CPU 551 Practice Exam

Carol's Dance Studio (CDS) is insured under a Business Income (and Extra Expense) Coverage Form with a $1 million Business Income limit of insurance. None of the optional coverages of the Business Income (and Extra Expense) are in effect and no endorsements apply to CDS's Business Income (and Extra Expense) Coverage Form. The one year policy period shown in the declarations began on July 1, 20X1. On October 1, 20X1, access was denied to CDS for four weeks by civil authorities because of fire damage to a shop next door to CDS. The resulting loss of business income that CDS sustained was $45,000. The business income loss for the first 72 hours following the time of action by civil authority totaled $4,000. After the first 72 hours, CDS sustained $9,000 business income loss in week 1, $10,000 business income loss in week 2, $11,000 business income loss in week 3 and $11,000 business income loss in week 4. How much of CDS's business income loss would be covered under the Business Income (and Extra Expense) Coverage Form?

$41,000 of CDS's business income loss would be covered under the Business Income (and Extra Expense) Coverage Form. Business income coverage begins 72 hours after physical loss occurs.

Sam's Dry Cleaners (SDC) is insured under a Business Income (and Extra Expense) Coverage Form with a $1 million Business Income limit of insurance for the dry cleaners location, subject to option (2) Business Income Other Than "Rental Value". None of the optional coverages of the Business Income (and Extra Expense) are in effect and no endorsements apply to SDC's Business Income (and Extra Expense) Coverage Form. The one year policy period shown in the declarations began on July 1, 20X1. On October 1, 20X1, SDC suffered a direct physical loss to its building and contents due to a fire. The resulting loss of business income that SDC sustained was $800,000, including a $5,000 loss for the first 72 hours following the physical loss. After the period of restoration ended and SDC resumed operations at the insured premises, the dry cleaners continued to sustain loss of business income loss for 90 days due to customers using other dry cleaners in the neighborhood. The first period of 30 days after reopening was $15,000, second period of 30 days was $10,000 and third period of 30 days was $5,000. How much of SDC's business income loss would be covered under the Business Income (and Extra Expense) Coverage Form?

$820,000 of SDC's business income loss would be covered under the Business Income (and Extra Expense) Coverage Form. $795,000 is covered after 72 hour deductible. An additional $25,000 (60 days) is covered due to Extended Business Income Additional Coverage.

A manufacturer decided to ship its goods by land and used a common carrier trucking company. During the course of transporting the goods, the truck was overturned by a tornado. The driver survived the accident, but the goods were destroyed. Why is this loss an exception to common carrier liability?

. It arises from an act of God. Correct. It arises from an act of God and is an exception to common carrier liability.

The coinsurance basis for business income coverage is

. Net income plus all operating expenses except certain deductible items.

A neighborhood elementary school wants to obtain insurance coverage for operational extra expenses in the event of a covered peril. In reviewing whether an Extra Expense Coverage Form or Business Income (and Extra Expense) Coverage Form is most beneficial, the school should likely review which one of the following?

. Whether its business income exposure is also served by covering lost income and expenses.

Business income losses can be measured in terms of net income. Toy Company recently experienced $70,000 in expenses and $100,000 in revenue. What is Toy Company's net income?

A. $ 30,000

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, ABC performed an inventory calculation and determined that the actual physical inventory on hand was $102,000 less than what the company's records indicated. ABC could not establish that it had sustained a loss without the inventory calculation. How much of this loss will be covered by the Employee Theft insuring agreement of the Commercial Crime Coverage part?

A. $0

Sizemore Industries has a Building and Personal Property Coverage Form (BPP) that covers four buildings at one location. Each building is insured for a separate limit of $150,000, and a $5,000 deductible applies. A windstorm causes $4,000 worth of damage to each of the buildings for a combined total of $16,000 of damage. How much will the insurer pay for Sizemore's losses to its buildings?

A. $0 Correct. The insurer will pay $0. When the occurrence involves loss to more than one item of Covered Property and separate Limits of Insurance apply, the losses will not be combined in determining application of the Deductible. None of the losses exceeds the deductible.

A building under construction is insured on an unendorsed Builders Risk Basic Form policy for $100,000. During the course of construction, defective materials caused the main floor to collapse, resulting in a $10,000 loss. The actual cash value of the building at the time of loss was determined to be $110,000. Assuming a $1,000 deductible, the amount payable to the insured is

A. $0.

Richard's Clothing Store has a $500,000 Business Income (and Extra Expense) Coverage Form on which there is an 80 percent coinsurance clause. A fire swept through the store. Richard's Clothing Store estimates that its net income plus all operating expenses for the policy period would have been $1,875,000. The estimated business income loss is $300,000. How much will the insurer pay

A. $100,000

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, two employees, Beth and Jim, in collusion, stole money and merchandise from ABC. Beth and Jim stole money on May 1, 20X1 and August 13, 20X1. They also stole merchandise on January 15, 20X1 and September 29, 20X1. The amount of the money loss totaled $15,000 while the amount of the merchandise loss totaled $110,000. With respect to applying the limit of insurance applicable to the employee theft loss, how much will the insurer pay for the employee theft loss?

A. $100,000 Correct. The total amount of the employee theft loss is $124,000 ($110,000 merchandise + $15,000 money less $1,000 deductible). The limit of insurance is $100,000 which is the most the insurer will pay. The $1,000 deductible comes off the amount of the loss, not the limit.

Four government employees conspire to steal from their employer who has an ISO government crime form. The total amount stolen by the four employees was $6,000,000. The per employee loss limit is $1,000,000. The four employees were identified, and it was determined that employees 1 and 2 each stole $2,000,000, employee 3 stole $1,250,000, and employee 4 stole $750,000. The total settlement amount payable to the insured is

A. $3,750,000.

Comparing vandalism coverage of the Standard Property Policy (SPP) with the Building and Personal Property Coverage Form, also referred to as the BPP, there is no vandalism coverage for buildings vacant after how many days for each policy?

A. 30 days for SPP and 60 days for BPP Correct. There is no vandalism coverage for buildings vacant after 30 days for the SPP and after 60 days for the BPP.

Which one of the following statements is correct regarding net income loss exposures?

A. A net income loss exposure is the possibility of loss caused by a reduction in net income.

Which one of the following statements describes a way in which surety bonds differ from insurance policies?

A. A surety bond is a three party agreement among the surety, the obligee, and the principal, whereas an insurance policy is between the insured and the insurer.

Although buildings can be classified in many ways, the system used to classify buildings for purposes of rating commercial property insurance is based on their

A. Ability to resist fire Although buildings can be classified in many ways, the system used to classify buildings for purposes of rating commercial property insurance is based on their ability to resist fire.

The cost to replace property with new property of like kind and quality less depreciation is referred to as the

A. Actual cash value. Correct. The cost to replace property with new property of like kind and quality less depreciation is referred to as the actual cash value (ACV).

Which one of the following statements is true of condominium unit owners, cooperative shareholders, and planned unit development homeowners?

A. All unit owners, shareholders, and homeowners have insurance requirements spelled out in the governing agreements or bylaws.

If a condominium association is considered to be the owner of and responsible for improvements made to the original building specifications by the unit owner, the approach used in the statutes and agreements to divide interests is the

A. All-in concept.

The Financial Institution Bond Form 24 contains limits of liability. Which one of the following statements about the limits of liability is true?

A. An aggregate limit applies to the entire bond.

Which one of the following is available in the Commercial Crime Coverage Form for insuring loss resulting from extortion?

A. An endorsement requiring first communication of the threat to occur during the policy period

Which one of the following most fully describes what must occur in order for business income insurance to apply?

A. An interruption of operations caused by property damage from a covered peril to property at locations or situations described in the policy resulting in a loss of business income and/or extra expense.

The Recoveries condition of the ISO Commercial Crime Coverage Form specifies how

A. Any subrogation or salvage recoveries will be divided between the insurer and the insured.

The Condominium Association Coverage Form is designed for insuring

A. Appliances, such as dishwashers, under the building coverage.

Which one of the following best describes the process for rating business income and any additional coverages that are automatically included in the businessowners policy (BOP)?

A. BOP property rates include loadings (built-in charges) for these coverages.

Which one of the following statements best describes the rating process used with businessowners policies (BOPs)?

A. BOP rating is not as complicated as the rating for a commercial package policy.

ABC Company, a candy manufacturer, produces candy from a brand new factory, warehouses inventory in two buildings at other locations, and sells direct to the public from three retail locations. The risk manager for ABC is concerned about being able to track inventory values at the various locations. Which one of the following should the manager consider to provide maximum coverage with a minimum of valuation management?

A. Blanket Insurance coverage

One of the reasons that blanket insurance premiums typically are higher than comparable separate specific insurance policies is because

A. Blanket insurance usually requires a higher minimum coinsurance percentage than the separate specific insurance policies.

The Condominium Association Coverage Form does not cover which of the following?

A. Business personal property that is individually owned by a unit owner

Which one of the following contains an insuring agreement, delineation of the property covered and not covered, and additional coverages and coverage extensions?

A. Commercial property coverage forms

Which one of the following lists the covered causes of loss (basic, broad, or special); the deductible amount; and any optional coverages?

A. Commercial property declarations

A container-load of merchandise located at an eastern United States seaport needs to reach a final destination in Maine. Which one of the following methods of transportation used to move this merchandise to Maine would provide the highest degree of carrier responsibility?

A. Common carrier

Which one of these is an example of a loss that would be covered under the Commercial Crime Coverage Form?

A. Compensatory damages arising directly from a loss covered by the policy

Cromely and Company is purchasing a commercial condominium unit that it will occupy. Cromely wants to insure its business personal property along with any improvements that it makes to the unit. Which one of the following forms would meet its needs?

A. Condominium Commercial Unit-Owners Coverage Form

Your Business Personal Property includes coverage for improvements and alterations as an owner in what coverage form?

A. Condominium Commercial Unit-Owners Coverage Form only

A major department store advertised a storewide shoe sale beginning on Saturday. On the previous Wednesday, the shoemaker's heating system exploded and a fire destroyed all the stock which was to be delivered on the Friday before the sale. Which one of the following time element coverages of the Equipment Breakdown Protection Coverage Form would apply to this situation?

A. Contingent Business Income and Extra Expense

What type of dependent property delivers materials or services to the insured or to others for the account of the insured?

A. Contributing location

Extra expenses are expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption. Which one of the following is an example of an extra expense?

A. Cost to rent temporary office space

Which one of the following would be covered under the Extra Expense insuring agreement of the Business Income (and Extra Expense) Coverage Form?

A. Costs to move to a temporary location

The Ordinance or Law Coverage endorsement to commercial property causes of loss forms provides

A. Coverage C only if the replacement cost optional coverage is activated, and the property must be repaired or replaced as soon as is reasonably possible after the loss.

A company carries the Equipment Breakdown Protection Coverage Form including all ten insuring agreements. If the company's steam boiler explodes, which one of the following losses, caused by the steam boiler explosion, will be covered by the form?

A. Damage to the company's business personal property Correct. Damage to the company's business personal property will be covered by its equipment breakdown coverage.

During a long period of business interruption, payroll expenses

A. Do not normally continue.

Policies for the crime loss exposure for financial institutions are called "bonds" because

A. Employee dishonesty, a key coverage, was traditionally called a "fidelity bond."

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form's (BPP) coverage for personal property of others?

A. Even if the insured does not buy coverage for personal property of others the BPP still provides a coverage extension for personal property of others, which is limited to $2,500 at each insured location.

Which one of the following statements is correct with respect to the business personal property coverage provided by the Building and Personal Property Coverage Form (BPP)?

A. Except for limited off-premises coverage, coverage for business personal property applies only when the property is located in or on the described building or in the open (or in a vehicle) within 100 feet of the building or structure or within 100 feet of the premises, whichever is greater.

