-owned detached trailers- there is limited coverage for non owned detached trailers provided by a new coverage extension. It covers damage to a non-owned trailer not connected to a vehicle and on the insured's premises for which the insured has a contractual responsibility for loss or damage to the trailer. The limit is $5,000 Business Personal Property Temporarily in Portable Storage Units. A limit of $10,000 of coverage is provided for business personal property temporarily in storage units(including detached trailers) provided the storage unit is within 100 feet of the described building or structure or 100 feet of the described premises, whichever is greater. The coverage is for 90 days from the time the property is placed in the unit. If the portable storage unit on the premises has been in use for 90 days or more this extension does not apply.

Coverage Extensions

Outdoor signs- whether attached to the building or not are covered up to $2,500 for the perils covered by the policy

EXAM ALERT!!!!!##@##$$$%^^&^%%%#%$#$%%^

POLICY IS EXCESS OVER OTHER INSURANCE WHEN THERE IS ANOTHER POLICY COVERING THE SAME LOSS, BUT SUBJECT TO A DIFFERENT PLAN OR COVERAGE. IT ALSO PREVENTS DOUBLE RECOVERY OR OVER INDEMNIFICATION.

The commercial property forms conditions

Policy period, coverage territory transfer of rights of recovery against others to us- this condition defines the subro rights under the policy when the insurer makes a payment to or for any person or organization, the named insured or any other. If payment is made under the policy and there is a right to recover damages from a third party, that right is transferred to the insurance company.

COVERAGE a

Provides building coverage which also includes outdoor furniture, floor coverings, certain appliances (refrigerators, dishwashers) additions, alterations, repairs in progress, including materials, supplies and temporary structures on or within 100 feet of the described premises; Completed additions (the new annex added to the described structure during the policy term is covered even though it did not exist at policy inception)

coverage A

Provides building coverage which also includes permanently installed fixtures (pa systems and blinds) Machinery and equipment ( drive- on scales, refrigerated lockers) Outdoor fixtures ( light and flag poles, mailboxes, fences, TV antennas, satellite dishes) personal property used to maintain or service the premises ( fire extinguishers, Ladders)

EXAM ALERT ^^^^^^^^^^^((&*&^&*^)*(&u)&u

REMEMBER THAT THE 31% OCCUPANCY REQUIREMENT APPLIES TO COMMERCIAL PROPERTY POLICIES AND NOT NECESSARILY TO OTHER PROPERTY POLICIES.

PARTY WALLS

SEPERATES two buildings but is actually a part of each building. If the same insured owns the entire building, loss settlements are unaffected. However, if different insureds own the shared party wall, loss settlements will be shared proportionally. If one owner wants the wall repaired and the other does not, the insurer will pay the damage in full and then subrogate back against the adjoining building owner

The commercial Property cause of loss forms

State the perils that are insured against.

If a condominium association policy and a condominium unit- owners policy are in force covering the same property and a loss occurs, which policy would pay the claim

THE condominium association policy is primary and would pay.

Legal Liability

Tenants in a landlord's building have an exposure as a result of being held legally liable for damages to a building caused by an insured peril. In cases where the value of the building is considerable the insured may wish to cover their exposure to loss by using this form. The coverage can also include personal property of others coverage The legal liability form can be used with one of the three cause of loss forms previously discussed ( basic, broad, and special).

''Sinkhole Collapse'' is a peril that is covered under which of the following commercial property cause of loss forms ?

The basic, broad, and special forms.

Coverage written under a builders risk form on either a completed value or reported value basis includes

The building and its foundation Building materials in the insured's care, belonging to others within 100 feet of the premises Temporary structures constructed and used on the job site including scaffolding, construction forms and cribbing but only if no other insurance is available for these items.

Coinsurance- Complying with the coinsurance clause does not guarantee that the insured will receive full recovery on a total loss.

The clause sets only the minimum amount of insurance required. If the insured suffers a total loss and is insured to exactly 80% of the ACV, he/ she must cover the uninsured 20%. most agent's today are encouraging their insureds to cover their property at 100%

Form revisions

The insurance service office(ISO) introduced some revisions to the commercial property forms to address losses related to mold. these changes affect the cause of loss forms, the building and personal property coverage form, and some of the other commercial property forms. For losses ''other than'' fire or lightning, the losses have been limited to $15,000.

