CRIS Course 4 - Commercial Property

Trade Builders has a builders risk policy for its current project-an elementary school. Trade is using some specially ordered and prepared wood for the gymnasium flooring. A loss occurs to the wood flooring before it is installed, and Trade hopes to recover the loss from its builders risk policy. However, the insurer denies coverage because of the "property included in values reported to insurer" requirement of the policy. This means that Trade did not:

Include the value of the lumber when it estimated the Total Project Value shown in the policy (Many policies exclude coverage for property that clearly was not included in the value estimation on which the premium was based.)

Which of the following is not a characteristic of contractors equipment policies?

The policy ties coverage to a specific location

SkyHigh Steel Erection and Construction Company has a contractors equipment policy that provides named perils only coverage for loss to crane or derrick booms. This could be accomplished by any of the following methods except:

A boom coverage restriction with an exception that provides coverage for loss to booms from specified named perils.

Which of the following illustrates the additional coverage for increased cost of construction?

A building damaged by a covered cause of loss is being repaired, but the repair expenses increase because the repairs must comply with current building codes.

Which of the following losses is most likely to be covered under an all risks contractors equipment policy?

A flash flood hits a construction site and damages welding equipment.

Under what circumstances would Connie Contractor have a need for rental value coverage?

A portion of the office building Connie owns is rented to a tenant. (A contractor that owns the building that houses its offices and leases space in that building to others is exposed to a potential loss of rental income.)

What kind of deductible is most often used for delayed completion coverage?

A time or waiting period deductible

On a construction project to build a new school, which, if any, of the following would be considered soft costs?

All costs other than labor and materials.

Higgins Excavation has a contractors equipment policy written on a blanket basis. What is covered on this kind of policy?

All equipment of the type defined in the policy.

Barton Construction's personal crime policy includes most of the crime coverages that are available. Which is not one of the available coverages?

Burglar alarm coverage (these would be covered: computer fraud coverage, forgery coverage, and coverage on property other than money and securities)

Trade Builders is housed in a small office building which it owns. One Friday, when workers expected to be paid for the week's work in cash, Trade's bookkeeper absconded with the payroll and fled from the country. This loss is covered under Trade Builders':

Commercial crime policy with employee theft/dishonesty coverage.

Equipment breakdown coverage pays for all of the following except:

Cost of routine maintenance on the covered equipment

Tory Builders purchases a commercial property insurance policy. This policy will cover all of the following except:

Damage to the foundations of Tory Builders' own buildings. (These would be covered: -Leased photocopy machine that Tory Builders is contractually obligated to insure. -Loss of furniture and fixtures in Tory Builders' office. -Damage to most of Tory Builders' business personal property on the premises)

O'Neil Drywall Contractor depends on Domestic Gypsum as its sole supplier of American-made wallboard materials. If a fire or windstorm were to damage Domestic's facility, O'Neil would have to buy its raw material from other suppliers at a significantly higher cost. What type of coverage does O'Neil Drywall Contractor need to insure this loss exposure?

Dependent properties extra expense coverage (Also known as contingent extra expense coverage, this endorsement would trigger extra expense coverage if a supplier's premises are damaged by a covered peril.)

Kingston Contractors files a claim under its contractors equipment policy for a loss to a portable generator it owns. The insurer refuses to pay the full amount of the loss due to the coinsurance clause. This means that Kingston:

Did not purchase a limit of insurance equal to the specified percentage of the generator's full value.

Ursula Underwood is the human resources director for a small company. Ursula handles all the employee benefits plans for her company, including their 401(k) plan, major medical and dental plans, and disability insurance plans, so she must be bonded. The employee dishonesty policy procured by the company should include each of the plans as a named insured in order to satisfy this

ERISA requirement

A commercial property policy written on an "all risks" basis covers losses:

From all causes except those specifically listed in the policy as excluded.

Commercial property policies are written on all of the following kinds of forms except:

General liability (it is written on: manuscript, individual insurer, or standard)

Hanson Custom Home Builders procures a new commercial property policy from its insurer-Mega Insurers-for its company headquarters. Hanson would like to void the coinsurance clause in the policy with an agreed value provision. In order for Mega Insurers to agree to this, what will it require of Hanson?