Torrential rains caused severe flooding and washed away an insured's boat house and pier. At the time of loss, the insured had valid property coverage with a $1 million limit, a five percent deductible, and an ISO Flood Coverage Endorsement. The boat house and pier are

A. Excluded by being over the water.

A self-supporting solid wall that prevents a fire from passing through or around it is a

A. Fire wall.

The term "client" in the Clients' Property endorsement refers to an entity

A. For whom the insured performs services under a written contract.

A bank carried Surety & Fidelity Association of America (SFAA) financial institution bond Form 24 with an inception date of January 1, 2011, and an expiration date of January 1, 2012. On July 1, 2012, the bank discovers that an attorney it retained to perform legal services stole money from the bank during 2011. The attorney stole the money to make an anonymous donation to his favorite charity. This loss would not be covered by the 2011 Form 24 for which one of the following reasons?

A. Form 24 applies on a discovery basis.

The commercial crime endorsement that has three options for the insured's level of verification of transfer instructions is the

A. Fraudulent Impersonation endorsement. Correct. The commercial crime endorsement that has three options for the insured's level of verification of transfer instructions is the Fraudulent Impersonation endorsement.

The Businessowners Coverage Form (BCF) is similar to the Building and Personal Property Coverage Form (BPP); however, the BCF provides additional coverage for

A. Glass expense.

A very large commercial greenhouse grower employs a full-time risk manager, has an automated fire suppression system, and follows loss prevention best practices. The specialty policy best suited for this operation is a

A. Highly Protected Risk Policy.

Ridgely Corporation owns three large manufacturing facilities located across the United States. Ridgely takes great pride in managing and preventing property losses within its facilities that are all sprinklered, located closely near public water supplies and are of fire resistive construction. Which one of the following best describes the appropriate type insurance coverage for Ridgely Corporation?

A. Highly protected risk (HPR) insurance coverage

Which one of the following is the first step in the risk management process?

A. Identifying loss exposures

Alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them are referred to as

A. Improvements and betterments. Correct. Alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them are referred to as improvements and betterments.

Loss to property after it has been transferred or surrendered is an exclusion that applies under certain circumstances to which one of the following Commercial Crime insuring agreements?

A. Inside the Premises—Theft of Money and Securities Correct. The exclusion does apply to the Inside the Premises—Theft of Money and Securities insuring agreements.

A bank employee fraudulently altered a customer's check and deposited it in the bank employee's personal bank account. Which insuring agreement from the Financial Institution Bond Form 24 would cover this loss?

A. Insuring Agreement A—Fidelity Correct. Insuring Agreement A—Fidelity would cover this.

An explosion occurred at a bottled spring water manufacturing facility. As a result, a machine which tests the water for acceptable levels of toxins and metals was disabled. In this instance, the ensuing potential business income loss is best described as

A. Interruption in production due to a bottleneck.

Which one of the following statements is correct with respect to the Newly Acquired or Constructed Property extension of coverage of the Building and Personal Property Coverage Form (BPP)?

A. It covers newly acquired buildings, provided the purpose of the newly acquired building is similar to the use of the building described in the declarations.

Which one of the following statements is correct with respect to the Causes of Loss-Basic Form?

A. It excludes loss caused by earth movement, other than by sinkhole collapse.

Which one of the following statements is correct with respect to the Non-Owned Detached Trailers coverage extension of the Building and Personal Property Coverage Form (BPP)?

A. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas.

The limit of insurance applicable to commercial property coverage is an important component of the final premium because

A. It represents the exposure against which the applicable rate is multiplied to calculate the premium.

Which one of the following statements is correct with respect to the Control of Property condition of the Commercial Property Conditions Form?

A. It states that coverage under the policy will not be affected by acts or omissions of persons other than the insured, if the others are not acting under the direction or control of the insured.

Which one of the following statements is correct with respect to the Insurance Under Two or More Coverages condition of the Commercial Property Conditions Form?

A. It states that the total payment under all applicable coverage parts is limited to the actual amount of the loss.

If a court requires a defendant to a civil liability lawsuit to demonstrate his or her financial responsibility until the outcome of a trial, which one of the following types of surety bonds would the defendant need?

A. Judicial bond

The best method of treating the loss exposure of flood when constructing a building is

A. Locating in an area with no prior flood experience.

One advantage that a Business Income (and Extra Expense) Coverage form has over the separate Extra Expense Coverage Form is that

A. Loss payments are not limited to a certain percentage per month of the amount of insurance.

A bond guaranteeing that work will be free from defects in materials and workmanship for a period of time is a

A. Maintenance bond.

Kid Company is a clothing manufacturer that makes pajamas for children. The risk manager is concerned that the entire fall production may lose value if the subcontracting company that cuts and supplies pajama shirts suffers a loss. The pajama pants would be undamaged but suffer severe decrease in value. An endorsement to cover this type of loss for Kid Company is the

A. Manufacturers' Consequential Loss Assumption endorsement.

The Power, Heat, and Refrigeration Deduction endorsement is available only for firms in which industries?

A. Manufacturing and mining

Which one of the following is covered by the Causes of Loss—Special Form but not by the Causes of Loss—Basic Form?

A. Melting of ice, sleet, or snow on the building structure

Which one of the following identifies a limitation contained in both the Business Personal Property—Limited International Coverage endorsement and the Property in Process of Manufacture by Others—Limited International Coverage endorsement?

A. Neither endorsement covers merchandise held for sale in the foreign country.

Computers XYZ Inc. that is sending a sales representative to Mexico to unveil a new product prototype at a trade show. The event will be held in the town square in the capital of Mexico. The representative will be in the country with the new product for an indeterminate amount of time in the event that more publicity opportunities arise. Computers XYZ has a Business Personal Property—Limited International Coverage endorsement attached to its Building and Personal Property Coverage Form (BPP). Will the endorsement indemnify Computers XYZ if the product prototype is destroyed by a covered peril?

A. No, because there is no return date indicated for the representative or the prototype.

A burger restaurant has a very expensive neon sign installed outside of its location which is covered under an Inland Marine Signs Coverage Form. Part of the neon lettering was not lighting due to an internal electrical disturbance and was being repaired when the middle of the sign cracked. The Signs Coverage Form will cover

A. None of the damage that has occurred.

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Service Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, two employees, Beth and Jim, in collusion, stole money and merchandise from ABC. Beth and Jim stole money on May 1, 20X1 and August 13, 20X1. They also stole merchandise on January 15, 20X1 and September 29, 20X1. The amount of the money loss totaled $15,000 while the amount of the merchandise loss totaled $110,000. With respect to applying the limit of insurance applicable to the employee theft loss, how many occurrences were involved in this loss?

A. One

To what extent are extra expenses covered under the ISO Business Income Coverage (without Extra Expense) Coverage Form?

A. Only to the extent that they actually reduce the business income loss

A macadamia nut processor operates a nut factory out of the Big Island of Hawaii. They ship their products to the other islands as well as to the Continental U.S. via air and water shipments year round. Once the shipments reach their land destination, they are then transported by ground to various grocers and other retailers for purchase. The most appropriate coverage to insure the products after they leave the factory is by

A. Open Cargo Insurance. The most appropriate coverage to insure the products after they leave the factory is Open Cargo Insurance.

A global consumer electronics manufacturer regularly ships large volumes of its finished products overseas for retail sale. To cover these shipments, the company will most likely need

A. Open cargo insurance.

A commercial manufacturing operation with multiple locations may choose an output policy over a typical standard property policy because

A. Personal property can be covered without listing the location.

The Earthquake and Volcanic Eruption Endorsement CP 10 45 (Sub-Limit Form) contains a provision entitled "Ensuing Loss." This endorsement

A. Prevents stacking of the commercial property limit and the earthquake policy limit when an earthquake loss results in a fire which also damages the property. Correct. This endorsement prevents stacking of the commercial property limit and the earthquake policy limit when an earthquake loss results in a fire which also damages the property.

Under which one of the following provisions of the Building and Personal Property Coverage Form (BPP) must the insurer be notified within 180 days after the occurrence of loss that a claim will be made under the terms of the optional coverage in order for that optional coverage to pay the maximum benefit available?

A. Replacement Cost

Transportation exposures can be controlled through the selection of carriers and routes. Which one of the following is a way to help manage these exposures?

A. Request loss frequency reports from potential carriers to review their safety record.

One Common Policy Condition in the Commercial Package Policy (CPP) is the examination of books and records. The intent of this policy condition is to

A. Reserve the right of an insurer to inspect and audit the insured's books and records.

Which one of the following statements is correct with respect to coinsurance used with commercial property policies?

A. The 80 percent coinsurance rate is reduced when a policy requires a higher coinsurance percentage.

Which one of the following statements is correct with respect to the Building and Personal Property (BPP) Coverage Form?

A. The BPP lists several types of classes of property that do not qualify as covered property.

The possibility of the insured incurring an uninsured extra expense loss other than the reduction in business income loss is greatly reduced by

A. The Business Income (and Extra Expense) Coverage Form.

Which one of the following statements best describes the Causes of Loss—Special Form?

A. The Special Form provides coverage for direct physical losses other than those that are specifically excluded.

Which one of the following is true for coverage under the Theft of Building Materials and Supplies (Other Than Builders Risk) endorsement?

A. The building materials taken in the theft must be located on or within 100 feet of the described premises.

Paris Cuisine, a fine-dining restaurant, rents space in a commercial building, which is insured by its owner. Paris Cuisine spends $50,000 on wallpaper, floor coverings, windows, and other improvements that would remain in the building if Paris Cuisine were to move out. Paris Cuisine's interest in these improvements is insured under which one of the following?

A. The business personal property section of Paris Cuisine's BPP

In determining an organization's estimated maximum loss (EML) of business income, what is the most likely starting point?

A. The coinsurance basis

Which one of the following debris removal expenses would be excluded under the ISO Flood Coverage Endorsement?

A. The cost to remove mud from the parking lot at the insured's premises

Which one of the following is true regarding the Equipment Breakdown Cause of Loss endorsement?

A. The endorsement excludes loss or damage to covered equipment while undergoing a pressure or an electrical test.

Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP) deductible?

A. The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible.

The Standard Property Policy (SPP) contains conditions that result in more restrictive coverage than the Building and Personal Property Coverage Form (BPP). Which one of the following is one of these more restrictive conditions?

A. The insurer may cancel the policy by providing only five days' advance notice to the insured.

Which one of the following is the usual practice for setting the limit of insurance for an equipment breakdown policy covering two or more locations?

A. The limit of insurance is usually set higher than the estimated maximum loss at the highest valued location, but less than the total insurable value at all locations.

Justin has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss—Broad Form covering his building with a $750,000 limit. A tropical storm struck Justin's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows on the 5th floor of the building. The rain from the storm caused water to enter Justin's building through the foundation, which caused significant damage to the first and second floors. Justin had equipment stored in closets on the first and second floors which were rendered inoperable due to the water damage. The total amount of damages was $40,000 for the windows and shingles; $110,000 for water damage to the first and second floors; $9,000 for the equipment on the second floor; and $7,000 for the equipment on the first floor.

A. The losses are not covered.

A computer manufacturer has an exclusive contract with a microchip manufacturer. After manufacture, the computers are shipped to a warehouse owned by a third party. The computers are then sold at a national retailer that pays the computer manufacturer directly for units sold. This retailer is responsible for 85% of the manufacturer's sales. The manufacturer has a Business Income From Dependent Properties endorsement on its business income policy. The endorsement will cover business income losses as a result of damage to which one of the following?

A. The microchip manufacturer, warehouse, and national retailer only

An insured has a Business Income (with Extra Expense) Coverage Form with a Maximum Period of Indemnity coverage option. Following a covered loss and after the period of restoration begins, it takes 120 days to complete repairs and another 60 days for revenue to return to normal. How would the policy provide coverage for this loss of business income?