EXAM ALERT BUILDERS RISK

The property is accepted by the buyer 90 days has elapsed since construction was completed the building is occupied or put to its intended use the insured's interest in the property ceases The insured abandons the construction with no plans to complete it.

Builders Risk

The rates on a builders risk policy are considerable less than commercial property rates. The average risk is only about half of what is reflected by the limit of insurance, because the amount at risk begins near zero, when construction is in the early stages, and gradually increases as construction continues.

Flood Coverage Endorsement

There is an additional covered cause of loss added to the covered cause of loss section of the commercial property policy. Flood loss is added as a covered cause of loss so that direct physical loss of, or damage to covered property, caused by or resulting from flood, is insured. NOTE: the regular flood insurance program does not include mudslides, it does include mudflows, but this endorsement picks up mudslides.

Value reporting Form

These forms allow an insured with property that fluctuates in value to be protected at all times and to pay a premium based on the values actually at risk. As long as values are reported correctly and promptly according to policy requirements, automatic coverage is provided as values move up and down. If a loss occurs and it is discovered that the insured has underreported values to the insurer, the insurance company will reduce its claim payment by the same percentage underreported in the most recent report.

property forms

These policies can also be written on a REPORTED VALUE basis. If written on a reported value basis, coverage will begin on the date construction begins if the building does not have a basement. IF the building includes a basement, coverage will begin on the date construction begins on the lowest floor that will be above the basement.

Protective Safeguard endorsement

This endorsement is attached tot he policy when the insured has installed ''safeguards'' such as automatic sprinkler systems, fire alarms, security services and service contracts. the insurer attaches this endorsement as a way to encourage the insured to maintain these systems. NOTE: If the insured's automatic sprinkler system is shut off due to breakage, leakage, etc. And service cannot be restored within 48 hours, the insurance company must be notified or coverage will be void.

Spoilage Endorsement

This endorsement provides coverage for perishable stock due to power outage, mechanical breakdown, or contamination. This coverage applies to losses resulting from change in temperature or humidity, or contamination resulting from a power outage either on or off the premises, or resulting form mechanical breakdown.

Condominium Commercial Unit- owners form

This form covers the commercial condominium unit- owner's contents, business personal property, and business personal property of others in the unit- owner's care. Building coverage is generally excluded. Unit- owner owned fixtures and structural changes are included in the covered property description. EXAM ALERT---- the unit- owners coverage form is always excess over a condominium association coverage form that applies to the same property.

Special Form Cause of Loss

This form is the most popular of the cause of loss forms. Covers direct physical loss that is not excluded elsewhere in the policy, this is known as Open Peril coverage. EXCLUSIONS INCLUDE loss of market wear and tear war and nuclear hazard settling, cracking, or shrinking earth movement including tremors and aftershocks flood, tsunami, storm surge, or tidal water rust, corrosion, fungus, decay, deterioration, hidden defects damage caused by insects, birds, rodents, or other animals explosion of steam boilers, pipes, and engines dishonest or criminal acts of insured employees. voluntary parting with property if included to do so by fraud or trick rain, snow, ice or sleet damage to personal property not in the building loss resulting from acts or decisions, or the failure to act or decide. Collapse(other than included under the Collapse additional coverage) faulty planning, development, design, specifications, workmanship or repair

Property not Covered

Underground pipes, flues or drains Electronic data- the cost to research, replace or restore the information on valuable papers and records, including those that exist on electronic or magnetic media, and data stored on computers except as provided in the coverage Extensions Vehicles or self propelled machines (including aircraft or watercraft) that 1. are licensed for use on public roads 2. are operated principally away form the described premises 3. you do not manufacture, process, warehouse, or hold for sale. But this does not apply to rowboats or canoes out of the water at the described premises.

All of the following are exclusions under the special cause of loss form, EXCEPT

Water damage

Which of the following perils is covered by the commercial property broad cause of loss form that is not covered under the commercial property basic cause of loss form

Weight of ICE and Snow

agreed amount

When the actual value of the property may be in question before a loss, the insured completes a statement of value and if agreed to by the insurer, this becomes the limit of insurance. the coinsurance clause is waived in this case. THIS method is used to inure '' one of a kind'' equipment or equipment that is functional but no longer manufactured.