Hanson must provide a signed statement of property values.

Liberty Power Company has contracted with Gencon Construction to build a new power plant. Liberty Power is concerned that this project might be a target for terrorism. What should Liberty do to make certain that loss to this project due to terrorism would be covered?

Liberty may need to consider purchasing a stand-alone terrorism policy. A stand-alone policy may be the best or only way to get full coverage for this high-profile project.

Kingston General Contractors insures its mobile equipment under a blanket contractors equipment policy. Coverage for accessories and spare parts that are used with the mobile equipment:

May need to be clarified with the insurer, since many contractors equipment policies are silent on this point.

Bridge Construction uses temporary scaffolds for most of its projects but removes them before the project is completed. How do builders' risk policies generally cover these scaffolds?

Most builders risk policies cover scaffolding and temporary structures while they are at the construction site, provided that they are not covered under another policy (such as a contractors equipment policy). (Unless insured elsewhere, temporary property is usually covered while it is at the construction site.)

A contractor that borrows equipment from others can sometimes be held liable for damage to the equipment, even if there is no contractual agreement to that effect. The contractor should arrange for coverage under its contractors equipment policy since its commercial general liability (CGL) policy usually provides no coverage for damage to borrowed equipment because:

Of the care, custody, or control exclusion.

Gencon will use a number of subcontractors as it constructs a building for Owner. Which of these parties should be named as insureds in the builders risk policy?

Owner, Gencon, and all subcontractors should be named as insureds.

The monthly limitation clause in an extra expense coverage form:

Places a maximum on the amount that can be collected, depending on the length of time required for repairs. (Even if the total amount of a short-duration loss equals or exceeds the policy limit, the maximum amount payable is subject to monthly maximums expressed as percentages of the total limit.)

Jeremy Paving's steamroller is used at every job site. If the steamroller were damaged in the middle of a job, Jeremy would have to quickly find and rent a temporary replacement at considerable expense. What type of coverage should Jeremy consider adding to its contractors equipment policy?

Rental reimbursement coverage

When purchasing commercial property insurance on its office and storage buildings, Fancy Builders must decide which valuation method will apply in the event of a loss. The two types of property valuation generally available are:

Replacement cost value and actual cash value.

Employees who work in Lakeshore Construction Company's office enjoy a gorgeous view of the lake immediately outside their ground-floor office. The building and contents are covered by a standard, all risks commercial property policy. To ensure that it has adequate financial protection in the event of a flood, Lake shore should:

Request a flood coverage endorsement or separate policy, since a standard all risks commercial property policy does not cover loss due to flood.

Most commercial property insurance policies are written on:

Standard forms or insurer versions of standard forms

G&A Construction Partners specializes in the construction of manufacturing plants. The construction contracts they enter into with clients usually call for installation of the manufacturing equipment as part of the project. For a new project under construction, equipment breakdown losses to equipment being installed as part of the manufacturing plant would normally be covered under:

The builders risk policy, either by deleting the relevant exclusions or by using a form that omits them altogether.

Ludwig Construction Company's all risks builders risk policy includes delayed completion coverage. Delayed completion coverage could apply to all the following scenarios, except:

The contractor building a retail shopping center does not receive roofing materials from the supplier as scheduled. The late materials delay the project completion.

While Folsom Contracting is building a new movie theater, the roof collapses due to a rainfall heavier than the building's designer had contemplated when computing load requirements. Folsom's builders risk policy will not cover the damage unless:

The design error exclusion grants coverage for resulting physical damage from an unexcluded cause. (This type of exclusion eliminates coverage for the cost of correcting the design error but leaves intact the coverage for resulting physical damage.)

A fire destroys Ace Contractor's office and warehouse. In order to continue operating, Ace leases office premises and a warehouse and pays express shipping charges to restock the warehouse with supplies necessary to resume operations with minimal delay. Ace has a commercial property policy that includes an extra expense coverage form. Under the extra expense coverage, what portion of Ace's post-loss operating expenses would be covered?

The difference between the normal operating expenses and the actual operating expenses is covered.

Gencon Contracting owns a warehouse building that it no longer uses and has been unable to rent out for more than 60 consecutive days. Under Gencon's standard, unendorsed commercial property policy, what coverage will be available in the event of fire damage to this vacant building?