A. The policy would provide coverage for 120 days.

One key difference between cooperative corporations and condominiums is that

A. The shareholder-tenants of a cooperative corporation do not own the "box of air" contained within their units.

wo tax collectors, who are employees in a local town, embezzled $520,000 from the town's treasury by altering checks and forging signatures. The town has an unendorsed ISO government crime policy with a $100,000 limit for forgery and alteration that was in force prior to the embezzlement. Which one of the following statements describes whether the town has coverage for this loss?

A. There is no coverage because there is an exclusion for losses caused by any tax collector.

Which one of the following statements about the commercial property coverage forms of Insurance Services Office, Inc. (ISO) is most accurate?

A. These ISO forms generally do not cover aircraft and airborne property.

Which one of the following is true regarding the Employee Theft-Name or Position Schedule endorsement?

A. This endorsement replaces the regular policy definition of employee with one that applies on either a name-schedule or position-schedule basis.

For business income coverage, the period of restoration is the period of time that begins 72 hours after the

A. Time the physical loss occurs.

Which one of the following risk management techniques is insurance classified under?

A. Transfer

Laura's Laundromat relies heavily on a steady water supply to remain in business. Laura wants to be sure that in the case of damage to property caused by an interruption of service from the water supply, her insurer will indemnify her. Laura should add to her laundromat's Building and Personal Property Coverage Form a(n)

A. Utility Services—Direct Damage endorsement.

Which one of the following is correct with respect to the Transfer of Rights of Recovery Against Others to Us condition of the Commercial Property Conditions Form?

A. Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs.

Worldwide Warehousing has a Building and Personal Property Coverage Form (BPP) with a $1,000,000 limit on a building and a $5,000 deductible. The warehouse suffers a $1,010,000 fire loss. Which one of the following amounts will Worldwide's insurer pay?

B. $1,000,000

A manufacturing company is covered under an ISO Commercial Crime Coverage Form. The policy includes a $100,000 coverage limit for employee theft. A group of three employees embezzled $100,000 from the company three times in a series of acts. What amount will the insurer reimburse the company for this loss?

B. $100,000

In the continental United States, a flood may occur in a town that has recently become eligible for participation in the National Flood Insurance Program (NFIP). If Flood Insurance Rate Maps have not been developed for the area at the time of the flood, the NFIP would provide insurance coverage under the emergency program with a maximum amount of

B. $100,000 in building coverage and $100,000 in contents coverage.

Jones Retail has a Business Income (and Extra Expense) Coverage Form with a $100,000 limit and a 50 percent coinsurance clause. At the time of a $40,000 covered business income loss, Jones estimates its net income plus all operating expenses (minus certain deductible items) for the one-year policy period to be $400,000. How much will the insurer pay?

B. $20,000

A company carries a Businessowners Coverage Form (BCF) with coverage extensions for Newly Acquired or Constructed Property and Outdoor Property. A fire causes $275,000 in damage to a building acquired within the last 30 days, but not listed on the declarations page. The fire also causes $250 of damage to each of 10 trees on the insured's listed premises. Ignoring deductibles and assuming sufficient limits, how much will the company be able to collect under the policy?

B. $252,500 The BCF covers, for up to thirty days, newly acquired buildings up to $250K. The Outdoor Property limit is $2500 with a sublimit of $500 for any one tree.

Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store under a Building and Personal Property Coverage Form (BPP) with a $275,000 limit and a $1,500 deductible. A large fire in the store caused significant damage amounting to $310,000 in covered damages. How much would Billy's insurer pay under his BPP?

B. $275,000 Correct. $310,000 - $1,500 = $308,500, which exceeds the BPP limit. The insurer will pay $275,000. The deductible is subtracted from the loss, not the limit.

Martin's Dry Cleaners (MDC) is insured under a Business Income (and Extra Expense) Coverage Form with a $1 million Business Income limit of insurance for the dry cleaners location, subject to option (2) Business Income Other Than "Rental Value". None of the optional coverages of the Business Income (and Extra Expense) are in effect and no endorsements apply to MDC's Business Income (and Extra Expense) Coverage Form. The one year policy period shown in the declarations began on July 1, 20X1. On October 1, 20X1, access was denied to MDC for five weeks by civil authorities because of fire damage to a shop right next door to MDC. The resulting loss of business income that MDC sustained was $70,000, including a $5,000 loss for the first 72 hours following the time of action by civil authority. After the first 72 hours, MDC sustained $11,000 business income loss in week 1, $12,000 business income loss in week 2, $13,000 business income loss in week 3, $14,000 business income loss in week 4 and $15,000 business income loss in week 5. How much of MDC's business income loss would be covered under the Business Income (and Extra Expense) Coverage Form?

B. $50,000

Music Store insures its business personal property, including merchandise, under a Business Personal Property Coverage Form (BPP) with the value reporting form endorsement set up on a monthly reporting basis. The limit of insurance is $750,000 and the deductible is $1,000. On October 25 a fire destroyed all of the merchandise and business personal property. The resulting damages totaled $700,000. The store's last report of values was $400,000 on September 30. It was determined that the actual values that should have been reported on September 30 were $500,000. Based on these circumstances, how much will the store collect for the $700,000 loss?

B. $559,000

A defendant appeals an adverse decision to a higher court. The court requires the defendant to post a bond that guarantees the payment of the judgment plus court costs and interest if the appeal is unsuccessful. This type of bond is called which one of the following?

B. A defendant's appeal bond

Which one of the following situations would most likely require a supply contract bond?

B. A government entity has agreed to purchase materials from a seller.

The IIA Insurance Agency is shopping for coverage for a technology firm that recently built a new production facility with very unique property loss exposures. Which one of the following type of coverage forms is most likely to address the needs of this risk?

B. A nonstandard form using provisions more favorable to the insured than standard forms

The Employee Theft insuring agreement of an ISO Commercial Crime Coverage Form includes which one of the following as an employee?

B. A person compensated and subject to the direction of the insured.

A building is under construction and covered by a Builders Risks Broad Perils Coverage Form without any endorsements. Which one of the following losses would be covered under this form?

B. A temporary structure on the site of the building being constructed catches fire

Ian is the owner of a Western-themed restaurant named The Burger Den. The Burger Den is known for the unique and decorative fence that surrounds it. Ian believes that this fence attracts new customers and is good for business. Which one of the following endorsements should Ian add to The Burger Den's Building and Personal Property Coverage Form to ensure that a loss to the fence would be covered?

B. Additional Covered Property endorsement

A national manufacturer garages its vehicles at ten central locations. It self insures routine automobile physical damage for fender benders and many of the total losses on moderately priced vehicles. It wishes to cover this exposure under a policy other than a business automobile policy. Which one of the following would provide this coverage option?

B. An output policy

An output policy provides coverage for personal property

B. Anywhere within the policy territory without listing the locations.

Because reinsurance for flood losses can be both scarce and expensive, many insurers

B. Are only willing to provide limits for flood insurance that are lower than the regular policy limits.

Both of the limited international coverage endorsements, Business Personal Property—Limited International Coverage and Property in Process of Manufacture by Others—Limited International Coverage

B. Base valuation on U.S. domestic costs even if the property is replaced overseas.

The Builders Risk Coverage Form is designed to

B. Be issued at policy inception in an amount of insurance equal to the building's completed value.

Which one of these statements is correct?

B. Besides the Loss Payment, Unit-Owner's Insurance, and Waiver of Rights of Recovery conditions, most of the conditions of the Condominium Association Coverage Form are the same as those of the BPP.

In equipment breakdown insurance, a fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water is the definition of a

B. Boiler.

The Liability and Medical Expenses Limit in the Businessowners Policy is the equivalent of what limit or limits in the Commercial General Liability Policy?

B. Both the Each Occurrence Limit and the Personal and Advertising Injury Limit

Which one of the following is an option in the business income coverage form that suspends the coinsurance clause as long as the insured carries an amount of business income insurance that is equal to the value agreed on by the policyholder and the insurer?

B. Business Income Agreed Value coverage option

Which one of the following additional coverages would best cover the insured's loss of business income that results when fire damage to another building makes it unsafe for customers to enter the insured's premises and access is prohibited by civil authority?

B. Civil Authority

A commercial package policy (CPP) component that covers buildings and business personal property is referred to as a

B. Commercial property coverage part.

Which one of the following policies would respond to a furnace explosion?

B. Commercial property policy

A Commercial Package Policy always includes which one of the following forms?

B. Common policy conditions form

While both annual transit and open cargo insurance are designed to address transportation exposures, open cargo differs in that it is designed to

B. Cover overseas shipments.

Joel is the owner of Top Shop, a high end clothing retailer. Top Shop suffered a covered loss that destroyed half of the store. Before the rebuilding process started, Joel was informed that his store did not meet the standards of a new ordinance passed regarding customer safety, and that the whole structure must be rebuilt. If Joel had an Ordinance or Law Coverage endorsement attached to his Building and Personal Property Coverage Form, what section of the endorsement would cover the cost to demolish the undamaged portion of Top Shop and remove its debris?

B. Coverage B would cover the cost to demolish the undamaged portion of the store and remove its debris.

A family farm has two residential dwellings containing family living quarters on the property along with a silo and a barn. Other than the two residences, all structures on the property are used for farming purposes. The farm uses rented farm machinery to grow hay. Based on the information given, the farmer needs which of the following ISO coverage forms in addition to Coverage A—Dwellings?

B. Coverage C— Household Personal Property, Coverage E —Scheduled Farm Personal Property, and Coverage G—Barns, Outbuildings and Other Farm Structures.

Inland marine policies contain many of the general characteristics common to most insurance policies. The characteristic that provides coverage for inland marine floaters is which one of the following?

B. Coverage for property in transit

Which of the following is a noteworthy feature of the Increase in Rebuilding Expenses Following Disaster endorsement?

B. Coverage is reduced by expenses paid by any business income or extra expense coverage in the policy.

A company owns their building and has coverage under a businessowners policy (BOP). When damage by a covered peril to the foundation of the building is determined during a claim inspection at the building, the company's owners are surprised to learn

B. Coverage would be provided and the value of the foundation must be included in the insurance to value calculations.

An advantage of blanket insurance for an insured business that has several locations is that blanket insurance

B. Covers additional debris removal if the loss only occurs at one location.

Condominiums, cooperative corporations, and planned unit developments may each require specialized policies

B. Due to their combined ownership nature.

Omicron Incorporated is insured under an ISO commercial property policy and an ISO equipment breakdown policy. Both policies include the Other Insurance provision. In the case of a loss for which both policies provide coverage under the same plan, terms, and conditions, which one of the following statements is correct?

B. Each policy pays in relation to all applicable policies.

Marisa just purchased a new building for the accounting firm she owns. She plans on buying a Businessowners policy (BOP) to take care of her insurance needs. She has several specific concerns, including forgery, the company's electronic data, employee dishonesty, and the potential interruption of computer operations. Which one of the following exposures is not included in a standard BOP, but can be purchased as an optional coverage?

B. Employee dishonesty

Which one of the following common policy conditions permits the insurer to verify property and business income values necessary for premium rating purposes?

B. Examination of books and records

The additional coverage of the Business Income Coverage Form (BIC) which extends the regular business income coverage to include business income losses that continue after the period of restoration ends is the

B. Extended Business Income.

James is in the process of forming his own brokerage company which will include several employees. James will be best protected by purchasing which one of the following to cover the crime loss exposures of his company?

B. Financial Institution Bond.

One of the chief purposes for buying difference in conditions (DIC) policies is to cover

B. Flood and earthquake exposures not otherwise covered.

All of the following are generally characteristics of a highly protected risk (HPR), EXCEPT:

B. Frame or joisted masonry construction

Additional coverages that are unique to the ISO Businessowners Coverage Form (BCF) and not included in commercial property forms would be

B. Glass Expenses and Fire Extinguisher Recharge Expense.

The Businessowners Coverage Form (BCF) is similar to the Building and Personal Property Coverage Form (BPP); however, the BCF provides additional coverage for

B. Glass expense.

The General Property Form Property Covered section contains which one of the following coverages?