Each of the following is a coverage option under the ''business income'' form except

a deductible

Property Not Covered

accounts, bills, currency, deeds food stamps, evidences of debt, money, notes or securities Animals, unless owned by others and boarded by you or if owned by you, only as ''stock'' while inside of buildings automobiles held for sale. bridges, roadways, walks, patios, or other paved surfaces contraband, or property in the course of illegal trade the cost of excavations, grading, backfilling, or filling foundations land personal property while airborne or waterborne Bulkheads, pilings, piers, wharves or docks

Additional coverages

debris removal policy provides up to 25% of the direct amount of the loss including the deductible pay for debris removal. If the limit of the building or covered personal property is exhausted by the payment of claims and/ or debris removal expense, then the policy pays an extra $25,000 for the removal of debris. If another person's property is on the premises and the insured property is not damaged, the policy will pay up to $5,000 to remove the debris belonging to others. preservation of property- if the insured removes property from the premises when endangered by an insured peril, the property is covered for any direct loss while it is being moved and while temporarily stored elsewhere for 30 days.

COVERAGE B

describes the business personal property OWNED BY THE INSURED and covered while located in the building, in the open, or in a vehicle within 100 feet of the building or structure within 100 feet of the premises whichever distance is greater. furniture, fixtures, machinery, and equipment stock and other owned personal property used in the business Labor, materials or services furnished or arranged on personal property of others. ( In this instance, the bailee and the insured are the same person.)

Coverage C (Personal Property of Others)

describes the personal property of others that is in the insured's care, custody, or control. While this form provides 2,500$ coverage on personal property of others under extensions of coverage, an insured that has personal property of others on the premises that exceeds the 2,500$ limit, would consider a limit appropriate to values on the premises. Coverage also applies within 100 feet of the premises.

COVERAGE EXTENSIONS

property of premises- covers personal property away from the described premises up to $10,000 if it is 1.temp at a location the insured does not own, lease, or operate 2. In storage at a non-owned location 3. At any fair, trade show or exhibition

vacancy CONDITION

states that if a building has been vacated for more than 60 consecutive days before the loss, the insurer will not pay for loss due to vandalism, water damage, theft or attempted theft, building glass breakage, or sprinkler leakage( unless the system has been protected against freezing) In addition, the Vacancy condition states that any amount that would otherwise be paid for a covered loss will be reduced by 15%. For example, if a building is vacant for more than 60 days and is insured for 100,000$ and suffers a loss by fire, the payment is reduced by 15% ALSO STATES WHEN A POLICY IS ISSUED TO THE OWNER OR GENERAL LESSEE OF A ''BUILIDING'' means the entire building. Such building is considered vacant unless at least 31% of its total square footage is occupied. Buildings in the course of remodeling or construction are not considered to be vacant.

Fire Department Service

the limit for this coverage is 1,000 although a higher limit can be listed on the dec page this coverage is per location stated on the dec page and is the most that will be paid no matter how many fire depts. respond to the loss or the number of services that were performed. Pollutant Clean Up and Removal- these expenses are covered if reported within 180 days of a covered cause of loss. Pays to extract pollutants from land or water up to a 10,000 policy aggregate limit per policy period. Increased cost of construction- this covers the increased cost involved in complying with building codes if the building was damaged by a covered cause of loss. this coverage is only available for buildings insured in a replacement cost basis and the maximum amount payable is the lesser of 5% of the amount the building is insured for, or $10,000. Formerly, this coverage was only available by endorsement and is still for the insured that needs higher limits of coverage than those automatically provided by this additional coverage.

Peak Season Endorsement

this allows the insured to increase his/ her contents limit for specified periods of time when his/her inventory bay be higher than usual. For example: a department store's inventory at the holidays This endorsement specifies a date when the coverage expires. If a loss occurs after that specific date, coverage will not apply. Usually, the purchase is for 60 days and this endorsement simply allows an insured to purchase a higher limit of coverage for a short period of time.

Radioactive Contamination Coverage

this exposure is effectively excluded from property and casualty insurance contracts by one or more standard exclusions referred to as ''nuclear hazard exclusions''. Insureds that need this type of coverage can secure it by purchasing the CP 10 37, the radioactive contamination endorsement, which will modify the cause of loss forms and the standard property policy to provide coverage. The CP 10 37 offers two coverages, limited radioactive contamination and Broad Contamination.

glass

valued at the cost of replacement with safety glazing material if it is required by law.

Blanket Coverage

when an insured has interdependent operations in two or more buildings or at more than one location, blanket limits are recommended. This would allow the insured to have ONE LIMIT APPLYING TO A COMBINATION OF BUILDINGS AND/OR PERSONAL PROPERTY, even at several locations.