The fire damage amount otherwise payable will be reduced by 15 percent.

The loss of income type of delayed completion coverage applies to:

The income that would have been received had there been no delay in completion.

After lightning struck a nearly completed building under construction and fried the structure's climate control system, Apex Construction paid an additional $25,000 for the expedited construction and delivery of a replacement climate control unit without which the building could not be completed and occupied. Under the terms of a typical delayed completion coverage endorsement, Apex will be able to recover this $25,000 for all the following reasons, except:

This expenditure reduces the delay by at least 7 days.

Gencon Construction's office building is destroyed by a fire, forcing Gencon and its tenants to relocate during reconstruction. Gencon incurs an increase in operating expenses or a loss of rental income as a result of the loss of use of this building while it is being rebuilt. These losses are called:

Time element losses

Which of the following kinds of property is not excluded by the commercial property policy, but rather is subject to limitations?

Trees, shrubs, and plants (Although trees, shrubs, and plants are listed under "Property Not Covered," limited coverage is provided in a coverage extension.)

Urban Renovators' builders risk policy excludes loss resulting from asbestos removal and enforcement of laws or ordinances regulating asbestos. Whenever Urban works on an older building that contains asbestos, Urban requires the project owner to have an asbestos abatement contractor remove or encapsulate the asbestos. With these coverages and practices currently in place,

Urban should attempt to have the asbestos materials exclusion amended or deleted, because it would be possible to have a builders risk loss involving asbestos that does not result from the negligence of the asbestos contractor. (A fire or a windstorm could cause the release of asbestos materials in a building undergoing renovation.)

Edison Electrical Contractors will install a very expensive, state-of-the-art scoreboard and video system in a new sports arena. Since there is no broad builders risk policy that includes Edison and other subcontractors, Edison should arrange for:

an installation floater (An installation floater is written to cover a specific type of property, not otherwise covered by a builders risk policy, during its installation.)

Hanson Builders specializes in the design and construction of theaters and procures builders risk policies for each of its projects. A new theater being built will include a state-of-the-art sound and lighting electronics board, which is valued at nearly $500,000, and which will be installed by Edison Electrical Contracting, a subcontractor. If the builders risk policy purchased by Hanson Builders does not provide coverage for the sound and lighting board, Edison should procure:

an installation floater (An installation floater is written to cover a specific type of property, not otherwise covered by a builders risk policy, during its installation.)

Johnson Renovations is the contractor on the renovation of a state capitol building. The building's marble staircase will be replaced with new marble that will be shipped from Italy at Johnson's risk. What provision found in most builders risk policies might prevent coverage for damage to the marble during shipment?

an ocean marine transit exclusion (Either this common exclusion or common territorial limitations would preclude coverage in the event Johnson loses its marble while it is in ocean transit.)

Handsome Contractors' contractors equipment policy includes both scheduled and unscheduled coverage. Items valued at more than a specified amount are covered on a scheduled basis. Items of lesser value are then covered on a(n):

blanket basis

Gencon Contracting operates out of a building that it owns. The building contains Gencon's office contents. If Gencon should suffer a fire loss to this building and its contents, the loss would be covered under Gencon's:

commercial property insurance policy (A commercial property insurance policy is designed to provide insurance on existing buildings and their contents.)

Much of Alpaca Patio Contractors' stock (paving blocks, stone, etc.) is among the personal property covered by its commercial property policy. If Alpaca Patio Contractors store much of their paving material outside a building, it is:

covered if it is within 100 feet of the premises described in their commercial property policy.

Nearly all contractors need crime coverage for:

employee dishonesty

Contractors equipment policies can be written on:

named perils or all risks basis

Nearly all builders risk policies are written:

on an all-risks basis (meaning that they cover any loss not specifically excluded)

Kenny Contractors have an equipment breakdown policy. Properly arranged, this policy can provide coverage for all the following items Kenny owns, except:

subterranean steam pipes

A provision in the equipment breakdown policy provides that, if the insurer determines that a covered boiler system is dangerous to operate, the insurer may immediately discontinue coverage until the problem has been corrected, at which time an endorsement can reinstate coverage. This provision is commonly known as a:

suspension clause