B. Increased Cost of Compliance

Buildings under construction have different exposures than completed buildings. One example of a difference is

B. Increased susceptibility to fire hazards, as fire protection is not fully installed.

Trip transit insurance is used to

B. Insure property such as a valuable piece of equipment moved from its place of manufacture to its place of use

Which one of the following statements is correct with regard to the Building and Personal Property Coverage Form (BPP)?

B. Insureds who have selected the replacement cost option may also elect to have the personal property of others valued at replacement cost.

Which one of the following statements about Coverage F—Unscheduled Farm Personal Property of the ISO farm program is true?

B. It is written with a single coverage limit.

Which one of the following statements is correct with respect to the Causes of Loss—Special Form?

B. It shifts the burden of proof as to whether a loss is covered from the insured to the insurer.

Which one of the following statements about the Specified Business Personal Property Temporarily Away From Premises endorsement is most accurate?

B. Its coverage is more flexible in some respects than the Property Off-Premises extension found in the BPP.

How many days do the insured premises have to be vacant for a leasehold interest loss to not be covered?

B. Just 1 day

What type of dependent property attracts customers to the insured's business?

B. Leader locations

CD Services (CDS) provides e-commerce services to entities that are too small to maintain an e-commerce program of their own. CDS relies exclusively on personal computers to perform its activities. A fire destroys the building in which it operates, including all of the electronic data. CDS has an Insurance Services Office (ISO) Business Income (and Extra Expense) Coverage Form. Which one of the following explains how CDS's business income policy will apply to the loss from the interruption of computer operations?

B. Limited to $2,500 for loss of income and extra expense due to the Interruption of Computer Operations additional coverage

The Computer Store (TCS) brought a claim under the Employee Theft insuring agreement of its ISO Commercial Crime Coverage Form. TCS's claim is based on an inventory shortage. To overcome the inventory shortages policy exclusion, TCS must demonstrate that the

B. Loss can be established wholly apart from inventory computations.

Livestock coverage can be obtained from private insurers to supplement a standard farm policy. An unendorsed animal mortality insurance policy covers which one of the following?

B. Loss resulting from the death of the animal

Which one of the following endorsements would be particularly useful to companies in the clothing manufacturing business?

B. Manufacturer's Consequential Loss Assumption endorsement Correct. Manufacturer's Consequential Loss Assumption endorsement modifies a commercial property coverage form to cover the increased cost of replacing damaged property with environmentally sound materials or methods.

Which one of the following coverages, optional coverages, or conditions applies to the Spoilage Coverage endorsement?

B. Mechanical breakdown

When a mortgage company discovered that the money collected under several escrow agreements was not used to pay the mortgagors' real estate taxes, they turned to their insurance policy designed specifically for financial institutions. Which one of the following is this type of policy?

B. Mortgage impairment insurance Correct. The policy which would respond to this type of claim is a form of mortgage impairment insurance.

The Causes of Loss—Special Form states that it covers "risks of direct physical loss." The loss or damage

B. Must be unforeseen and accidental from the insured's perspective in order to be covered.

In regard to condominium insurance requirements, the coverage

B. Needs of a condominium association are similar to the building insurance needs of a building owner or landlord. Correct. In regard to condominium insurance requirements, the coverage needs of a condominium association are similar to the building insurance needs of a building owner or landlord.

Many firms spend millions of dollars to build brand loyalty. What is the most common way to protect against a decrease in brand loyalty?

B. Noninsurance techniques

The type of activities conducted inside a building, some of which are riskier than others, is referred to as the

B. Occupancy.

The key in determining the maximum amount an insurer is obligated to pay for a covered crime loss under the ISO Commercial Crime Coverage Form is the policy's definition of

B. Occurrence. Correct. The key in determining the maximum amount the insurer will pay for a covered crime loss is how the policy defines occurrence.

The Functional Personal Property Valuation endorsement is available for providing functional valuation on

B. Older machinery and computer systems.

Judgment rating is used to rate

B. One-of-a-kind risks. Correct. Judgment rating is a rating used to rate one-of-a-kind risks.

Under the Building and Personal Property Coverage Form (BPP), which one of the following extensions covers loss only by fire, lightning, explosion, riot or civil commotion, and aircraft?

B. Outdoor Property

When compared to the Building and Personal Property Coverage Form under an ISO Commercial Package Policy, the businessowners coverage form offers higher limits for the coverage extensions of

B. Outdoor Property and Valuable Papers and Records.

Which type of policy is best suited to meet the diverse property needs of medium and large agricultural operations such as farms, ranches, and wineries?

B. Output policy

A warehouse under construction is insured by its owner under an unendorsed ISO Builders Risk Coverage Form with the Causes of Loss—Special Form. Which one of the following losses would be covered under this policy?

B. Over the weekend, the contents and several walls of the warehouse building were spray painted by vandals.

In a cooperative corporation, the tenants

B. Own the corporation's stock.

Common elements of a condominium are

B. Owned jointly by all condominium owners.

During a business interruption, some of the organization's expenses, called continuing expenses, will continue, and other expenses, called noncontinuing expenses, will not continue. Which one of the following is an example of a continuing expense?

B. Payroll of key employees Correct. Payroll of key employees is an example of a continuing expense during a business interruption.

The filed classes of inland marine business are those for which the

B. Policy forms and/or rates must be filed with the state insurance department.

The Valuation condition of the Equipment Breakdown Protection Coverage Form generally provides coverage for property on what basis?

B. Replacement cost if the insured repairs or replaces the property within 24 months after the loss

Which one of these would not be covered under the Inside the Premises—Robbery or Safe Burglary of Other Property insuring agreement?

B. Robbery committed against a watchperson working inside the insured's store

An equipment breakdown protection form can have internal limitations that apply to certain types of losses. Which one of the following losses is subject to such a limitation?

B. Spoilage damage resulting from ammonia contamination Correct. Spoilage damage resulting from ammonia contamination is subject to such a limitation.

The Vacancy condition of the Leasehold Interest Coverage Form

B. States vacancy exists when the unit or suite rented or leased to the tenant does not contain enough business personal property to enable a tenant to conduct customary operations.

Collin owns an apartment building and he is the named insured of a Businessowners policy (BOP) on the building. Collin furnished one of the units with his own personal property, and he lets his friend Tony store equipment in the other. In the event that the building suffers a covered loss that destroys all of Collin's and Tony's possessions, which possessions would be covered under the BOP?

B. The BOP would cover all of the possessions within the building.

Which one of the following is true about the purpose of the Value Reporting Form?

B. The Value Reporting Form was created to address coverage for businesses with unpredictable personal property fluctuations.

A company owns a unit in a commercial condominium where they operate their architectural business. They have installed interior walls and doors in the unit in order to have private offices for each of the staff architects. In addition, the unit is furnished with desks, chairs, computers, drafting tables and a large meeting room with table and chairs. The building they are housed in is owned by a condominium association. The association has a Bare-Walls Concept with regard to ownership in the unit based on statutes and the association agreement. A tornado caused the roof to be blown off the unit that the architectural firm occupies. There is extensive damage to both the exterior and interior walls, floors, and most of the furnishings within the unit. Which one of the following is true regarding coverage for the damage?

B. The architectural firm's Condominium Commercial Unit Owners Coverage Form will provide coverage for the flooring as well as interior walls and doors they have constructed

Which one of the following types of commercial property would most likely be insured using a "nonfiled" class of inland marine business?

B. The equipment used by a contractor

An insured should set the limit for equipment breakdown business income coverage on the basis of which one of the following?

B. The estimated maximum loss of business income or the amount needed to comply with the Coinsurance condition, whichever is greater. Correct. The limit should be set on the basis of income, the estimated maximum loss of business income, or the amount needed to comply with the Coinsurance condition, whichever is greater.

According to the Common Policy Conditions used with the ISO Commercial Package Policy, if a cancellation results in a return payment, the refund would be sent to

B. The first named insured.

The ISO government crime forms differ from the ISO commercial crime forms in which one of the following ways?

B. The government crime forms contain two Employee Theft insuring agreements.

The loss determination section of a business income insurance policy states that the business income loss is determined by all of the following, EXCEPT:

B. The increase in business resulting from a catastrophe

The Valuation condition of the Equipment Breakdown Protection (EDP) Coverage Form addresses a number of topics related to how much the insurer will pay for a covered loss. Which one of the following statements about the valuation of a covered loss is true?

B. The insurer will value property held for sale and manufactured by the insured at selling price less discounts and expenses the insured would have incurred.

During a routine inspection at an elementary school, an insurer discovers a faulty shut-off valve on the steam boiler. The inspector orally advises the insured that coverage is suspended until such time as the valve is replaced. No written notice is given and no endorsement was processed suspending coverage. Before the valve is replaced an explosion occurs damaging the boiler and boiler room. Which one of the following statements describes whether the loss will be covered?

B. The loss is covered because written notice suspending coverage was never sent by the insurer to the school. Correct. The loss is covered because written notice suspending coverage was never sent by the insurer to the school.

A commercial property loss exposure is

B. The possibility that a business enterprise or another type of organization will sustain a loss resulting from loss of or damage to property in which the organization has a financial interest.

Which one of the following is the coinsurance basis under a Business Income Coverage Form (BIC)?

B. The projected net income and all operating expenses except for certain deductible items

The owner of a large property account believes that Highly Protected Risks (HPR) insurance may be to their benefit. This would be appropriate for them because

B. The staff is passionate about loss control and the HPR carrier has the capacity to tailor to the unique needs of the account.

Which one of the following statements describes the relationship between the surety, the obligee, and the principal under a surety bond?

B. The surety answers to the obligee for the principal's failure to perform a duty.

In assessing the insurance needs for a condominium association's policy, an agent has determined that the applicable statutes and association agreement require coverage under the all-in concept. This is a particular challenge because

B. The upgrades made to units could leave the condominium association under-insured in the event of a loss.

When at a rest stop in Ohio, a lock on a common carrier's trailer was broken and the customer's cargo stolen. The common carrier trucking company and its customer became engaged in a heated dispute over how much the carrier must pay for the customer's missing cargo. What is the answer to resolving this dispute?

B. They should review the bill of lading for any cargo limitation between the shipper and the carrier.

One of the alternative valuation methods in the Building and Personal Property Coverage Form (BPP) is the optional Manufacturer's Selling Price (Finished "Stock" Only) endorsement. Which one of the following statements about this endorsement is most accurate?

B. This endorsement values stock that has been sold but not delivered at selling price, less any discounts and expenses that the insured otherwise would have had.

The businessowners policy (BOP) has two aggregate limits of liability which apply in the same manner as the general aggregate limit and products completed operations aggregate limit of the Commercial General Liability (CGL) policy. The Completed Operations Aggregate Limit of the BOP may be increased by endorsement to only

B. Three times the liability and medical expense limit

The businessowners policy (BOP) has two aggregate limits of liability which apply in the same manner as the general aggregate limit and products completed operations aggregate limit of the Commercial General Liability (CGL) policy. The Completed Operations Aggregate Limit of the BOP may be increased by endorsement to only

B. Three times the liability and medical expense limit.

A dry cleaning store is covered under an unendorsed businessowners policy (BOP). The store's outside sign is not attached to the building and was damaged by wind. The $1,200 to replace the sign would not be covered because

B. Wind is not a covered peril for unattached signs under the BOP.

The Condominium Commercial Unit-Owners Coverage Form generally includes coverage for only which of the following?

B. Your Business Personal Property and Personal Property of Others

Buildings under construction present unique exposures, such as the increased likelihood that what two perils will occur?

Buildings under construction present unique exposures, such as the increased likelihood that theft and fire will occur.

An insured chooses the "Agreed Value" option for its Building and Personal Property Coverage Form (BPP). The agreed value for the property is $100,000 and the limit of insurance is $120,000. The building is totally destroyed by a covered cause of loss. At the time of the loss, the value of the building was $130,000. Ignoring any deductible and rounded to the nearest $1,000, the insurer would pay

C. $120,000.

Sandy's Surf Shop, which is insured under a Business Income (and Extra Expense) Coverage Form, was damaged from a hurricane. It took her four months to repair the damages and resume operations. Normally, Sandy would have had revenues of $10,000 per month, and expenses of $8,000 per month. While closed, she was unable to operate at all. She incurred a total of $5,000 in overtime labor and express mail charges to replenish her inventory. What is the amount of her business income loss?

C. $13,000 The expected net profit for four months is $8,000, and the actual net loss was ($5,000). Therefore, her business income loss was $13,000.

Jim's Barber Shop has a Building and Personal Property Coverage Form (BPP) with a $100,000 limit on the building and a $1,000 deductible. The building suffers a $15,000 fire loss. Which one of the following amounts will Jim's insurer pay?

C. $14,000

The owners of Uncle Reggie's Steakhouse are insured under a Building and Personal Property Coverage Form (BPP) that covers their building and business personal property for $350,000 and $100,000, respectively. The policy has a $2,500 deductible. A fire results in $350,000 worth of damage to the building and a $70,000 loss of business personal property. In what amounts should the policy provide coverage for this loss?

C. $347,500 Building and $70,000 Property

Retail Store insures its business personal property under a Building and Personal Property Coverage Form (BPP) with a value reporting form. The limit of insurance is $1,000,000 and the deductible is $5,000. On December 21, a fire destroyed the store and the personal property. The store's last reported value on November 30 was $750,000. Assuming that the last report of values was accurate, how much would the insurer pay for the store's personal property loss which amounted to $700,000?

C. $695,000 Correct. The insurer would pay $695,000. $700,000 − $5,000 = $695,000.

A steam boiler exploded at Manufacturing Company's (MC) factory building, due to excessive pressure in the boiler. The boiler was installed thirty years ago and cost $32,500 when it was new. The boiler had an estimated remaining useful life of ten years at the time that it exploded. A replacement boiler of like kind and quality would cost $80,000, but MC decided to replace the boiler with a more efficient, environmentally friendly model that cost $110,000. MC had an ISO Equipment Breakdown Protection Coverage Form with a limit of $5,000,000 and a $25,000 deductible. Assuming that this was the only property damaged, how much should MC expect to recover from its insurer?

C. $75,000

A truck driver hauling 20 head of registered steers for a rancher overturned in a hairpin curve. Five of the steers died; seven were maimed and had to be killed; three wandered off and were lost; and five survived after treatment by a licensed veterinarian. Assuming the rancher had an animal mortality insurance policy, how many of the animals would the policy cover?

C. 12

The minimum coinsurance requirement for blanket insurance under a commercial property policy is

C. 90%.

Food Company is an international corporation providing food products and services worldwide. Which one of the following property forms would provide the broadest coverage with uniformity to all of the property owned by Food Company worldwide?

C. A foreign master policy with "difference in conditions" coverage

Which one of the following buildings is most likely to be considered a highly protected risk?

C. A large fire-resistive building with automatic sprinkler systems

Which one of these is an example of a loss that would be covered under the Commercial Crime Coverage Form?

C. A loss caused by a fraudulent entry made by an employee acting on a fraudulent instruction from a computer-software contractor who has a written agreement with the insured

Which one of the following bonds must a person often furnish before he or she can hold public office?

C. A public official bond

Which one of the following loss exposures is generally eligible for inland marine insurance?

C. A trucking company's liability for damage to property of others while being transported

A disaster recovery plan is important for analyzing business income loss exposures for which one of the following reasons?

C. Advanced planning facilitates recovery.

The Need for Adequate Insurance condition in the Builders Risk Coverage Form is, in effect, a 100 percent coinsurance clause in which the amount of insurance that should be carried is based on the value of the building on the date it will be completed. What is the formula?

C. Amount payable = [(Limit of insurance/Completed value) x Loss] - Deductible

In addition to covering the assured's interest in property being shipped, open cargo policies cover the assured's responsibility for general average charges. A general average charge is

C. An expenditure or sacrifice of part of the vessel or cargo made in a time of danger to save the voyage. Correct. General average charge is an expenditure or sacrifice of part of the vessel or cargo made in a time of danger to save the voyage.

ABC Company has a constant need to move its inventory among its locations throughout the United States. It also temporarily keeps inventory at trade shows and at many different locations, including customers' facilities and public warehouses. Ignoring liability coverage, which one of the following would best suit ABC's needs?

C. An output policy

Which one of the following types of business is usually eligible for coverage under a businessowners policy?

C. Apartment building

The Limited Coverage for Unmanned Aircraft (Scheduled and/or Blanket Coverage) endorsement's coverage

C. Applies on and off the described premises throughout the policy's coverage territory.

Ellen is the risk manager for a toy manufacturing company. The company is considering whether it should be begin manufacturing its own version of hoverboards. Ellen advises against this because of hoverboard-related lawsuits other companies have experienced. If the manufacturer's management team listens to Ellen and decides not to manufacture hoverboards, which risk management technique will they be practicing?

C. Avoidance

A new business, Neighborhood Cleaners, is opening next week. The business is a dry cleaner for clothing and home items. The major concern is protecting its goodwill with customers by having coverage for all of the goods it will be receiving from customers. Which one of the following is the best choice for them?

C. Bailees' customer policy

The county fairgrounds committee is seeking contractors to build a new stable for the annual farm show. Contractors are required to guarantee that they will enter into a contract upon acceptance of the bid. In addition, the contractor must guarantee that the project, once completed, will be free of liens. To satisfy the committee's requirements, contractors who want to participate in the project will need to provide which one of the following pairs of bonds?

C. Bid bond and a payment bond

An insured with operations conducted at more than one location that it owns and with interdependency among those locations would be best suited to use which single business income coverage option?

C. Blanket insurance

An organization conducts operations at more than one location that it owns with interdependencies among locations. What policy or endorsement is best suited to meet the organization's need for business interruption coverage?

C. Blanket insurance

Which one of the following is a peril covered by an equipment breakdown policy?

C. Boiler explosion Correct. Boiler explosion is a peril covered by an equipment breakdown policy.

An insured's office building is valued $500,000, contents valued $100,000 and leased computers valued $50,000. The insured wants to be certain covered property can be repaired or replaced without any coinsurance or depreciation penalties in the event of physical loss or damage. Which Limits and Optional Coverage(s) on the Building and Personal Property Coverage Form would best suit this insured's wants?

C. Building $500,000 with Replacement Cost and Agreed Value Optional Coverages; Contents $100,000 with Replacement Cost and Agreed Value Optional Coverages; Extension of Replacement Cost to Personal Property of Others $50,000

There are several types of breakdown losses to fired pressure vessels. Which one of the following is an example of this type of loss?

C. Bulging

A difference in conditions (DIC) policy

C. Can have property valued at an amount that is mutually agreeable to the insurer and insured.

A description of the property insured, a list of mortgagees, and the applicable coinsurance percentage(s) are shown on which one of the following documents?

C. Commercial property declarations

Which one of the following correctly identifies a provision under the Property in Process of Manufacture by Others—Limited International Coverage endorsement?

C. Coverage is extended to the insured's business personal property to include raw materials and in-process goods while being manufactured in a foreign coverage territory.

The Ensuing Loss provision in ISO's Earthquake and Volcanic Eruption Endorsement provides that in the event of a fire resulting from an earthquake

C. Coverage limits may not be stacked from the various areas of the policy.

Setting policy limits for equipment breakdown coverage is both similar to and different from the process used for other commercial property coverages. Ignoring business income, which one of the following should determine the equipment breakdown limit when a policy covers a single location?

C. Covered property value

A motor truck cargo liability policy

C. Covers a trucking company's liability for damage to goods of others while being transported by the trucker.

The steam boiler at a hotel explodes due to excessive internal pressure causing damage to the hotel's basement, laundry facility, the first floor rooms, and the parking garage of the mall next door. Which one of the following would be excluded from coverage under the Equipment Breakdown Protection Coverage Form?

C. Damage to the parking garage next door

When an insured is choosing between replacement cost and actual cash value on a policy, the insured should

C. Determine if the policy limits is adequate for replacement cost.

A buyer has newly purchased goods shipped on an ocean freighter bound for the United States from Europe. To assure there is no liability for the goods until they are delivered to a warehouse in the United States, which one of the terms of sale should this buyer use

C. Ex Point of Origin

A landlord was certified as having a "green-friendly" building when a covered loss destroyed the building. The Increased Cost of Loss and Related Expenses for Green Upgrades endorsement on its Building and Personal Property Coverage Form (BPP) would cover the

C. Expenses required to obtain experts to recertify the building.

Which one of the following statements is correct with respect to the covered causes of loss under the Causes of Loss—Basic Form?

C. Explosion includes the explosion of gases or fuel in a furnace or flue.

In business income insurance, the expenses that an organization would not have incurred if the business interruption had not occurred are called

C. Extra expenses.

A local savings and loan association purchased Financial Institution Bond Form 24. Mandatory insuring agreements on their Form 24 include which one of the following?

C. Fidelity, On Premises, In Transit, and Counterfeit Money

When operations of the same insured at two or more locations are completely independent, either specific or blanket coverage may be appropriate. Which of the following is a factor to consider when choosing specific or blanket coverage?

C. For insureds with more than one location, application of blanket policy limits provides more flexibility.

Which one of the following Commercial Crime Coverage Form insuring agreements provides coverage on a full worldwide basis?

C. Forgery or alteration

Which one of the following types of property is covered under the ISO Flood Coverage Endorsement?

C. Foundations below the lowest basement floor

Which one of the following statements is correct with respect to the condition Duties in the Event of Loss or Damage of the Building and Personal Property Coverage Form (BPP)?

C. If the insured fails to perform any of them, the insurer may not have to pay for the loss.

Which one of the following statements is correct with respect to the effect optional coverages of the Building and Personal Property Coverage Form (BPP) have on premiums?

C. In some cases, the limit of insurance must be increased to cover the additional property values being insured.

Under which one of the following provisions of the Building and Personal Property Coverage Form (BPP) is the maximum payment $10,000 or five percent of the building limit, whichever is less?

C. Increased Cost of Construction additional coverage

Losses on title insurance policies are rare for which one of the following reasons?

C. Insurers require that any problems be corrected or excluded from coverage.

ABC is a small manufacturing firm with all of its sales and production being conducted out of a single building. A boiler explosion at ABC destroyed a key piece of machinery used in the manufacturing process, causing a complete interruption of ABC's manufacturing. Also destroyed in the explosion was all of ABC's completed inventory. The business interruption is expected to last for several months. Which one of the following types of expenses would be most likely to continue without reduction during this period of inactivity?

C. Interest expenses on outstanding debt

An explosion occurred at a bottled spring water manufacturing facility. As a result, a machine which tests the water for acceptable levels of toxins and metals was disabled. In this instance, the ensuing potential business income loss is best described as

C. Interruption in production due to a bottleneck.

The ISO Flood Coverage Endorsement differs from other coverages in the commercial property coverage part. One of these differences is that

C. It is often subject to separate and lower limits than the policy limit.

One of the reasons inland marine insurance developed in the United States is that

C. It met a demand for "all-risks" coverage for property in transit.

Which one of the following statements is correct with respect to the Preservation of Property additional coverage of the Building and Personal Property Coverage Form (BPP)?

C. It protects against "any direct physical loss or damage" and is not limited to either the covered causes of loss or locations stipulated in the coverage form.

Which one of the following is correct with respect to the Increased Cost of Construction additional coverage of the Building and Personal Property Coverage Form (BPP)?

C. It provides a small amount of insurance to cover the increased cost to comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings.

Under the Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate condition of the ISO Commercial Crime Coverage Form written on a loss sustained basis, if certain requirements are met, the insurer agrees to pay a loss that occurred during the prior policy period of another insurer. Which one of the following situations is likely to exist if such a condition were not available?

C. It would be nearly impossible to persuade an insured to switch to a new insurer.

Which one of these would not be covered under the Computer and Funds Transfer Fraud insuring agreement?

C. Loss resulting from the fraudulent entry of electronic data into a computer system that is not owned, leased, or operated by the named insured

Which one of the following best describes an advantage to insurers of nonfiled compared with filed classes of inland marine insurance?

C. Nonfiled classes allow for the customization of policy provisions and rates for individual insureds.

The risk manager of a midsize manufacturing company would like several specific property coverage enhancements and a seamless approach to insurance for their building, business personal property, inland marine, and crime insurance. Which one of the following types of policies would best suit the risk manager's needs?

C. Output policy

Under mortgage indemnification insurance, Coverage D would indemnify for damages because of the insured's failure to do which one of the following?

C. Pay a mortgagor's real estate taxes

Which one of the following is true in regard to the National Flood Insurance Program?

C. Personal property located in a basement of the insured building is excluded.

The Businessowners Coverage Form (BCF) differs from the Business and Personal Property Coverage Form (BPP) in how it covers the personal property of landlords in apartments or rooms they furnish for tenants. Which one of the following best describes the difference?

C. Property in furnished rooms is covered by the unendorsed Businessowners Coverage Form.

The Additional Covered Property endorsement

C. Provides a blank space for inserting the additional property to be covered.

Diversification involves

C. Providing a range of products and services used by a variety of customers.

Which one of these would not be subject to a special limit of $5,000 per occurrence under the Inside the Premises—Robbery or Safe Burglary of Other Property coverage under the Commercial Crime Coverage Form?

C. Securities

Which one of the following is an example of a loss that would fall under the smoke cause of loss under the commercial property policy?

C. Smoke discharge due to a sudden furnace malfunction

A small retail chain needs building and personal property coverage for a warehouse it recently acquired. It has long term plans to rebuild the structure due to its distressed construction and lack of public water supply. In the interim, the chain's best option is to purchase a

C. Standard Property Policy (SPP) to cover the warehouse.

Which one of the following losses would be considered covered water damage under the commercial property policy Causes of Loss—Broad Form?

C. Sudden and accidental discharge of water from the breaking apart of an insured's water pipe

Which one of the following is a policy condition in the Equipment Breakdown Protection Coverage Form?

C. The Joint or Disputed Loss Agreement

Which policy form—the Standard Property Policy (SPP) or the Building and Personal Property Coverage Form, also referred to as the BPP—provides the increase in hazard provision?

C. The SPP does have it, but the BPP doesn't..

Crime loss exposures of financial institutions are covered by financial institution bonds. These policies were developed by

C. The Surety and Fidelity Association of America (SFAA).

Businessowners policy (BOP) rating incorporates which one of the following variables?

C. The amount of the policy deductible

Which one of the following is correct with respect to the Vacancy condition of the Building and Personal Property Coverage Form (BPP)?

C. The conditions under which a building is considered to be vacant are different for a tenant than for an owner.

A restaurant chain is taking a pre-loss analysis of the impact of business income and extra expenses. A factor for them to consider is

C. The cost of loss of income when patrons find a new restaurant.

In the Equipment Breakdown Protection Coverage Form, expediting expenses include which one of the following?

C. The costs of overnight shipping to obtain a machine part

Which one of the following is a disadvantage of Difference in Conditions (DIC)-type endorsements compared to separate DIC policies?

C. The coverage is often not as broad as that of a separate DIC policy.

Which one of the following statements is true with regards to the Extra Expense Coverage Form?

C. The form is intended to meet the goals of organizations that, when suffering a loss, must continue their operations at any cost.

An assistant at a veterinary failed to give medication to a dog, and as a result, the dog became ill and died. The dog's owner sued the veterinary. Which one of the following statements is true regarding coverage for this claim under the Businessowners Coverage Form?

C. The form would exclude the claim, but an optional coverage is available to insure it.

An insured is reviewing the Commercial Package Policy (CPP) to determine which conditions apply to all coverage parts in the policy. One of those conditions states that

C. The insurer has the right to do an on-site inspection of the insured's books and records.

Which one of the following statements is correct with respect to the Replacement Cost optional coverage of the Building and Personal Property Coverage Form (BPP)?

C. The insurer is obligated to pay the cost to replace the damaged or destroyed property with new property of like kind and quality without any deduction for depreciation or obsolescence.

Which one of the following statements is correct with respect to the Mortgageholder condition of the Building and Personal Property Coverage Form (BPP)?

C. The insurer is sometimes obligated to make a loss payment to the mortgageholder even though it has denied coverage, for example, to an insured who has committed arson.

Concerning the Discharge from Sewer, Drain, or Sump (Not Flood-Related) endorsement,

C. The insurer will not pay when the discharge results from the insured's failure to perform routine maintenance or needed repairs.

Concerning the Discharge from Sewer, Drain, or Sump (Not Flood-Related) endorsement,

C. The insurer will not pay when the discharge results from the insured's failure to perform routine maintenance or needed repairs. Correct. Concerning the Discharge from Sewer, Drain, or Sump (Not Flood-Related) endorsement, the insurer will not pay when the discharge results from the insured's failure to perform routine maintenance or needed repairs.

The coinsurance basis may not be accurate for estimating the maximum loss of business income for which one of the following reasons?

C. The period of restoration is significantly shorter or longer than 12 months.

The Common Policy Conditions of the ISO Commercial Package Policy include a clause concerning changes in the policy. This clause states that

C. The policy can be changed only by a written endorsement issued by the insurer.

A large retailer with 50 domestic locations has transit coverage through an annual transit policy. They have recently established a location just over the Mexican border and will need to cover this location's shipments both in and out of Mexico. Which one of the following describes a fact regarding the territory covered by the basic annual transit policy?

C. The policy territory may be modified to add Mexico for an additional premium.

A public official bond guarantees which one of the following?

C. The public official will perform his or her duties faithfully and honestly.

Which one of the following statements is correct with regard to the Causes of Loss—Broad Form?

C. The weight of snow, ice, or sleet cause of loss does not cover damage to personal property in the open.

Which one of the following is true regarding the Destruction of Electronic Data or Computer Programs endorsement?

C. This endorsement helps close the coverage gap of most commercial property policies that provide inadequate coverage for the cost to restore damaged electronic data.

Under an ISO Commercial Package Policy, the insurer reserves the right to examine and audit the insured's books and records related to the policy at any time during the policy period and for up to how many years after the termination of the policy?

C. Three

Condominium unit owners may wish to limit the insurance coverage on their units

C. To avoid duplicating coverage maintained by the association.

Securing outside materials and maintaining roof tie-downs are risk control measures particularly important for the peril of

C. To differentiate their product from those of their competitors.

Which one of the following is the purpose of the Contingent Business Income and Extra Expense insuring agreement in an equipment breakdown policy?

C. To provide business income and extra expenses arising from the breakdown of covered equipment at identified locations not owned or operated by the insured

An architectural company has a multitude of drawings, specifications and blueprints stored on its premises. Many of the documents are one-of-a-kind items that cannot be replaced. Which one of the following is the best choice of insurance coverage for the protection of these items?

C. Valuable papers and records insurance

When does the coverage period for a surety bond typically terminate?

C. When the principal fulfills its obligations

Difference in Conditions (DIC) policies seldom require coinsurance. The absence of coinsurance allows the insurer to

C. Write the policy for a lower limit than the full value of the property.

Cameron has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss - Broad Form covering his building with a $750,000 limit. A tropical storm struck Cameron's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows with flying debris. The total amount of damages was $20,000 for the windows and $20,000 for the shingles. How much will Cameron's insurer pay for damage to his windows and shingles?

Cameron's insurer will pay $40,000. Windstorm is a covered cause of loss for building damage, which includes the roof and windows. No exclusions apply.

Cameron has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss - Broad Form covering his building with a $750,000 limit. A tropical storm struck Cameron's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows with flying debris. The total amount of damages was $20,000 for the windows and $20,000 for the shingles. How much will Cameron's insurer pay for damage to his windows and shingles?

D. $40,000 Cameron's insurer will pay $40,000. Windstorm is a covered cause of loss for building damage, which includes the roof and windows. No exclusions apply.

Taunton Company (Taunton) has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss—Broad Form. Because the building is older and has unique architectural features, Taunton decided to insure the building on a replacement cost basis. There is a $2 million coverage limit on the building, with a 90 percent coinsurance clause and $2,000 deductible. The building was struck by lightning and a resulting fire caused substantial damage to the building. The cost to repair the damaged portion of the building with materials of like kind and quality was $500,000. At the time of the loss, the replacement cost value of the building was determined to be $2.2 million. How much would the insurer pay when the repairs are completed if the replacement cost option is activated?

D. $498,000 Correct. $498,000 Fire and lightning would be covered under the Causes of Loss—Broad Form. Once the repairs have been completed, Taunton's insurer will pay the replacement cost of $500,000 minus the $2,000 deductible. No coinsurance penalty will apply because the building was insured at a value above $1,980,000 ($2.2 million x .9).

An organization suffers a loss, creating a business interruption lasting 45 days. The organization suffers a loss of $60,000 the first month and $15,000 the second month. If the organization's Extra Expense Coverage Form has 40%-80%-100% limits on loss payments and a $100,000 limit of insurance, how much will the organization be indemnified for its losses?

D. $75,000

An insured has a Business Income (and Extra Expense) Coverage Form (BIC) with an Extended Period of Indemnity coverage option for 180 days. Following a covered loss, the period of restoration is 120 days. It takes an additional 90 days for revenue to return to normal. Ignoring waiting periods, for what period would the BIC cover the business income loss?

D. 210 days

An equipment breakdown loss associated with an air conditioning and refrigeration system includes which one of the following?

D. A compressor valve failure

A defendant appeals an adverse decision to a higher court. The court requires the defendant to post a bond that guarantees the payment of the judgment plus court costs and interest if the appeal is unsuccessful. This type of bond is called which one of the following?

D. A defendant's appeal bond

The policy valuation approach that determines the basis for using new property of like kind and quality and adjusts for depreciation to determine the amount to be paid at the time of a loss is called

D. Actual cash value.

The Insurance Services Office's (ISO) Earthquake and Volcanic Eruption Coverage Endorsement provides coverage for earthquake and volcanic eruption, which results in certain exclusions being revised or deleted and some exclusions being added. Which one of the following statements is true regarding earthquake and volcanic eruption coverage?

D. Aftershocks or eruptions that occur within 168 hours of the original earthquake or volcano event are considered one occurrence.

A shipping company contracted with Cruise Ship Art Galleries for delivery of artwork to be sold on the ship. The shipping company delivered the artwork directly to each port of call. Coverage for the artwork was under an inland marine policy. The valuation provision that would best be applied to a loss to the artwork prior to delivery would be the

D. Agreed value method. Correct. The valuation provision that would best apply for a loss to the art would be the agreed value method.

Which one of these is not an element of the Commercial Crime Coverage Form's definition of occurrence?

D. An act committed by only one person

Construction Company (CC) was consulting with a risk management firm to purchase coverage for its exposures. CC acts as a general contractor for local school districts. The company is currently working on several playground and gymnasium sites at different locations. Building materials and equipment are stored at a warehouse owned by CC prior to transport to the job sites. The company also leases 25 pieces of construction equipment which are used at the various locations. Coverages that would be recommended to the company based upon the exposures indicated are

D. An inland marine builders risk policy and a contractors equipment floater.

Animal mortality insurance provides broader coverage than ISO farm program in which one of the following respects?

D. Animal mortality insurance is available in higher per-head limits. Correct. Animal mortality insurance is available in higher per-head limits.

The two additional exclusions in an unendorsed ISO government crime form that eliminate coverage for losses caused by certain individuals are

D. Any employee required to be individually bonded and any treasurer or tax collector. Correct. The two additional exclusions in the government crime form that eliminate coverage for losses caused by certain individuals are any employee required to be individually bonded and any treasurer or tax collector.

A Businessowners Coverage Form would provide better coverage for the landlord of a fully furnished restaurant than a Building and Personal Property Coverage Form (BPP) in the event of a loss because the

D. BOP insures building and the contents for a single amount of coverage.

For coverage to apply under an Inside the Premises—Theft of Money and Securities insuring agreement of an ISO Commercial Crime Coverage Form, the thief must

D. Be present inside the "premises" or the "banking premises."

Although surety bonds are different from insurance contracts in several ways, they do have many similarities. Which one of the following statements describes how they are similar?

D. Both have a set liability limit.

In the Equipment Breakdown Protection Coverage Form, the policy definitions contain several exclusions that eliminate coverage for certain causes of loss and types of equipment. Which one of the following is an equipment breakdown exclusion?

D. Breakdown caused by windstorm or hail

Martin enters a warehouse by smashing a basement window and climbing through the opening. He steals supplies and a box of petty cash and exits the building through the same window. This is an example of which one of the following types of theft?

D. Burglary

A large hotel's compressor motor short-circuited causing partial loss of heat during a week-long bridal show in January. The hotel lost over 70 percent of the guests due to the lack of heat. Which one of the following insuring agreements of the Equipment Breakdown Protection Coverage Form would cover the loss of guest revenue?

D. Business Income and Extra Expense

Rachel's salon is insured under a commercial package policy that includes the Business Income (and Extra Expense) Coverage Form. Rachel's salon sustained an actual loss of business income at the described premises as a result of a fire damage and access to Rachel's salon was prohibited by civil authority. Rachel decided to rent a temporary location and rent substitute equipment while her shop was being repaired. However, while at the temporary location, Rachel's regular customers attended other salons and Rachel' income was below normal levels. Rachel returned to her salon once it was repaired and her business income returned to normal. Which one of the following insuring agreements would best apply to Rachel's claim under the Business Income (and Extra Expense) Coverage Form?

D. Business Income and Extra Expense insuring agreements

A company wants to ensure that it is protected against cost of renting substitute facilities to continue operations in the event of an equipment breakdown. To be certain such protection is afforded by its policy, the company should purchase which one of the following insuring agreements?

D. Business Income and Extra Expense—Or Extra Expense Only

Which one of the following is an example of the exclusion for Indirect Loss in the ISO Commercial Crime Coverage Form?

D. Business income loss

Difference In Conditions (DIC) policies can serve a variety of needs for an insured. DIC policies are equivalent to which one of the following Causes of Loss forms?

D. Causes of Loss—Special Form

Sunny Day Condominiums is a housing complex that offers residents luxuries such as a pool, sauna, and tennis courts. These amenities are not owned by any one resident, but by Sunny Day Condominiums as a whole. If Sunny Day wanted to be sure that a loss to the sauna was covered by an insurance policy, Sunny Day Condominiums should purchase a

D. Condominium Association Coverage Form.

A performance bond would most likely be used by a contractor in which one of the following situations?

D. Constructing a building according to plans and specifications

The ISO Condominium Commercial Unit-Owners Coverage Form

D. Contains an exclusion that coordinates the unit owner's coverage with the condominium association's coverage.

A dairy farm insures its farm under an ISO farm policy with the broad causes of loss. The farm's silo is damaged when a delivery truck accidentally runs into it. Which one of the following coverage forms applies to this loss?

D. Coverage G—Barns, Outbuildings and Other Farm Structures

Which one of the following perils would be covered under the commercial property policy broad form but not covered under the basic form?

D. Damage due to weight of snow

Which one of these sections of the Commercial Crime Coverage Form contains the limit of insurance?

D. Declarations

The Delicious Restaurant suffered a covered money loss under its ISO Commercial Crime Coverage Form. The form had a limit of $10,000. The value of the loss was $14,500. The insurer paid the policy limit. After paying the $10,000 policy limit, the insurer recovered $11,000 of the stolen money. Ignoring any deductibles that might apply, what dollar amount of covered property, if any, would go to Delicious Restaurant and to the insurer?

D. Delicious would receive $4,500 and the insurer $6,500 The insured receives $4,500 and the insurer $6,500. The insured receives the amount of the loss not covered by insurance and then the insurer recovers up to the amount of its loss payment.

Which one of the following causes of loss is covered under one or both of the ISO earthquake and volcanic eruption endorsements?

D. Earthquake aftershocks

In the business income coverage form, the period of restoration

D. Ends when the property is or should have been restored.

In which one of the following additional coverages in a Business Income Coverage Form are losses covered that continue after the period of restoration ends?

D. Extended business income

Adjacent properties can increase the probability of loss to the insured's building and contents. When rating commercial property exposures, the term used to refer to the hazard posed by adjacent or surrounding properties is

D. External exposure.

Inland marine policies that cover property of a mobile or "floating" nature are called floaters. Which one of the following types of property is likely to be written on an inland marine floater?

D. Fine arts

The broad causes of loss in the Causes of Loss Form—Farm Property differ from those covered by the Causes of Loss—Broad Form used in commercial property policies. Which one of the following losses is included only in the Causes of Loss Form—Farm Property?

D. Flood losses to covered livestock

Which one of the following can be added to the Legal Liability Coverage Form?

D. General lessees, with an additional premium charge

The dividing line between unit owners' property interests and the association's interests is important when assessing condominium loss exposures. Under the bare walls concept, the condominium association

D. Has no interest in property within the unit's walls.

How would an individual unit owner get coverage under the Condominium Association Coverage Form for his or her personal property that is being used in the building's common areas for decorative purposes?

D. In the Personal Property of Others coverage of the Condominium Association Coverage Form

Accounts receivables insurance not only covers the amount of money the insured is unable to collect when records of receivables are destroyed but also covers

D. Interest on loans to offset the uncollectible amount.

Which one of the following statements about the Scheduled Building Property--Tenant's Policy endorsement is most accurate?

D. It broadens coverage provided by the Building and Personal Property Coverage Form, also referred to as the BPP.

Which one of the following statements is the purpose of the No Benefit to Bailee condition of the Commercial Property Conditions Form?

D. It reinforces the insurer's right of subrogation against the bailee.

A building with concrete exterior walls and wooden support beams is which one of the following types of construction as defined by Insurance Services Office, Inc. (ISO)?

D. Joisted masonry

The Payroll Limitation or Exclusion endorsement is used if which approach is used to handle payroll expenses?

D. Limit payroll or exclude payroll

The rate charged for the Legal Liability Coverage Form is what when compared to the usual commercial property contents or building rate?

D. Lower

Jamie is the owner of JRB, a manufacturer that produces designer boots. JRB suffered a covered loss that resulted in all of the right boots in the warehouse being destroyed, thereby making all of the left boots useless. What endorsement should Jamie have added to JRB's Building and Personal Property Coverage Form to ensure that the company would have been indemnified for the lost value of the undamaged left boots?

D. Manufacturers' Consequential Loss Assumption endorsement

The Power, Heat, and Refrigeration Deduction endorsement is only available for which one of the following types of businesses?

D. Manufacturing and mining firms

In the early 1900s, the inventories of jewelry stores, property while in the course of inland transit, tourists' baggage, and even bridges were typical inland properties insured by which one of the following types of insurer?

D. Marine insurers

Which one of the following is an option in the business income coverage form that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration or (2) the policy limit?

D. Maximum Period of Indemnity coverage option

A farmer is concerned about an unexpected production loss as compared to the farmer's actual production history if it is not the result of neglect, poor farming practices, or theft. In addition, the farmer owns a prize bull. Which one of the following are two insurance policies that the farmer should purchase for these loss exposures?

D. Multiple peril crop insurance and animal mortality insurance Correct. Two insurance policies that the farmer should purchase are multiple peril crop insurance and animal mortality insurance.

Blanket insurance is

D. One limit of insurance for a combination of business personal property and building(s).

Which one of the following statements is correct with respect to Property Not Covered under the Building and Personal Property Coverage Form (BPP)?

D. Only contraband or property in the course of illegal transportation or trade is totally uninsurable by endorsement or in other policies.

SSA Company (SSA) has coverage under an ISO Commercial Crime Coverage Form. SSA suffered a covered safe burglary of its premises during which property that belonged to a customer was taken. How does the Ownership of Property—Interests Covered condition apply to the customer's loss of property?

D. Only the insured can make a claim under the policy for the customer's property.

Which one of the following terms has a specific definition in the business income coverage form?

D. Operations

A coverage provision of the Functional Building Valuation endorsement is

D. Ordinance or law.

When offering the Utility Services Coverage endorsement, many insurers are reluctant to insure

D. Overhead transmission lines.

Which one of these is not covered under the Employee Theft insuring agreement?

D. Patents

Most insurers that offer businessowner-type policies for contractors rate the liability coverage for eligible contractors separately from the property coverages by applying a separate liability rate to the insured's

D. Payroll, receipts, or number of full- and part-time employees.

Which one of the following is the type of deductible most often used for spoilage coverage in the Equipment Breakdown Protection Coverage Form?

D. Percentage of loss deductible

Which one of the following sets of two bonds would a developer likely require a contractor, to purchase because of winning a large bid to build a mall?

D. Performance bond and payment bond

The Condominium Association Coverage Form is designed to insure the building and business personal property loss exposures of condominium associations. In addition to the building and the association's business personal property, this coverage form also covers which one of the following major categories of property?

D. Personal property of others

Under the ISO farm program, Coverage B—Other Private Structures Appurtenant to Dwellings provides coverage for which one of the following?

D. Private garages Correct. Under the ISO farm program, Coverage B provides coverage for private garages.

Manufacturer makes and sells name brand products, has three locations in the United States, and contracts with two manufacturers to make its products in South America. Manufacturer's products include a large profit margin that it wants to make sure is insured. Which one of the following endorsements to the Business and Personal Property Coverage Form (BPP) would be the best choices for Manufacturer? Select one:

D. Property in Process of Manufacture by Others—Limited International Coverage

When added to a commercial property form, the Brands and Labels endorsement is intended to

D. Protect the insured's reputation when the insurer takes any part of the property as salvage.

The Legal Liability Coverage Form

D. Provides a lower premium rate than direct property insurance on the covered real property.

Layered property policies

D. Provides a method for insureds with high concentrations of values to obtain coverage.

An advantage of using an output policy is that it

D. Provides broad coverage by combining all property coverages.

The Commercial General Liability (CGL) Coverage Form provides "fire legal liability" or "damage to premises rented to you". The "fire legal liability" coverage

D. Provides limited coverage for liability arising out of part of the building rented to the insured.

Highly protected risk (HPR) policies define property covered as

D. Real property and personal property.

Which one of the following is an action a surety can take if it fears a principal will be unable to perform the obligation that is the subject of a surety bond?

D. Require the principle post collateral. Correct. If a surety fears a principle will be unable to perform the obligation that is the subject of a surety bond, the surety can require the principle post collateral.

Which one of the following statements is true regarding the Inside the Premises—Robbery or Safe Burglary of Other Property insuring agreement of the Commercial Crime Coverage Form?

D. Safe burglary means the unlawful taking of a locked safe or vault from inside the premises.

Which one of the following is a type of covered property under employee theft coverage?

D. Securities

Although leasehold interest insurance fills a need for some insureds, such insurance is seldom bought, perhaps because

D. Some insurers include a nominal amount of lease cancellation coverage in their commercial property policies.

Which one of the following statements about commercial property coverage forms is correct?

D. Specialized coverage forms exist for insuring buildings under construction, condominium association buildings, and the property of condominium commercial unit owners.

A food wholesale company suffers a loss as a result of the local utility's electrical transformer shutting off electrical power to the insured premises for several days. The loss includes damage to raw materials and loss of business income. Under their Equipment Breakdown Protection Coverage Form, the insuring agreements that cover these losses are

D. Spoilage Damage and Utility Interruption.

The most widely used financial institution bond is

D. Standard Form No. 24.

Sarah owns an ice cream shop that operates in a very old building. The structure is so decrepit that it has been deemed a "distressed risk" and is considered unacceptable in the standard insurance market. What kind of coverage should Sarah seek out to insure her ice cream shop?

D. Standard Property Policy

Under the conditions of ISO Commercial Crime Coverage Form, which one of the following is a duty of the insured after discovering a loss or a situation that might result in a loss?

D. Submit a detailed, sworn proof of loss within 120 days.

Leasehold interest insurance is seldom purchased since

D. Tenants may choose to self insure or retain the risk since it is a small exposure.

The principal difference between the two ISO earthquake endorsements, CP 10 40, Earthquake and Volcanic Eruption Endorsement and CP 10 45, Earthquake and Volcanic Eruption Endorsement (Sub-Limit Form), is

D. The CP 10 45 form is not subject to coinsurance and permits coverage to be written subject to a sublimit.

Under which one of the following causes of loss forms is the burden of proof on the insurer to prove why coverage does not apply?

D. The Causes of Loss—Special Form

The only material difference between the extra expense coverage provided by the Business Income (and Extra Expense) Coverage Form and the extra expense coverage provided by the Extra Expense Coverage Form is which one of the following?

D. The Limits on Loss Payment condition found only in the Extra Expense Coverage Form

One characteristic of a layered property policy is

D. The availability of broad coverage for the risk.

Transportation loss exposures can vary based on the party responsible in the event of a loss. The term of sale "FOB (free on Board) Vessel" refers to which one of the following?

D. The buyer assumes responsibility for loss as soon as the goods are placed aboard the vessel at the port named in the terms.

In determining an organization's estimated maximum loss (EML) of business income, what is the most likely starting point?

D. The coinsurance basis

Which one of the following statements is correct with respect to the Concealment, Misrepresentation, or Fraud condition of the Commercial Property Conditions Form?

D. The commercial property coverage part voids coverage if the insured conceals a material fact pertaining to the covered property.

The National Flood Insurance Program (NFIP) consists of two different programs in flood prone areas. Which one of the following is true regarding the programs?

D. The emergency program has subsidized rates but limited amounts of insurance.

Which one of the following statements is correct with respect to the Recovered Property condition of the Building and Personal Property Coverage Form (BPP)?

D. The insured has the option of taking the recovered property and refunding the loss payment to the insurer.

The Causes of Loss—Special Form provides coverage for which one of the following scenarios?

D. The melting ice, sleet, or snow on the building or structure Correct. The Causes of Loss—Special Form provides coverage for melting ice, sleet, or snow on the building or structure.

An insured who owns a large business has been comparing the different types of commercial insurance policies. The insured would likely choose a Commercial Package Policy (CPP) because it will provide

D. The option to add lines of insurance for most coverages that are needed.

The coinsurance basis may not be accurate for estimating the maximum loss of business income for which one of the following reasons?

D. The period of restoration is significantly shorter or longer than 12 months.

A community that becomes eligible for National Flood Insurance Program (NFIP) participation is placed in the emergency program until

D. The required flood management plan and necessary Rate Maps are developed.

Which one of these would not be covered under the Inside the Premises—Theft of Money and Securities insuring agreement?

D. Theft committed through a remote computer

A city has an unendorsed ISO government crime policy and sustains a loss when the city auditor discovers that the city treasurer has been embezzling from the city's funds. Which one of the following statements describes how the city's insurer would respond to this loss?

D. There is no coverage because of a policy exclusion that eliminates coverage for a loss caused by a treasurer.

An A&E Accounting Company (A&E) operates a bookkeeping business insured with an unendorsed Businessowners Policy (BOP). On rare occasions an A&E assistant will use a personal auto to drop off completed tax returns at the local post office on the way home from work. Recently, the assistant was involved in an at-fault accident en route to the post office. Which one of the following best describes how the BOP will handle this loss?

D. There will be no coverage because there isn't a Hired and NonOwned Auto endorsement on the policy. Correct. There will be no coverage because there isn't a Hired and NonOwned Auto endorsement on the policy.

Which one of the following statements is correct with respect to the Commercial Property Conditions?

D. They apply to all coverage forms included in a commercial property coverage part, unless a coverage form contains a condition to the contrary.

Which one of the following statements about judicial bonds is true?

D. They can usually be classified as either plaintiff or defendant bonds.

Which one of the following statements about the use of deductibles in the Equipment Breakdown Protection Coverage Form is true?

D. They may be combined for two or more coverages.

Which one of the following statements is true regarding manuscript forms of insurance policies?

D. They usually offer more favorable terms for insureds than standard forms.

Which one of the following statements about title insurance is true?

D. Title insurance covers the cost of curing defects in the title.

Inland and ocean marine policies provide coverage for transportation loss exposures. For an insured that would be considered an infrequent shipper, which one of the following would be the best type of inland/ocean marine insurance to cover this insured's shipping exposure?

D. Trip transit insurance Correct. Trip transit insurance would be the best type of inland/ocean marine insurance to cover that insured's exposure.

The coverage that standard farm policies provide for crops is inadequate for many insureds. The Multiple Peril Crop Insurance (MPCI) provides coverage for which one of the following?

D. Unexpected crop production losses

Coverage is provided for which one of the following losses under the Inside The Premises—Theft of Money and Securities insuring agreement of the ISO Commercial Crime Coverage Form?

D. Unexplained disappearance of securities from the insured's office

Storing dynamite in "igloos" is an example of which one of these types of risk control for explosions?

D. Venting

Under the Financial Institution Bond Form 24, Insuring Agreement B—On Premises Coverage, would jewelry on deposit at a U.S. bank's Europe office be covered for burglary?

D. Yes, burglary is covered on premises located anywhere worldwide. Correct. Yes, burglary is covered on premises located anywhere worldwide.

A builder's risk policy covers a building in the course of construction. Which one of the following would be a coverage enhancement on the inland marine builders risk policy?

It would be collapse during the course of construction resulting from faulty materials is covered under the builder's risk policy.

One purpose of the miscellaneous real property coverage which can be added to the Condominium Commercial Unit-Owners Coverage Form is to insure

One purpose of the miscellaneous real property coverage which can be added to the Condominium Commercial Unit-Owners Coverage Form is to insure

Peter has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss - Broad Form covering his building with a $750,000 limit.

Peter's insurer will pay $10,000. The BPP's definition of Building includes outdoor fixtures and windstorm is a covered cause of loss in the Broad Form. Outdoor fixtures do not fall under the Outdoor Property coverage extension, which excludes coverage for windstorm damage.

When a covered loss occurs, the Limitations on Coverage for Roof Surfacing endorsement covers the

Roof's actual cash value immediately before the loss occurred.

Roy's Toy Manufacturing is covered by a Building and Personal Property Coverage Form (BPP) with a Value Reporting Form endorsement. His policy limit is $1,000,000 with a $1,500 deductible. In November, Roy's filed a report with its insurer declaring $70,000 in values which was a correct value for that month. As the holiday shopping season approached, Roy's suffered a fire that badly damaged a large portion of its inventory. Estimated inventory losses were $80,000 and total inventory values for December were calculated at $100,000. How much will Roy's insurer pay for the loss of inventory?

Roy's insurer will pay $80,000 − $1,500 = $78,500 as the last report was correct.

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. On June 5, 20X1, a thief entered ABC through an open window while the store was closed and stole $2,500 worth of electronic merchandise. The thief also broke into a safe causing $1,500 damage to the safe and stole $3,000 in cash from the safe. Under which insuring agreement would the theft of electronic merchandise be covered?

The $2,500 theft of electronic merchandise is not covered under the Inside the Premises—Theft of Money and Securities insuring agreement, because the stolen property does not qualify as money or securities. This theft is also not covered under the Inside the Premises—Robbery and Safe Burglary of Other Property, because the cause of loss does not meet the policy definition of robbery or burglary.

The Standard Property Policy (SPP) could potentially provide coverage that would be denied by the Building and Personal Property Coverage Form, also referred to as the BPP, if a building's occupancy is what percent?

The SPP could potentially provide coverage that would be denied by the BPP if a building's occupancy is under 31 percent.

Which of the following is the amount of leasehold interest coverage each month during the life of the lease?

The amount of leasehold interest coverage is automatically reduced each month during the life of the lease.

Omega Holdings owns a building with an actual cash value of $200,000. The property is insured under a Building and Personal Property Coverage Form (BPP) with a building limit of $140,000, an 80 percent coinsurance clause, and a $1,000 deductible. The policy includes a Causes of Loss—Broad Form covering the building. The building suffers $80,000 in fire damage. Which one of the following amounts will Omega's insurer pay?

The insured should have carried 80% of $200,000 or $160,000. Instead the insured carried only $140,000. [($140,000/$160,000) x $80,000] - $1,000 = $69,000.

Acme is a manufacturer that makes seasonal products and insures its business personal property with a Business and Personal Property Coverage Form (BPP) with a Value Reporting Form. The amount of insurance is $1,000,000 with a $1,000 deductible. Reports are due monthly. Acme suffered a business personal property loss of $500,000 caused by an insured peril, and the prior monthly report made was $400,000. The actual value of business personal property at the time of this report was $400,000. What amount would Acme's insurer pay for the described loss?

The insurer would pay $499,000. $500,000 − $1,000 = $499,000 since the report was accurate and the limit adequate.

A business has determined its estimated maximum loss (EML) to be $2,700,000 and its coinsurance basis to be $4,000,000. The limit of insurance that should be purchased by the business is

The limit of insurance that should be purchased by the business is $2,800,000. $2.7M ÷ 4M = .675 rounded up to 70%. .70 × $4M = $2.8M.

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20x1, ABC performed an inventory calculation and determined that the actual physical inventory on hand was $105,000 less than what the company's records indicated. ABC was able to prove that the loss was a result of employee theft and it was covered under the Employee Theft insuring agreement of ABC's Commercial Crime Coverage Form. How much will the insurer pay for this loss?

The loss amounts to $105,000 which exceeds the $100,000 limit of insurance for employee theft. The insurer will pay the amount of the loss in excess of the deductible up to the limit of insurance ($105,000 -$1,000 = $104,000). The limit of insurance in this case is $100,000 (The deductible comes off the amount of loss, not the limit).

A manufacturer had a covered loss that destroyed its finished inventory of suit pants worth $10,000. The finished suit jackets which can no longer be sold as a complete suit are now worth only $10,000, while the entire inventory of the combined pants and jacket would have sold to a department store for $100,000 if sold as a complete suit. The manufacturer has the ISO's Manufacturers Consequential Loss Assumption endorsement on its commercial property policy. The insurer will pay

The manufacture will receive $10,000 from its insurer. The endorsement does not cover consequential loss to items that have already been completed.

Under a business income form, if the Maximum Period of Indemnity coverage option is selected, it limits loss payment to the lesser of the policy limit or the amount of loss sustained during the

When the Maximum Period of Indemnity coverage option is selected, loss payments are based on the lesser of policy limit or amount of loss sustained during the 120 days immediately following the beginning of the period of restoration.

When using the Legal Liability Coverage Form, what should be considered when determining the appropriate limit of insurance?

When using the Legal Liability Coverage Form, the maximum possible loss, including loss of all covered property of others in the insured's care, custody and control—including damages for loss of use—should be considered.